The Home Service Expert Podcast - Growing A Home Service Business That Can Run Without You

Episode Date: April 19, 2019

Michael Kaplan is the former co-owner of Zerorez Carpet and Living Services Care in Minnesota, where he successfully grew the business to over 170 employees with over $15,000,000 a year in revenue. Today, he's an angel investor at RedHookinvestments.com, helping businesses build strong leaders and realize their potential.   In this episode, we talked about Leadership, Hiring, Business Growth...

Before we get the podcast going, I wanted to let you guys know that the Home Service Millionaire book is available now at homeservicemillionaire.com forward slash success. And it's for free. All you got to do is pay for shipping. It's homeservicemillionaire.com forward slash success. And it's a hardcover copy. And I put a lot of extra things in this book. So please be sure to order your book. And I also made it available on audio. Go to homeservicemillionaire.com forward slash audio and download your own audio book. Thanks. This is the Home Service Expert podcast with Tommy Mello. Let's talk about bringing in some more money for your home service business.

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. Welcome back to the Home Service Expert. My name is Tommy Mello, and we're on the podcast, The Home Service Expert. I've got Michael Kaplan here. He recently sold his company. It's called Zero Res Carpet and Living Services Care in Minnesota. And he actually studied economics and went to law school in Minnesota. And they had over 170 employees

with over $15 million a year in revenue. And right now he's an angel investor at redhookinvestments.com. Michael, I'm really happy to have you on today. And I'm just really interested in learning more about the carpet industry. 170 employees is nuts. Tell me a little bit about where you've been and what you're doing today. Yeah, well, thank you so much for having me. And I will tell you, it is kind of nuts. I mean, think of you've got people coming from all walks of life. We were cleaning carpet and air ducts, etc. in six states.

And there was a whole lot of juggling. And I'll be honest, I didn't wake up one day and say, I'm just going to spend the next 12-15 years in the carpet industry. It was an interesting path where I... Originally, I had looked at franchising. I was going to be a sandwich baron. I was going to open a bunch of Jimmy John's out in Boston. And one day I woke up and said, Well, what if my tomatoes don't show up? And I probably have a contract to buy them. I probably have a franchise agreement that requires me to buy a certain type of tomato. And I realized, Well,

if I get stuck on tomatoes, I probably shouldn't buy a sandwich franchise. So I went to get a little more education, went to law school, and didn't want to practice but wanted to go out and buy and turn around business. And the first one that I ran into that made a lot of sense, a real estate investor that I met through some friends was buying a carpet cleaning franchise that was two employees and three trucks and doing maybe about $300,000. This was 2006. And he was going to be a silent partner and we had a couple other partners who were going to be active. And I was going to finish up school, spend a couple years in the business and then go out and buy a bowling alley or

a barbecue manufacturing company or whatever. And the opportunity grew and grew and ended up turning into something really special. Certainly not what I had in mind. But I think the industry, I think your listeners can really appreciate that the home and service industry is really, really fragmented. And the barriers to entry are often very low. So we found out pretty quick that if we could figure out how to get the message out and provide top-notch service, scaling it wouldn't be a huge issue. Turned out to be a whole lot more moving parts than I expected, a lot more difficult, but the opportunity certainly

was there. Yeah, it's interesting. So I look at carpet cleaning. So I'm in the garage door industry and I love carpet cleaning because you can continue to keep your customers. I mean, I fix a garage door. I'm there maybe every 12 years if I fix it right. And I love the book, The Ultimate Sales Machine, where he talks about how he took a carpet cleaning business and actually did a study, a case study on how cleaning a carpet twice a year is healthy and it keeps the germs out of the air. So he basically took a carpet cleaning industry owner and he just doubled the times he goes to the customer's house. 170 employees. Tell me a little bit about your operation, your org chart.

Tell me about how it was all structured. I think the hardest part of a small business, and by no means were you a small business at that point, but is the structure and how it's ran. So I want to hear more about that. Oh, yeah. And I mean, when you start out, if it's to be, it's up to me is how you operate. And it wasn't a system for how zero-res it is.

Here's how Michael did it, or here's how Susie did it in the phone room. And what was required was that we start to put specialists in place, leaders who are ninjas at what they do, and have them sprinkle the information down. So what we developed over the years was a leadership team. And that comprised... We operated the business on something called EOS, Entrepreneurial Operating System. There's a book called Traction that walks through how you execute on that. And it takes a lot of the leaders from the books we've all read,

good to great, Jim Collins, Patrick Lencioni, Charles Cournot. The books and philosophies that they put out there were... It's all the right ideas, but you don't quite know how to execute on them. And what EOS does is gives you a platform for using those philosophies and living them in your business. So our leadership team had a visionary whose role it was to have 1000 great ideas and drive culture and identify where the business is going over the next handful of years. There was an integrator or a COO whose job was to filter those thousand great ideas, prioritize them, and figure out which ones we had capacity to do and keep the trains running on time.

And then there was key people from sales, finance, service, etc., human resources. And that leadership team had weekly meetings. And then that sprinkled into them taking the big takeaways from those meetings and going to their departments and having meetings that duplicated but got a lot more granular. Took the big message from the leadership team meeting and got into the more nuts and bolts of what does the sales department need to do this week. So that's what was happening in Minneapolis. But we had locations in Charlotte, Savannah, St. Louis, Pittsburgh, and Omaha. And the same thing would happen at the branch level where the leadership team would meet,

and then they would break into smaller groups that was out of state. The out-of-state operations were solely responsible for field services and maintenance. And the Minneapolis operation was responsible for marketing, finance, that sort of stuff, making it kind of a hub-and-spoke model for the out-of-state operations, if that makes sense. Yeah, that's great. I love the concept. Let me ask you this. This is a question. I've probably read seven books that come to mind on this. But franchises versus ownership versus... What is that called where you... Like a licensing kind of thing?

A licensing deal. Yeah, that's perfect. So you own them all, you license it out, which I think you got more control of, or you franchise it. Can you go through the three and tell me the pros and cons? Well, there was a point in 2011 where we had high-level discussions with our franchisor about buying the franchise system. And what I realized was, the thing that I'm great at is marketing to and taking care of primarily residential carpet cleaning customers. If I bought the franchise system, my customer would change. And I would be marketing to and taking care of franchise owners. And it's a very different customer, very different business.

It's hard to break up that relationship as a franchisee or a franchisor. You're married and marriages don't dissolve easily. You have a bad customer out in Plymouth, Minnesota. Great. You lose a couple hundred bucks and you fire him. And you say, yeah, you know what? That didn't go well. The stakes are very, very different. So I really like being an independent. I don't mind having partners in my Red Hook business

where the whole game is investing in small service companies. That's my job today. Finding great service companies that have great leaders that need some capital, need some strategy, and I can add value as a coaching consultant with an investment. That model I like a lot because it's nimble. What works in Poughkeepsie may not work in Tulsa. And I like being able to say what we're doing in Poughkeepsie uses a different strategy than what we know works in Tulsa. And I like being able to say what we're doing in Poughkeepsie uses a different strategy than what we know works in Tulsa. Franchising, you got to build the sub at Subway the same way. You can have a regional menu,

but all the things are the same. And I think it's really, really tricky to execute in a franchise. As a franchisee, it can be really beneficial if it's an evolved franchise system. That's why you pay a royalty. That's why you're buying into the brand because they've got their ducks in a row. They've done it forever and they're going to add value. But a lot of franchises don't. And I've met lots of franchisees who are just banging their head against the wall.

I got this contract. My franchisor owns all my customers and my phone number. But they're not giving me anything. They're not building my business. I'm building their business. So as a franchisor, it can be lopsided or beneficial. But in business, I find you want to find equilibrium where value for value transferred is at parity. And it's difficult to do that in franchising

without an enormous amount of effort by the franchisee and the franchisor. Does that kind of resonate? Yeah, I think you built some animosity up and I understand that. I've talked to a lot of franchisors who they explained to me that, you know, the franchisee needs to be

super invested in the community and they need to go above and beyond. But when you're doing that as a franchisee, you might feel neglected and feel like, hey, I'm taking all the blood, sweat, and tears out of my life to make this happen. But at the same time, I kind of feel that way about A1 as my market managers.

They bust their butts in different states, but we're not a franchise. But we're also giving them a corporate structure that one manager has got to take the phone once every four months on the weekend. States, but we're not a franchise. But we're also giving them a corporate structure that one manager has got to take the phone once every four months on the weekend. We buy parts way, way, way cheaper. Our ValPak is the absolute lowest it could ever be as far as mailers are concerned. We've got all the advertising except for the local community stuff handled. So I think that there's pros and cons.

Absolutely. Like you said, I think there's a lot of times that the franchisor doesn't give enough support and there's animosity built up. And a lot of times people wonder, could I go out on my own? But I'll tell you what, I've done it on my own and thank God we're at where we're at today. But if I had to go back in time and had to restart, it's not easy to get the deals. And you said it when we talked earlier. What was that analogy you said about just you make I'm operating with plays on what you're doing with your multi-state, with regional managers and collective buying. I'm going out with Red Hook Investments where we're finding small entrepreneurs in the home service industry. And rather than trying to just coach or consult them,

we're investing in them. They don't pay us, we pay them to buy into their business, a minority stake. And we're trying to help them grow and steal second base. We want to use our experience, having been through these battles, and growing home service companies. I don't care if it's a snow and mow or an HVAC company or a carpet cleaner. the principles are the same. You've got to have an artisan who really understands how to do the work. But then all 95% of the rest is how do we make good finance decisions and good choices on what services to offer and write marketing messages to the right people and tracking the snot out of stuff.

And so we're out helping people like an active board of directors, not running the business for them, but being a sounding board and helping them grow because it's hard. And getting that real world MBA on your own, it's a cold, dark winter when the phone's not ringing and you got five grand in the bank and you're hoping you can make payroll, that sucks. And so we're trying to run people towards systems and toward more sustainable businesses where the business is built on how the company does it and how the organization and the culture are formed rather than just how Joey happens to do it that day. So really try it. I don't know if that's too circular, but trying to build up

systematized businesses. And it's straining and stressful, but never more rewarding work. Yeah, it's really important to get the business running on its own. And you mentioned earlier, you go out for the bus system, that if a guy gets... If there's one guy that gets hit by a bus, and they're out of business, then that's tough. And trust me, I lived a lot of my business years that I was that guy. And I think I have a $2 million insurance policy just in case I get hit by a bus at this point. Yeah. So what you mentioned was, I evaluate businesses' stability based on what I call a bus number. How many people would need to be hit by a bus for the business to go under? And if that number is one or two or three, is it really a business or is it a job that

is way worse than a business? Because you're doing all of the stuff. You're the head cook, you're the bus boy, you're the waiter, you're the marketer, the list goes on. You're doing all of that stuff. And yet you don't have a team to rely on. So my job in life right now with Red Hook Investments is to invest in people and help them grow their bus number through systems and through smart planning to try and grow something stable that they build up leaders. Rather than just being a manager, we're developing leaders. Because if all you do is manage people, there's no one there to watch the shop. You can't

take a weekend off or go to Maui or have a sick day or, God forbid, get hit by a bus and have something sustainable left behind. Well, what I like to say is, what happens if a guy wins the lottery at your company? So if you got this golden nugget, you got somebody that's just... A lot of times we pray for the right person, whether it's the COO or the chief technology officer or somebody in the finance department. And we say, one day we're going to get a better salesman and this is going to happen, but you can't build a business on that.

So I think you start with the systems. And I talked to a buddy of mine last night and I told him, he goes, well, what business are you really in? And I said, I'm in the people business. We grow people because without them, we fail. And I think we've learned a lot about getting the right people. And I'd rather hire somebody fresh

that's never heard of the home service niche and find somebody with 20 years experience. But what I found was every single person listening right now, I'd say the majority of people at least, not everybody, but they would love a guy with 15 years experience. They'd say, come on, please get started today. Here's a new truck for you. And I'm kind of opposite of that now. And it's hard to believe that. But I'd rather have somebody that's a fresh slate. And we start from scratch. And I can show you my way. And you come in knowing what we're expecting. You can't compare and say, well, we didn't do it that way at the last shop. What's been your

experience in the carpet niche? Oh, I love the way you talk about people. We went for years where we absolutely wouldn't hire someone with experience because our culture was still developing and evolving. And I look at culture in a company as... Patrick Lencioni wrote a book called The Advantage. He says, it is the differentiator between companies that win and companies that lose. Two similarly situated companies, the one with the stronger culture is going to thrive compared to the other one. And I truly believe that.

You can't spell culture without the word cult. So we ran toward trying to create a frat where people felt invested, where they felt aligned with where we were going, where people would actively seek out opportunities to make the company better, because we solicited feedback and all that. And if you don't have a strong culture, and you bring in the strong-willed guy from the competitor down the road who thinks he invented carpet cleaning, well, guess what's going to win? The loudest voice. And if you don't have that culture that's got a level

of permanence and stability, the new guy or in a growing company, the dearth of new guys are going to overwhelm that culture and then you've got this mess. But if you do have a really strong culture, then once we did stabilize and the bulk of the heavy growth was out of the way and we were operating a more mature company, we brought in tons ofbrace that, then bring your new ideas. You need to have that baseline, if that makes sense, of standards, systems, culture to set the tone. Otherwise, it's the inmates running the asylum. You know, there's a long time ago, I used to go to church religiously every Sunday

and I don't do it as much as I should now, but the pastor came on the microphone and said, you know, so many people will criticize the Bible yet they've never read it. And I think the point of that is you got to know it before you criticize it because it's so easy to read a book that's against it. But before, you know, in his words, you got to know the truth before you could ever examine anything else. And I think that's the basis of it. When people come into work for me, they got to understand our manual and their manual specifically.

But they got to understand the CSRs, the dispatchers and the role that we all play within each other. And I have a mentor, Al Levy, who really kind of brought the manuals to us and helped us grow that part. I mean, we did 18, 19 million last year. We'll do well over 30 this year. And it's kind of funny because we did that without some of the systems we have now. And I can tell you that taking the time to sit down,

it's boring as hell for me. I'm telling you, I am not an operational guy. I'm sales and marketing, and I'm all about pushing the revenue, but I'm not good defensively as far as financial. I mean, I've been forced in that, but it is all about the systems and the systems dictate the people you get. So people always ask me, what's more important, systems or the people? And I'm like, the systems dictate the people you get and the training and more importantly, the retention, because so many people forget they're always going after new customers all day long. How do I get more? How do I get more? And I'm like, you're losing them

as quick as you're getting them. You're not even booking most of your phone calls. So what do you have to say about that as far as some of these younger entrepreneurs, younger in business at least, about some of the biggest mistakes that are made? Boy, well, I feel you. And I mean, it's hard. Setting up systems... The people listening

to your podcast are probably mostly hard-charging entrepreneurs. We don't like to sit down with our pens and our rulers and write out all the nitty-gritty if this then that stuff. But it is so important, if you want to scale the business, to absolutely obsess about that stuff. And the way I find it more manageable is to bring the team into it and sit down and say, Alright, where do we want to be in three years? What do we want the world to look like? And it's not just revenue. Everyone's going to throw out a revenue number first. But okay, so you're doing 3 million today and you want to do 7 million three years from now.

Great. Whatever the numbers are. What's the world going to look like? How many employees? How many trucks? How many pieces of whatever equipment? What kind of culture? What kind of benefits?

All that stuff. And then think, where do you need to be in one year so that you're on pace for that three-year goal? And then what can you do this quarter that you could obsess about and really check off the list so that you're on track to hit your one-year goal so you're on track to hit your three-year goal? So that type of planning with a little bit of vision casting about where you're going to be and then working backward, I think really knocks down some of those emotional and time commitment challenges that you have.

Because if you say, well, crap, all the systems we have when we're doing 3 million are going to be irrelevant when we're doing 7 million. Doing 18 million and then going to 30, I think half of the systems have to be tweaked, right? Because you're running largely a different business. So breaking into those bite-sized chunks, I think, is massively important to make it tolerable for the entrepreneur to create these systems and practical for the entrepreneur to create the system. That's really interesting because a lot of times it's so hard. I mean, I feel that the people out there listening, it's just, you say all this stuff

and I say all this stuff and we say, hey, sit down for a weekend and build out the manuals and do the orange chart and get commitments from people. I'm like, dude, I'm working 12 hours a day already. Oh yeah. You know, the biggest thing I think I hear the most of is how do I get the right people? And the problem is you spend 25 bucks a month on a Craigslist ad and you

expect to get the right people. And half the people out there are not paying their guys enough to get good people. And they're going, the unemployment rate is super low right now. And if you're going on Indeed and Craigslist to find people, you're failing. I mean, you got to recruit, you got to recruit people that have a job. And that's half the battle, I think, because if you're out there getting a bunch of people that are unemployed, they're unemployed for a reason. Unless they just moved to town, it's really, really hard to be successful as a really small business with bad employees. What do you think on that? Well, if I had a hiring secret, I would look to hire inside the box. And when my business

was growing up and figuring out where we were, it was during the recession. And in 2009, we hired lawyers and doctors and professors. And I kid you not, these white-collar professionals were out cleaning carpet because they got laid off and they had to make ends meet. And those people were not inside the box. They were never going to fit inside the box. And when I say the box, I mean, what does the job look and feel like? What are the benefits? And what are the pain points of having a schedule that you don't really know when you're done?

And sometimes you work weekends and here's the pay range. That's the box. And you try to take a doctor or a university professor and put them in that box, they may have some success, but the odds of them being happy there are unlikely. So I think you need to first develop the box and put all the benefits in and all the retention tools, the free breakfast and the things the benefits in and all the retention tools, the free breakfast and the things that create culture and community and make the job fun or engaging or meaningful.

And then put people on your team that are going to fit in that box and thrive. So don't go out and try to find someone who is going to fire you, I guess, is the way to dumb it down. Yeah, I've done a lot of mistakes and I've hired the wrong people. And we had a huge meeting two weeks ago. I flew all the managers out. And one of the things we talked about is you got to have a safe zone. You got to walk into work and not feel like you're going to get fired

if you have a suggestion. And I feel like a lot of times when we hire some of these white-collar people, they always want to run the business almost. And you're like, well, settle down there. First, learn our way. And then we're more than welcome to take on new ideas. But we always talk about there's three ways to handle a new idea. No, and here's why. Yes, but not now. Or yes, let's get that going. But what it is, is it's a change within the manual. And the manuals should be short, simple. And this is your job from day to day. Here's how you work with your CRM. Here's how you communicate with your dispatcher.

And I think a lot of the companies out there, they're going, well, I don't even know where to start, but it's pretty simple. Document your day from 8am to 5pm and sometimes to 10pm, if you're like me in the business and say, what can I do to step out of this? And what systems could I create to let me work more on the business instead of in the business? Where do you get started? So today you open up a business or let's just say, let's do this. Let's talk about Red Hook. You sit down and I'm sure there's a big question here. You go through a lot of things. You look at a lot of numbers. What's the first month look like to really help out a small business?

Well, I think there is strategy and accountability that's lacking from a whole lot of businesses. And it's for a number of good reasons. Like I said, being the head cook, the waiter, the busboy, all those jobs, they're trying to do too much. So what they're doing all the time is working on the business, not in the business. We try to step back and say, where are we trying to go? What are we really trying to accomplish? And how do we stop cutting the end off the ham? There's a great story. Maybe it's not great, but a story I tell too much about a daughter

and a mother sitting there making the Christmas ham. And the mom cuts the end off and puts in the pan and sauce and whatever goes in the oven. Daughter says, well, why do you cut the end off? And she says, well, that's what my mother always did. That's what we do. And grandma walks in and she says, well, why do we cut the end off the ham? Oh, I used to have a pan that was too small. So I used to always cut the end off the ham so Oh, I used to have a pan that was too small. So I used to always cut the end off the ham so it'd fit in the pan. So you're doing something in the business.

You've got this system that probably could be revisited frequently because it may not match up with what your goals are. So what you're doing as an $18 million company, probably not as relevant to what you're doing as a $30 million company. Your core values aren't going to change. Your manual is not going to change in terms of how you execute on it. But the way you schedule jobs is going to be totally different as an $18 million versus $30 million. So we're going to look at ways where people are

using archaic systems that don't make sense. And we're going to layer in some strategy and look at where do we want to be in three years? How are we going to get there? And it's not being everything to everybody. So many businesses try to... They sell pencils. They're awesome at selling pencils.

Someone asked for a Sharpie. They said, well, yeah, I guess we could do that. How many times have you done that in business? And avoiding doing that, avoiding being the guy who's working with small business in home services. It's like they show up with a trench coat. They open the trench coat and, You want to buy a frying pan? You want to buy a clock? Yeah. We help them narrow in and focus. Do less. Let's be awesome at what we do.

And then really recognize that what we sell is trust. And when someone trusts us, they give us permission to offer more services to them, where we can excel, where we have a high level of competence, and we can earn more wallet share from them. But until you earn that trust, just focus, focus, focus. So we try to get them to do less. We try to get them to come up with the long-term strategy. I strongly believe if it's not written, it's not real.

So we write it down. We set those goals. Then we start to work on investing on the team, in the team. And culture trumps all. And you can't get where you want to go if it's just you running that direction. You got to get the team on board. And that means, like you said, with the manual, getting them to focus on, let's do it our way. And then when we have a high level of trust in each other, I'm going to give you the latitude to make it your way. But it's within our parameters. Maybe you've got a six-point system in the house,

a circle of success. Every good window cleaning or carpet cleaner or fill-in-the-blank service hits these six touchpoints. I want you to do them your way because you understand what our mission is and I believe in you. And so trying to map those out, that's kind of what we do in the first month. Yeah, I like the fact that you guys, you got to kind of take two steps back to take 10 steps forward. Absolutely. Understand where we're at today, understand where we're going, document it, hold each other accountable.

I think accountability is huge. And the biggest mistake I've seen, and I think Michael, you could attest to this, is most of my time being an owner, I've always told people how to do it. Here's how you sell. Here's exactly the process. But I never had them repeat back to me and explain to me that they could do it back. So I said, I told you a million times, I've heard every manager that I have tell me, I've gone over this every day. I said, when's the last time you did a one-on-one with them and had them do it back to you and explain to you that they know what their uniform should look like? And they agree and they sign off knowing that. Because if it's not written down,

it's not accountability. So have you ever noticed that once you actually take the time to have them repeat it back and sell you in role play and sign off saying they know it, that you actually get stuff done? You use the magic word roleplay. And it's embarrassing sitting there with your peers and doing a mock scenario of how you're going to talk about pet urine on carpet. But if you can do it in front of your peers, you can own it in the home. And I always teach people that when you're in a home, you're playing a character. You're in a play. You're King Lear or whoever. You are on stage and you know the script. And you are the professional who knows it better than your fellow actor. And your fellow actor owns the home. So what you do is you put on that persona, but you got to know your lines. You have to repeat them 1000 times and practice different ways at getting that the same handful of bullet points.

And if you don't do that, in practice, you're never going to be able to own in the home. And you're never going to be able to think outside of the box and take the cues from the person you're engaging with, the homeowner, to be able to achieve their goals. You're not going to be asking the right questions. So absolutely, it's wildly important to inspect what you expect. And that's what you get from role-playing. You're able to validate that, okay, not only have you heard me, you're able to digest it, make it your own, and perform. So let's do this. Let's go over... Did you do a lot of role play? Or was that something you delegated to your management team? Well, I used to clean a lot of carpet. I answered a lot of phones.

I did everything but the books. But through the years, I was fortunate to be able to build a great team with my partners and fire myself from things that were either not the highest dollar, or that I wasn't the best at. It's been a while since I roleplayed, but I certainly have experience, I guess is the way of saying it. I think the biggest thing that I focus on with roleplay is objection handling is because so many of us, we can't handle silence and we don't know how to approach a customer. So what's the biggest objection in the carpet cleaning industry? Maybe like when you're adding on more carpets. So I'm at the customer's And I hired a guy once who used to have his own carpet cleaning company. He went to a pawn shop. And for $200, he bought a carpet cleaning rig. He got a quote for insurance. Just a quote. Didn't have insurance,

but he printed it out and showed it to people. He's a nice guy in spite of that. But my competitor, he's doing the same thing differently for $200. We're spending millions on trucks and marketing and very different business, but that's my competition. So when people are hiring a carpet cleaner, they're very price sensitive. And they're used to getting a very low level of service. So I think the two objections are one, you're probably gonna screw me because you're a carpet cleaner. So there's a trust issue.

And two, you're trying to charge me a whole lot for a service that someone else is charging me a whole lot less for. So what is the, I think that everybody out there has got the price objection. What is the rebuttal on that? And I hate the one that said, we're gonna show up in a rap truck,

we do drug tests and background checks. Everybody does that now. I always go to blue sky. What are you going to receive? We got benefits and we got features about our business. So what is the best way to respond to that about the price? Well, I think you tell them what you stand for. And the biggest problem that I think people have

in communicating what they stand for is they don't have it clearly articulated and written down and on the wall. They don't teach it to their team. So what are your core values? What makes you, you? And one of the core values that we had at ZeroRes was commitment to wow. And a commitment to wow is, listen, we are going to pay attention and make sure that the value we deliver

exceeds the price every time. And how are we going to do that? We have the right people. We have a gotta love it guarantee, which means call us anytime. We're going to come back out. We're going to fix it. We're on your team. And you can tell that to your team. But showing them is a lot different.

I got a Facebook message from my sister-in-law who saw a Facebook message from a friend of a friend who had us out three years ago and said, yeah, they were okay. Somebody said, hey, how's ZeroRes? And 20 messages said, oh, they're great. They're great. Then this one lady said, well, it didn't really work for me. My sister-in-law knew what we stood for. She told me. I called her up three years later and I said, well, wasn't it awesome? She said, well, it's weird that you're calling me. But the stairs didn't turn out great. I said, great. Can we come back out and re-clelean it? And it knocked her socks off because I wanted to spend money to fix a three-year-old problem where she was unhappy enough that she had spoken about

it. Teaching your team, literally showing your team that type of commitment embeds in them a level of dedication and a level of understanding of what we're made of that you cannot quantify, but it oozes over the phone. It's like, I'm sure you've heard or taught this philosophy that if you smile when talking to a customer over the phone, they can feel it. You know what I'm talking about? Oh, yeah. Yeah, I teach that. Put a mirror on your desk. Oh, yeah. And it's corny, but it's enthusiasm. It's commitment. It's, I believe in what I'm doing. And if you can instill that through your value system, through your mantras and your team mentality, customers can feel it.

And it doesn't mean that I could sell $300 a room carpet cleaning over the phone. But 90% of the time when I'm talking to a customer, I'll get them scheduled because I make it about them. And I say, Yeah, we're not the cheap guys. But we've had El Cheapo where you don't trust them and he's smoking in the van and he's got 3, four or five buttons undone and his equipment's dirty. He's got no warranty or insurance. All of the points that we don't like to talk about, like you said, everybody can say them. I don't talk about them about me because there's a presumption that I'm awesome. You called me. I'm fantastic. What you want to avoid and the reason

you're willing to pay more is so you don't get that other guy. That's where your risk is. And when you layer in the confidence and the smile and some really easy procedural stuff like great communication with, we're going to call you before we come out so you're not stuck on the couch waiting for us. We're going to give you a succinct arrival window. We've got money back guarantee, those types of things. Price becomes less of an issue. And it becomes more of a... I'm very confident that I've got the experience to address your needs. And I'm going to take care of you like your family. I don't know if you're buying it, but that's my pitch. Well, no, I buy it 100% because I made the mistake and hired the cheapest company.

I did that on a roofing deal that I did. I had to redo my balcony. And I've learned people want it done cheap. They want it done fast and they want it done right. And you don't get all three because the guy that's fast and that's cheap is using... He cuts corners every time. You can get two, but you can't get three. And I tell people, look, I'll tell you what,

I can match that price because we'll match any price. But my goal on the phone is simple. It's not to talk about price. It's to get my technician out there because the fact is that when my technician gets out there and they could actually show them and you can meet them and you get a text message on the way, you hear about their profile. We offer them a water or a soda on the way or a coffee. You get to know me and then I can show you the benefits of using us. But over the phone, it's a lot harder to deliver that. The first thing I do is say, yeah, absolutely. Sure. We'll match that price. Then we get out there and I don't do a bait and switch.

We absolutely have those parts on the truck. But how long are you going to stay in the home? So my guys are trained to ask four questions and learn about the customer's needs. And if they're flipping the house, we put on the cheapest. So I don't say cheapest. I say the best value solution. I never use the word cheapest. A lot of times what I say is this is a band-aid fix. And I always say this is a good investment if we're using the top notch. I love it. I think that having a good, better, best is important. No more than three. And I think that having a good, better best is important. No more than three. And I think to go back to the basics of where I'm at,

I want to do a billion dollars in revenue. That's my goal. A hundred million, I think, is super attainable in the next two years. So I'm starting to think, Grant Cardone, 10 times. How do you do 10 times? And you talked a lot about culture. And I got to tell, I got to go back to this.

You can do as much as you want with culture, but you got to go where everybody goes, where is your avatar? Where's your customers hanging out? I don't even think that way anymore. I can get, I'll get a thousand customers tomorrow if I want. I think where are the best employees hanging out? Where can I recruit from on a daily basis? I go to QuickShrimp every day. I hand the people there the cards cause they're the best people you can get. And I think that so much time is, how do I get more customers?

How do I keep them coming back? Blah, blah, blah, blah, blah. I'm like, you know, with a small business, you need to get, you said it yourself just now earlier. You said, I need to find these right owners and guide them and lead them. Well, the same thing with employees. You're just looking at them, you know, they're your partners, but I'm looking at it like when I go

out and find a person, now it's so important. If I want to get to the billion dollar mark, I'm going to need a bunch of A players. And there's an old line, 1A equals 3B and 1B equals 3C. So 1A player could do nine times what a C player could do. So you have 170 employees. I mean, what did you do to get these people in the company? I think there's two sides to that coin. How do you bring in the right people? And how do you avoid the wrong people?

And I always felt that if we had a good public image and we were actively asking for referrals, your best employees are like the next best employee where you want referrals from your current employees to bring in people like them. So if you're doing the right things to bring in candidates, which is more and more difficult, like you said. I think the things that you need to do are have the strong culture, have a clearly defined expectation. What does that box look like with all the right perks and all the...

Not lavish stuff, but make it fun. I mean, you're bringing people... They spend more time at work than they do at home. You need to recognize that and thank them for it. And then you also need to... How do you say that? You need to give them the shots so that they don't get staked. Whatever that word is. You have to let them know what sucks about the job. What is the job really like before they

start the job? I was talking with somebody who... The guy... We were talking about a business that we might be buying. And it's a $10 million company. And this guy's a really expensive chief operating officer. And he probably makes $300,000-$400,000 a year. And he told me he went, applied for and worked for two weeks for Amazon in their warehouse. I was like, you're crazy. I mean, it's fantastic though. And he said, the people there, there are a lot of good people, but a whole lot of people that churn and turn over every day because they'll hire anybody.

And I said, that's insane. And they said, well, they don't have the time or they don't think they have the time to stop and ask the right questions and tell people what the work's really like. And at ZeroRes, we took the complete opposite approach. We would immunize. Did I do that right? And we would tell them, Hey, here's what your schedule is going to be like. And here are some pain points. Here's what your pay is going to be like. Here's some good and some bad. After the interview, if we liked them and they liked us, we'd send them on a ride along day. We would have them go out and do the job with a lead technician, a trainer, for a day. And if they had a commitment or something,

maybe they just do two out of the four jobs or whatever. But get them on a truck. And guess what? If they hate the work, we probably shouldn't hire them because we're going to spend $5,000 training them for a month before they add any value to the business. And there's an opportunity cost with that. There's a financial cost with that.

It's a pain in the butt. So let's take the time to slow down a little bit and tell them what the work's really like. Show them what the work's really like. And then find out, is this something where you think you could commit and thrive? I don't need you to speak carpet or be a mathematician or understand how to calculate square footage or any of that stuff. We'll figure that stuff out. If you think you could thrive here, I will help you thrive here. But some people think, well, I just need a job. So I'll take this one. I'm sure it'll be easy. And they take it and they realize, well, crap, this is a whole lot of work. And then they fire us by quitting

and we're out, you know, four or 6,000 bucks in a whole lot of time. Well, it's way more than four to $6,000 because I guarantee you they weren't booking the phone calls. They weren't doing upsells. They weren't showing up. So the opportunity cost is 100,000

guaranteed on the wrong hire. And I think that a lot of us, we basically, we take a mirror to their mouth and make sure they could fog the mirror. We hire them because we do it on a desperate list. Rather than always, people say always be closing. I say always be recruiting, looking for that because I can turn knob and I can double my lead volume.

I mean, we're the best at Google. We're the best at Facebook. We're the best at Yelp. We do our retention rate, our referral base. Everything's kicking butt. But these employees, I'm such a big fan of personality profiling, learning about the right people for the right job.

And a lot of times I get the right person, but they might not fit that role the best after I get to know them. But we have installers versus technicians. And we have trainers versus junior techs versus senior techs. So when you come to work for us, you're coming for a career, not a job. And I like what you said. You got to tell them up front.

I always talk about this on my sales meetings about the movie 8 Mile. And I talk about it at the wrap office. He goes, I did live in a trailer and my mom did this. And he gives all the bad stuff up front. And the guy just sits there and doesn't know what to do. And the point is, you got to let them know where they're coming into. And I think that's a huge thing. That's why we look at some technicians that are five years old. And I'm like, man, it's not the same company. These guys helped us grow the company and they'll never get rid of these guys.

But they would have never got hired on today's standards. It's kind of interesting to look at that. Yeah. I think one other point to layer on is I don't think enough businesses look at the world as having two customers. They say, well, my customer is the person who pays us. Your second customer as a business owner,

it's the person you pay to go out and do the work. And when you think about the world through that lens, you think about, Okay, why would a customer fire me? Why would a customer not have a high level of satisfaction? First, you're probably not tracking employee satisfaction, which is a must. But you're offering what that box looks like that you're probably not tracking employee satisfaction, which is a must. But you're offering what that box looks like that you're putting the employee in.

What if you're offering a really crappy box? Like you said, $12 an hour or crappy benefits or the work schedule sucks. You have to sell your customers to get into their home. You have to sell your employees to retain them. And you have to rethink what's in the box. You have to solicit feedback because your perspective is probably not as good as the employees. And then you have to curate that just like with a customer and update it and make sure that people are feeling it. And it's not all about lavish parties and things like that. But you do have to feed them. You do have to have benefits and

good training and upward mobility, etc. The willingness to advance is so important. Know you're at a growing company. I find that I hear that all the time. And employee satisfaction, to me, is just sometimes acknowledgement and listening and hearing. And it's not always about money. I'm not a big fan of 1099 employees. I got to tell you, I think there's a lot of people out there that are probably like, I save a lot of money. But you're running a fine line and it's not worth it. It's just, I'm not a big fan.

I got to tell you, what is your thought on 1099 employees? There's a time and a place. But it really depends on the type of business and the type of customer interaction. There are distinct benefits financially and pain points. And in the carpet cleaning model where we're out doing hundreds of jobs a day, we had zero 1099s because your home is your castle. You're inviting us in your home into places you wouldn't invite your mother. We're going in your closets and cleaning under your bed. And your kids are around and sometimes you're not home. Really personal, sensitive stuff. We can't be like the other guys. Our brand was too important for us to have to try and save a buck by having a 1099.

Now, in a window cleaning business I own that does commercial route work and goes out to Starbucks and H&R Blocks and cleans the windows on a route, all they need to do is show up. And it's not that it's low-skilled. It's just a different level of customer interaction. 1099, I love it. It's fantastic. But there's a time and a place

and it's not customer-facing. Right. I agree with that. Wholeheartedly. I'll do a 1099 if I'm working for a builder and I got 20 houses in a row to put a garage door on. That's different. That's B2B.

So with the primary home service business, the carpet cleaning, we tried to exit a transactional business and be in a relationship-based business. And it was based on a philosophy that anybody you hire is going to come out and clean carpet with varying degrees of success. Some are going to do a great job, some are going to do a bad job. The customer is not going to remember what you did.

What's going to stick with them is how they felt after you did it. And to really instill a relationship and not just be a one-time deal, we needed people who were at our Christmas party. And you typically don't have contractors there. You have employees who live and breathe your culture. And they come over to my house and have a barbecue or drink beer after work or whatever. They got to be part of that community. Otherwise, I'm at risk of giving the customer a transaction. I went out and put a whole lot of effort and a whole lot of money into getting that customer

and pissing away the opportunity because I went cheap. Yeah. I got to tell you, I love this. I love this conversation. And the business owners out there, the key word you said in that was beer. Because I think having a beer, I just love taking a guy out, a technician,

a call center rep, a manager, and having a beer with them and listening to them and take notes. You know what taking notes does when you're talking to somebody? It shows that you're freaking listening to them. You know how many notes I have right now of everything you've said?

I mean, the difference is you're actively listening. You're not just there hearing them, you're listening to them. And when you take notes and a customer says something and you write it down and you show them you're listening, it makes a huge difference. And I think that's, that you should do that with employees.

And it's a good place to let them know that you care. And I've got an assistant now, but my desk used to be the messiest desk and it's a good place to let them know that you care. And I've got an assistant now, but my desk used to be the messiest desk and it's still not perfect. But I noticed that all my manager's desks were messy. And when my desk was clean, now their desk is clean. And you gotta lead by example and it's easier said than done.

But I noticed here that you're a big fan of raving fans. And I gotta tell you, when I read that book, it's such an easy book. It's like who moved my cheese. But I love that freaking book. You can read it within an hour on a plane. And it talks about the ultimate experience for a customer. Tell me a little bit about why you love that book and what you got out of it. Well, I love it because it's simple and it's true. So it's an easy read. It's an allegory. The fairy godmother comes and walks him through some customer service scenarios. Fairy godfather.

Fairy godfather. Yeah, yeah. Golfing godfather. So it's very, very simple. But it's the difference between working on your business and working in your business. And it makes you stop and think, am I doing it on purpose or am I just doing it? And what I took from the book was to really actively assess the value proposition that we're providing to the customer. You may think that you're doing the best thing by doing it your way. Well, your perspective really doesn't matter because the customer is going to define what they want. And so you got to talk to your customers. You got to listen.

You got to ask questions. You got to do focus groups and call them and solicit the hell out of them for feedback. And because of that book, we implemented a company called Listen360, doing a net promoter score, if you're familiar with that. Yep. I got three books on my shelf about it. It's just a simple question. The ultimate question. Yep. Ultimate question 2.0. I mean, I'm right there with you. It is the... Real quick, the net promoter score, you survey your customers, you ask them a question on a scale of 1 to 10, how likely are you to refer me to your friends and family? 9 out of 10 is they're very likely they're promoters.

7 or 8 means they're kind of passive. They're not that excited about you, but they don't hate you for sure. 0 to 6, I'm not likely to refer you and I kind of hate you. And the net promoter score distills that down and takes the percentage of promoters minus the percentage of detractors. And that's your net promoter score. And we obsessed about it because it tells the entire story. Got a disgruntled employee out doing work and not giving a shit. Net promoter score is going to go down because it shows. Prices are too high.

Net promoter score is going to go down because value didn't exceed price. By tracking the heck out of data points like that, you can move the needle on the status quo of the business. Don't track that stuff. And it's really, really tough to move it because you don't know where the goalposts are. Well, I think what you're talking about is basically a secret shopper because we use the same company. So tell me a little bit about how you use... That's what it is, right?

Listen360 surveyed our customers via email automatically to ask them that Net Promoter Score question. And then secret shoppers basically do the same thing. We use both companies. But one of the things that I highly, highly, highly recommend, we built an A1, because my company is A1 Garage Door Service, it's called the A1 Applause Program. And what we do is we go out and we send out the salesman after every install to the customer two weeks later. We actually go over a lot of things with them. We give them a free surge for tech.

We tell them how to maintain their door. We make sure they're satisfied. We check everything on that door and go through a checklist and make sure it was done properly to keep an eye on our installers. But we also say we deliver five out of five service and we're going to come back

and make sure we delivered that because we're setting it up to leave us a five star. And then the guy goes back and you say, well, how do you afford to pay that guy to go back? Well, he gets 10 bucks if he gets the customer to leave a Yelp. He gets 10 bucks for Google, 10 bucks for Facebook. He gets a testimonial. He gets a sign on the front yard. That's 10 bucks. He gets a next door. That's 10 bucks. And the point is you want the customers to do it. They're glad to do it if they had a great experience. And it's just a really good program to keep an eye on.

Your net promoter score will go through the roof because now everybody's watching. It reinforces the good behavior by the technician out doing the work because they know they're going to be checked on. And as valuable as that marketing program is to get those reviews, it's probably more valuable to catch the people who aren't thrilled and fix the problem so that they become a referral engine for you. I've had angry customers be the biggest referral sources ever.

And when they get a phone call from me, and I'm happy to call customers. Actually, part of my plan over the next couple of months is to take companies and just go through their Yelp and their Google and literally spend a day on a whiteboard and actually do some case studies on how I can take you from a three-star to a four and a half star within a week. It's easier said than done, but I'm really good at this. And part of it is you got to ask for it, right? You got to ask your happy customers to spread the gospel. And you got to get in front of right? You got to ask your happy customers to spread the gospel. And you got to get in front of the bad stuff. I had my general manager and I had Bruce who handles my reputation management.

They both walked in and they said, we're wrong. We're right on this customer. They want $400 back. And this is BS. They said, we're not doing it because we're right. And I said, no, give it back. And they said, no, no, no, no, no, no, no, no. I said, no're not doing it because we're right. And I said, no, give it back. And they said, no, no, no, no, no, no, no, no, no. I said, no questions. I'm not sorry to be the dictator here, but give it back. It's my money anyway. So they were shocked, but I think it's so important. The customer's always right. And you're going to have to give back money.

And I know business owners hate to hear that, but how many times have you given back money, even though you were in the right? Hundreds. I mean, I don't even have to think about it. So we always start with, hey, we got a lot of guarantee. Let's go fix the problem. Sometimes they're pissed.

Sometimes they're short on time, whatever the issue. If it gets to the point where we're giving back 60 bucks for cleaning a room or 600 bucks for cleaning a house, great, whatever it takes, we'll give it back. point where we're giving back $60 for cleaning a room or $600 for cleaning a house. Great. Whatever it takes, we'll give it back even during that first conversation. But it will always circle back. Okay, the check's in the mail. There's $120 plus tax, $132, whatever, that's going to be posted on Monday. You've got your money back.

Now can we come do that resurface that you wouldn't let us do in the beginning? And that blows their socks off because they're like, wait a minute, you already gave me my money back. Now you want to come reclean the carpet? Yeah. If every time you walk into your living room, you say, damn it, zero res, it doesn't work. I need to fix the problem. When can I do it? I don't care if it's nine months from now. Let's get on the schedule. And that changes the whole mentality because it shows that the commitments to the work and to the end result and the money is just part of the package. It's not driving the conversation. I already gave you your money back. How do we fix it? Because that's what the real issue is. And I've had people tear up their checks. I mean, that doesn't happen every time. But we've absolutely given back

tens of thousands of dollars. Because what does $300 mean? As you're trying to build something that requires people on the outside looking in saying, wow, this is a stand-up company. And on the inside looking in, your employees, your second customer, they need to believe that you're doing the right thing and you're not just about money. Or they're not going to run through a wall for you. And that's tough. I've had a hard time with that because they're like, why do you always want to give this guy the best jobs? And I'm like, he pays the bills.

I don't let Tom Brady sit down during the Super Bowl either. But at the same time, we give everybody a fair chance. It's just, it's tough. And that's a fine line. And it's tough to do that as a business owner when you're trying to make ends meet, especially when you're small. And it's not being unethical. It's just saying, look, this is how it works. I mean, I look at this as a game. Okay. I'm a big fan of just saying, look, this is how it works. I mean, I look at this as a game, okay? I'm a big fan of just like, I'm a competitive guy. And it's a tough way to look at it. But I want to go back to raving fans real quick

because I thought about when you go to a restaurant, let's say you go to Cheesecake Factory and you have a good experience. It's good. And you enjoy it. And you're not going to go on Yelp afterwards, but you're not going to go on Facebook and trash it either. You might take a picture of your food and post it on Facebook, I don't know, or Instagram or whatever. But the point is,

when you go to somewhere and you're treated like a king, and the experience is a wow, it's a raving experience. That's when you're going out and you're willing to go out of your way to do great things for that company. And so you got to ask yourself, what can I do above and beyond as a business to deliver that experience of wow? And that's what I think raving fans kind of goes into. I wanted to ask you that a lot of business owners have a good percentage of customers that don't come back. And I know carpet cleaning is all about that. What do you do to get those customers to come back more often? I think that making sure that you look at the value proposition is the key. You talked about the word cheap, and you tried to not use the word cheap.

And there are cheap carpet cleaners out there. We're not the most expensive or the least expensive. We're the most valuable. And if you transition the conversation to value, and you look at the whole package that they're getting, the dollars are only part of that equation because there's the benefits that you extract for that value. And if we're trying to make sure that value exceeds price, one tip that I would have is give them something free. Give everybody something free to make sure that you cheat when they're doing that value versus price math. So if you give them something

for free, don't charge for one of the rooms. Call it a marketing expense. Don't charge for a pet treatment in one of the rooms. Clean their car. Clean their something. I have a $75,000 pressure washer slash vacuum in your driveway. What can I do to make you love it? Because if all I'm doing is buying business every time, it's a really, really expensive proposition for me. I want to take you off the shelf. I hate the phrase customer for life. It's customer till you fuck up. Excuse the language. But that's the truth. So it's customer till next time, till you stop caring, till you forget about your core values, till you forget about making sure value exceeds price. But on every job, if you instill in your team that value has to exceed price, that strongest relationship is going to win, and that they're

going to remember not what you did, but how they felt after you did it. And you give the technicians the leeway to act on that. Great. I don't care what you give for free. Give something. I want you to write it on the invoice. Because I want to see it and I want the customer to see it. So that we can plant that seed and they can remember, oh yeah, that was important to me. That was valuable for me. Stuff like that. That makes all the difference. Now, I know you're interviewing me, but I want to ask you, when you're going to a billion

dollars, and I love that, that's a BHAG and that's fantastic. But you also said you're only getting your customers once every X years. How are you going to do that without a subscription model? Well, we sell service agreements. We're at 5% right now, but I'll be at 25% by the... That's okay. I was going to encourage you to read Automatic Customer. I read it last weekend on the plan. I love it. And we didn't plan this out, podcasting listeners.

But I love that book, John Warwick. Oh my God, that blew my freaking mind. If you saw my phone right now on my Google Drive, I have about 25 bookmarks and I also have a bookmark on Audible. But there's eight ways to create this revenue model.

And they go in at first and talk about Amazon Prime, but it's an amazing book and absolutely gotta get that subscription. And actually, I've got a lot of ideas to really do this in a lot of different ways as far as the garage door niche in itself. But absolutely, you gotta keep them coming back.

Yeah, and I mean, there's... I used to think about carpet cleaning and think, okay, a subscription's got to extract all of the value from the cleanings. Say I want to get one cleaning a year or two cleanings a year. Say, pick a number, call it $400. I've got to have a monthly fee where I extract over 12 months $400. And the more I thought about it, that's just upside down. Amazon Prime... And the automatic customer got me thinking about this. Amazon Prime doesn't extract

the value from the customer. It's a membership. It gets you into the club. So for $99, what do you get? It's not even free shipping. You don't pay per shipping. But you get convenience. It's two-day shipping. Because you're paying for that shipping via the $99. And when you buy something via Amazon Prime, you're paying more. And we don't think about that.

But you can always find the product cheaper on Amazon if you don't buy it through Prime. It's just you have to look for that. But then you got to pay for shipping and you don't get it as quick and it's not as convenient. Yep. So what you're doing is you buy going Amazon Prime and that it's the most brilliant subscription model I've ever heard of. They're letting you into the club and charging you 99 bucks. But then what happens... Costco has been doing it longer than...

Yeah. Yeah. So you get into the club and you get this convenience and you get this opportunity to spend a ton of money, but it takes you off the shelf. I'm not going to Target and looking for something. I say, when I'm at Target, I'm like, shit, I should buy this on Amazon. I have a box a day show up for my family. And I'm not the purchaser there, but I won't throw anybody under the bus. So I started thinking, okay, don't charge $400 for my subscription. What if I charged $99? And I gave them a little bit of value. Say I give them three rooms of carpet cleaning a year for $99. What did I do? I took them off the shelf. They're not out shopping Stanley Steamer or these other guys.

But when I'm out there doing the $99 loss leader, I can break even. It's not valuable for me. They're going to add a couch. They're going to have their ducts done. They're going to add some rooms. They're going to have pet problems or protection. They're going to spend more. So I get this long tail of monthly subscription fees without having to extract all that value, the full $400. It sounds like that's where you're going with your subscription model. I love it. Okay. So there's a couple things. Number one is the reason why subscriptions work the best. And I'll just go back in the book, The Automatic Customer, he talks about flowers, right? So if you're delivering

flowers every single week for a subscription, you know exactly the right amount of flowers, you know the exactly amount of employees you need, and there's zero waste. And that's the important thing to realize about this. As you know, I've got 10 calls to run today. I'm just doing a tune-up on the doors. It takes me approximately 17 minutes to do it and I can plan accordingly. So, you know, and there's a lot of mathematics that goes behind this stuff that you shouldn't just pull a number

out of your butt on this stuff. But I will say that my whole plan of getting people on a service agreement in the garage door niche is to replace that door in the next 10 years. I'm in line now. They're not going anywhere else. The biggest thing they're going to invest with me

is a new garage door. Hopefully a really nice insulated garage door. So by getting that service agreement, of course I got the opportunity for upsells, but the lifetime value of that customer. And what I found is everybody that buys a business, your multiple on EBITDA goes up substantially based on those service agreements. Absolutely.

That's amazing that you just said that because I read 12 books in the last... Okay, I spent 30 hours on a plane on the way to Thailand and 30 hours back. So I just was like audible at two times as fast going nuts. But that was the book I was like, I've already given that book out to 20 people. It was just mind-blowing. It blows your hair back. And there's a bunch of HVAC companies in town in Minneapolis where talking with the owner of one of them, he said, Listen, we do a service agreement. It's a loss leader for $8 a month. We will put you on our service plan and we'll come out,

we'll do a winter and a summer tune-up. So we'll get your AC ready and we'll get your heat ready and we'll shut the other down. And we don't make any money, but we absolutely know the lifetime value of that customer. Whether you're on the $8 a month plan or the $80 a month plan, you're going to spend X dollars over Y period of time because you get 10% off equipment that you buy from us. And who are you going to call when your heat goes out? Are you going to pick up the phone book or are you going to call the person whose sticker is on your furnace and you're paying

$8 a month? It's just brilliant. It doesn't matter how you package it. You can good, better, best it. But having that subscription model is invaluable. It's really, really cool. And he talked about, hey, we're in 20,000 homes a year, but I only have 6,417 or whatever the number was customers because that's how many subscriptions I have. Totally different way of looking at the business. It's a hard thing to sell to your employees. You got to come up with a compensation plan that makes sense. So what I do on mine is every anniversary date, it's 10 bucks a month.

On the anniversary month, so if I sell it in August, I get it the next August, they get 10 bucks. They get 10 bucks for selling it. They get that month and every anniversary day. So if you sell 30 of these, you sell 30 next year and 30 next year, 30 next year, after five years, you get 1500 bucks in mailbox money that August. So the trick is it becomes an annuity for the technicians. I had a guy that got 300 bucks last month. And that's beautiful. The secret is, is I'm not taking advantage of my customers. We give them a free surge protector, a free strut, a free operator bracket. We give them a free tune-up every year.

All this for 10 bucks a month. We get a huge discount on our price book. You get priority booking. I mean, we go to bat for the customer. I said, when we built this program, I said, no, no, no, that's not enough. I would never buy that. And I said, no, no, no, that's not enough. And I said, what else can we give them?

What else? What else? So finally, I'm like, oh, yeah, I'd buy that. And that's what you need to do when you're making up this plan is say, value, value, value added and make it a good investment for them. And I love the word investment. This is such a good investment for you because it pays for itself. And I get so riled up at these podcasts, man. I love it because I love talking to smart people that have made it

because so many people are out there on Facebook listening to their co-workers or other businesses that are failing and complaining. And I love the guys that are on Facebook that go, oh yeah, I fixed this 20-year-old opener. These other guys don't know how to do that. I'm like, why are you bragging about that? You're failing at life and business. Well, they have the hardest job in the world because they're acting like a business owner, but really they're a technician.

The reason they're talking about the furnace they fixed is because they're not thinking about, how do I make this into something that works for me? Turning it from a burden into an asset. And they've just got that burden of, all right, I'm going to go out and I'm going to wrench. And the problem is, when you have that type of business or that type of job, you've got all the pain points of owning a business where you're accountable to all the things. You have all the debt, all the responsibility. You've got all the pain points of owning a business where you're accountable to all the things, you have all the debt, all the responsibility. You've got all the different hats you have to wear. And none of the benefits of really having a business other than being able to set your own

schedule. You don't have the ability to go to Maui for a week because the work doesn't get done. It is such a difficult position. And it's sad because they're bringing on their artisanship rather than on their aptitude as a business leader. That's the whole thing that we're doing with RedHook Investments. Little plug, redhookinvestments.com. We're taking strong business leaders and trying to help them skip some of those hurdles so that they can work on their business and create some sustainable systems that scale. So they're talking... They're going to school on the business model and the investment model. Because everybody's got the opportunity to grow a massively large

business or fit into whatever niche. I'm not out trying to grow $20 million companies in Poughkeepsie. It's what fits for you, what makes the most sense, and how do we get there so that your business works for you rather than you working a grind for a job that you're calling a business. And it's so much fun working with those folks like you with podcasting. I love being on podcasts and talking with smart, accomplished thought leaders and awesome entrepreneurs. And I love working with the companies we invest in at Red Hook to help them become the leaders that they know they can be and give them that real world MBA to go out and do it

on purpose rather than just fighting the fires in front of them. That's what most business owners do. The people we work with, we work with them to try and implement some strategy and play the long game so that over time, they can achieve the bigger goals that they have rather than just running from problem to problem to problem. I love the concept. There's a lot of people that do... What is the old thing?

If you can't make it in the real world, you teach or something like that. Yeah. There's all these guys out there that claim to fame as, I sold my business for whatever. And I'm like, you're involved in the business still. So it's different. I'm like, if you made so much money, you're so good at it. Why aren't you doing it anymore? That's my biggest... I just see some of these guys doing consulting and I'm like, I talked to a lot of people about different people that do this and they're not getting much. And they just, they look at them as a number.

And I'm like, look, if I can't make you 10 times, 10 times what I'm charging you, then freaking I'll give you your money back and get the hell away from me as quick as possible because we'll help them build a business. And a business means you can leave for Thailand like I did for a week or two and still know, we set a business. And a business means you can leave for Thailand like I did for, for a week or two and still know we set a record. We set a huge record day when I was out of town.

And that was like super fun for me. Cause I was just all smiles and, you know, talking to my managers and just like, Hey, you guys are killing it. You know, I want to wrap up some stuff here.

I want to get some final thoughts. What were you going to say? I'm sorry. Oh, I was just going to say, you know, exiting my business, I was able to achieve a lot. I want to get some final thoughts. What were you going to say? I'm sorry. Oh, I was just going to say, exiting my business, I was able to achieve a lot. I hunted a lot and killed a lot and loved it. What I wasn't able to do that I can do with Red Hook is I'm able to leverage better because I'm able to invest in more people that can go out.

I can help them help themselves and share in that success. Because we're putting in money, buying part of a small company, and taking it from a small company to a medium company, or a medium company to a large company. Finding these leaders, if I get 40, 60, 100 of these folks out there running hard toward their goals and helping them as best I know how with my team and systems, I can do bigger things than if I go and say, Alright, well, how do I grow my database? Well, if we're cleaning 13 million million or whatever the number is in Minneapolis, I either need new markets or new products or new... That doesn't scale that well.

The growth in carpet cleaning in Minnesota has been extracted in large part. There's always room number of new investments, and I can help them be the leaders that I know they can be based on meeting with them and understanding where they wanna go. If I can give them some growth capital to go do it and help them along the way, that scales a lot better and a lot quicker. It annoys me too when people think they've made it

and they say, oh, I was this awesome entrepreneur, now I'm on a beach in Maui. I would die if I were on a beach in Maui. I want to be in the game. I love the sport. I love the investment. I love going out and killing something. Yeah. You're different. You're different because you're still in the game. You're still paying to be part of that company and still part of the leadership team. So I consider myself very, very good at marketing. I think I could beat anybody at Google. I was in Thailand at a search engine optimization

conference. I could outrank anybody on reviews. I know a lot about marketing. So I hate that I have to get involved still with the day-to-day, but at the same time, it keeps me humble and it makes me realize that there's no I in team and I need to know all facets of the business. And I hate finance. I hate QuickBooks, but I still, every day I got to look at it and see all the crap. But it's fun for sales and marketing. But part of business is, you know, in a perfect world, I think when we're over a hundred million, I'll still look at a five-minute report each day, but I'll just be living my marketing world because I think when we're over 100 million, I'll still look at a five-minute report each day, but I'll just be living my marketing world because I think we can take over

the whole freaking industry with garage stores. And I want to be a consolidator. So keep Red Hook out of garage stores. I'm just kidding. But I promise that I will not buy a garage store company. I will refer it to you. I think you understand it a little bit better than I ever will. But I'm having you. I think you understand it a little bit better than

I ever will. But I'm having fun. I'm working with great thought leaders in the home service industry. And I can't thank you enough for having me on your podcast. It's been a ton of fun. Yeah. One of the things I always ask the guys, the people on the podcast is... So you mentioned the advantage. You mentioned traction. You mentioned, obviously, the automatic customer. I think you said Good to Great or Built to Last, one of the Jim Collins books. Is there any other books that if you were,

especially the small businesses out there, because I think we got a lot of people that listen that are just ready to take their business to the next level and they might be at that five to 10 employee range. What's a good book? Or maybe even just about mindset. I don't know. What that you'd recommend?

I would recommend The Game of Work. Have you read that? The Game of Work. I don't think so. The Game of Work. Charles Cournot. And he started a consulting firm actually called The Game of Work LLC. And the whole concept is if you don't measure it, you can't move it. And I look at a business and say, every system in this business is perfectly designed to get exactly the result that it gets. If you don't like the result, what you're really

saying is you don't like the system. If your customers aren't happy, it's not the customers, it's your systems are churning through and spinning out customers that aren't happy. How do you change that system? And so it's all about trying to gamify work so that people are engaged and identifying the KPIs that help you identify where those goalposts are. Because if the goalposts keep moving, you're never going to score. And work can be as much fun as play. We just think about it differently.

And a quick analogy from that book, he says, all right, you got two options. Do you golf, by the way? I do. Okay. 68 the other day on nine holes, though. All right. You're a bad person. Oh, it was on nine.

Okay. I don't golf. I'm not a golfer. But if you gave me two options, if you said option one is go play nine holes and keep score, drink some beers and tell me how it went. And option two is take this club,

go into that field, walk four miles and swing the club 100 times. One of them is a sport and you track it and you've got success metrics and you can quantify it to an extent. And people love it. The other is just silly and would be boring. And when you think about that, it's the exact same activity, right? It's just you keep scoring more. And when you do that with work, it changes the entire sport you're playing because all of a sudden people know what success looks like. It's an easy read. It's a short book, but I've used it to change a lot of businesses. When you mentioned that, and this is just an

observation, but I look at the best golfers in the world and they go, they look at way more defined KPIs. How many putts? How many times did you hit reason regulation? How many times did you hit the fairway? What's your average drive? And you look at those details and you're right, the more systematic. But there's also, I don't believe in more than five or six reports because so many people quantify things and they go, and they just, I'm like, why are you building a pivot table on this bull crap?

I try not to swear, I always swear at work, but I'm trying to keep it as PG-13 as I could. But I'm like, why are you so focused on all these stupid numbers? Look at your booking rate. So I'm building a KPI calculator. I built a KPI calculator that basically says when you move around your booking rate

and your average ticket and your conversion rate and a couple other factors, you can double your revenue like that. You can double your EBITDA too by just getting your booking rate up a little bit, increasing your average ticket a little bit, and increasing your conversion rate when you go out to the home and get the work. So that's something that's going to be really cool that I'm going to be sharing soon.

If you measure everything, then nothing matters. And I think that you're getting exactly that point where you talk about, well, why are you building this chart on this obscure KPI? I think you have to scorecard. Every system and every person in the company has to have a number. They have to have success metrics. But you got to start with the really big ones. And once you've extracted value out of moving the needle on the big ones, then you can get more granular. And as a leader of a big company, you need to look at a big scorecard. And is the number positive or negative? Are you winning or losing? And if you're winning, leave it alone and move

on to the next. Because why obsess about something that the systems are working and you're winning, unless you've got the wrong standards. But you can get more and more granular. But if you try to eat the Ellison in one big bite, you're going to choke. You got to eat it one bite at a time, small bites, own the KPIs that are the easiest. I guess that too, because a lot of times, you'll get there, then you'll take your eye off the ball and it'll go away.

One thing that you mentioned that's huge, and this is the thing I hate, Michael, I got to tell you, I meet businesses every day and they all say the same damn thing, bugs the crap out of me. We book over 90% of the phone calls. I'm like, no, you don't. Sorry. Guaranteed you don't. You're full of it. No, no, no, no, no, no. And they go, I go, show me the metrics you're basing that off of. And when I really look into it, they're not, oh, that was an out of service area. Well, why are you getting those phone calls?

Maybe you should be in that service area. That should count. Oh, that was a parts call. We don't sell parts to customers. Oh, you don't? I convert those all to service calls. You're just not good at it. Oh, we were overbooked that day, so we couldn't do that. And the CSR doesn't want that to go

against their score. Okay, so you're probably at 50% then. Because they got this huge gray area. And my call center manager hates that I do that. But it is what it is. Well, it's a blind spot. It's a blind spot. And so many people are... Like I said before, every system is perfectly designed to get exactly the result it gets. They're trying to run systems that make them look good. But in fact, they're pissing off customers because they're not caring to their needs. They're not maximizing their opportunity, etc. And they're just painting a different picture. They're not tracking reality because they're scared of it. More often than not, they're telling themselves a story

that has them becoming complacent and puts a ceiling on their opportunity. And it frustrates the hell out of me too. Well, I got to tell you, do you ever come to Phoenix? I actually went to Phoenix last... We went for spring break last year. We're going to Tucson for spring break last year. We're actually going to Tucson for spring break this year. I got a couple of little rugrats.

Seven, five, and then a four-month-old. Oh, wow. Well, congratulations. That's awesome. Yeah, thank you. I guess... I don't have kids yet, so I am somewhat jealous, but not 100% because I don't know if I can handle a four-month-old yet, but...

Yeah, well, if you want to babysit, you're welcome to. But I'll meet you in Tucson. Let's talk about that. I want to tell you about a book. I've actually read it a couple of times, but I read it again on the plane. I actually got it on Audible, but I have the book that I read.

It's called Blue Fishing. And I don't get any money from the guy. I never met him before, but I'm not like... But this book is super, super good. It's called Blue Fishing. And I don't get any money from the guy. I never met him before. But this book is super, super good. It's called Blue Fishing, The Art of Making... Sims Happen. Yeah, Steve Sims. I just Googled it. I'm going to buy it

now. Buy that book and then let's touch base and talk about it. One last thing I'd like to do is just give the listeners one last thought. Something that maybe we didn't discuss, something that's on the top of your mind or a last piece of advice. I think that maybe one thing that separated my growth trajectory from a lot of other people's growth trajectory

is a willingness to admit what I was not awesome at and go out and find people who are awesome at it and sponge it, suck it up. Don't try to create everything. Obviously, you have to innovate. You have to be unique. But go out and don't recreate the wheel. So I went to...

I was in Phoenix. I was in Spokane. I was in all over Texas and Georgia and Charlotte and traveling the country trying to learn about this carpet cleaning stuff by people who had been doing it for generations and people who were brand new but doing something special. And people love talking about themselves. They love talking about what they're great at. They'll welcome you in their business. And they'll teach you everything they know

if you buy them a beer or a good person. And that willingness to travel with my partners and to sponge up ideas and try to take the best parts from over here and over there and build something that was uniquely ours, I think was massively influential in getting where we got.

And so I would encourage everyone to do two things. One, go out and find people who are doing, who are where you want to be and pick their brain, visit their shop, create a travel budget, go out and learn. Or start a podcast. Start a podcast, yeah. I think I was like you. Or start a podcast. Start a podcast. Yeah.

I can find the guys like you. Well, it's a blessing to be in the same conversation. And so go out and do that. And then locally, find a group of businesses, not necessarily mentors, but businesses that you can talk shop with who are doing cool things that aren't what you're doing. Your competition is not going to teach you their business. But I'm in a group called CEO Roundtable. And there's a microbrewer, there's a children's book publisher, there's a software guy, there's a carpet cleaner, there's a home builder. All these different diverse perspectives jamming on business once a month. And I wish we did it more often.

But that's the second little takeaway that I'd encourage people to focus on. How do you create that board of directors that can talk shop with you, that's helping you and invest in you? And that's one last plug for redhookinvestments.com. That's what we do where we invest in a business, we're buying a stake in it, and we've got this community of businesses that are growing each other. And the pressure washing company in the middle of Florida just taught the window washer in Las Vegas how to do what he does. He's not an expert yet, but the first day he went out, he sold 1000 bucks of pressure washing. He's not an expert yet, but his first day he went out,

he sold a thousand bucks of pressure washing. He thought that was the coolest thing. And he was able to skip the line and skip some of those missteps because he had a wily veteran teaching him. And it just came up organically. They were shooting the bull about P&Ls and marketing expenses.

And before you know it, he rolled out a new service and being in that closed community gave him that opportunity. And so whether you're finding a community like that or a CEO roundtable or just having coffee with people that you cold called, people will show up for a cup of coffee or a free lunch if you say that you're enamored with what they do, you love their brand, can you pick their brain? And you can create that network effect. Skip the line a little bit and skip some of the missteps.

You have to do that. That's the best piece of it. You know, I just want to add one comment. I went to Service Titan. They have this annual event. And I mean, I got every single card. I have this program on my cell phone. It's called CamCard. I called everybody. I text mess single card. I have this program on my cell phone. It's called CamCard. I called everybody. I text messaged them. I'm in touch with them.

And in every city that they're in, we're sharing each other's email list and we're helping each other out and we're winning together. So great advice. Once again, Michael Kaplan. One last thing. How does everybody get ahold of you? Somebody wants to pick your brain or possibly get you to invest in their business. What's the best way to do that? Redhookinvestments.com. And investments is plural. So redhookinvestments.com.

There's a quick little contact thing. And what we do from there is we reach out and shoot the bull. I try to learn about who you are, where you're going, and see if it's a fit. There's no commitment by the people filling out that form. It's just a healthy conversation about what they're trying to achieve. And if there's a place for me and my investment group to help,

great. If not, we're going to help them find the resources that do fit. It's really funny. There's just not every business is the right business for me to invest in. But there's a really sharp guy who's a wedding DJ in California. That's not a business I'm looking to get into. But I've become a mentor for him and helped him think through referral programs. And he's got my cell phone and we shoot the bull once a month or whatever. And I've gone out, I've slayed the dragon, I've made a bunch of money, I want to give back and I want to stay in the game.

And that's what I'm trying to do. So if I can help people, fantastic. If there's room for investment, even better. A long-winded way of saying redhookinvestments.com. All right, you heard it, ladies and gentlemen. You got to go fill out that form. I think it's a good opportunity, especially if you're stuck in your business

and you're grinding every day and it's not moving. There's no better time. So Michael, I appreciate you coming on. And I'm going to take you up on that too, son. I'll stop and maybe we can do lunch or something. Well, fantastic. I hope you fill out the form too, Tony. Yeah, I'll fill it out.

Well, if there's ever anything I can help you with, don't be shy. All right. I appreciate it, Michael. You have a great day and appreciate you coming on. Terrific. Thanks so much. All right, buddy. Thanks. Hey, guys, I really appreciate you tuning into the podcast. I want to let you know that my book is available right now on Amazon. It's called The Home Service Millionaire. That's homeservicemillionaire.com. Just go to the website. It'll show you exactly where and how to buy the book.

I poured two years of knowledge into this book and I had 12 contributors. Everybody from the COO at HomeAdvisor to the CEO of Valpak and of course, Ara, the CEO of ServiceTitan. It tells you how to have the right mindset and become a millionaire and think like a millionaire. It goes into exactly how to turn on lead generation. Have those phones ringing off the hook for the customers that you want to be calling where you

can make money and get great reviews. It also goes into simple things like how to attract A players. Listen if you want a great apple pie, you need to buy good apples and you need to know where to buy those apples. And it also talks about simple things like knowing how to keep the score. You should have your financial check every week. You should know exactly what's coming in and out of your account. You should know when to cut advertising that's not working. And more than anything, you should know how to cut employees that aren't making it for you. Listen, you might have a big heart, but this book is going to show you how to make decisions built on numbers. I hope you pick up the book and I really appreciate everything. I hope you're having a great day.

Tune in next week. Thank you.