The Home Service Expert Podcast - How To Run Your Business on Autopilot By Building A Great Company Culture

Episode Date: August 7, 2020

Matt Michel is an internationally recognized, highly acclaimed motivational and informational speaker. He is the founder of Service Nation Inc., which operates the Service Roundtable, the world’s largest contractor alliance. Matt was the 35th and youngest person inducted into the Contracting Business Hall of Fame, and was named one of the 22 most influential people in the history of the residential HVAC/R industry by Contracting Business Magazine. In this episode, we talked about strategic planning, marketing strategy, entrepreneurship...

I'm just the guy at the front of the organization. So I'm the one that gets all that, but it's a lot of other people behind me. And that's where the small contractor has got to realize that he can't build a business unless he builds a team and he can't build a team that's successful unless he builds the right culture. You know, I came late to the belief in culture, but I'm a big believer in culture. And when we had a group of contractors who were all doing well through the pandemic and the early part of it start talking and we had a webcast with them, every single one of them stressed the importance of their culture.

And if they hadn't been working on their culture for years before that, they wouldn't have been able to get through this as easily. Peter Drucker, you know, who's kind of the ultimate management guru, said that culture eats strategy for breakfast. You know, strategy is you can have a great strategy, but it's got to be executed. Culture, you know, is self-executed, right? That's why you can leave for a month. I suspect that you have a great culture in your organization so that even when you're not there the culture runs the organization 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. Today, I have a very special guest, Matt Michel. I'm going to go over everything about this gentleman. He's a strategic planning expert, marketing and strategy. He's really big into entrepreneurship. A little bit about him is he's the CEO of Service Roundtable from 2002 to present. He used to be involved with Decision Analyst, Vice President, 1996 to 2002. He was part of the Dwyer Group from 93 to 96, and Tompkins PLC Marketing Manager from 1990 to 1993. An internationally recognized and highly acclaimed motivational and informational speaker, founder of Service Nation Incorporated, which operates the Service Roundtable, the world's

largest contractor alliance, founder and creator of AirServe Franchise System, the oldest continually operating HVAC residential franchise network, became the 35th and youngest person inducted into the Contracting Business Hall of Fame, named one of the 22 most influential people in history of the residential HVAC industry by Contracting Business Magazine. The inaugural recipient of HVAC Golden Toolbox Award presented by North American Technician Excellence in Contracting Business Magazine. Quite the resume there, Matt. You know, it's just been in the industry a long time, so things start piling up. You know, I've been to your events. I've seen Ken Goodrich. I know Al Levy, Alan Ferguson. I could go on and on of the people

that go to your events. I spent a lot of time in the HVAC world just because I'm trying to model my garage door business a little bit more. And I don't think there's a more successful industry than HVAC plumbing electrical in the home service space. What are your thoughts on that? Well, I think HVAC and plumbing right now in particular have done really well. We've had this pandemic, but guys who are focused on the residential service end of the business have just plowed right on through it. We recently did a survey of our Service Nation Alliance. It's our best practices group, but our alliance members in HVAC and the majority of them report that sales

are the same or higher year to date. And almost, I think it's an overwhelming number, like 70, 80% report that their expectations are that they're going to finish the year ahead of 2019. So for contractors on the HVAC side, it's certainly looking like a good year. And then plumbing has also done extremely well, especially when we had the toilet paper shortage and people were flushing all kinds of things down their toilets. There was a lot of drain cleaning that was going on and continues to go on. Well, people are home. They're working from home. They've got to be comfortable. The plumbing's got to work. The air conditioning's got to work. They're running it more. So this is a great

opportunity for contractors who are focused on that end of the market. And that's where we address our efforts. Yeah. Service Titan, who we use as well, did a study and they actually have the data, which is pretty cool that they're able to give some insight of the call volume. And the call volume has actually risen. I think everybody had a couple of weeks scare. It went down a little bit when it really came out the news. And then it kind of rebounded and they did it in the garage industry, the plumbing and the HVAC. And all of them kind of modeled each other pretty closely on the graph of what I've seen. So you've been in the HVAC industry for a long time. Tell me a little bit about how you got started and then really what got you into Service Roundtable. Well, I started out as an engineer. So yes, I'm a recovering engineer, which explains why I'm charismatically challenged. But I started out as an engineer with a turbo refrigerating company and then moved to Linux Industries to run factory automation for nine factories.

And very quickly discovered that I'm better in marketing than engineering. So I moved into marketing. And then from there, moved to Titus, where I ran their VAV box division and DDC controls division started AirServe went to decision analyst and came up with the concept for the service roundtable and it was one of those things that it just wouldn't let me go so you know we got some guys together and a number of contractors, and so we formed the organization. Tell me a little bit about Service Roundtable. It's been around now since 2002, I take it.

A lot of members. How does that compare? It seems like HVAC, out of anything, you've got things like Nextar and all these different best practices. You've got different buyers groups out of Florida. You're out of Dallas. Tell me a little bit about Service Roundtable, what it really is for the listeners. Who are the people that should get involved with it and how you're different than some of these other organizations? Sure. Well, if you want to ask me what the defining characteristic is of our members, it's their growth oriented. They want to grow. And if you want to ask me what the defining characteristic is of our members, it's their growth-oriented.

They want to grow. And if you're not interested in growing, I probably can't help you. Walk out in your backyard, look around. Everything is either growing or dying. And it's the same way with businesses, and it's the same way with people. We're either growing and developing as individuals. Our businesses are either growing and developing, or they're receding. So we are growth-oriented, we're growth-focused, and our members, we have hard data on their purchases from manufacturers and we have industry shipment data, and we know that our members, same-store sales, outpace the industry by three to one.

So we grow three times as fast as the industry grows on its own. Our mission is to help service contractors improve their business and financial performance, leading to a profitable exit strategy. So what we do, it defines everything about us. And when you talk about us versus other groups, well, one of the things that's different is we're larger at the service roundtable level. Nobody else has anything like the service roundtable, which is a $50 a month internet-based self-serve business alliance, but there are 5,200 members in that. So we're larger than any of the trade associations in our area or in our space. And then we also have the Retail Contractor Coalition and we have the Service Nation

Alliance, which is our best practices group. The Retail Contractor Coalition is a branding program. We serve plumbing, HVAC, electric, and remodeling, and we just added a general business for it. So we've got garage door contractors in there as well. You might want to check it out. Yeah. Our buying group is the largest buying group in the industry. We've got everything from unitary equipment manufacturers to marketing companies to big box retailers. There's almost no way that you cannot pay for your membership with the use of the buying group. And we operate the Service World Expo, which has become the preeminent residential contractor conference and show in the industry. Yeah, last year was great. I mean, we've all heard of michael gerber i had him on the podcast

a couple months ago and i think he was like a lot of us were founded our businesses off of his book it's like the old cliche work on it not in it and it's hard for a lot of contractors to actually do i mean i find that a lot of the best contractor owners, and this is 50-50, I'd say, but a lot of them don't know the trade as well. They know they'll talk about the parts and they know what a condenser is and they understand the basics, but they're not involved enough to say, let me go fix it. And so many contractors, they got that old technician mentality, right? They know how to turn a wrench, not a profit. And that's where we come in because they may have been to trade school, but there isn't an owner school. So we try to fill in

the blanks there. And, you know, it's tough for any business owner. When you start out, you're the guy, you know, you're doing it all. And it's tough to back away from that and understand it really becomes more empowering and more fulfilling when you give things up. Because in my case, I'm at the point with the company to where I work on the things I want to work on or I largely work on the things I want to work on. Things I don't like, I give to somebody else to do. And why wouldn't any business owner try to build a business that allows them to do that? That's when it really becomes fun. Well, it's interesting because I'm in the same boat you are. I mean, if I'm not here for a month, we set records without me. I mean, I think I'm more of the strategic vision, the mission, and I'm a bottleneck finder. Marketing and sales are my bread and butter. They're what I love to do. I get people

amped up. We talk about process. And I don't like accounting. I don't like finance. I'm familiar. Yet every single morning, I've got five pages sitting on my desk of cancellations, of KPIs, important things going on, conversion rates, different things that matter. But I don't make this report. Can you imagine every day me? I mean, you don't know me very well, but if I was sitting here all day doing a pivot table, trying to figure out calculations of Power BI or Domo, I would be so annoyed. But thank God we've got amazing people. And I think you're right. It's delegating and building a team. You know, one of the things I like to talk about and hear your perspective is

I think the garage door industry and a lot of other industries are so far behind the mentality of ownership. And they're on the Facebook groups. I'm sure you've seen them and they go, you can't charge that much. You're taking advantage of people. But these are the people, and I talk about this all the time. They work from home. They drive an old truck. Their wife answers the calls for them and their son does most of the work. He's the other tech. And they're still in the field. And when they leave to go on vacation, guess what happens? The customer doesn't get served. They don't have insurance. They don't have a CRM like service center, a robust one. They're not using the stuff like a quality product like train or for my case, Liftmaster, because they can't afford it and they can't afford to advertise.

And they all seem to say the same thing. You're taking advantage of customers. And why is that? What's going on with these people that have been in a bad area? It's not like that in my area. Yeah, they're the impoverished craftsmen. They take pride in their poverty. And they are subject to envy, which is one of the seven deadly sins, when really they should practice emulation. And, you know, one of the things is the most successful contractors, just those successful people are always willing to share with others. I mean, they're the most generous about sharing. You know, you mentioned some of them like Ken Goodrich, he'll talk to anybody and he'll take anybody's call and he tries to help them out. All you've got to do is reach out and ask and people will help you become more than you are. You know,

and it's, you know, the old Lion King thing, you're more than you've become. Well, it's the same thing for every contractor I've met. All of them can become more than they are right now. But part of it is they have to have the humility to ask for help and to accept help. But it's out there. There's lots of groups that are like ours that are out there that are willing to help them. And there's lots of contractors within those groups that will help other contractors. You know, and you mentioned earlier about how all the strings of accolades I've gotten. Well, I really haven't earned any of those. My team has earned those. It's other people that have earned it. I'm just the guy at the front of

the organization. So I'm the one that gets all that, but it's a lot of other people behind me. And that's where the small contractor has got to realize that he can't build a business unless he builds a team. And he can't build a team that's successful unless he builds the right culture. You know, I came late to the belief in culture, but I'm a big believer in culture. And when we had a group of contractors who were all doing well through the pandemic

and the early part of it start talking and we had a webcast with them, every single one of them stressed the importance of their culture. And if they hadn't been working on their culture for years before that, they wouldn't have been able to get through this as easily. Peter Drucker, you know, who's kind of the ultimate management guru, said that culture eats strategy for breakfast. You know, strategy is, you can have a great strategy, but it's got to be executed. Culture, you know, is self-executed, right? That's why you can leave for a month, because I suspect

that you have a great culture in your organization, so that even when you're not there, the culture runs the organization. Yeah, you're right, and the team, and you know, we use predictive index, we really analyze our team, especially the leadership and find out what we're missing. Because if you were to join our team, I think you would be a great addition just because you come from an analytical engineering background. I'm more of a jump right in there, marketing, really thinking about our avatar, our perfect client and how to relate to them. And I'm more of a social, like I like to run meetings and lead teams. And so when you look at, if you split up the whole thing into four quadrants and you find

out where everybody is on the team, sometimes by adding one person that you're missing could actually amplify it for 10 times growth. And I think building the team, and I used to hate when I even started the podcast, which was years ago, I had a hard time with people always talking about culture because, and now I'm a hundred percent behind culture, but people are like, wait a minute. I had three trucks break down yesterday. I had a guy steal from me. My advertisers are idiot. Money mailers just closed down during the pandemic. And I've got a system where nobody could work.

See, mine's all over VoIP. I told people leave the same day we had to and it didn't drop a beat. And it's paid for performance. But these people are going, wait a minute, you want to talk about culture? And that's what they got to reverse an engineer and say, listen, it's hard for you to recruit because you don't have people that enjoy working there. So I think culture to me used to be a bad word. Now it's a great word. But also I'd say, how do you build culture? You do find things out

of work. You actually know, you know, whether you got technicians or amazing call center representatives, know their kids' names, get to know them, take them out. I mean, I had 15 people show up yesterday, shook their hands for the first time. I have trainers, recruiters. We've got this thing going. And I'm like, I feel bad. I'm like, we need name tags. And people are like, wait a minute. Are you the guy on the truck that's like all over YouTube?

And the guy that I'm like, yes, I'm not the guy that interviews anymore. But ultimately, I have amazing people that are better than me at everything. I'm just here for the smile at this point and to have fun. But they love that. Ultimately, what I see myself as now, and I kind of have this cliche, is I'm on Mars looking down at Earth, which is the business, and try to find the good things. There's all kinds of good things happening all the time. I just got into work and there's this big trophy diamond dealer, the best you could be for our distribution center, who's the largest garage or distribution center in the world. There's only like 15 diamond dealers in the whole world

for the largest garage door manufacturer. And I'm like, it's just sitting there with a row of them. I'm like, that's pretty cool that we got this because I can't tell you, I haven't installed a door in 10 years. You do a lot with Service Roundtable to help small businesses. What are some ingredients that you think are kind of the ingredients of a successful strategic plan for growing a business that most people aren't thinking about?

Well, you know, it starts with a mission and a vision. The old Gerber thing, begin with the end in mind. But we talk about culture. Well, culture is shared values. And people have to know what those values are. You've got to identify your shared values for your organization and your values mean certain behaviors are acceptable and unacceptable. So values are consistent with behaviors and behaviors drive results. So your culture ultimately is your values, which determine the behaviors that drive results.

So culture drives results. So you start there. In our case, we have an annual success plan that we encourage our members at the alliance level to use. And we look at SWOT analysis, strengths, weakness, opportunities, threats. We look at manpower planning, seasonality, growth by departments. You've got to make sure that you've got the right number of people there. You've got to have a training plan. You've got to make sure that you've got the right number of people there. You've got to have a training plan. You've got to have a marketing plan. All this goes together.

And when it all works together, you're dialing in success. It follows. And it starts by thinking through all these things and working through it. And it's not easy. But again, we're talking about a few days a year that you spend focused on this and that drives you for the rest of the year. So, you know, it's interesting you bring that up because I'm in the process here in third quarter coming up soon of creating a board of advisors. And some of that has to do with paying them either a piece of equity or some type of monetary thing for a day, for a full day. And you could do it biannually, quarterly.

What is your take on that and how important is that? And is that important? It's really important. So the board of directors that we had for the most of the length of Service Nation until the point where we sold the company. We had Mitch Crott, Contracting Business Hall of Fame, Mike Heide, President of Callahan Roach Flat Rate Systems, David Heimer, who was our COO and now Senior Vice President, Contracting Business Hall of Fame, Steve Saunders from Chippewa Mechanical, Contracting Business Hall of Fame,

Larry Taylor, Contracting Business Hall of Fame, Ron Smith, who'sical, Contracting Business Hall of Fame. Larry Taylor, Contracting Business Hall of Fame. Ron Smith, who's not just Contracting Business Hall of Fame, he's considered the father of modern HVAC contracting practices. So you're talking about an all-star lineup. And I can tap into all of these guys and help with growing my business and making introductions and finding things. I think it's really important. And at the Alliance level, where we have our best practices group, we put every member in an advisory board with seven or eight other contractors and a mentor, because we really believe in this approach.

We believe in looking at problems from different perspectives by different people. And it's also an accountability. I can tell you, before I had a board meeting, I got more done in the weeks before I had a board meeting than I think I did the rest of the year because I knew I had to report to these guys. They were there to hold me accountable. I mean, none of us likes to be held accountable, but all of us do better when we are. Yeah, absolutely. That's one of my favorite words. Yeah. So when you talk about building the board, you know, there's different people that specialize. I think,'s one of my words yeah so when you talk about building the board you know there's different people that specialize i think in one of your articles you discuss start thinking of for a plan for an exit strategy until it's too late and i want to talk about that

but also when you're building a board of directors or board of advisors or whatever you would call it i think the missing piece a lot of time is people miss the financial gurus familiar with private equity that understand how multiples work, that understand the end in mind, which you said earlier is ultimately there's one or two things going to happen. You're going to sell, you're going to pass it on to family, you're going to die. You know, there's pretty much three certainties in life that are going to happen with a business. So typically, I think a lot of people would prefer some of the fruits of their labor. But if you're making a healthy profit or EBITDA, then you're

fine. But I think it's important to understand how to get the most of your business. And there's so many factors that we look at. We look at you 1099 or do you not? Who's your biggest clients or do you have a lot of them? Are you involved with new construction or are you mostly not new homeowners? Kind of retrofit. How many service agreements do you have? And that's gonna help your multiple. And I've probably been on the phone

with 30 to 40 private equity groups just in the last three months. And I'm not selling anytime soon, but to learn that side of the business. Most people don't even understand what profit or EBITDA is and how you could add back things and how you could make advantages for taxes. And how important is it to have those people on your team? I think it's important, but I think as the business leader, you need to become familiar with all of those issues yourself. You know, that's not really something that you can completely outsource. I mean, we always had a CPA,

an outside CPA, and that was part of our management checks and balances. And we had guys on our board that knew numbers cold. They knew the business cold. They would intuitively pick up on things. One of our business advisors is John LaPlante. John LaPlante says that, you know, the numbers will speak to you if you'll just listen. And he's absolutely correct. But the problem with the exit strategy for most guys is it's an afterthought and it should be a forethought. You know, you should be thinking about your exit strategy the day you start your company. And you start a company long before you have a business. If you can't walk away for a month and have it still there, you don't have

a business yet. You just have a company. And really, you know, what the idea is to build a business that can run without you, and that's worth something to somebody else. And the way you do that, well, like an example, you can take two contractors who have businesses across the street from each other, have them trade places, and they've got to burn each other's shops to the ground and start building up from scratch because everything is between their ears. And that's not a business, people-centric business. They need to be process-centric. And when you're process-centric, then your service manager leaves or retires, and you have a new service manager, and he comes in, and this is the way we do things, right? And so there's a process to follow. And if you're a Gerber disciple, you know all about that,

because that's part of what Michael Gerber teaches. Yeah, you know, I've read Michael Gerber over and over and over. I mean, Ken said he read it 39 times, but, you know, I don't know if I read it that many times, but ultimately I met a guy, I had him on the podcast and his name's Al Levy, seven power contractor. And he came into my office and, well, first he criticized my book and said it needed some work before I released it. And I agreed with him. So he helped me with that.

And then he walked in and said, why are there calendars on everybody's walls? This is, you know, at this point, 2016 or whatever. And he said, I could have stole all your inventory with your forklift. Show me your manual for your field supervisor or your CSR or your text. And I said, I handed him this book of just like our normal, like, this is our holiday pay and everything, and it's dusty. So he came in and really said, look, you need to create a playbook and create a way for these people to win. So when you read about it, I'm a big fan of not salary. I'm not a big fan of yearly reviews. I'm a big fan of pay for performance, and you earn it

every day. If you're brand new, you can still move to the top really quick. I'm not a big fan of tenure. So he taught me a lot of stuff. He taught our whole team a lot of stuff and we took what he did. Now we have 27 manuals. We have checklists everywhere. We have certain KPIs. We don't have more than five direct reports. All these things that when you start networking in the podcast, Service Titan, obviously Service Roundtable, where it's just crazy when I walk around. And some people in the grocery business are like, dude, why do you love HX so much?

I'm like, because they figured out in the 90s what we need to figure out now. We're still charging the same prices that we charged in 1995. And the smartest people in the grocery industry say, you got to look around what everybody's charging and make sure you're not out of whack. And I say, are you, do you know who Ellen Rohr is? Yes. So Ellen says, yeah, she's amazing. You know, she just says add up all your bills and be really friendly to yourself.

Add up the nicest CRM, have yourself two monitors, cold air conditioning if you live in Arizona in the summer. Buyers, people, breakfast. Do nice things for people. Drive new vans. And then add in 15% to 20% on top of that and reverse engineer your pricing. And why is that so hard for people? Why do they say that's not fair and you shouldn't be able to do that stuff?

You know, again, I think we go back to the envy proposition. And so when these guys are out there, they're, you know, again, taking pride in their poverty and they're pointing their finger at you. Well, three fingers are pointed back at them. And they look at the successful contractors and they have to make excuses and they have to denigrate them because if they don't, then they've got to face the fact that the enemy is staring back at them in the mirror. And if they would do the things that you do, they could have the success that you have, but they're not willing to do that. They're not willing to make those changes. And it's hard for a lot of people to make those changes and they live a life of sustenance instead of a life of prosperity.

And what contractors do is too important for a life of sustenance. We're talking about the people who keep people cool in the summer and warm in the winter, that keep the lights on, that make sure that the toilets flush and the showers are hot. Make sure your garage door is open. The people that remake houses, old houses into something new, these people all deserve prosperity. And the only thing that's holding them back, or the things holding them back the most, is between the ears. Yeah, you're right. And a lot of people, until you get it out there and create some commonality,

this is the process. And we don't change the process till we learn the process. I love how people say, take this and make it your own. You know, I look at somebody like Tom Hopkins and he's actually located in Phoenix and he's the art of selling. And he says, don't make it your own. Repeat after me. And what he says is, this is not a prepayment penalty. This is a prepayment privilege because you get to pay it off early. And I just love, I love learning and reading these books and just learning because don't make it your own. Find somebody that's a role model of yours. Find somebody. And you know, one of the things that I, I'm fortunate that I was able to do is

I fly out. I flew out to Michigan. I flew out to Florida. Keegan with Best Home Services and Matt over there in Detroit with, I forget the name. I've been all over the country for three days at a time to study these guys, sit down with their marketing department, learn about their recruiting. Obviously, they get the same thing by being in the service roundtable because there's a huge thing to surround yourself and be the dumbest guy in the room and listen to people it's so funny because you go to these shows that are industry specific or from a distribution center whether it's train or goodman or or what it might be and i'm sitting there and they said a lot of people said what's the advantage of wrapping your vehicle? And just so you know, I'm like the wrapper.

Like I've got my own wrap company. Like that's the number one thing when you start is have a clean, simple to read. You don't have to have that you're BBB. You don't have to have that you're duct cleaning. I mean, you're air conditioning. So make it nice and easy, kind of like a billboard. And all these people said, yeah, it's just not worth it.

It's $3,000 for a wrap. And I'm like, you get that from one good customer. And customers feel better to buy from you when you show up. And you've got a symbiotic relationship between your brand, your truck, your shirts, your website. Like, I don't know what you say to some of these people, but they need to come to the service roundtable and learn about some of this stuff. A vehicle wrap is the very first thing that you do. If you can't do anything else from an advertising and marketing perspective, wrap your trucks well. The average truck has 30,000 exposures a day. You know, think about the power of that. I mean, look at the billboards. Why are people putting up billboards? Because they work. Well, you've got a mobile billboard. Take advantage of it and buy a spreader and not a transit mini truck. Get a big billboard and just look at the companies that are really successful. I mean, let's start looking at outside of our space. When I say UPS, what do you think of?

Big brand trucks. Yeah. When I think of FedEx, you think of the logo on the truck. Or look at SafeLight, the auto glass. I mean, they're not driving small ones. But even the small graphics they put, I'm like, oh, man, you're making a mistake. So look at DHL. When I say DHL, you think of big yellow trucks. And DHL has a brand awareness that's better than any

manufacturer in the air conditioning industry. And yet, you know, they haven't done any national advertising and forever, they get it from their trucks. So is it possible a contractor can have a better name brand awareness than the brands of products they sell or he sells in his local market area. And it's entirely problem. In fact, I think that if you wrap your vehicles well, you're going to stand out more than you realize. I'm a huge proponent of vehicle wraps. And we do a lot of them. But you mentioned something else earlier. You were talking about how you go when you visit these other contractors and these people who are successful. Success begets success, right? And if you surround yourself with other contractors who are successful,

it's going to rub off on you. You're going to have to start emulating them. And that's where these small guys who just revel in their misery, if they talk to anybody, they talk to other small contractors and they all get together and they have a pity party about the industry and themselves. And I tell you, I go into in the communities all the time and I talk to one contractor, oh, you can't believe how horrible it is. The people here are so cheap. There's so much price competition. And then I go across town, talk to another guy who's serving the same market. He says, man, business is booming. This is great.

We're making money hand over fist. I got great customers. I love my people. What's the difference? It's so funny because you hear the same thing internally with your technicians. They always say, you know what? It's a holiday. It's rainy outside. You don't

understand this other company's cheaper. One thing I can tell you that I'm kind of learning is to be the brand that's top of mind mentally, to become part of their DNA, the back of their brain, to not be this guy that's going out and ranking number one for garage door repair. I want to rank number one for every search term, but I'd rather them go, I'm choosing this brand because I've seen them around and I trust them. There's three things that people go for. You want it done right. You want it done on time and you want it done cheap. Pick two out of the three and here's what you get. Because you never get all three. My dad taught me that when he was coach transmissions. You know,

I was talking about pricing and alan roard did a great job but there's this book i got the power of positive pricing how much is your pricing costing you and you wrote it so it's a big book man i mean there's a lot of stuff in here and this book wasn't easy to get it took a while to get in i I can mention it once. The first thing before there was a comment, I went and bought it. So great book. Tell me a little bit about what's in this book, The Power of Positive Pricing for the listeners. Well, it's basically a how-to guide on pricing, but it also covers pricing theory.

Starts out very meat and potatoes. This is what your service price should be. Then it talks about material markup. And, you know, a lot of people, they set their pricing based on what was done before. And what we're trying to do is take a fresh look at it and recognize that labor carries overhead. And if you recognize that fundamental concept and you use that in the way you price things, then you'll price so that you can make a profit. We look at different approaches to discounting. A lot of people have some type of show-up charge, diagnostic trip, truck, whatever. And frankly, that's subsidizing their low service

rates if they're charging by the hour. And if you get rid of that and you get your pricing correct and you're using flat rate pricing to make it presentable to the homeowner, then you can use that diagnostic charge as a marketing tool. If you've got a $50 show up charge, you can give away $50 gift certificates or $50 coupons. Some of the things that plumbers will do in Southern California, where it's a pretty competitive market, people will have them come out and they'll take their show up charge and after they've troubleshut the problem and say, look, if you call somebody else, this is not refundable, but if you let us go ahead and proceed with the repair, this will count towards the repair. And so that's to encourage them to proceed because it's money that they would lose otherwise. Those are just a couple of the things that are in it.

You know, we talk about how you discount. Sometimes you do need to discount, but you've got to discount with integrity. It's important that you have a strategy behind your pricing because it's part of your marketing mix. Now, your marketing mix is product price, promotion, and placement, or how you distribute your products or go to market so it's a marketing tool as well as a financing tool and frankly until you get your pricing right nothing else matters it's interesting when i started i didn't have a price book it was kind of the wild wild west it was like oh yeah discount that. I mean, I had a general price. I mean, it was me and by myself pretty much. I mean, it was the Wild West back then in 2005, 2006.

And then I learned to have a price book. And then you learn, wait a minute, did we make money on this? And I've recently took a deep dive within the last year of our discounting. And I've had anywhere from 3% to 18%. And we really started to analyze the numbers of where the perfect piece is for my business. And it's right around 7% because we want to work on both garage doors. We want to do things now while we're there. And discounts are not bad. I tell people, listen, if you're wondering why your neighbor might have paid a different price, have you ever been to Walmart? Well, yeah, I've been to Walmart. Well, you know, at Walmart, if they'll match any competitor's prices, you can bring in Albertsons or Bashes. You know, I don't know if they have those around. The listeners don't want to talk

about other grocery stores. They match prices. They get military discounts. You got to start at the same price. How you discount is not going to be the same for every customer. And there's nothing that I think is ethically wrong with that until you start taking advantage. And I see a lot of guys, and this is probably what the bad guys do in every industry, but they do a couple of different trip charges or they'll do three labor charges for an older couple. And now there's a lot of laws against taking advantage of older people. I mean, when I go into the shops

that really know what they're doing, they'll call, they'll say, can I call someone, maybe a son or daughter to make sure that this is okay? And they get authorization three different times because I've seen some serious stuff go on with the attorney general and different things for taking advantage of people.

And that's why pricing, I'm a big fan too, is when Alan Ferguson first talked to me, I didn't realize it was called flat rate. But actually, I talked to him yesterday on the phone. I have one of the authors that wrote the book. Oh, man, he was the one that told me about it. It's about the visionary and the integrator, Rocket Fuel. And so we were talking yesterday. He goes, how did you hear about my book? I said, this guy, Alan Ferguson, just really talked you up. And he said, he's a visionary and I'm a visionary. So I had to read it. And so we just, we shot the ship for about an hour and he's

coming on too. But Flatrate is just, it changes the game. So Alan sent me this sheet. He said, add up, and it's an old one. So it said, add up your yellow book charges, add up your CSRs and all the labor. And there's probably like 25 things. And then it says, how many hours do you work actually in the home?

How many hours are they spent driving? How many holidays? So it takes out all this pay. And it comes out that you should be charging $400 to $500 an hour. And let me just tell you this, $400 to $500 an hour, that's not including your markup and parts. The people listening go, that is outrageous. And I know a lot of the people listening, and there's a lot of listeners, they might think that's outrageous, but that's what it costs you to do business if you're running a real business. And I think that a lot of people miss that.

What is your comments on that? A couple of weeks ago, I got my haircut. It cost $15. People will say I overpaid. You look at the results. But it cost $15, and it took 10 minutes. And I had to go to the barber, and I had to wait to be seated. And so if you look at, you know, what the expense of the barber has, I mean, not much.

He's paying for the chair. And, you know, you can get six people through an hour at $15 each. That's pretty good for somebody who has minimal training. I mean, they have some, they have to go to Barber College, but they've got to have a state license. But to sit there and just flip hair, or go to Jiffy Lube, or any of the quick oil change places, look at how much time they actually spend, and what they actually charge and break it down to an hourly rate, you'd be surprised how much it is. So look, pricing, this is math. Take the emotion out of it, right? You know, if you can't charge enough to make money, what's the point? Let's charge less and go out of business faster. You know, I certainly agree that there are some people who may try to take advantage of others in certain situations,

but there are people who will openly steal from other people as well. I mean, Larsonie is in the heart. It's not on a price book. A price book is an exercise of math, and it's a business strategy, but homeowners, consumers will never understand what it costs to get a professional truck with a professional technician with a full set of truck stock at their house. They will never understand the cost of what that is. And you can't even try to explain it. So you charge what you need to charge.

And then you make sure that your service matches what you're charging. That's sort of the mystery in all this. You've got people that don't charge much, and they have to squeeze their service down so that they can try to survive at that level. And yet the idea is provide a premier service. To do that, you've got to charge a premier price. Well, before you can deliver a premier service, you've got to set the price, and then you've got to build the service up to match it. And if anybody says that it's only about money and it's only about cheap, then why do we have

high-end restaurants as well as McDonald's? It's all meat. Why do we have high-end clothing stores as well as the discount stores? And they're even selling some of the same brands. There is a lot for the experience and a lot for the service, and different people have different things that they value. I mean, when I didn't have any money, price was the most important thing to me. I don't even question what I'm being charged anymore by contractors because I'm looking for the top contractor who will do a great job and who will take care of our house and make sure that I'm not hassled by having to call them back because they screwed up. I want somebody who will do it right and use a minimum of my time as

a consumer. And there are consumers that are like that. There's a lot of them like that. And I talk about my $300 steak dinner that was the best I've ever had. That was really a fart in the wind for the experience I had. And then I talk about my buddy who's taking really good care of me on a lot of stuff. But the first time he came out, Arizona summer 2013, and he does me a favor. He fills up the Freon and fixes then fixes a fan and next day i come home doesn't work again i'm like dude i can't take this heat it's 120 degrees in the house i have to wait for you it's the summer does me another favor wires it together well now the wires come undone

so it happens the fourth time it happened i said, if you got to replace the unit and charge me more, I don't need any more favors. I was coming home to this. And my point is, everybody tries to do somebody a favor. My dad, when he used to work for another guy at a transmission shop, his name was John. He said, charge my friends more. He goes, what do you mean?

They're your friends. Why would I charge? He goes, because if that car breaks, if something happens to the transmission, they will call me and call me and call me and annoy the shit. I'd rather them take it to someone else. And for me, when I do garage doors, you have to have a level of excellence, which means to me that we have checks and balances.

We have a second pair of eyes. You've heard of field supervisors. They drive every one out of five calls with a guy. Well, post-COVID, we're able to get on a screen share to actually see, did we weigh the door right? Did we replace the right parts? Are the tracks level? Did we measure the right size? And that level of excellence is unheard of in most industries. But technology, I think, is the ultimate. You know, they say 10% to 15% is a good number to be at anything more than 20 is, is probably a little bit too much and less in my opinion.

And I think someone like Ken Goodrich would agree is when you change the game. And that's like doing things like I could pull every single house in Dallas that took an equity line on their house. And I can, it's crazy what technology could do. I could skip trace. I can drive by your house, take a picture of it and skip trace the owner, even if they don't live in that house with a click of a button. And people are like, well, how do you do this stuff? Well, I'm involved a lot in the real estate industry, but I also I'm learning stuff from every industry. And when you could take things from other industries and apply it to one, another one, it's crazy what you can do. It's crazy because they'd never heard of this stuff.

You know, and one of the subjects I wanted to talk to you, cause we've got about 15 minutes here is marketing because marketing is like my number one. It's like, and I listened to Ken and I've got the wizard of ads over here, all of his books. I mean, I've got Audible is my big thing, but ultimately marketing is everything. If you can make your phone ring off the hook, you need to be able to convert sales, obviously.

But I find that most people are losing because they can't make the phone ring or they can't make good technicians. So they either say, I don't have enough calls or I wish I had more guys. And their idea to get more guys is to go steal them from another company rather than make them. Every single day, you give me a young, well, I shouldn't say young, but willing and able person. The reason I say young is it's 125 degrees in Phoenix. And if you're 80 years old, you're probably going to die in a garage.

So typically, you've got to be able to handle that heat and get up and down on a ladder. But let's talk a little bit about marketing. And let's talk about some unique and interesting marketing ideas that you've encountered that actually make sense. Well, the classic things for any small business, any company is, especially if you're a service company, you've got to get butts in trucks and you've got to make the phone ring. And those are the top two things that we hear from anybody we talk to. So talking about making the phone ring, you know, again, first thing, make sure you've got your trucks wrapped. Make sure you've got them wrapped well and work on your brand identity and, you know, a good logo. And there's a whole list of things on truck wraps to make them right and make them stand out.

Everybody's obsessed today with search engine marketing, and they're obsessed with these guys that will provide leads to them. And really, I want to be in charge of my own lead generation because if I'm in charge of my own lead generation, I control my own destiny. And I want to make sure that I'm doing all the customer retention strategies first, that I've got that in place. Because once I get a customer, I want to keep them for life. I don't want to lose them. You know, and it costs a lot of money to get a customer. I want to make sure that I retain them. So I want to have the consumer newsletters. It still works. Consumer newsletter is a great tool. And I want to do it by email. And I want to do it by mail. I want to have all of my leave behinds. I want to have a good sticker program. I want to have magnets. I want to have all this stuff in place. And then I want to make sure that

I'm doing happy calls and I'm following up. And that's also critically important today because of the power of referrals and those referral sites. I want to find out if there's a problem before they get on and slander my name. And so I can go out and take care of it and be proactive. Then we start talking about how am I going to get customers? Well, you talk to any small business, any contractor, they'll tell you that the best way they get customers is word of mouth. And that's true, but you can stimulate word of mouth. So there's all kinds of things that you can do with referral fees and bounties to help with that. I'm going to talk about just a couple things right now though, that are creative and a little bit out of the box. Something that I started when I was back with Dwyer was the oldest furnace contest.

And so we did this in association with a home show. We were kind of kicking around trying to come up with an idea. So we decided that we would give away a furnace to anybody who registered who had the oldest furnace. And they had to pay for the installation, but the furnace would be free. So the contractor that I was working with got his supplier to donate the furnace. So think about this. He's out nothing, right? He's got the furnace donated, so he's promoting that brand. And the homeowner agrees to pay him to install it. So he's still getting his installation for it. The only thing he's not getting is his material markup, but he's coming out ahead. And then every lead that he got, everybody that registered was a qualified lead because they, one, they thought they might have the oldest furnace and they knew that it was old and it

needed to be replaced. And two, they were willing to at least pay for the installation. So all he had to do now was convince him to pay for a little bit more. This guy got so many leads that he had to give some of them to his competitors, you know, to other contractors because he couldn't run them all. And that has worked time and time again. It's worked all over the country and it's worked with all kinds of appliances, not just furnaces. Another one, which originally came to me from Tom McCart, and Tom McCart was the first guy in the air conditioning industry to sell a million dollars of replacements. And that was back when systems sold for $2,000 or $3,000. So he was selling a lot of stuff.

So Tom came up with the idea of a sanctuary agreement. And a sanctuary agreement was where he went to the church, and he was working with a contractor in Oklahoma, went to the church, told the pastor about this, got the pastor to tell people to buy one of these service agreements and the pastor had to sell them. The church sold them and everyone that was sold resulted in a $10 donation to the church building fund. This contractor went from almost no service agreements

to about a thousand. It was a mega church, but to about a thousand in just a few church, but to about a thousand in just a few weeks and get to hire more people to just keep up with the maintenance. So that same principle that's called affinity marketing, and that can be used with any charity or any group or any organization where there's a bunch of consumers that have a common affinity. An example, go to a homeowner's association, talk to the HOA, and you can usually find them on the internet

and you can find the people to contact. And if the HOA will promote your company, any service call that you do within the HOA results in $10 to the HOA. Or go to the Humane Society. And the Humane Society passes out coupons. And if you turn in one of these coupons to your company then somebody turns one into your company then you make a donation to the Humane

Society so now you've got these other groups that are out there marketing for you and you know they're marketing around that affinity and that's something that's really hard to Trump and we can have all the Google leads you want but man this is sort of referral marketing on steroids. And so that's, that's one that can work really well. And, you know, if anybody wants a guideline on how to do this, I'm, I'm happy to send them a small booklet on, on affinity marketing. So, you know what, if you would have mind, yeah, well, let's put some of that stuff. I'll have your podcast and underneath it, they'll be able to go to the site to be able to get more on that. Because, you know, I think of that as partnership marketing and

you might say, well, what is partnership marketing? Not you, but a lot of the listeners and who could sell my services better than I can? Well, let's see. Where's the number one entryway of bugs and scorpions and spiders? It's the bottom rubber on your garage door. So if they want to increase their customer happiness of their service, they should be looking for entryways, the number one way, especially, and let me go out there and why not pay them $30 for every time they do it. So we built this thing called Schedule Engine that works with service Titan that works with our capacity board. They book it.

And I told them, I'm not interested in your product unless I can track you as an affiliate. You need to create affiliate tracking. So they book it on their screen. They book the time for me to go out. I run a report each week. They get a nice check. And here's the coolest part, is I want to know if I'm a church or I'm a pest company or whatever I am. If I'm going to promote you, I want to know that you're making our customers and our congregation happy. I want to make sure you're doing a good job so we can take the customer reviews from each. We ask them,

how do we do one out of five? And that's one thing I always ask. We want to deliver a five out of five service. We can actually send them the reviews and you'll know if you're sending people from your HVAC company or painting or pest control, that we're taking care of your clients. And if not, it goes to me and I'll do something to make sure they're taken care of it. That's a complete refund. That's fine. Because that relationship, you need to protect it. A lot of times people, they go, man, this is the church. I'm getting the best clients ever. They're spending money in the name of God. So I just think you really got to cherish that relationship and a good CRM like service titan allows us to be able to send them the feedback too, to let you know. Because I think of people are like, I've heard of a HVAC company saying,

hey, for every garage where you sell, we're willing to give them a free tune-up. And I'm saying, well, I know nothing. There's no such thing as a free lunch. So I refer you over, you go out there, wham, bam, thank you, ma'am, tell them. And all of a sudden I'm getting a one-star review. Hey, the garage or company was great, but they referred me over to this guy. They got to be really careful, but that's the best way to market and get ahold of agents like real estate agents or designers. And one of the guys that I know really well at the design center, super successful,

he sells rugs and some of these rugs are $80,000. And he said, do not consider it a fee like a finder's fee, call it your marketing fee. So it really is a marketing fee. If you've got an affiliate delivering work because he pays designers. And he said, here's the trick, Tommy. Don't wait a month or two months

and don't have them ask you for the check. You send them the check the day you receive the money from the customer. That's the biggest mistake that people do with this whole relationship is you'll tell the church, yeah, and then they got to hound you down right after three months about it. You got to be proactive with those relationships

and you'll deliver more of them. But I've got a full page of notes here. This is awesome. I want to just talk lastly about, actually we're running low here. So you've talked a lot about successful entrepreneurs and one of them you said that it's successful entrepreneur puts himself last. Can you give us a real life example of that? And then I'm going to finish up with some final questions that we always finish up with. Sure. So what the entrepreneur is doing for chow, the officers always get at the back of the line. You want to treat your frontline well.

You want to treat your people well. You want to put them first. You want to put their needs ahead of yours. You want to be willing to pitch in. If anybody's going to take a cut in pay because of slowdowns related to COVID, you're the one that takes it first. And the thing is, is in a service business, your people are unable to treat the customers better than you treat your people. Right. So let me say that again. Your people are unable to take care of your customers better than you take care of your people.

So it's critically important that you do that. And that's the way that you show leadership as a servant. And you're there to serve your people who serve your customers. That's got to be the highlight of this whole thing is, think about that listener, you know, people out there, the best that your employees could take care of your customers is the way that you take care of your internal customers, which are the employees themselves. So if you treat them like shit, how can you expect them to treat your customers better is basically, that's awesome. What are three books? And of course,

I've got every book, how to win friends and influence people. We've got the E-Myth. I've got a couple crazy books that I love, like Ultimate Sales Machine. I mean, some staples. Give me three books that really, it could be fiction for all I care, just three books that really pop and made a big difference in your life. Well, I'm going to throw one, give you one, but it's not going to be on my list of three. It's probably the one that's made the most difference, of course, is the Bible. But when you're talking about three books, the E-Myth is one of the books that I actually give copies to everybody in our company. And it's one of two books that are sort of required reading. The

other is Ron Smith's HVAC Spells Wealth. It's the Bible for contractors. Yeah, he got his CDs. CDs. That's funny. You know, I would add to it right now, Ken's book that he wrote with Gerber, the E-Myth HVAC Contractor. I put that in there, but in terms of books that really have an impact on me from a business standpoint, you know, you talk about some of them. Carnegie's books are incredible and they never go out of style. Hopkins books, but Dennis Waitley's. Dennis Waitley's books about the winner's edge, you know, was one that really impacted me. And it's mostly books about how to get my mind right and get myself right more than it is necessarily about this is a business technique. Prout and Reese wrote a whole series of books on marketing that were instrumental in how I approach that.

You know, and I'm always looking for new stuff. I walk into my library now, I could list off half a dozen things. I've got all the Wizard of ad books. I've got lots of sales material. There was a book one time called Up Against the Walmarts. And it was a book about how to compete with the big boxes. And it fundamentally opened my eyes to the way they price. So if you go into one of those stores, you'll find that they advertise 60 to 80 items, and those are dirt cheap. And if you go to some of their backstore SKUs, their margins are higher.

You get one good takeaway from any book, it's worth it. You know, if you get a chance, check out this book by Robert Cialdini. It's called Yes. The original staple is called Influence, but he's an instructor at ASU that I learned about in my master's program. So University of Arizona taught me about an ASU professor. So you know it's got to be good. It's 50 ways to influence people. When you learn the stuff that he teaches, you actually become more powerful and you can't use this stuff in the wrong way because it's almost like you can use it to get your kids to clean their room.

Like tell them, hey, I need you to clean the entire house, wash the dishes. I want you to dust the family room and make sure you vacuum, take care of everything. And then they say, are you kidding me, dad? And then you just say this, if you're not going to clean the entire house, can you at least pick up and clean your room? All of a sudden they're happy. So he teaches these things. One of the things I wanted to ask is how do people get a hold of you if they wanted to reach out? They can email me at matt.michelle, M-A-T-T dot M-I-C-H-E-L at serviceroundtable.com. But be patient. I get about a thousand emails a day and sometimes I miss things. Or they can call my mobile, 214-995-8889. That's 214-995-8889. Interesting.

You just did that. That's interesting. And then final thoughts. I kind of leave it up to you to give one final piece of advice or takeaway or whatever's on your mind for the listeners to kind of walk away from. What makes a successful entrepreneur

the defining characteristic of people that I know who are successful is they are determined to succeed. They has made a determination and he made that determination when he wasn't successful, when he was one of those guys we talked about who didn't charge enough and he's sitting in his truck with his mullet waiting because the supply house is taking care of guys who are good customers before they see him. And that kicked him into gear and he made a determination to succeed and he didn't accept anything else. And I think that that is the commonality of all successful entrepreneurs. They are determined that they will succeed. Well, listen, Matt, you run one of the most successful groups. You've changed thousands of lives through the process. And I know you're a busy guy. I really appreciate you

coming on. I'm definitely going to see you at Service Roundtable. The next one coming up is in Florida, correct? Correct. In September. So we got that one. Tampa Convention Center is open. Okay. All right, cool. Well, listen, thanks again. We should do it again sometime. I really, really appreciate it. The folks that are listening, I'm sure you got a ton out of this. So many great ideas in marketing and just to reconfirm that you're in business to make a profit. So we really enjoyed it. And thank you again. Thank you. My pleasure. Hey guys, I just wanted to thank you real quick for listening to the podcast from the bottom of my heart, it means a lot to me. And I hope you're getting as much as I am out of this podcast.

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