The Home Service Expert Podcast - Fueling Business Growth with Memberships

Episode Date: February 9, 2024

And I think that's huge. I mean, aligning, I think you said it perfectly. It's aligning your team goals with your goals. We always said when we started the business, our goal wasn't just to make a lot of money. Our goal was to build a sustainable business that really wasn't built on the backs of our employees, but was built with them. And so every decision we make, we try to be in line with that. You know, we think about dress code, what's good for them, what's good for us. We think about pay, what's good for them, what's good for us. Because if you can align that, then your culture is built together and people want to come to work every day. They're excited to, and that excitement feeds right into the clients. If you don't have

happy staff in our business and they're in your client's face 24 hours a day, you're not going to have happy clients either. Welcome to the Home Service Expert, where 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. Before we get started, I wanted to share two important things with you. First, I want you to implement what you learned today. To do that, you'll have to take a lot of notes, but I also want you to fully concentrate on the interview.

So I asked the team to take notes for you. Just text NOTES to 888-526-1299. That's 888-526-1299. That's 888-526-1299. And you'll receive a link to download the notes from today's episode. Also, if you haven't got your copy of my newest book, Elevate, please go check it out. I'll share with you how I attracted and developed a winning team that helped me build a $200 million company in 22 states. Just go to elevateandwin.com forward slash podcast to get your copy. Now let's

go back into the interview. All right, guys, welcome back to the Home Service Expert. My name is Tommy Mello and today is a big day for me. I got my buddy Jacob Meltzer here and we haven't met in person, but what I do know is you run an amazing company. I'm going to go through some accolades here. Jacob is an expert in leadership development, customer service, community outreach, and event planning. He's the owner of Keep It Cut. It's actually a place I go to get my hair cut. I've got the lady that comes to the house, and then I go to Keep It Cut. And I pay a membership fee, but I get to set a time anytime they got an app. I just book the appointment. I can go to any specialist I want or the first one that's available. And it's a cool place, man. They listen to good music. They get you in and out, but they really care about like it's the next level

up of haircuts. And then a lot of the guys that go there go every single week and they can get the facial treatment, whether they do their facial hair, they'll actually do the shampoo and conditioner. It's a good spot. And I've been going there for the last five, six years, and I was able to get Jacob's number. And so he's here today. It's a membership-based haircut facility. He's also done a lot of other things, but he's the owner and operator of Keep It Cut, a chain of men's hair salons that specialize in offering unlimited haircut memberships.

He earned his bachelor's degree in biology at Western Washington University and later pursued his master's in post-secondary and higher education from Arizona State University. Over the course of a decade, he dedicated himself to student leadership development and property management and then transitioned to running his personal business full-time, showcasing his role as a serial entrepreneur. Thanks for being here, brother. Yeah, Richard, thanks for having me in. So tell us a little bit about yourself. It sounds like you started in, of all things, biology. And then tell me about your partnership, how you guys decided to go into this industry. Yeah, like you said, I kind of bounced around a little bit when I first went to college. My thought was I'm going to med school. Um, I came in pursuing biology and then it was probably about, I don't know, second semester

on campus and there was a blood mobile on campus. So I stopped by to give blood. And if you ever given blood, you know, the first thing they do is they prick your finger and they test your blood to make sure you're, you're good to get blood that day. As a budding biology student, I'm asking the nurse, you know, Oh, thing they do is they prick your finger and they test your blood to make sure you're, you're good to get blood that day. As a budding biology student, I'm asking the nurse, you know, Oh, what are you looking for here? And she's telling me about the hemoglobin and how it's the blood's falling through this fluid. And I pass out. I pass out so hard that when I wake up, the nurses are all around me smelling sauce to get me to wake up. And I was like, okay, med school, not for me, you know? Yeah. But I was already into it. So I finished my biology degree, enjoyed that. And then I got into student leadership development. So I worked

for the universities, worked in the dorms, kind of advising students, helping them work through those first transition years, little property management, little babysitting, a little leadership development. It was a lot of fun. And then I had a buddy who I grew up with who wanted to start a business. And so we bought into a tax business. It was a tax franchise. And that's what got me down here to Phoenix, moved from Washington, did that for a year while still doing the university property management, did the taxes for a while. It's kind of a side thing.

It wasn't the end all though. We wanted to do our own. And then we started looking at membership-based businesses and that got us into Keep It Cut. Membership-based businesses. You don't really think about haircuts or even garage doors for memberships. We talked previously about the valuation of a membership-based business. And I'll tell you this, with home service companies, it's expected, like you know exactly how much you're collecting each month.

And then you know exactly how much is your churn. Like how many of those memberships, like you must have this down to a science and the age of the store, the age of the client, maybe even down into like micro demographics as age groups. Like what do you guys look at? Yeah. I mean, it's low single digits is how many people we lose a month for memberships. I mean, our, our retention is really, really good on the membership side because we're not like a gym membership. And that's the first thing a lot of people will say like, oh, gym membership, you get all these people to sign up and then they don't come and you make all this money. And like, no, no, no, that's not how we built our business.

We actually cancel members without them even asking if they don't come in in three months or more because we don't want that fake money. You know, we want people who are coming in every week, every two weeks. We want a service that like really feeds people's needs. And so with that, that's why our membership turn rate is so low because people want the service. We have good quality service. They come back time and time again. And we just knew, kind of like you were saying, if you build that basis, you can get that loyalty, you build the relationships between people, and they just come back over and over again. And you don't have to spend that same marketing dollar to get new folks in if you can just retain your current folks. And what is,

explain the membership exactly from the cost of the consumer. I don't know the exact plans off the top of my head. Yeah. So it's $25 a haircut. So you can still come in and get a single haircut because there's some people who just don't need a monthly membership. You know, they come once a month because their hair's a little bit longer, they're traveling a lot. So it's $25 for a single haircut or $38 a month for unlimited haircuts. And when we first priced it out, we were thinking, okay, do we do a membership model where you get, you know, for this price, you get two haircuts a month. For this price, you get three haircuts a month. But what really appealed to us about the membership model was this unlimited idea that you get as much as you want for one set price. I love the buffet, you know, like you just go and you don't have to

think about it at that point. You have a wedding, boom, you just come in. Even if it's only been a week, you get touched up. You have an interview, you have a date, or you're just getting cleaned up for the weekend. It makes it super easy to think about. So $38 a month or $25 for a single haircut. So it's about like, you know, if you come every three weeks, you're breaking even. If you come more than that, you're saving money. Okay. So you got it all down to the metrics. Yeah. And what is a good store? How many memberships do you need to make a store to where you want to get it to financially? A few hundred will really get you to kind of

over the hump. Okay. And then from there, yeah, then you kind of just build, you know, it's a slow build because we're, we're all labor-based. Yeah. And so we got to do the hiring. Yeah. And so you're constantly balancing that really fine line of having enough staff to meet your client needs, but not too much staff because our margins are so small that you're also, you're just eating up all your margin by overstaffings. So that can be a little tricky. Yeah, no, that sounds like the fact that you have the background and the tax advising, it's all numbers based and to build that break even and then figure out how much capacity could you handle. Capacity planning is everything in this business. My business partner, this is kind of the reason we went into this. He was a financial analyst to

start. So he was doing investments. And then when we started the tax business, he had to leave that because there was a conflict of interest there. You're not allowed to do financial investments and taxes at the same time. So he actually went and started being a rate analyst for a trucking company. So you rent trucks and trailers. He's the one who's setting those prices. You want to move from Seattle to California, he sets the price for that truck or trailer. And so he loves numbers.

He just constantly is thinking about numbers. So when we sat down to think about our next business, we didn't think about businesses. We thought about memberships. What business doesn't have a membership already applied to it. And what can we do? Cause he thought it would just be a fun mathematical piece to work out. And it really has been, even now we're still dialing that in of, you know, how many clients do we need per hour to really make this work and how often people come back and what's our retention. Um, I think you talk a lot. You guys give a referral fee,huh. So that's like an affiliate deal? Yeah.

And that works out really well. We don't do very much external marketing. We've tried, we've dabbled here or there, but our most successful marketing has been our referral program. So if we have a current client, they don't even have to be a member, and they refer in somebody else, then that person gets their first month of membership for free. No strings attached, just come and try us out. And then if they pay for a second month of membership, then the person who referred

them in gets 20 bucks. Again, whether they're a member or not. Right. Because most likely, like if you get your haircut and you're a membership client, you're probably friends with other membership clients, right? People will hang out with people who are like themselves. Police officers hang out with police officers, you know? Hippies hang out with hippies. And so if you have short hair, your friends probably do too. Yeah. You know, I'm really diving deep into affiliate marketing and there's three buckets of affiliate marketing. There's like your power affiliates. Those are guys on like, they've got like these marketplaces that affiliates hang out. The one I'm involved in has a hundred thousand affiliates. And then the second one is like your influencers. They're big on TikTok, Instagram, Facebook, YouTube, LinkedIn X, which is Twitter.

And then the next one is like your ambassadors. Those are your employees and your client base. And there are three different buckets. And if they're mastered correctly, more than half of your business will come through your affiliate channels. And I think it's a great, great model going into this next year and mastering that. I think, you know, you guys never had asked me to leave, like check in.

And if you do a social media post, and I don't know your business well enough, but if I liked the gal that cut my hair, she did a great job. And it was super simple for me to post. And it was tracked correctly. And it was just didn't take a lot of time. I'd probably do it. And every time I go to a restaurant, if the girl or whatever the server

is, boy, girl, male, female, if they say, listen, we're doing a contest, I want a bottle of wine tonight. If you leave me a review, I'll typically do it. I don't do it for the company. I do it for the person. Yeah, absolutely. And especially in our business where it's relationship based, uh, you can do a lot more of that and be honest with you. Marketing is our weakest point of our whole business. It's not where Josh and I come from. I'm operations and people, he's numbers and finance. And so we joke sometimes that the business is succeeding in spite of us because of us, because we don't do a lot of outreach and we really rely on that internal piece. So I think we've dived into one bucket. I think we could probably dive in those other two pretty deep and get a lot better. Interesting. Yeah. And I mean, you got to,

basically you cannot go in there for a haircut without setting an appointment, correct? No, you can walk in. I mean, it depends on the store, the busier stores, the ones that have been established. It's a little bit harder to walk in. Our goal is to always have one person who can just handle walk-ins. You know, That's how we staff. We say, okay, how many people do we think we need to cover everyone who typically books during this time? And then one more to handle walk-ins. So if we're staffed up, you should be able to walk in and grab a spot. For shorter staff, which these last couple of years have been much tougher, we're finally getting back to being full staffed again. Yeah, that's hard. And so that's when we moved to, we used to be a waitlist model before COVID hit and COVID

shifted us to an appointment based model, which is actually one of the best things that could have happened to us. It was a unpurposeful pivot and it was great because now clients can look ahead a day or two, but most of our clients still book within 24 hours. It's pretty interesting. Guys are, you know, they're lazy. I'm lazy. Yeah.

I literally look and I'm going, do I want to go to Arcadia or Scottsdale? What's, where could I get in at this time? And I'm getting better at setting appointments. I'm really focused on managing my schedule, but it's just one of the things where I just kind of want to stop off and go get a haircut. Well, how do you acquire talent? Because I think the capacity planning is probably one of the most important things in home service as well as like, when's the next time to hire a tech or top grade? And how do you, how do you balance that? Where do you go to acquire talent? A hundred percent. And talent is our, I mean, raising capital is your first problem, right? Having enough money to just get going. Talent is the second, especially in our industry. Cause

you have to think in like, let's say the Phoenix area, you have 35,000 cosmetologists. And then of those, you have a small portion who actually want to do just men's hair. Cause we do 96, 97% men's hair. And then of those, you need people who can do that well. Cause we're not like your base level haircutter. People expect more from us. We're, we're that center. We're like the Chipotle. We're the fast casual haircut, right? You want a really good quality product, but you don't want to pay a ton for it. So that's where we're at. So you have those folks and then you have to have the ones that aren't crazy. You know, the ones who are really going to show up every day, who don't bring the drama to work. So you take this 35,000 pool and you shrink it down and it's really a pretty small pool. And then you take that down to demographic, you know, maybe we're in Queen

Creek and not Glendale. Well, now you lose out on all those people that are West Valley. So talent is, it's tough. So this year, what we really focused on was exactly that. So we, we always focus on our compensation. We have good compensation, full benefits package, 401k, you know, matching retirement, health benefits, dental. We've added as much of that as we could along the way. And then this year we hired a recruiter and a training manager. That's her whole focus is just doing. And really it's interesting because we didn't change much in our process, but just having somebody who's dedicated to that, you know, a lead comes in from a, you know, a hiring site, boom, she's on the phone texting and calling them. And she has

that handholding all the way through the process from the first interview to a technical interview to onboarding now, getting them really integrated into our company culture to hopefully increase the retention of those folks as they come on. Yeah, a hundred percent. I wrote a book called Elevate, Build a Business Where Everybody Wins. And my philosophy has always been as the founder owner, I need to have a dream so big that their dreams could fit inside. So I try to figure out what their goals are. And then you could break down their KPIs to say, if you want to buy a house in 2025, here's what would need to happen. And then you got to also teach financial stability and how to budget personal budgeting.

And you also have to have the significant other get behind that and say, this is the reason they're working these hours is because their goal is to do this. What does an average person, I mean, I think they probably tip better there. I know I always leave 20 bucks, whereas Great Clips, I think they're probably getting three to $5 tips. You guys have an hourly and then you get the tips or how do you do that? Yeah, it's a mix. We do an hour, base hourly and they get a commission. We call it a revenue share because they just get 10% of every dollar they bring into the business.

So they get their base rate plus their 10% and then their tips on top of that. So including their tips, our staff make between $26 and $36 an hour. So $52,000 to $72,000 a year

for a basic, a base stylist and then assistant managers and managers more. Do you have like somebody, maybe a group of people at the stores that are just like outdoing everybody? Yeah. There's always, you know, we call them the unicorns, you know, there's always unicorns

and typically those are people who, you know, they've established themselves and they just focus on that customer service and they focus on learning how to, it's tricky. Learning how to build the relationship with the client so they come back, right? That's the joy of the membership is if you have a membership client, they want to come back to you over and over again, hopefully. So you want to build that relationship and then you need a really good haircut and then you need to get your haircut times down because that's where your real profit comes in. If you can do three haircuts an hour versus two haircuts an hour, it's a huge difference in the money that you bring in.

Yeah. Yeah. So those folks who can do the three haircuts and then maybe even squeeze in a few more throughout the day, those are the people who are really, we had a, I mean, a manager who was including all of her production boats was making over a hundred K a year because she was just killing it, you know, great personality, you know, building her, her business book of business, really scheduling it in tight, working hard and hustling. And that's kind of the goal of our compensation model is that those who work hard get paid for

it. You want to come in and coast, you can do it, but you'll never make great money. But if you want to come in and bust, you can really do well. So one of the things we do here at A1 is I interview the top two technicians. Doesn't mean they made the most money, but the best mindset. They broke through whether their KPI, whether it was conversion rate, customer satisfaction, less recalls. And then I interview them and we play it for the entire company. It usually lasts 25 minutes. And so I want to share these videos and I'm like, what are you going to do for your family? I'm taking my kids to Disney World and we're going first class and we're cutting all the lines. And so they get a taste of what it does for them personally, but they also hear from their own cohort what's working.

So something you can try is take your top performer and say, here's what I realized is I like these type of clients. I really suck up to them and make sure I follow up with them because they get in and out. I got their haircut styled in and they kind of have a whole game plan, like a whole war chest of how they do it. They know their next five moves, but having other people learn that from someone that's in the same position goes a really long way. And all of a sudden people are asking for help versus, Hey, we're going to train you. I don't want to be trained. I'm happy where I'm at. Performance pay helps people want to get more help, especially if they have a big goal and they're driving towards something and you know about it.

And instead of saying, hey, we're going to put you on a performance improvement plan, say, listen, I know your goal. I know your dream. I can get you there five months quicker. I think that goes a long way. And I think that's huge. I mean, aligning, I think you said it perfectly, aligning your team goals with your goals. We always said when we started the business, our goal wasn't just to make a lot of money.

Our goal was to build a sustainable business that really wasn't built on the backs of our employees, but was built with them. And so every decision we make, we try to be in line with that. You know, we think about dress code, what's good for them, what's good for us. We think about pay, what's good for them, what's good for us. Because if you can align that, then your culture is built together and people want to come to work every day. They're excited to, and that excitement feeds right into the clients. You know, if you don't have happy staff in our business and they're in your client's face, you know, 24 hours a day, you're not going to have happy clients either. So the only store I could think of, there's like great clips, there's sports cuts, or I can't name all of them, but their model is more of an hourly plus tips.

And they're just obviously churning through people all the time, stylists. What does a Great Clips make per location versus if you're open to this, what is a good location of Great Clips versus your model as far as EBITDA? That's a great question. I don't have all that data. I would say, honestly, we're probably about even, surprisingly. That's the last time we looked at it. But the difference is, what's the quality that you get out of it and the staff satisfaction. So when we kind of look at those two pieces, we say, okay, we might be making the same amount store to store on just the EBITDA piece. But the value of the

business is hopefully more because of the membership base. And then we feel good about it because all of our staff do really well. They get paid well to do it. They make a good wage when they're happy coming to work. You look at like some of the quick chain cutters and you're looking at 12, 13 minute haircuts. I mean, to do that, one, you have to be just busting through. So your body's really getting worked on that. And two, you can't have a high quality cut every single time with that type of haircut. So that was kind of our goal is again, it's not necessarily to make more with the business, but even if we were to make the same, but we could have a better quality business and a better environment for our staff, that's a win. I think the multiple would be

quite a bit more. Have you ever thought about buying? So where do barbers fit in? Because you got barbers, you got the great clips, and then you got your model. And I don't even know the other models. I know there's people that'll buy a facility and rent out the booths. That's a different model. Explain to me the different models and how they all work. So you got your fast hair cutters.

Those are your great clips, your super cuts, fantastic Sam's, a little bit on the edge of that. Then you got your mid-range, us, sports clips, kind of those mid-level where you're going to get a little bit better quality. You're going to pay a little bit more for it. And usually that comes to time. You just, you pay a little bit more, you get a little more time for your stylist, a little more training typically with that folks. And then you have full service salon. They're servicing both women and men. Typically, um, they do color, they do kind of, you know, more services. Um, and then you have your barber, which is that separate feel of a business. It's kind of its own, it's its own thing. And it's interesting cause we hold a barber

license and a cosmetology license. We can hire both, but of our a hundred staff, we have four barbers. Okay. The personality is just so different between kind of a salon side and a barber. Yeah. Um, you know, barbers typically when they come and interview, like they have their way of doing it and that's how they're going to do it. And kind of like, I'll come in, I'll do my work. You'll love me cause I'm here and then I'll leave and you'll be happy. You know, it's a, there's an ego that comes with the barbers and they do great work, but I haven't found as much of that connection as I thought we would in that industry. That's interesting. Yeah. You know, I think about like barbers, I think about New York and Chicago and like LA is like, you go in and they'll do like a

really tight fade. And every time I went to the barber, I ended up like cutting off way more hair than I anticipated. I'm like, wow. We always joked growing up that we had one barber in my small town and he went to gym, you got a haircut. That's it. You know, you didn't get to choose.

You can tell him whatever you want, but you got a haircut. Yeah. Yeah, that's pretty much what it is. They're going to go high and tight. They're going to trim up your brows. It's nice when they pull out a razor. I do like that side of it is like getting a little pampered.

Yeah. And they'll do a little bit more special to you. Like we don't do lineups, which is where you're really carving out that crisp lineup around your hairline. And so that's kind of some of those niche pieces you're going to have to go to a barbershop for. And so what does a top store do versus a non-top store? What have you guys figured out over the last decade that says, obviously, location, location, location. What are the things that go into that?

Management, management, management. It all starts with that leader. Yeah, we had one store that was really struggling down in Ahwatukee. And at first we thought, oh, it's location, right? Ahwatukee is kind of this little island of Phoenix. It's set off from a major highway. People don't cross over into Ahwatukee. And at first we thought, oh, it's location, right? Ahwatukee is kind of this little island of Phoenix. It's set off from a major highway. People don't cross over into Ahwatukee. So either you live there, you don't. And we thought that was our limiting factor. And we just couldn't get staffing up because there wasn't enough staff in that area to really pull from. So we were constantly kind of like, oh, this person I think will work. And then they weren't

great. We ran through five or six managers before we landed one that was solid. And all of a sudden the metrics just turned and it matched all of our other stores in terms of growth. And so what we thought was a location issue was really, it was a management issue. And so we took that to heart because that was our third store. And now as soon as we start seeing performance issues in a store, the haircut trend not going normally, the first thing we do is look at management and we look at staff dynamics. What's happening here? Again, happy staff, happy clients. That was pretty eye-opening.

I've had literally, we're in 35 markets and I can tell you it just comes down to who's managing that market because they're not only recruiting, they're training, they're mentorship, the way they conduct meetings, the way they motivate their staff around them. What KPIs do you look at? If you had to get, like, I look, I'll tell you mine. I look at four KPIs that I could change any business. What's my booking rate. When I get a customer and show up at their house, what's my conversion rate, what's my average ticket. And then I look at what does it cost me to acquire a client, but those four things, they could pretty much change any company. And then there's other factors. And then I obviously look at the income statement and the balance sheet and just know what percentage of profit,

gross profit. But what are the big things that tell you, if I put these in front of you, you say, that's my best store, that's not? Yeah. The first one we look at is, I mean, our general overall marker is just haircuts per day. That gives us a general gauge to see if things are on track. And then from there, we can dial in retention. Again, because being that membership-based business, I guess really with any business, retention is our number one. You have new client retention and existing client retention. So how many of our clients who come in for a haircut the first time come back again? And then how many of those people

who've come back again, come back again following that. Because if you can increase your retention, I think a lot of folks who are in business, they don't get the math side of it. But if you can increase your retention, very small amount, it will greatly outpace new marketing. So you can spend way less on marketing. It's one-tenth, is what they say. You can spend one-tenth keeping an existing client than getting a new one. Yeah. And then you dial that in and you say, okay, now you've used those folks to market to other folks who are in their circles to really keep that plug on. So retention is one of our main indicators that we're looking at. And then productivity.

How many haircuts are we doing for how many hours are staffed? Because that's the piece that really will play into your expenses versus your profit. I think the fact that you brought in a full-time person for training and recruiting, I think that's going to, the evolution of that will grow. And when you get really strong on social media and you get the programs are referring more, you're going to see the company double very quickly. And it's hard because it's another expense. Because at first, it looks like a line item that's like, okay, we're raising our cogs. But really what it'll do is if your employees stay longer and the clients stay longer and they're referring more,

it just gets rid of the headaches too. Yeah. We were stuck. I mean, at the beginning of the year, we were just stuck about 85 staff. We'd hire two, lose two. We'd hire three, lose two. So we were making slow increments. We're just like, man, something is just, isn't firing. And we, we couldn't figure out what it was. We hadn't had this trouble in the past. So we're like, okay, well, I think let's try something different. And so we hired this person in, we now have 105 staff. So, so you moved it up 20%, 20%. Yeah. And that's, you know, you can't do more haircuts if you don't have more staff. And we had some stores that were just getting run over. Clients wasn't our issue.

It was time to serve them. Well, I love the model. I knew the first time I went in there, I was like, I got to meet these guys. But when we opened up, my grandma would have been 85 at the time. I'm on this farm out in Eastern Washington. She's a wheat farmer. And I'm telling her this idea that we have to open up this membership-based hair business. And she goes, she leans over to me and she grabs my shoulder and she says, and people will pay for that?

Like, yeah, grandma, people will pay for it. So how many paying clients do you guys have right now? We go through about 10,000 plus unique clients a month. Wow. That's amazing. With a staff of 100. Yeah. Huh. So tell me a little bit about your crowdfunding the 11th store, which is crazy. So you said in the beginning, before we got on, you said, first, you guys came up with the investment, then you had a special investment. Kind of talk about what you guys have done so far versus this latest. Sure. So the store number one, it was just this idea. We need to test it out.

So we just pulled together cash and credit cards. How do we fund this first store? We found a general contractor who also was the laborer, just trying to really bring our costs in. I think our first store cost us $80,000 to build out. Our current ones cost about $250,000 to build out. I mean, we were just trying to pinch all the pennies. Get that first one open.

It's open for about a year. We're like, okay, this concept's working. People love it. Every single person who comes in, our conversion rate is really high. People come in to sign up for memberships. But we don't have the capital to open more stores yet. Banks won't fund us because we're not quite there yet. So we decided to do a friends and family securities offering.

So it's just a debt-based securities offering. So we're essentially said, we need to raise $300,000. Here's anywhere between an 8% to 10% loan payback. Who's interested? And we can only talk to friends and family. So we kind of reached out to people we knew. And we were able to squeeze that together, open two more stores. And then once we had those three, after a couple of years, finally, we were cash flowing

enough that then the bank will look at us and say, okay, we feel like you're a safe bet now. We'll loan you for a couple more stores. And it's kind of what our cycle has been since then is we open a couple of stores and they just eat money for the first year until we can build up our client base. And then we get our cashflow back up, go back to the bank, beg for some more money. They say, yes, they give us money for a couple more, open those, wait another year or two till our cashflow is back up and do that again. So this year we have 10 stores open and we were just waiting for our cashflow to come back around to go back to the bank. And we had this property come up over in Queen Creek. That's just going to be gangbusters. It's prime property. It's one of those that you're like, if we don't move on this, somebody else is

going to, and then we're going to get locked out for the next 20 years of non-competes. So we got to find a way to fund this. And we had looked at crowdfunding years ago, but it wasn't regulated yet. And now it is. Now there's about 30 sites, websites you can go onto, and you can set up crowdfunding anywhere from equity crowdfunding, where you're selling parts of your company. Or what we did was a revenue share crowdfund, which is a little different. So it's a debt crowdfunding. So people are, they're not getting equity in your business, but they get a little bit of play. And the way that it works is for every dollar they put in, they get $1.65 back. So that rate is already set. They already know how much they're going to have it back. And then the rate of return

is based on how quickly we can pay that back. And the way you pay it back is you pay it back as a percent of your revenue every quarter. So every quarter will take 12% of whatever that store brings in and it gets divvied up among all those investors. So what's helpful when you're opening a new store is your debt payment is really low to start when you're not making very much money. And then it's much higher later when money's no longer an issue. And then for the person who's investing, it's good for them too, because if you can pay it back sooner than you're expecting, we're roughing eight, nine-year payback. Maybe it'll get them a 10% return. But if this store goes better than that, we can pay them back sooner.

Now you're looking at 12%, 13% return, and it can go up. So they get a little play in the game. So you're telling me on 65 cents they're going to make, they put in a dollar, they get a buck 65 back. Over 10 years, that's... But they're getting paid back a portion of it over time. So instead of like a rate of return, which most people would think of like, okay, I'm going to get a 6.5.

That sounds like it'd be a 6.5% rate of return. But you have to calculate it as an internal rate of return where it takes into account the time payback because you're getting your revenue back or some of your investment back. You're giving your principal back. Yeah. Yeah. And interest. Well, how much have you guys raised? Yeah. So for that one, we did 300,000. And you got it? Yeah. So we wanted just enough to open that one store because if you get more than that, we don't really have a use for that extra cash. So this is what we wanted to raise. Raised it, boom, hit that store. Now we're rolling, getting that one ready to go.

And that's on mainvest.com. Yeah. Mainvest. So Mainvest, it's, they were the only ones that I found off the top of my quick search that did the revenue share notes. And that's why we went with them. There's been a couple other businesses locally that use them as well that had good success. What would you consider your best store?

What percentage of revenue do you try to put towards the bottom line? For me, it's 20%. So on a dollar, I try to make 20 cents. Oh, gotcha. What do you guys find your best stores at? Because I'm just curious as far as that 12%. If it's kicking off 15% bottom line quickly, like if it took a six month wrap up period, the question I would say is, okay, if they're doing $50,000 a month, I'm just showing out numbers. And they're bringing 15%, that's $7,500 going towards principal and interest. So I'm sure you had a table people looked at as their payback period. How long did it take to raise the $300?

It was quick. It took us about a month. Actually, the raise was two months but what we found is that you got kind of a bunch of people who sign up at first and then there's this lull and then you're kind of waiting like okay who else is out there yeah and what they told us the main invest company said well you're gonna get most reaction again at the last week because there's no reason for people to invest in that middle period. There's kind of waiting. And so we got nervous. We're about halfway through and our landlord was ready to sign a lease. So we were worried about losing that lease. So we just reached out to as many people as we could and then we finished it up halfway through with a couple of larger investors.

So it was an interesting process. I don't know if we'd do it again, honestly. Maybe if we did it, I think we would do it with a lease that wasn't so critical. So that way we weren't as, you know, deadline focused on it because that wouldn't put the, put the pressure on us a little more than we wanted. Yeah, no, that's crazy. And it was really hard to explain the rate of return because you can't post the projected rate of return on the website. It's not allowed by the SEC. So we could post a calculator link and we could post all the numbers to put into the calculator, but people had to go and do that themselves. And we found that most people just don't want to on a site like that. They're just looking for

quick, easy. Did you have any of the employees that you know that went to that? Yeah. Yeah. We did have a couple of us, which was exciting. Oh, that's cool. Yeah. I'm just thinking now you got my brain going into this. It's a whole different way to raise. They don't own the business, but they get a rate of return. It's crazy that it could take eight or nine years. I mean, what's your long-term play? I mean, have you guys sat down and said, we're going to build this thing to this? Are you using it as a lifestyle business? Do you have a plan of potentially selling it? That's kind of what we're looking at now. We say, okay, we have 10 stores. Everything's, you know, pretty smoothly running our day to day, you know, Josh and I, uh, we can really work as

much or as little as we want to at this point. You know, anything that we do is really just building the business and making it better. And so we're kind of looking and saying, okay, where do we go from here? Do we get up, you know, a PE partner who comes in and gets us, you know, from 10 to 50 stores? Cause that's our, always our biggest limiting factor is just cash, right? We could open another 20 stores tomorrow. We just don't have the cash to do it. Or, but then with that, you know, you lose some control. Um, and that's really scary because part of what we love about being in business is that we can work as much or as little as we want. So my business partner just had a second baby and the last four months he can just hang out and really enjoy that time with his family.

There's no pressure. There's no deadlines other than me, you know, badgering him from the sideline. Yeah. When you come back, when you come back, you know, that's good. So we're kind of going through those higher level questions of what do we want this to be now and how do we get there? It's a very pertinent question to today. If I were you, I would start with the end in mind. I think it's so much smarter to say, what do I want out of life? Right now you feel like this defines you. And a lot of people are stuck going, I've owned this business for so long, I don't know what I'd do without it. But once you get a few hundred, or a few million dollars under your wing of this cash, you can go out and do,

there's opportunities that'll find you. So, I mean, I'd love to explore this deeper and say, what are the multiples? How does it grow? What could it become? What's happened with like the great clips and the sports clips and the other things? And how does this model scale to multi-states,

especially like, because it starts to become more, you get the arbitrage. It starts to become a bigger multiple the more you grow. And the more certainty. And so putting some KPIs, dashboards,

building out some technology. You've already built out the app. How long did that take to build? We're about, we're almost done with month four and we should be wrapped up by middle this next month about four or five months for the for the new app yeah the new booking app oh so

you got a whole new app coming out yeah yeah so the one we currently use is just through the point of sale software and it works not as much as it does yeah but it doesn't work great and it has some real flaws for a multi-location business like us. So we found that, okay, we have to build our own app now. So we started that about four months ago and we're almost done. And that's going to, that's our number one, really it's our only complaint we get from clients is guys, your app sucks. Come on, you know? And it's like just little things, but they're little annoying things. And so this should be really good for client experience. We're pretty excited. Are you guys going to have a feature where it says like what I'd love? And obviously everybody will tell you, but it would just be nice to know. I try to get my haircut every three weeks. Give me a few time slots. And then I could

say, press any button, take this time slot. And if I got my favorite, I could set up the thing to say, I want to use Julie. And it can say, here's Julie's time slots. And I can just pick one and it automatically goes on to it. Is that something where you guys have thought about done? Done. Yeah. That's, that's the goal. They have, we're trying to just reduce the number of clicks, right? Can you, you know, pull out your phone within 30 seconds, book your haircut. And if you're a regular, which a lot of our clients are, right. You want that to be easy with favorite stylists. And so you should be able to pull up. Hopefully you're already logged into the app. Yep. You just choose what service you want that day. Boom with favorite stylists. And so you should be able to pull up. Hopefully you're already logged into the app.

Yep. You just choose what service you want that day. Boom haircut. If you already have your favorite stylist picked, it'll show you the haircut times for her. Boom. You click that you're booked. You know, it was really cool back in the day.

You're familiar with Yelp. As you can go find friends and you could actually sync your Facebook account and LinkedIn. I think, I don't know exactly. I know you could do your Facebook account, but you can send an invitation to everybody by just syncing it in where it goes out and it finds everybody on Yelp that's also a Facebook. And you could also invite friends.

So it's a great affiliate tool to say, hey, listen, you don't really have to do anything. This will work through your social media. You hit a couple of buttons and it'll invite everybody in for a free haircut. If they like it, you get paid on it. Have you thought about doing anything like that? No, I'm not familiar with that. That'd be really interesting. I love technology. I'm like obsessed with it. I just feel like this business has got me excited just because it's something, you know, Warren Buffett says, invest

in things you understand, right? He's like Coca-Cola. I love the drink and I'm going to go big with them. And so he invests in things he understands. And this one is like pretty common sense. You like getting haircuts, you get more than one a month, then this is the right move. And you get to know somebody. A lot of times getting a haircut is just catching up on life. It's like, I enjoy the haircut. I'm like, I actually don't mind getting a good long haircut. And then with the wash afterwards. And I also don't mind like sports clips or whatever it's called. They used to like wrap you with a towel and like do, maybe that's a little over the top. And I don't see if there's any value that you guys can make more money on that. But yeah, you can do it.

You know, it just depends on like, you know, what, what level of pamper do you want to do? Yeah. We made the conscious decision to be, uh, if that fast, casual, simple services, we do haircuts, we do washes, we do grooming, you know, we looked at other things. We do hot towel. Could we do color? Could we do massage? Um, and he's coming back to it.

Like, you know, get rich in your niche. Like we're really good at what we do. Specialist. Yeah. Let's keep it focused. And what we found, honestly, is there's a couple other groups that are in a similar sphere. They offer a lot of services. They're having a really hard time finding staff because you need to find staff who then are good at all those different things and train them on it and make sure every single person who works can do those things.

It's tricky. Well, you're a jack of all trades, a master of none. Yeah. And I think that there's a big issue with that. I agree with that. Stay focused. Focus on the one thing, Gary Keller. When jumping from one to five stores, a lot of people are like, I want to do what you

did, Tommy. I want to be in a bunch of states. I want to go expand. And I'm like, do you own the market share where you're at? So a lot of people that they're ready to expand, they think they are ready, but they haven't taken significant market share. I know home service is different because you could have 30 locations in Maricopa County for a haircut salon. It's all about what's close to my house, what's close to

my work on my way, figuring that coming home from work. But what do you tell somebody when they ask, when's the right time to grow locations? I think it's probably different for every person. I think coming back to like, what's your end goal? So for us, our first bit was like, we got to get some out there and prove concept concept because it's not, no one's doing it out there. And then from there, we said, okay, well, if this takes off, we need to be in front of everyone else that's out there. We want to be the Kleenex of, of unlimited haircut memberships. So part of us expanding out quickly, we took every dollar we could into expansion right away because we said, we need to get our name out there, get established. Somebody else looks at our market and says, eh, I'll try another market first. So that was our first goal. We always talked about though, expanding responsibly. So we don't, again,

we want to make sure we paint our staff well along the way. So we don't want to sacrifice that. I think a lot of times when brands expand too quickly, they sacrifice by saying, well, we can cut pay on staff a little bit. We can scrimp here, we can scrimp there, and you start degrading your brand. And so our goal has been if we can maintain our brand and then we still have enough to push out, let's do that. That's kind of the model we've taken so far. Where do you find yourself recruiting usually? Like, are they applying or are you out there actively looking or is it a little bit of both? It's 99% Indeed. It's crazy. It has shifted so much. Craigslist used to be our number one when we started. That's where stylists would look. Now it's all Indeed. They've just eaten up all of

the job searching market share for stylists. That and referrals. We do a referral bonus for our current staff. What's the referral bonus? So if current stylist recruits in somebody, they each get $500 just for sending somebody in. Let's see. Indeed, keep it cut. I got to check this out. Going to put it to the test. 4.2, 21 reviews. That's pretty damn good.

4.2 is hard to get. I'll be honest. I'm upset with it. And here's why. One of those, the landscaping company, and I can't get the review off of there. Keep it cut landscaping. So it's some disgruntled employee. I can help you with that. And then there was like four people. When we first opened one of our shops, the first couple of months, we had some trouble staffing. So four people left, all left poor reviews at the same time. And that brings our rating down. Everything else is,

is gravy. So I don't like, when I look at our Google reviews and our Yelp reviews, I mean, I don't like to be close to four. If I can be 4.5 or above, that's my goal. That's the quality that I want to bring to the marketplace. But what are you doing to actively get reviews? I never got anything to leave a review. I never got anything after a haircut to say, did we do a good job? Yeah. We've done pushes at some point for like the Google reviews, I mean. Yeah. Google or Yelp. I mean, you're done pushes at some point for like the Google reviews, I mean. Yeah. Yeah. Google or Yelp.

I mean, you're not really supposed to ask for a Yelp review, but you're supposed to say, how do we do? Right, right, right. You can't say, you can't gate, it's called gating them. Right. Or if they leave a review in something else, then if it's good, it goes on to Yelp. If it's bad, it comes to a manager. We've done some different campaigns, but it was person to person.

So it was again, it's like, hey, those membership members that you know, that you have regularly, like you said, reach out to those people who, you know, cause you already have the relationship. And you give them some type of performance to Google. Yeah. And we give our staffs a little bonus to you of like, Hey, if they about 20 bucks, right. If a client posts a review with your name, you get five bucks. And by the way, getting pictures and reviews can't wait more. Interesting. Especially on Google and Yelp. Like, get the picture. They're all geotagged

because they're taken on an iPhone or a Droid. I think it makes a huge difference. And plus, they can see the store and they can know it's real. Mm-hmm.

So, and how you respond to negative reviews is important as well because a lot of people filter to the one stars. Mm-hmm. And they want to see

something from the owner that they care, that they're, you know, we understand whatever it could be be it just needs to be a reasonable explanation of you know they didn't do color and i walked in there okay well we specialize in this and we're really sorry blah blah blah but you got to respond to those i sat down with a guy a few years ago and he said with with your expansion, you got to be good at training leaders and pulling them from other industries. He said, you're going to have to be very good at developing people. And I think that's something you're starting to take into consideration is how do we give them

leadership skills? How do we teach them manager skills? How do we teach them time management? How do we get them to understand these concepts so they're stronger, but they stay on longer? Because an open and closing door all the time where people are quitting is so hard. You can't build regulars, not for your type of business. So are you guys, what is the training that goes into it with this recruiter slash trainer? What is their job focused on as far as they're getting them through the process, but how do you keep people? Do you have anybody that's like focused on that? Yeah. I mean, up for many years, that was me, right? So I come from that world of leadership development on the student side. So I had a lot of background in people development. And so it was every month we get together with all our managers, but we talk through, you know, policy procedure stuff, but we're also always doing leadership training.

Kind of the way we found that works really well for us is we choose a book and we read a chapter every month and we work our way through it. So the first one that we always have all of our staff read is Crucial Conversations. And it says, you know, how do you, it teaches you how to understand how you communicate first and foremost, and then how do you communicate with other different personality types and styles. And then from there, we work through different ones. We do a broad range of books that talk about leadership, management, organization, appreciation, love languages, kind of the full gamut to try to give them a full leadership spectrum to say, as you as a leader, you're leading your ship. I can't be in there every day. So I want to give you all the tools that I can to model our style of leadership down with your

staff. And that tricklesles down i read five languages in the workplace so it's a good book yeah it's great you know i think and everyone just gives you that little bit like i was reading through your your home services book um i think all those different pieces you pulled you know some of the best pieces from all these different authors because it's like you know those just those core concepts they come back over and over again and i've read that crucial conversations book five or six times i I always pull something new from it. I haven't read that book. I've read a lot of, I've read a book called Fierce Conversations. Yeah.

A good book. I really enjoy Still the E-Myth. It's Michael Gerber. I've had him on the podcast and he discusses the foundation of like SOPs and run it like a franchise model. Even if it's not a franchise, run it like a franchise model. Even if it's not a franchise, run it like a franchise. Have you ever thought about franchising? We have. Yeah. Yeah. We talked about franchising. I mean, we owned a franchise at one point. That's what turns us off to franchising. Mostly because it comes back to control and lifestyle. And so right now, as we think about what would it take to franchise, I talked to some folks who did it and they're like, oh yeah, I'm working nights. I'm working weekends because I'm doing all these recruiting events. And then

now you have all these franchisees who are coming to you with their issues. Not a bad model. I just don't know if it's what we want right now. And then you lose some of the control over some of those other aspects of how much employees are paid and benefits and are they going to keep that cultural model? I know you can do it and pass that down, but it gets tricky. So we thought about it and then kind of shied away from it. Plus to open up, you know, one franchise store or we'd have to open up like, I don't know, eight to 10 franchise stores to make as much as we would on just one corporate store. Yeah. So we kind of, yeah, we waited out a little bit. But to your point though, I mean, as you talk about like, when is it right to expand

from day one on store one, we were building out operations and manuals and, you know, checklists and training sheets to feed a hundred stores. We were always thinking forward, like let's build this for a hundred stores, not one. So for the 11th store, the first store took some time, prove a concept. The fifth store probably was a lot better than the first store. How do you feel like this 11th store will be as far as like scaling up to where you want it to be? Yeah. I mean, right now to get open, it's clockwork. I mean, all of our checklists are in place. You know, we, from the time we start looking for a property to the assignment opens

and then moving forward, it's just really checking down a list. Now it's dialed in, which is nice. It doesn't take a lot of work. And then from there now, kind of, like I said, we're, we're terrible marketers. So that's kind of one area that we're starting to look at more is, okay, how can we ramp faster? Our ramp is pretty slow comparatively to some other businesses. It works for us and it's worked for us because we haven't pushed hard on it. But one of our goals with this new one is to start thinking about that. Like, okay, how do we get that ramp up faster and get that EBITDA up quicker?

So do you have a CFO? No. I mean, Josh is our kind of CFO in that rule. So one of the things I look at is say, what can we do for promotions that doesn't lose us money long-term? If you're in Chandler, there's Intel, restaurants, Cheesecake Factory.

That's where I worked when the fashion, whatever, Chandler Mall opened. But you know all those people in there. If you've got like a way to get them in for the first haircut, the question is how much can you afford to lose in promotions to get them in on their first haircut? Because a lot of people are just going to take it up as a free haircut, right? And then they're never going to come back. But there's got to be a formula as you keep testing it to say,

33% of these will turn into clients and so we're going to eat this amount of costs till we ramp up and that's part of the initial investment right and then looking at that 300 grand is do you feel like 300 grand is you feel like there's numbers that you get that number when you get economies of scale could get that maybe down to 180 maybe maybe i mean construction costs are they just ballooned um most of its labor honestly a lot of the prices of the materials will come back down but the labor hasn't similar to our industry right our labor has ballooned um since pre-covered so some of that probably a little bit could come down in scale for sure but i wouldn't say a ton but i think our biggest pieces of that you know 300 000 we raised a chunk of that is

working capital to get us over that hump. Right. So that's the money that, you know, if we could, if we're saving 75,000 for working capital to get us to cashflow, well, if we could spend that same 75,000 and get up to cashflow day two, you know, we're pushing it forward. So that's kind of the piece of like, that's really the thing we're thinking is like, how do we take that money we would have lost anyway and put it in the marketing dollars now? And will it play out or will we just eat, you know, marketing dollars and that?

You know, I invested in a restaurant called Kasai and they just opened up Peoria, but they're going to Queen Creek. And are they going to be on Gansel and Combs? I don't know exactly the cross streets, probably. Maybe they'll be our neighbor. But the cool thing about it is these restaurants, it just seems like a lot of these people fit to get in and out of a haircut. It's like the perfect, it's not too expensive for them.

And they're used to tipping well because they're in the industry. So it's great for your people because they come from the same type of industry where they rely on tips. Have you noticed any particular type of clientele tip better? I'm sure this would be a question for some of the stylists, but is there any ones that you're like, you know, they're going to be good tippers? I mean, in general, I think generally it's like, you know, if you have more money, you're going to tip more. That's in general. Service employees do tend to tip, you know, more regularly because they also appreciate like, oh, I work on tips. I understand

that's a huge portion of your income. I think you find that. I think especially with like no-shows, it's interesting. We have probably about 5% of our clients no-show. They'll make an appointment and don't show up. And what they don't understand is that a huge portion of that client's pay is based off of their tip. So when you don't show up, you're really eating a huge portion of that. And so I think people who are in the service industry understand that better and show up more often. People who aren't, they see the membership as, well, I already have the membership. What do you care if I show up or not?

Right? I paid for unlimited haircuts. Well, you have, but you haven't paid for that tip. So is that something that the software can do as a reminder? Just like for me, I just got a text message yesterday. Are you sure you're going to make your dental appointment? Yeah. Press one and then I'll get another one the day of. Correct. So that they got a time to fill it. Yeah. So we

have that and it made zero difference in no shows, which is it has a reminder. Yeah. Yeah. We have text and email reminders. Um, if, uh, if clients are that SMS, that opt-in of SMS, if you got it, you got to stay compliant. That thing's that list is worth gold for reminders and just like leaving reviews. I just love this stuff. Like I'm fascinated by this business model. Let's see here. I think that's what's fun for me, what still keeps me engaged in it. I mean, I don't love haircuts.

I didn't expect to be in the haircut world. I don't cut hair. But I love those pieces of those levers and thinking like, okay, so you have, yeah, how do we increase our retention? Why, you know, does this percentage of our clients not come back after their first visit? What lever can we twist there or tweak there? How do we communicate with our clients better? What's that limiting factor? I think those are the fun parts of business that it's a puzzle and it's never ending, which is exciting. You know, well, you got their cell phone number. You learn a lot from clients that don't come back to say, you know, I didn't like the atmosphere. I didn't like the music. It could be whatever. Not everything. You're not going to please everybody. 1% of customers you're never going to please, no matter what.

And depending on your marketing message, it could be a lot less. People are like, how come my customers don't spend the same as your customers? I'm like, look at your brand. Have you ever seen, like, you don't wrap your trucks. Like, you show up when you feel like like, you don't wrap your trucks. Like you show up when you feel like it, you don't tuck your shirts in. Like you attract, where do you market? Yeah. I can tell you your client base by where you market. And you know, I was the king of Craigslist over a decade ago. I picked up Craigslist. They didn't spend a lot of money, but what I learned about Craigslist,

these were like people that were like, uh, big influencers. So like they go on Craigslist, but then they tell everybody about me. They were like the person you like big influencers. So like they go on Craigslist, but then they tell everybody about me. They were like the person you'd call if you needed your dishwasher fix, you'd call this guy and he'd be like, I use this guy, Tommy with A1. And they'd spread the word really fast. It feels really personal. Yeah. It didn't, it didn't feel like big company, right? It feels like, Oh, I'm connected with a person. Right. Yeah. And that's okay. I mean, I prefer calling a good company now that I've owned houses since 2012. I'm like, I want to call a company that's going to show up no matter what, weekends,

nights, holidays. I want my stuff to work when I hit the button or whatever it is. And before I used to be like a deal shopper till 2012, I bought a house, got everything done at a discount. And then two years later, the roof leaked. Like the air conditioning went bad after three years. Like I just got shoddy work. I got really cheap work and that's what I was paying for. And I thought I was hustling and up doing everybody. And then I realized I want somebody to show up the same day. It's going to warranty their work. That's going to be trustworthy around my family. I don't have to worry that they did a background check that they're not high when they show up. That's hard to find. And you got to charge for that.

And I'm glad we charge for it, but we're not absorbing it. I mean, we give options because I don't, I believe if you're not giving options, you're giving ultimatums. So what else would you like to share with the listeners about the business? What were some of the hardest lessons you had to work through? I think for us, having not come from the business world, we're just learning, you know, how do you raise capital? I think my thought was coming not come from the business world, we're just learning, how do you raise capital? I think my thought was coming to it like, oh, you go to a bank and you get a business loan, right?

And they fund your business and you start your business. And you go into the bank and they go, do you have a business yet? And you say, no. And they say, well, you're not going to get any money from us. What do you mean? I thought this is what the small business loans are for. Well, the SBA can do some stuff. Those are for businesses that are established and are short cash flow. Essentially, if you're a good bet, we'll bet more money on you.

I was like, oh, okay. So that's been kind of fun is learning how do you raise cash. At one point, we had eight credit cards all maxed out to the gill because that's what we needed to do to get the cash. We needed to move forward to get over that hump. But it was, I'll call it responsible spend in that we knew our payback was there if the concept worked out. And then you just evolve from there and okay, now that's done. We don't have to keep those maxed out anymore. And how do you get that next, that next chunk of change? But I think the biggest part with that was just reaching out to network and saying, how do people get money? And

you know, I think you've mentioned it before. And some of your podcasts is like network, network, network. Network is your net worth. Yeah, because if you've never done it before, there's so many people that already have. You just waste so much time trying to figure it out yourself when you just make one phone call. And there's people who are in roles like yourself or myself who want to give back and help other growing entrepreneurs. You just need them to ask the question.

So I think asking questions is probably the biggest failure that I had early on that I've learned the most from. And now that's the first thing I do is I don't know this. I'm going to go look it up, but I'm going to go ask somebody who knows this really well. Where do you go to find help? I mean, you read a lot of books. It sounds like what else do you do? What are you involved in? Why PO or why or EO or any of the, do you go to like BNI or what, do you have anything you go to, to like for mentorship? I haven't been recently. I had a daughter in 2020 and that really slowed me down on some extracurricular things. I've been involved in local, local first Arizona. So I try to hit up

their networking events and now it's a lot more personal connection. When I have issues, I'll say, you know, it's a legal thing. I reach out to our attorneys. Hey, do you know someone who's specific about this or struggling here or PR person that we used for a while, Evolve PR and marketing. She's amazing. Jen in Scottsdale. She's connected with so many people that when we were first trying to figure out how do we expand, she connected me with somebody who had also, they had about 10 locations at that point. And she said, would you be willing to meet with this other person? And he met with me. So I think just trying to build those connections through people. And then, yeah, I read a lot. So if I have a question about something on finance, for instance, or like franchising, I read three franchising books to figure out,

is this something we want to do and try to educate as much as I can on the backend. I'm glad you said that about franchising. Cause everybody's like, I think I got a concept. I want to franchise. I'm like, first of all, when you get in the franchise business, you're no longer in your core business. You're babysitting. Number two is franchisees expect a tricky business. So you better have it all figured out. You better have your call center figured out, your technology suite. You better have a great website. You better have a great careers page. You got to handle everything. People want a business in a box. So you got to think your way through it. You got to have every... And I would not sell franchise to nine out of 10 people. I would really be careful.

Chick-fil-A, I think they have like 5,000 people that want to be their franchisee, but they don't even own the real estate. They don't, they'll make six figures, but they'll work their ass off for that. But they get the right people that want to work hard and be successful. And they just buy into the business. And I think franchisors, they just say, oh, you're going to put the 50 grand or the 200 grand up, you're in. And then like McDonald's is a great job. You got to go through their training program. You got to have at least a million bucks in the bank. You got to go through their university. You got to sit there and have every single job

as the investor. You might be worth a hundred million dollars, but you're still going to go through the program, working at McDonald's for a certain amount of time. And that eliminates a lot of people, but it gets the buy-in. Yeah. Because when you start a franchise, you have your business and you have your franchise business. Right. It's a whole second thing. And it is. And I think a lot of people, I'm like, have you even proven the concept in three markets? Like you've proven three, three stores is kind of that magic number. I feel like where there's a proof of concept, three restaurants, three, like, and I'll tell you this, it's harder to do a market outside of your core market where you

grew up and you know, everybody, where you went to church, where you've got family. And it's a whole different concept. It's the greenfield strategy. It works, but it's easier to buy a company and then turn it. They're both difficult because then you got integrations and then you got to kind of clean up a mess and headspace trash and learn who wants to go on this trip with you and who doesn't. But there is a concept of taking, are there any like mom and pop stores that are not on the membership model, but just haircut that you guys have looked at possibly purchasing or would that not even make sense? I thought a little bit about it. Again, this last year is exploring different options. I think the trickiest part with it is to rebrand the stores potentially. It's a big expense.

So that could possibly work. And then finding the right place because there's just not a ton of, yeah, it used to be a lot of mom-pop ones, like smaller ones, maybe single salons. I'm not sure. Yeah. It doesn't seem like it works for this model as much. I think PR is a great play with a lot of press releases and getting people and just, I feel like, like getting into the right companies, like Intel and Honeywell and some of the main players here should go. Daddy's here. I was going to say sugar daddy. So give me your top three books that changed your life. It sounds like everyone needs to read the crucial conversations. What are some

other books that you recommend? I like that one. I think in building company culture, there's one called appreciation. It's by the OC Tanner group, the research group. And I really liked that one because it outlines a research back understanding of how do employees want to be appreciated and recognized. And so we built out a whole appreciation recognition model for our company from little things of like, you know, weekly, you know, it's on our weekly manager checklist. Did you appreciate every single staff member verbally? Okay. Those little things that check in. And then we have incremental anniversary awards, you know, your three, your five, your seven, your 10 year awards. But it's also like each of those

has a specific piece of, you get something that's a token gift and then you get something cash based that you just can go buy whatever you want. So there's different ways to structure it to make sure people really feel appreciated and don't just, you're like, Oh, I appreciate them all the time. But research shows that you need appreciation in these specific ways to be effective. So that one is really helpful because I think that in creating a staff culture where people want to stay and then recruit other people into your business, appreciation and recognition is important. And it has to be systemically in your business. It can't be something like, oh, yeah, we appreciate our staff. It's got to be part of your operating documents, part of your checklists. It's got to be critical. So I say that's probably number two.

And then for people who are just starting out, I think what was interesting for me is Blue Oceans and Blue Oceans. Blue Ocean Strategy. Yeah. Yeah. Which talks about that concept of like, right, you have, you know, this main core industry. So maybe you're in garage doors and you're garage door tech. You're like, I want to do my own business. What should I do? Well, instead of looking at taco shop, you know, something completely different, maybe look at garage doors and say, well, what isn't being serviced in this industry already? Or for haircuts before our chat, we were talking about mobile stylists. That'd be a perfect industry that I could look at.

If I'm a stylist, I'm working in a hair salon. I could say, huh, this is a mobile haircuts. Isn't something that's really being done on a big scale yet. Maybe I could do that and hit that niche it's kind of on the edge of the market that i understand really well but isn't being touched yet that's what we did with memberships we took a existing industry haircut it's been around for a long time there's nothing special about it but we twisted it just slightly and now we have a brand new model membership-based haircuts and nobody else is doing it there's a reason for people to shop us versus somebody else.

So I feel like those three books were, I feel like, critical and I think good for anybody in any industry to read. I think about, like, literally nobody's asked me this, but if someone, the stylist that I told you about that comes to the house, if she said, hey, listen, I have two hours these two days. If you pay me 80 bucks an hour, I'll come cut whoever. All I ask is that if they like my haircut, throw me 20 bucks.

I'd pay her 160 bucks a week. I'd come for two hours during our meetings and figure that out. You don't make time windshield time. That's a loss. So how do you get more people there? Hey, do you got any neighbors that could come here that would want to do it?

There's a way to make that work. My dad would probably come over. I just don't think about it. But it's up to the entrepreneur to figure out these things. And like, oh, man, I just had the guy show up for the IVs yesterday at work. Five of our guys got them. It's like $180 a pop. He's probably got $50 worth of vitamins in that.

So $130 times five, it's a lot of extra money, you know, but there's also opportunity costs. There's this drive time. There's, you know, at first I didn't want to do the IV. Then I decided I wanted to do it. Usually it comes to the house, but I think there's so many businesses. Blue Ocean is what it talks. The core competency I took out of the book was, for example, a blender.

Instead of selling the features and benefits of a blender, like, hey, it washes easy, it cleans up great, it's dishwasher safe. The Blue Ocean side of it is this blender has higher RPM, so it chops up the nutrients better and releases more vitamins, which gives you longer, more hair, longer, brighter skin, more energy throughout the day. Because everybody's selling the features and benefits. Oh yeah, you know, slices and dices. But the blue ocean side of it is you'll live longer if you use this blender.

And literally you'll live a happier life. It's like the outcome. How do people get ahold of you if they want to reach out, Jacob? How do people get ahold? How did you get my phone number? I was sneaky. So it was funny when your assistant called because I said, I mean, Josh and I, we're not like, you know, super secretive, but we are pretty careful to not have our number out there. And our stylists know not to give out our numbers.

So I was like, interesting. I'm happy that you did it. I don't worry about it. We won't get anybody in trouble. But it was great. It was funny. But no, if they want to get a hold of me, jacob at keepacut.com. Very flexible and always open to folks' questions and thoughts.

And then what I always do at the end of the podcast, I'll give you an opportunity. We talked about a lot of stuff, just maybe something for the listeners to think about. Going into business is a lot of work. I tell a lot of people, you don't want to go into business. You can make more as an entrepreneur.

You can make more as a manager. Like a lot of people go into business and they say, oh, I want business. I want freedom. The sweat equity, the first five to 10 years is all work. It's not easy. And you're not guaranteed a paycheck. We're all, if there's profit left over for us, that's how we make our money. We're performance pay. So what are your thoughts is something for the listeners to kind of end with? Yeah, I think that's a, it's funny you say that. Cause when I was transitioning to keep a cut, I wanted to quit my full-time job. So we had three stores open now.

So like, okay, I got to do that. And I was like, well, we don't have enough money to pay me yet. So at that point I was driving Uber part-time. I was Airbnb-ing out my house. I had one room in that I would Airbnb out as a separate room. People would rent that or they'd rent my whole house. And if they rented my whole house, then I would go stay with a friend or go camping. Or worst case scenario, I'd rent another Airbnb for less and split the difference. But there's that hustle in the beginning that really is tough.

I think if you're thinking about going into business or even scaling business, because it sounds like a lot of folks who are listening to your podcast or think about scaling, it really comes down to thinking every decision about a hundred locations and not one location. So if you're going to make a policy choice, think about, will this scale to a hundred? Because you can save yourself a lot of time later if you get things set up right to start. Just from day one, start building out your operations, writing down everything you do. So that way, as you decide, or maybe you won't ever do it, you'll just have a really fine-tuned operation. But if you decide you want to scale up, then you'll be ready and you don't have to put all that legwork in later. I love it. Well, I appreciate your time today, brother.

Thank you. Great work. Thank you. Yeah. Thanks for coming in to Keep It Cut. We appreciate you. Yeah. No, it's great. Thanks, guys. Thanks for listening. Hey there. Thanks for tuning into the podcast today. Before I let you go, I want to let everybody know that Elevate is out and ready to buy. I can share with you how I attracted a winning team of over 700 employees in over 20 states. The insights in this book are powerful and can be applied to any business or organization. It's a real game changer for anyone looking to build and develop a high-performing team

like over here at A1 Garage Door Service. So if you want to learn the secrets that helped me transfer my team from stealing the toilet paper to a group of 700 plus employees rowing in the same direction, head over to elevateandwin.com forward slash podcast and grab a copy of the book. Thanks again for listening, and we'll catch up with you next time on the podcast.