The Home Service Expert Podcast - The #1 Reason Home Service Companies Get Stuck Between $1M and $10M

Episode Date: May 11, 2026

🚀 FREEDOM 2026 Get your Tickets Today! https://homeservicefreedom.com/ Most home service companies don't fail from a lack of opportunity — they fail because they lose focus. Tommy sits down with Yarin Gaon, a growth advisor who has mentored over 397 businesses through Chicago and SCORE and helped company after company break through the $1M–$10M plateau.  Yarin's framework is built on one core idea: the path of least resistance always wins. In this episode you'll learn: — Why your current business model might not be the version worth scaling — How to find the 20% of your operation driving 80% of your profit — The growth canvas replacing vision traction organizers for home service leaders — What "path of least resistance" actually looks like applied to your business — Why you need to pause before your next quarterly session and design Version 2 Yarin's free playbook: fractional.partners — no lead magnet, no catch. Just the framework.  -- 🕐 TIMESTAMPS 🕐 -- 00:00 - Introduction 00:51 - Yarin's Background and Story 05:06 - Hustle vs Focus 06:08 - What Vision Actually Means 08:20 - Defining Your Real Success Metric 10:39 - How to Build a Monopoly in Your Market 12:11 - Military E-Commerce Business Breakdown 15:49 - Diversification Mistakes and When to Cut 21:17 - The Wrong Growth Model 23:51 - Growth by Addition vs Subtraction 30:50 - Profitability Before Capital 33:41 - How Private Equity Values Your Business 37:47 - What the Best CEOs Have in Common 39:53 - Better Decisions Equal More Profit 1:05:46 - Why Franchising Fails in Home Service 1:07:09 - The Explicit Decision Framework 1:09:45 - The Growth Model Framework 1:12:48 - Free Playbook and Book Recommendation 1:13:32 - Path of Least Resistance Explained 1:15:14 - Build a Machine That Prints Profit 🚀 FREEDOM 2026 Get your Tickets Today! https://homeservicefreedom.com/ Tiktok ⟶ https://www.tiktok.com/@officialtommymello Instagram ⟶ https://www.instagram.com/officialtommymello/ Facebook ⟶ https://www.facebook.com/thomasmello/ Tommy Mello Millionaire ⟶ https://www.youtube.com/@officialtommymello Live Q&A ⟶ https://homeserviceexpert.com/questions

You can be successful. You can grind and you can hustle, but at some point it's going to break. The question is, not how do I grind harder? The question is what is the path of least resistance? You want to find what exactly is the lever that I want to pull? What do I want to double down on? Sometimes it's saying no to revenue to protect your EBIT. Better decisions executed by top A class individuals equals profit.

Before you make any big decision, pause, what you've built version one of your business, Doesn't need to be the version you actually scale. Your business now is very different than the business you started with. Oh, way different. You have to be intentional about creating these versions. All right, guys, welcome back to the Home Service sector. Today I got Yaran Ghaon with us.

I pronounce that, right? Perfect. It's Australian. Correct. It's awesome. Love me some Israeli people. I'm telling you this. The people that I know are always hustling from Israel.

That's right. Good people. Hustle is not a plan. We'll talk about that. So you're an expert in scaling company. growth advisory, operations, positioning, leverage, profit design. EOS, it's funny, I just,

I know Gino Wickman, Mark Winters was just on the podcast. Your base in Salt Lake. Correct. And you just moved from Austin. Forex founder started his first business at 14 SMS payments. Awesome. Built and sold Israel's largest military e-commerce platform. Well, let's rock, dude.

Tell me a little bit about getting started at 14, your SMS payment platform. and, you know, just how you got started. Yeah. How did I get started? I loved building stuff. I love building stuff. So I love building systems.

It's 14. If I take you, that was like early 2000. And text messaging, micro payment was just beginning. So you could buy a wallpaper by texting a number and pay for a wallpaper for your phone or a ringtone. It was a whole community or list of service. you can do or you can have with text messages. And I thought that was a really cool thing. But being 14, I couldn't really monetize.

I couldn't really do this, meaning that I had a website. I wanted to start monetizing my website, but I couldn't do this. So I ended up building a platform for small business owner for small companies that basically allows them to implement like a code inside of their website and start monetizing their own content. That's what I did. Wow. Yeah. And how did that work?

Work perfectly. So I grew this. And then two years later, people came to me and said, we want to charge more than the highest ticket price. So in text messaging back in the 2000, you can charge up to, I think, $4 or $5. People wanted to charge more. So I partnered with the second largest credit card company in Israel. And we built a payment processing with credit cards. So same idea.

Instead of SMS, it became credit cards. And then I ran it for two years. and I joined the military at 18. There's a mandatory military service in Israel, and I had to close my businesses, and I drafted, I ended up being a combat sergeant. Wow. Yeah, they'd have about three years, learned a lot, experience a lot.

What were you making at age 14, 15, 16 years old before you got into the military? Tenth of thousands of dollars. Yeah. Not crazy amount of money, but it was a lot for a kid. Correct. Yeah. That's great.

parents that enabled me to do that. Like, my dad gave me a checkbook under his name and I transact because I was too young. I couldn't even open a bank account at 14. My parents enabled me. And that's what I was able to really play and experiment at such a young age. That's great. Entrepreneurial family? My dad was an entrepreneur correct.

Oh, that's great. And then you served the IDF's combat sergeant. Commanding platoons, you know, is there anything you really? took from the military that sticks with you today? So many things stick with me today. You can do hard things. It sounds so cliche, but it really, like, it just puts you in an uncomfortable situation.

I was a plush kid from a plush life, and I got throwing into this mix that was very different than the way I grew up, different people, different environment. You just adapt. And you just, you just, rise up or crush and you just rise up.

You teach you a lot and you put you in positions where I don't know any other 19 year old in America that like at 19 I committed 40 soldiers in what world when a 19 year old

has that experience anywhere like no it's crazy I mean you had to grow up fast correct so it ages you you handle pressure you know

pressure situations. After the military, you notice Israeli soldiers weren't getting enough gear. So you built a, would you want to go through this? Why are you laughing, Tommy? I just think it's crazy. You're a hustler.

I am a hustler. But I'm a focused hustler. Now you're focused. Now I'm focused. I was always focused. But I am a builder. Yeah. Yeah.

I want to do. So let's talk about hustle. Like hustle is amazing. I want to be a hustler for a very, I'm trying to find the path of least resistance in everything I do. Right. So it's not just about hustling and driving repetition

and just hammering stuff. It's really about fine-tuning what works and then finding the path of least resistant to get to where you want to be. Yeah, simplify it. Correct. Yeah. I think that's the problem.

I think that's why Elon Musk does so well. Yeah. Because he eliminates, automates, or delegates almost everything. Correct. And he's great at recruiting and building a team. Correct. People think Elon runs all these great businesses, but he's probably the best recruiter on the planet.

Identifying the individuals, right? Who, not how. It's not just the individual. It's also like identified individuals and then giving them a very cohesive, focused vision to execute upon, right? Because otherwise they'll work in wherever direction they want to. But it's about crafting this super tight realistic vision and then having them, okay, so what is the path of least resistance to get to where I want to be? So tight vision is in what to focus on, or is it a tight vision as far as revenue and profitability? Is it just certain tasks? Do you have your top three or top five?

What does the top vision mean to you or a tight vision? So vision is this really ambiguous term that people use, EOS use. A lot of people use. So here's what vision means to me. So vision is an aggregate of multiple different things. one is defining a success metric that I would love not to be revenue based. So what exactly are you trying to achieve here and what is the metric that measures that besides revenue? So a lot of companies set vision.

I want to be a $10 million company. That's great. It's amazing. But that's not a filter mechanism, meaning that you want to be a $10 million. It's not going to help you make decisions along the way as you face a fork in the road. And is this opportunity right for me saying I want to be X. revenue is not going to help you do this. But if you have a success metric

that ties to your problem solution thesis or in different ways your mission statement, right, I am here because I want to affect this change in people, in the world, in whatever I do. This is why I started this company, right? People start companies because they have some sort of, besides just making money, they have some sort of mission or a reason behind

why they're trying to do what they're trying to do. If you're able to articulate what end looks like and what is the metric that measures this and then give it to A players, then they'll execute in the right direction. That makes sense, yeah. I think most people go into business primarily for money and freedom

and that they don't like their boss. That's true also. I think a lot of people are like, why would I be going through all this shit when I could do it for myself and make all the profit? Then they get their ass handed to them. Correct. I mean, nine out of ten businesses fail.

Yeah. And that's why I'm not a big fan of tax the rich. Like, tax them. Tax them probably more than regular people. But don't tax them so much to stop them from wanting to do the business. Yeah. Because it's already hard enough to be successful. So Tommy, let me ask you a question.

What is your success metric? As you build this venture and you have all these different areas and side businesses, what is the metric that defines success for you? But right now, more legacy. We're on uncharted territories, but I'll tell you this, I get about three or four messages a week of people buying their first house, changing their family tree, spending more time with family. So I get a lot out of watching people win because right now,

I don't know what else I'd be doing other than A1. I mean, that's my primary thing. I don't really spend any time with anything else. Like, this is my race horses. They wear blinders for a reason. I don't I'm not like Elon Musk. I don't want 10 different companies. I think most people that do want that many, they all fail.

Yeah. Going back to focus. They lack to focus. And it's fun watching people's lives change. I will say that. And for A1, it's just, it's like I want to be a, you know, personally, I look at this business and I say, it's almost impossible to create a, be the only company. but I do. I look at it like, how do we

shut down all, like I enjoy the competition. By the way, I love great competition. I mean, it makes me better. But I'm like, how do we create a monopoly? What would we need to do to make it impossible to compete? I mean, we were on the phone with Lowe's. We're flying out to go see Home Depot.

We're working with Costco. Angie wants to give us all their leads. Like, how do we just say that we're the only viable company to do garage doors? And it's very hard to do when there's 500 companies just here in Phoenix. Yeah. How do I become the obvious choice?

Well, if you were able to take it from raw materials and vertically integrate. Yep. That's one way to do it. So vertical integration is the first thing. And, you know, I do think we're headed in a time with technology that I think if you win by six months. We're talking about robotics and other things in the future. But if we could be the largest in North America and be vertically integrated, we could win on everything speed.

We could win on price. I don't like to win on price personally. Yeah. It's not a good win. No, I like to win. No, I like to win on time, and I like to win value. Yeah. And show up and people feel good about the experience.

I always talk about how I go to the nicest steakhouses, $1,000 per couple. But I go back there every two weeks. Because you get value. I love it. Yeah. I mean, they treat us like gold. The manager stops by.

They call us the next day to see how it win. Any special occasions is a free dessert. and, you know, your martini could be halfway full. They'll come back, shake it up, make sure it's cold. The plates come out at a 400-degree plate. It's an experience. Yeah. And I think that's how most buying should be.

Early in my life, I used to buy the cheapest. Now I buy the best quality because I'm an experienced shopper now. Yeah. I mean, the people that say they don't like quality are the same people wearing $300 Nike's. Isn't that funny? Yeah. They say, why would anybody pay that for that?

I'm like, well, how much does your shirt cost? You're wearing a $220 t-shirt. Just did they place value in different things? They don't place value on homes because they don't even own a home. A lot of them still live at their parents' house or they run an apartment. And then too many people sell out of their own pocket. They wouldn't spend the money on that, but I go, but you're also not going to go to a nice restaurant. You also don't drive a nice car, different priorities.

Most of them lease a nice car. Yes. So tell me about this military thing. I'm interested. So how did you create a business out of that? So just for context, in Israel, there's a super. mandatory service for males. And the government doesn't equip with enough equipment.

So think of it. Everybody has to join the military, but it's underfunded. And as you draft, you're just, you're missing gear, like basic gear, like shirts and socks and watch and a letterman and a flashlight. So there's a whole secondary market of army gear that people buy before they enlist and during their military service as they want to upgrade their weapon or upgrade their vests or really have some status symbols as they serve. And what happens is, as a combat soldier,

you really get to go home every two to three weeks for about 48 hours. So it's a very short amount of time. And the challenge is that Israel observes the Shabbas, meaning that during Saturday, everything is closed. So you really have a very short amount of time on Friday morning to get everything you need, and then you go back to the base Sunday morning. And I thought to myself, okay, as I was one of these soldiers that buying equipment,

why isn't there an e-com or website that I can just ship it to base? Or why there wasn't any store in Israel that's hyper-specializing military equipment. Everything was hiking gear with a military section. And it's like, let's talk about hyper-speciality, right? Why hyper-specialty is a differentiation? Why isn't there a single one-stop shop

for everything that I need, hyper-target for a specific person or a specific type of customer, in this case, an 18-year-old to the 21-year-old soldier, that they can just buy as they're in the base and as it shipped either to their home or to the base or they come pick it up. So I built this. I started from my apartment. Started selling it from my, it was online.

That doesn't really matter where it was. And I grew it and I grew it. And we opened a brick-and-mortar location. And I ran it for seven years. And then we sold it. I sold it to my largest competitor. and I moved to the States. It was the catalyzer of selling it.

Yeah. Did you do good? I did good. I didn't do great. I made a lot of mistakes as I was building my business. And it cost me when I exited. It cost me in multiple and it cost me in exit price, exit value. I made a lot of mistakes.

What were some of those mistakes? One mistakes that I made is I overbuilt systems. So I'm a system guy. I love building systems. So I built the website. and I built the CRM and I built the ERP and I built a POS register that someone comes to the store. What happens is as I came to sell it, these custom software became debt, not assets. So as I sold it, I was the only one that could operate those and maintain those.

So when someone buys it, they have to replace this. Hurt me when I came to sell because that was the only one. So I built now this is super relevant for the AI, right? Everybody's building systems. Everybody's building their own thing. But two things happen when you do this. One, you step aside of your core competency. If you have a core competency, you're not a dev shop, right?

You're a garage door or a roofer. You're not here to sell systems. And you're not here to maintain those systems if you want to exit, right? So I would rather pay more off the off-the-shelf solution to end up building it outside of my core. Yeah, I made that mistake. Tell me. Well, I started a vehicle wrap shop because no one could keep up with our wraps. I also had two full-time mechanics because I was buying older trucks.

And you get distracted and you're like, and then I prioritized recycling metal. So I had two guys that did all the recycling. And I'm like, I don't make any money on this stuff. Why not just go out and find the right rap company, find the right company to stage all the stuff? I find the right, the recycling metal was a waste of time. I mean, one of my competitors back in 2015 told me I paid for my rent for my building with recyclables. And I'm like, so I started to prioritize all these other things except being the best garage door company on the planet. And these are all distractions.

And a lot of people go, what if we own this side of it? What if we own this? What if we controlled all this? And you realize you're not good at anything. You're a jack of all trades a master of none. Correct. We talked about vertebration in the beginning of it, right? What happens is when you overflow the bucket, because you got one bucket.

So I always say, like I used to always say, I put my eggs in a lot of baskets. When you could overflow the basket, it could overflow into vertical integration. Yes. But you've got to hire the best. But I think with this world of AI, it's going to be much easier for these OEMs to go straight to the consumer. I think that's where we're headed. I mean, SRS is a big roofing. They handle a lot of roofing supplies.

they sold the Home Depot, they're doing $1.4 billion of EBITA. Wow. So I think some of these larger players are going to start getting in the game. Because home service is blowing up. So is home improvement. Correct. I mean, it's AI proof in a lot of ways. Yes.

So, yeah, focus is like most companies I talk to can't get past $5 million. So let me ask you a question, Tommy. So two things. One, you identified that this is a distraction. Yeah. What was that moment? What caused you to step out of execution and zoom, out for a moment and say, okay, this is my business, this is what making me money, this is

but not making, I'm going to cut. What was the count? I had a lot of good mentors. And when I went to see all the $100 million shops in 2018, I realized they didn't have any distractions. They just paid the top people. I learned what accelerated depreciation was. Why buy new trucks?

Why the mentality of the technician was better? What customers, when you see a brand new truck wrapped perfectly show up, it doesn't say I'm cheap. It says, I'm a good value, but I'm going to do the job right. But, you know, the guy's smoking out of the back of the truck. It's all rusted out. It's barely right. Yeah.

So I just hired the best. And Dan Martel, buy back your time. He said, once I started buying how I want to be bought from, everything changed. Yeah. And I think that's true is like all of a sudden, the top clients came to me. And they said, we don't care what it costs. Just do it the right way. Yeah.

You were able to attract the top clients. And I learned through just watching other people. I mean, I went out and visited it. I spent a lot of times visiting other shops. Let me ask you another question. You talked about diversification. What point do you diversify? At what point?

Because every diversification dilutes your focus by design. So at one point, we're going to get to this because it's my passion. I think that people over-diversify too early. Way too early. I mean, we're going to do north of $100 million of EBITA, and I'm not ready to diversify. But if I did, I would buy out a really, really strong call it just a parts manufacturer. Okay.

So they got this nailed. specialists. That's all they do. They've got a written track record and they're going to stay on board for that. So within your value chain. Yeah. So I would say I'm going to go master lead manufacturing at Six Sigma and, you know, first in, first out, all that stuff. I'd say once you get big enough, you could buy channels and you're buying the people in the know-how. But I think like HVAC plumbing electrical makes a lot of sense because HVAC's got a small window four months. Then you need the shoulder season where the electric and, you're you're sharing those leads.

But I mean, even neighborly, one of the largest franchises in Home Service, they're only sharing 3% of the leads across franchises. So everyone wants to go into all these things. But Parker and son's a good buddy of mine. I talked to Paul yesterday. They do about $300 million just in Phoenix. And they do a lot of services. They only spend 3% on marketing because they own the client.

Yeah. I don't like that as much because you've got to train a lot of different people on a lot of different things. A lot of different suppliers. You don't get the economies of scale. there's a lot of reasons why it doesn't make sense to me. I'd rather own the industry than the client and just own the client for what we do.

I say no one could compete, like Anderson renewal. Yes. The thing is, so we talked about a lot of companies don't really make it past the $5 million stage. Before I tell you what I think, why do you think that happens? I think it's a lack of systems and a lack. I think most home service companies,

they don't have a good finance person in their team, FP&A. Their pay structures are wrong. They don't pay enough. They don't train enough on how to take care of clients. But the biggest thing is they don't have the math model to understand the right pricing to where they could have nice things like new trucks, the best parts, the best training, the best tools, the best marketing, and still be able to make a profit afterwards. When you get on these forums on social media, they all say, oh, look at that company, taking advantage of old people.

No, no, they don't. If I ask you, who's the most expensive in your market in Utah? I don't know. You tell me. It's any hour. Okay. And who do you think is the most expensive? I don't know. Same company every time. Same moving company, same H-track company, same. Anybody, why is it the most expensive?

Because to run calls and run warranty calls the same day. To get out there when you need me the most, to have reliable trucks, reliable staff that don't turn over very quickly, there's a price to have a CSR, a dispatcher, the right CRM. Most of these companies are working out of their homes. Their wife's working for free. Their daughters are making $12 an hour. They didn't plan on making a profit. They plan on making a living.

That's the biggest difference. Now, you tell me what you think. So let me tell you how I see the world. Companies, what I see, I see companies grow with a wrong growth model. And I'll explain what I mean by that. As you start growing a company, you use a growth model called growth by addition. The idea here is you grow zero to one, zero to two. it's all about adding more, say yes more.

More channels, more type of customer, more products, more geography. It's all about just saying yes. And that works really well as you start finding your what we call product market fit. Or you try to find really traction, early traction. What happens is, as they find traction, companies try to keep going by addition. They keep saying yes. More type of services, more type of clients. Oh, I can do residential.

Of course, I can do commercial. I can do all of it. I can do plumbing, I can do HVAC, I can do electrical. Yes, just one lead, no problem. I can service it. And what happens is, as they grow, they feel friction with growth by addition. Stuff start to break. And the first inclination when stuff starts to break is to systemize.

And that's where I'm going to push a little bit. The first inclination is to systemize, right? I feel this all this tension, all this chaos. We're not really providing a great service. Let's system. Let's put some systems in place. They install EOS, entrepreneur, know, operating system or they put some SOPs or processes, great.

But what happens is that there needs to be a shift from what worked at the beginning doesn't work later. Yeah. So from moving from growth by addition into growth by subtraction. And growth by subtraction means, okay, let's identify the 20% that moves 80% of profit. Yeah. Yes, but profit, not revenue. And it goes, ties back to your comment around financial models.

it's really easy to focus on revenue because revenue looks great, sales, cures all, right? But not all sales are created equal, right? There's costs associated with each sales. And inside of your business, there are really like five different businesses with different margin profiles and different sub-businesses.

So identifying where is the profit, the EBIDA, truly coming from... That's a good... I'm glad you went there. And then you take that business and say, okay, I built the business, he said two million dollars, three million dollars, something is working,

but I don't want to scale the whole business. Let's find what's the engine here really? Which one is the perfect customer for my business? Yeah, what at lead source? Correct. Is it Angie? Is it home warranties? Is it this?

Is it this? And a lot of people do all of it. They take on commercial. They take on new construction. But they don't really know. I say, what's the profit margin per business unit? They have no idea. No.

They don't have a good CFO. They don't have a good F&A team. They don't have a good controller. Not just that, but also execution suffers. So as you serve different type of customers and different type of product, You become mediocre by design and all of them. Think of a $2 million company, small team, still like semi-home. It's very small, not a lot of capital, not a lot of money.

You cannot do multiple things well. It just doesn't work. So the whole game is, where's my core? What can I double down on? And then you take that and you build a business around that core until you get to a point where you're big enough to diversify, where you're big enough to say, okay, I'm ready to add another. service line or I'm ready to add another territory. People just grow too early and it hurts them and they feel like, oh, this is an execution problem when it's really a decision problem

that was never made. I think a lot of people, they ask me, when should I grow to another market? We're thinking about growing and I'm like, do you have the substantial market share in your current market? You go to church, your kids go to school, you've got all your family and friends there. And if you don't own that market, why would you want to scale? Correct. It's so much easier to do it in your current market. And they go, well, you know, we just want to grow. And you're right.

They always say yes. I was on the phone with Alex Tremosi for an hour this morning. Yeah. And he was telling me a lot of the stuff he's doing. And I'm like, man, he goes, when are you going to expand into other services? I go, not anytime soon. I want to be a master of my craft. I go, look, we own less than 2% of market share.

Yeah. We get to 10 pretty easily without changing a thing. Yes. So. But that is the key. That is my opinion. So in order for you to grow, let's talk about growth for a moment because there's growth of top line and there's growth of EBITA and they're not the same. It's really easy.

I talk about this so much. Because it's elementary, but it doesn't happen. So it's worth mentioning this. Growing top line is great, meaning like I get more sales, but it's an illusion because you have to service those sales. And not just service. You have to build an operation that does that. successfully and not all sales or EBIDA is the average of all of your activities. Some of them produce a lot of EBDA.

Some of them take away from your EBDA. So you want to find what exactly is the lever that I want to pull. What do I want to double down on? And sometimes it's saying no to revenue to protect your... A lot of time is saying no to revenue. I mean, it's a lot of time. I just did a video on Instagram and I said, there's a $5 million company making 10%.

There's a million dollar company making 30%. Which one would you buy? Well, the fact is I only buy off of EBITA. Yeah. And what's nice about what we do is I can take a high revenue and change some stuff in it because they got the leads. But I know what to cut. Like usually when we buy a big business,

we got to cut like 40% of it. Yes. People don't understand that. I buy the business. I pay them on the EBITDA, but I know where their profit is because we do deep analysis. We just cut everything. Yes.

And they go, man, I can't believe he got rid of the gates. Like, because they did gates. Yeah. Like, we're just cutting a, we bought a company recently in Dallas. We're getting rid of the gates. Yeah. Because literally, it's not making money. It's not making profit.

Yeah. And we don't do gates. So why do you think the owner didn't cut the gates? I think the fact is, I really don't think they really realized. This is where the bookkeeping comes in. I don't think most people know where their profits coming from. Correct. I think they're good business owners.

They got a good business owners. bookkeeper, they don't get audited financials, and they don't know where the money's coming from. They don't look, you got to look at the entirety of that business unit and say, what did it cost, what are the insurance costs, what are the trucks costs, what are the gas costs, what are the people that are booking the phone calls costs? And it's hard to come up with the numbers to do that. You've got to have a really built strong financial company to look at these things. But when you realize it, you go, huh, if we only made out $130,000 this month, $10,000, you'll at that, you're like, what is that, 7%? Is it worth it when we're making 25%?

Ah, yes. And that took a long time for me to learn. I was doing 17 million walking in every room bragging about revenue. But it's exactly the kind of businesses that I work. It's the same, right, you are a bit, you were a business with leads, product market fit with traction, and it's just deluded focus. This is what this is. So let's talk about financials for a moment, because I built a calculator and it's, all of all of my tools are free and publicly open. I don't don't sell tools. And the idea here is here is where people get this wrong. When they look at their business, they look at it as one thing.

But their business is not one thing. It's a collection of multiple different things you do, either different products you sell or different type of customers you serve or different channels you acquire customers to. And if you look at your business, you ask yourself, okay, so if I had to almost segment my business by type of product that I sell or by the type of the type of personas or customers that I serve. And then what most people do is they look at their cogs, right?

They look at the direct cost and say, hey, this is profitable. What they don't look at a lot of times is the overhead that is associated with that specific activity. So let's take an example. Let's say that you have a wholesale side of your business and you have a retail size. there are different office or back end or overhead costs that are associated with that revenue stream that if you didn't have that revenue stream, we're never there. So if you are doing like wholesale, that requires a special sales team to sell to that size. Not to mention you got wholesale, you got different insurance.

Correct. You got cigarette breaks. You got trailers. You've got different machinery. Everything. And so we've gotten into this discussion a lot in the last year of should we, start stocking all the inventory. And I'm like, I've done that. I've done that a lot. And I go, I just don't think we'll get to the size where it might make sense. But this wholesale side,

I'm involved with a flooring company, great people. I'm going to have them listen to this podcast, but we're going to do commercial, residential, wholesale. It's a lot of things. And it's not very profitable. It's hard because you think we should put more money in and just try to make it work. but I tell people, don't borrow money. Get profitable. Correct. Eventually, if you want to buy another business or you're buying trucks or a special machinery, eventually after two years, you could invest in certain things.

But I like to make the small mistakes and use my own profitability to grow. Because if you're not making enough profit, why would you want growth? Correct. It's almost like profit or capital or money is an accelerant, right? It can move you forward. But unless you have a super tight machine, that you know predictably I'm going to put $1.00.50 out. Like, why would you get debt or why would you raise?

It's all about self-funding. You don't have to self-fund the growth, but it's really just like make sure your model is super, super tight and profitable. Like the million-dollar company does 30% net profit. I will throw capital it gladly over the five million-dollar company that does 10%. 10%. It's all about tightening your machine before you use. scale. Capital

or money is just, it's a scale. So like for me, I look at capital. Like if you gave me a hundred million dollars extra, I would put that mostly into top of funnel marketing because you're a machine. But I know in 18 months that I'm going to take market share. Yeah. And that's

that literally will compound into taking market share in all the markets. Yes, but you're in a position where your machine is so tight and tuned. And we know where every dollar is. Correct. So putting money in the up a funnel is just an accelerant. Yeah.

For a lot of companies, I don't think a lot of companies have lead problem. They all say they do. Yeah, because it's the easiest to identify. Oh my gosh, if I could just get more leads, why to keep the machine going, so you keep hiring people to make no money? Correct. And then the CPA calls you at the end of the year, says you owe $300,000 and you go, I don't even have $300 grand.

How is that possible? Where's the money? Where did the money go? Yeah. That's what they all say. Number one priority for a business owner is to identify where is, what is the business is an engine, right? What are the different components of that engine?

And where is my profit flowing? Profit. Now revenue. Revenue is super easy, but it's a misleading metric. And that's how good companies grow. That's what everybody says. I tell them my buddies and I, we don't, do you think every month on like the 28th or 30th

we're sending each other revenue numbers? No. No, we're talking about EBTA. You can't about profit. Because you cannot feed your family. You can't sell revenue. Correct. You can sell a business.

Home service is a great multiple. I mean, anywhere from 5x to 20-something X. And what size? You know, a million to two million, depending on the industry, so high demand. Yep. Demand means it breaks. I need a fix right now. The hot water heater blue.

Yep. It's leaking. The garage door, I can't get out. The air conditioning, it's 120 degrees out. If it's demand-driven, about a million in H-Fact might get you around an 8 to 10x. Around five. In EBIDA or an EBDA? Yeah.

About 5 to 10 million, you'll probably get a 12-14 X. That's a great multiple. And 20 million of EBDA, you're probably getting a 17 to 18x. EBIDA or multiple is basically the predictability of your machine. Yes. That's what this is. Well, as interest rates go down and you borrow money, this is what private equity understands. If I borrow 6x EBDA, my cash on cash return, especially if the interest is low, I can borrow my cash on cash return is much better.

As long as the business can pay the debt. And grow at the same time, which is difficult. A lot of businesses borrow too much and they can't grow and pay the debt. Debt is a double ed sore, right? You want to take debt or you want to take capital. When you are positive that your machine is optimized. Right. And that is what most people skip.

They just skip it. They skip the optimization part. They jump straight to growth. A lot of it is ego. No, your ego is not your amigo when it comes to business. That's a good one. Yeah. That's it. It's like a step that people skip at a specific stage that costing them and just make sure that they get stuck in this $5 million stage. Usually one to ten. It's crazy because you find great businesses. Passing a million dollars in sales is not an easy task. I think only 4% of the U.S. businesses surpassed $1 million in sales. It's not an easy task.

What about $100 million? I think it's 1%. It's super, super small. But you see these businesses and you see the one to ten and they just get stuck. But it's crazy because there's good team that's traction or product market fit. And they get stuck because they don't optimize before they scale. It's a very good observation. I always say revenues for vanity, profits for sanity. That's what I say. And cash is king.

And they say, you know, a lot of people are like, well, you don't understand. I hear that same phrase, you don't understand. You don't understand. You don't understand. You don't understand. I was in your shoes. I've lived your life. And I go, I'm the only one that understands.

I was there running extra jobs just to make sure we made payroll. I mean, I've done it. My mom has worked for the company. I mean, we've gone through so much. And what I know now is if you focus on profitability, what I'm willing to do is shave revenue dramatically to get to profitability. Yes. And that almost seems like a failure to most companies.

Like it feels like, man, I'm really making the wrong decision. One of my buddies, really smart guy, he shaved all of his new construction, got rid of it all. And he says I took a $5 million hit on revenue. So what? Not a big deal. What's the bottom line impact? Bottom line, but not to mention, new construction will lower your multiple. So I said, what are you trying to do?

Are you trying to get the highest multiple? Because right now you get a, if you get rid of the new construction, you might go down a million dollars of EBTA, but you go from a 6 to a 12x. If you want to exit, that's a game between the multiple and the EBDA. Because these are the two levers. The two levers. Correct. Yeah.

And that's one thing that most people listening, I think they should be taking a lot out of this. I talked to power washers. They wash. Yeah. And they ask me what I should do. What should I do? You said switch to this industry. You heard me talk about this?

I go, yeah. I think the best bet would be try to get up to this level. Try to get a 6x. That way you got $10 million to work with. If you're going to be working just as hard to get a client, I mean, there's job. that don't really require a whole lot, like, for example, insulation. Okay. It's pretty easy.

Garage flooring. There's a lot of things that don't require. And by the way, the owners don't need to be good at the job. You don't need to be a technician. The E-Mith Revisited talks about Michael Gerber. Why would you want to be a master of that? So you could go to the work, so you could go inspect the work, or would you be a master of business?

Correct. Most CEOs that are professional CEOs, they don't come in understanding the entire business. So they spent six months learning the business enough to understand each role, how the widgets made. But they're never going to be a master that they could take out the hammer and go do the job. What do you think they're a master's at? The what? The masters.

What do you think they're a master's at? Most CEOs, the best ones, they can see around the corners and see the future. They know how to produce profitability, but they're really good at producing teams that are accountable. So it starts with an org chart. Yep. And then it starts with each and every KPI that adds to that profitability, like the booking rate, the conversion rate, the average ticket and the cost per lead.

That's how you make money, reduce cancellation rates in home service. Okay. Capacity planning. I think what they do is they learn the business. They set a good vision and then they bring the right team on to absolutely execute that vision. Okay. And they're very good at time management. They don't waste a lot of their days on stupid meetings.

Like Elon Musk's rule, if you're in a meeting that you don't think you should be on, then walk out. Yeah. If you're not pertinent to them, because how many meetings do you think most teams have? Some of them have no meetings. Yeah. That's a mistake. And then some of them are meetings all day that they never get to work. Correct.

So what's the right solution to that? To have more meetings? People that are in meetings all day long. What is the solution for people that have meeting on their long? So let's talk about why they have meetings all day long. They have meetings all day long because they feel like they have to control their situation. There's a reason why people have meetings because they substitute systems for decisions. Those meetings don't make decisions so they have multiple of them.

But I want to go back just for one moment on the, what does the best CEO have? In my opinion, it's people plus the ability to allocate resources. So as a CEO, as a manager or as a business owner, your job, really, if you don't want to be the operating, you want to be the owner, right? Talking about the e-myth, one of the step is just decide where energy goes. Energy and capital and people. And just like it's a mixture of the focus and the vision, right? What exactly I have a team of 10? What are we focusing on?

What am I feeding them? What are we saying no to? And the smart, successful CEOs and owners are able to make better decisions. Better decisions executed by top A class individuals equals profit. Yeah, that makes sense? It's a little abstract, but it's all about business is a game of the mind, right? unless you want to be a technician, if you're playing an owner game, it's about making decisions, and it's almost like chess, right?

So your ability to make decisions, and specifically profitable decisions around where energy goes, it's what it's going to dictate. I like that a lot. Where the energy goes? Because a lot of times people just spend a lot of time kind of systemizing, let's do more meetings, let's have quarterly priorities, let's have all these, like, project management in place. but they haven't really made a decision around, is this something that worth spending time on?

One of our best project managers, she's absolutely phenomenal. Her name's Joan. She's like, does this move us to the Noura Star? Correct. And she's like, there's only 10 things possible we could have. And my COO's amazing, his name's Luke. Whenever I say we need to focus on this,

he goes, this is the top five? Yeah. Which one should we take out? Yeah. And then we've got to look at those and say, is this get us to the NORSTAR, which is our EBITA goal. Is that your No Star?

I mean, as a company, there's a lot of people that have equity in this business. And there's a lot of people that have profit units and different types. I mean, the North Star for me is a little bit different. But as we have private equity backing us, they're trying to get a good return for their partners and their selves. So, yeah, I would say customer service, making sure people win along the way. But obviously, we rank ourselves. We set a budget and we say that we hit the budget this month. and are we headed in the right direction?

Yeah. And I think that's what most businesses do. I mean, if you're publicly traded, you've got a fiduciary responsibility to all of your stockholders to maximize profitability. I know there's certain growth in, like Jeff,

Jeff Bezos, when he knew when the stock was $2 that the market was like, it was worth a lot more than that. He didn't let it bother him. But he still knew that he had to get the stock price up. Yeah. I mean, what should be the North Star? So I believe, so here is the challenge with the EBITA as a North Star, right?

EBDA as a North Star doesn't necessarily allow you to make long-term decisions. Yeah, you're right. If you look at everything through the penny of the dollar and like, okay, is that going to contribute to EBDA or not? That's great, but you might end up with a very different company the one you envisioned. That's true. So I want to, so the way that I like to think about this is I like to start when we talk about no star is like, what exactly are you trying to solve here? And maybe that sounds a little bit of abstract for most people thinking of, I'm doing a garage door, what am I trying to solve?

But if you extrapolate this and you want to become a best-in-class business, what is the problem you want to have? What are you trying to really do here? And how would you measure that success? Is that number of people that are not stuck with their garage door for less than three hours? Is that the people, I don't really know what is in business dependent. But if you're able to articulate, what exactly am I trying to change in the market? Right.

You started A1. Why did you start A1? What were you trying to change that your competitors were missing? Well, I was in my early 20s. I know. Yeah. Mine started off as I was a work. The first 10 years were practice.

I didn't have a systematic way of looking at the business. As you grow and you become a little bit more sophisticated and you grow a little bit more business. There's a bigger business here. There's other people that need to opt in into what you're doing. doing. I said no to a lot more things. And I say absolutely not. And by the way, I go in now to discussions of new opportunities.

And I say, this is the only way that this would work out. And I never veer from that. Like, if it's not going to be this, then we're not going to take that on. So you're intentional. Yeah, very, very intentional. Yeah. Because look, if you say yes, like you said, I mean, you say yes to too many things. And it's like you're, you're literally juggling and everything falls.

Yes. I wish everyone could pay attention to this podcast and just realize, where are you making your money? What leads for us are you making your money? And here's the thing. You might have my buddy Tom Howard. He's got a guy that does $20 million a year in HX in the field. That's Phil. When you get that kind of performance now, he took him out of the field to train everybody else.

Now he's got a bunch of $12 million producers because the guy kind of taught everyone else. That's crazy. One guy in one business doing $20 million. at 70% gross profit. That is crazy. It's also a risk, but yes. Oh, you wouldn't want to buy that business because he's got key man insurance for that guy.

But if that guy could start molding everybody else, that's what they did. And I think that's very powerful, considering there's a lot of A-track businesses that don't do a million. Imagine I have one guy doing 20 times what your whole business does. It just goes to show that it can be done,

and it's a series of decisions. It's not the market. You don't need to expend. It's not adding more service. in becoming best in class in what you choose to do. And most people just never choose. They never choose a lane. So they try to become great at everything

and they end up being mediocre at everything. So it's choosing a lane where I feel like I have the most advantage because of X, Y, Z. And I chose that lane, and I'm going to focus on that lane so I can become the best in my territory in that lane. and then I scale. Yeah. I own my market.

I own my domain. I own my industry. It doesn't have to be the whole market. I own retail at a specific geography for a specific type of customer. And I tap that until there's no more left. Until there are no more leads left to serve. You could own like 20% of the market. Correct.

And then find a different market. Yeah. But don't expend when you own like a quarter. or like 0.1% of the market. 1% of it. So what do you tell you work with 400 companies? How do you get this through to the people? I start with a shared source of truth.

So we talked a lot about decision and we talked a lot about growth decisions. So the first, what I found to be most helpful is you have to start with articulating your decision. So I built a canvas. It's a one page that basically says all of your decisions for your business, so everybody in the business has the same idea or shared mental model of what you're building here. That canvas includes who is the type of customer that I'm serviced that I'm focusing on.

What are the revenue stream that I'm focusing on? What is my lead acquisition strategy? So what channel am I focusing on? What's my hook? What is the incentive? And it kind of just going through and outlining on one page, what is the exact? most profitable version of my business that I can create.

And you create this shared source of truth. Basically, it's 18 questions. Simple question that are, instead of doing MBA talk, it's like, what customer are you focusing on? What is, the hardest question by is,

what revenue stream produces the most profit today? And you just answer these questions as a team with all of your stakeholders and you put this in your office or in your warehouse and you print it. And this becomes a source, of truth. So as you face a decision, an opportunity, quote, quote, comes into your sphere, you ask yourself, okay, this is my source of truth. Does it align with it? Do I need to update my

source of truth? And because it's written, and because you've made it with your team, it's strong. And it allows you to stay focused. And you can revisit it as you go and you learn more. Yeah, you can change it every year. But it serves as like, I have made an explicit decision. I have chosen my success metric. I have chosen the segment or the type of customer I want to focus on. I have chosen the most profitable part of my business

I want to double down on in the next year. The mere act of choosing and putting it on paper is where a lot of value is created without changing execution. I love that. Where do you get it? You go to playbook. That fractional.

Partners. Playbook. Playbook. That fractional. So what this really is, it's a private equity playbook that I'm trying to bring to smaller companies. So instead of having a playbook, if you were just like yourself, you were talking about I bought a company and I cut 40% of it and I basically increased my EBITA. But instead of selling it, here's a playbook you can do yourself.

And instead of having someone external buy you out and do it for you, take the same principles that a private equity would have if they buy you and do yourself now. Do you think it's easy? It's not easy. To work with people. I find that the people listening and they know who they are. Yeah. They're stubborn.

You know, they, they, just like a kid, you could say, listen, don't go do this. Make sure you wear a helmet when you ride your bike. What do they do when they get around the corner? Yeah. You know, so like sometimes, and I was that way, sometimes you got to fill the pain to make the change. Correct. And I'm hoping that the people could actually adopt this before they get to the point where they're like, how many people do you think message me a week to say, I don't know

what to do? Because I'm out of money. I'm going through a divorce. I'm losing everything. They get distressed. And it shouldn't get to that level. Correct. And there's a better way. Correct. Because when I worked, I worked in a venture capital firm as an entrepreneur in residence. And basically what it means is I was the entrepreneur that the fund sent to help companies. And I only work with distressed companies. And I was like, distressed meaning that usually they went out of money. And I kept rassing with like, why get there? They are. is a process you can do to never get that, don't get to that burnout.

Don't get to the point where you don't have more capital. Don't get to the point where your debt is so high. And to your question, how do you have them? I built a system. So this canvas is really like a system of here are the decision you need to make, and here is when you need to make those decisions. So if you bring a system like EOS, right, entrepreneurial operating system, there's a system to systemize chaos.

I built the same thing to systemize how you make decisions. and how you make more profitable decisions. If you do it with your team, you can do it yourself, or you can have me come in and help you go through the system, but it's meant as a DIY, you will see your business shrink.

You will see people enjoy what they do more. You will be more effective. You will do less, and you will make more. And it's not hocus-pocus. It's math. Through by subtraction. Correct. You just have to,

so I found that a lot of people don't know what to subject. They don't want to say no to revenue because they're not confident that say no to revenue is actually going to increase their profit. But if I walk them through a system or they walk themselves to a system where every decision built upon another, they can start making cut decisions with confidence. That's where the value is, right? When I, part of my, part of the workflow is to analyze your financials and try to find where exactly do I, is it worth focusing on? What revenue stream? Or should I focus on conversion or on more traffic or on retention?

What part? Once you go through that process and you have an answer, it's much easier to say, hey, we're not doing that. That just doesn't align. So step number one is like data. Step number two is decisions. I find that it's, look, we look at a lot of companies to buy. Yeah. And getting the data is the hardest part.

There's no good books. They don't have conversion data. They don't have call booking data. They don't have attribution data. and that's why I find it hard for you to want to work with a $2 million business because it takes a long time to even find that data. It takes a lot of time to find the data that is true. There's a process that we need to go through to clean their data.

It's there. Like if there is enough, it's there. And I don't, so there's two different types of data. There's two different types of insights you can get from looking at a financial data. One is tactical insight. And the second is strategic insight. and I try to keep it as clear as I can. Tactical insight is,

what do I need to optimize in the machine to make more money? Do I need to focus on conversion or do I need to focus on retention? Do we have a lifetime problem? Or do I have a traffic problem? These are hard to find in $2 million businesses because they don't keep metric

about how their machine is working, right? That's one set of data. The second set of data is strategic data. Strategic data asks the question what revenue streams are worth doubling down on? And these are macro questions. These are a little bit zoom out. Do I want to focus on wholesale or on retail?

Do I focus on HVAC or do I focus on plumbing? Do I focus on new install versus maintenance versus different product that I'm selling? These questions can be relatively easily answered by playing with your P&L. And you know that the data is not perfect, but it's directional data. And that's what we're looking for. Direction, right? Once I have direction, you can put some systems to really capture the minute details of your conversion and your retention, all that good stuff. But first, I want to make sure that they're in the right direction.

I'm going to pause because this is like... No, it makes a lot of sense. I get it. Why are you doing this? Why you've got a lot of knowledge? You can be an asset for any company. What's the point of going to these smaller businesses? By the way, I think it's a noble cause.

I love helping people. I see a lot of value. So selfishly, let's talk selfishly why I'm doing this. I see a ton of value in taking a $1 to $10 million business that is not investable today, that is not scalable today, and walk them through a maturity process where at the end of it, they are interesting to private equities. And basically I'm turning them into investable assets.

There's a lot of value that can be captured there for me and for companies. is. Yeah. But the higher goal is like, AI love building systems and I love seeing aha moments in people. Like they've built something. Something is working,

but they just don't know how to squeeze that lemon. Yeah. But they've built something of value. But it's not being captured today because nobody wants to invest in a $5 million business, top line, right? But there's a gem. So if you can take them through a process

of kind of figuring out what's the noise and what's the signal and have them build a more profitable version of it, there's a ton of value that can be captured there. What is your profit leak audit? It's the financial audit. That's what you do with the strategic. So I built a calculator for service-based businesses. You type in your profit, your marketing cost, how many leads, and he basically spits out,

what is the most profitable lever for you to focus on right now? And it's the beginning of doing this kind of work. We have to start with what are the numbers telling us. Well, can you imagine, this is a good analogy, can you imagine that you have a secret recipe from grandma? Sure. And you've got this special, call it cookies. They're all-mill raisin cookies. But every time you don't remember the amount you put in anything.

So there's no real recipe for success. Right. You're like, I don't know how much flour versus how much yeast versus how much vanilla extract. I think that's how businesses operate. I really do. I think they don't really know how much marking dollars that I put in there. They don't know the math. They don't know the measurements.

They don't know the KPIs. And they're running so blind and they got more leads, but I'm like, more leads mean more cancellations. You're booked out already. Also, those are not free. Yeah. And then what do they do? They trust their agency to say,

go get me more leads. We're doing it. And then they're spending money on PPC. You're competing with everybody that needs more leads. It's the only thing you can really do. Social media and paper. click, maybe some LSA ads, but you got to be better than that. That's why I love home improvement.

They could go to a home show and generate 500 leads. They could go door to door. They could go set up a place at Walmart and generate unlimited leads because they learn how to hunt. And that's one thing I really respect about home improvement companies is they build a man where it didn't exist. What are you, what are some of your success stories of owners that actually understood this, you've worked with them, and where they at today?

I built this in different ways. So the framework as it is today has evolved all the time. Usually I work with a company and we started. First step is to identify where profit is coming from. So as I unblocked or unlooked at their books, it looked like they have multiple different channels that they sell their product at. So it's not as one-to-one to home services, but it was a D-C. product, but basically they were selling their product in multiple different ways, and not all of

them are created equal. So let's talk about acquisition for a moment. Not all lead generating activities produce the same, A, quality of leads, and B at the same price. So as identifying, the first activity is to identify where is the actual profit coming from. So once we did, we cut 80% of their activities and hyper-focused in this example, there was just their website, and profit doubles in 12 months. And it's just the idea of you already have the product.

You already have the team. It's really just about like focusing and narrowing down. Because you can't do everything well if you are $1 to $10 million company. You just can't. You know, I think it's hard. The hardest thing about home service is capacity planning where you need a certain amount of jobs for a guy. That's why I like pay per click because I could get more jobs if I need them because you got to keep the guys happy. You know, you don't want them running one job a day, but you don't run them running five.

But it's a trap. It's a trap because if you look at this from a capacity perspective, you might get jobs that are not good jobs, quote, unquote, for you just to fill your capacity. Well, the fact is you could downsize the people you have for sure. But in my opinion, we're the same price book in every market, 24 states. We walk in, someone called us out for a reason. It's an opportunity. Sure.

I used to be in this role. I know there's an opportunity there. it doesn't mean I have to sell you something that's broke. Okay. What I'm going to do is offer everything. I say, did you know that we could install an opener that Amazon Prime could deliver and Walmart could deliver groceries? Did you know the bottom rubber is what keeps all the nasty bugs out and yours is hard?

Like, people think I only sell things people need. You know what I buy? Would you buy? I buy things I want. Correct. So when somebody explains, if a plumber comes to my house and says, listen, you don't have any issues in this house, but how long does it take your hot water to get hot? and I say 35 seconds, if I got it hot in five seconds, would that be interesting to you?

If literally what would happen is, if you don't have an automatic shutoff valve and your water is leaking, you know, that could cost, God forbid, the hot water heater goes out, that could be a $50,000, you know, obviously an insurance thing, everything gets ruined. Would you like us to put an automatic shutoff valve? So you find opportunities within the lead that you've already got? Yeah, well, you ask questions and you educate. Yeah. And there's no reason. And a lot of people just feel like you're a scumbag salesman. I'm like, look, I'm going to offer them everything. Are you a scumbag if you work at Nordstrom's and you offer them a belt and a jacket and shoes and pants? I always say, listen, I'm going to go through everything with you no matter your age, no matter your color, no matter your gender. And no matter what it's going to be the same for everybody. And if you like something, great, if not, no big deal.

So many people have a problem with this in the home service space. You know what? I like to go to the State 44 I told you about, I want to hear the specials. Tell me about everything. Tell me about the best drinks. Even if I got somebody that's not drinking with me, I'm still going to listen and hear the observations.

You know what I hear? I hear increasing average order of value. And you'll be having a super tight machine that every leader comes in the door is being extracted. Extracted, it might sound like opportunistic, but like serviced. Yeah. Well, the fact is, if you're an American,

you're my client. You still live, I don't care if you're Mississippi, New Jersey, California. I have the same price book everywhere. People are like, how does that work? You got to pay people different parts to different. It doesn't need to be that way for us. But we're not a big ticket.

We're not selling $40,000 tickets. You're also in a very specific niche in product. So if you are in a very specific niche in product, you can be more lenient with the type of customers that you were serving. But you made a focus decision at the beginning, which I'm going to focus on garage doors. I'm not going to fix your water heater. It's not my business.

My business is garage door. So within garage door, I can sell you the strip, and I can sell you the clicker, and I can sell you the service maintenance plan. But that's my niche. That's what I know how to do extremely well. And then I can train other people to do that, but that is my focus. So I can serve the grandma or the young couple with a new house. It doesn't really matter to me because I am niche specific.

And every lead, once we get in there, we've got a process. And if the process is fully executed properly, it works. And we build the LTV up. And all I ask is, listen, if you're selling the house, let's make sure you pass inspection. But if you're selling the house in three months, let us come out look at the next garage drawer. We're going to get this to pass inspection.

We want to be your garage room company for life. And if you treat people right, you get a high net promoter, great reviews. You build a lasting impression. That's how you build a business. Yeah. When I first started, people took 50 cards. Like, I've given this to everybody at work. You're the best.

Like, you took care of me. They felt like I was their best friend when I left. So let's talk about this because a moment. Because a lot of people focus on top of funnel, right? They focus on leads. And what you were just describing is retention. Yeah, retention. How can I extend and prolong the relationship?

We have 50,000 service agreements. That's one way. That's a mechanism. It's one way. The other way is to build, do you know what a net promoter score means? Nine and ten's mean they're going to promote for you. They're going to tell everybody in the world about you. So this goes back to the experience and create delight.

that creates advocacy. Yeah, we offer coffee on the way. We try to do something more like take their garbage job, mow their lawn. Like, I had a guy mowed to somebody's lawn. I'm buying air pressure test for the, we'll check their car pressure. Just one thing above and beyond that we don't need to do. It takes only a few minutes. But you know what it does?

It increases your lifetime value. It lowers your cost of acquisition. And it just creates a much more efficient machine. It increases your frequency of purchase. Just by hyperfocusing, so if everything, hyperfocusing on the bottom of the funnel on the client you already have versus more traffic from new clients. You're right. You're right.

And I wrote down a note to myself that we need to focus more on the LTV. And you can't do what's crazy about our business is we'll do $410 million this year. It's a great amount of money. There's money in every corner. Yeah. I mean, there's money everywhere. There's so much money. And quite frankly, we only have, with 1,200 people at this business, we only have enough time to

focus on certain things. Yes. And we know there's a pot of gold. We just got to get to that pot. of gold. But it's like we haven't slowed down the machine because we have, it's hard to explain everything that goes on. But I like this conversation because it actually brings me back down to, it grounds me. It's okay to slow. It's okay to slow and optimize before you run. Slow, optimize, build a super tight machine. Well, what happens is every time we, we start making a ton of

money and I feel like I'm getting bored, that's when we go to the growth again. Because you, You almost got to grow, optimize, grow again, optimize again. It's not just you optimize it. It's grow, grow, grow, grow, grow, grow, grow. It's grow, optimize. Grow again, optimize again. And you've got to have these layers. People miss the optimized step.

They just miss it. They skip it. They just go to grow, grow, grow, grow, grow, and then end up with a super big business with super low margin. But that's what happens. It is all the time. So you have to almost like force yourself and your team to focus. Because think of you have 1,200 employees. They all make decisions by themselves, some more, some less,

but being able to articulate where are we going and disseminate it to your team is much harder than it looks, especially as you grow. It becomes more and more complex, more and more complex to actually communicate your direction and what we are doing and what we're not doing to the field technician. As you grow.

You know, it doesn't, it doesn't, just because if we don't, if we do the same exact thing in just a lot of markets. Okay. And the United States is a big place. It is. And there's, we're only in 24 states. So you're saying, I'm not touching the machine. I'm just expending geographically. Yeah.

That's just, my model is proven. And guys could go to any market. Yeah. And they could jump in the truck and it's the exact same thing. Sometimes the garage door is a little bit different, like extension spring. Sometimes it's way Dolphin Springs. But it's the same stuff. You own all of your locations.

Why didn't you franchise? Because you lose too much control. You got the FTC breathing down your back. I think franchises could be a great thing, but I think everybody that sucks at business says I'm going to create a franchise. Because the thing is going to solve them. Now they'll pay me. Yeah.

They'll pay me 7 or 8% of everything. All I need to do is sell locations, but you're getting out of the core business. Now you're trying to sell people businesses in a box. And I tell people, look, you're making a mistake. the reason you franchise is you got such a tight business model. It's replicated everywhere, and you can speed up way faster. It's like McDonald's. What a great business model.

You can put it anywhere. They know how to pick the locations. They get all the extra money on the food sales, so you've got to buy their fries, their ketchup, their buns, all that stuff. I think most people, especially in Home Service, are like, man, I can start this franchise, and everyone's going to pay me. But they have no manuals, no lead aggregator.

They don't have a nationalized call center. They don't know how to do the market. Like, they don't even know how to get the financials. And if I bought that franchise, I'm like, I get a lot of animosity in a couple of years going, why am I paying this when I've had to build all the systems? Yeah. You know what I mean? It's early expansion.

Yeah. It's, again, it's expending. It's franchising is just like getting a loan or having capital. It's just another accelerant. But if your machine is not tight. It's got to be tight. Then what are you, you're just creating more chaos? 100%.

Same shtick, different model. I think this is one of the best podcasts I've ever done just because it's such a simple thing of asking those 18 questions and saying say no more than yes. Yeah. It starts by being explicit around what is okay and what is not. What we're doing and what we're not doing. Most people just are reactive. They're just reacting to what the market is offering them. Oh, I got an opportunity.

Let's just. Well, you do that when you're broke. You say, look, I can go make money this week. Yes. I took on jobs. I took on this gate job with a solar actuator. I think I went there 20 times, and then I finally paid a company to come do it the right way.

Yeah. But I saw, man, this is a $40,000 job. Shiny object. Man, I can make some really good money and I can learn along the way, and maybe this could be, I will say there's things that you kind of take on. Like, there's softwares I looked at that I didn't use.

Sure. There's other softwares that I've at least taken the time to check out. And I go, oh, my gosh, that's a game changer. So I'll look at a lot of stuff. And we'll see if it works, but we'll test it. That's one thing we've learned with private equity is you could test it out in a market, not a big market. And if it works, you can test it out in three. But don't make these decisions to just say we're going to go nationwide.

It just because it's a lot of work. Yeah. So do you know what happens before you test? What? You make a decision, an explicit decision on what you're testing. So if I ask nine times nine out of ten owner what you're testing, they're not testing anything. When you make a decision and you say, this is who I think my perfect customer is, that is a decision that you can then later test.

But if you don't make a decision, you are not receptive to what the market is offering you because you haven't made a decision. Does that make sense? You have to be explicit around, okay, this is the business model that I'm building. This is the type of revenue or the product that I think

is going to produce the most amount of profit. This is the type of customer I think is going to produce the most profit. This is the marketing channel that the thing is going to give me the most amount of lead at the best price. Articulate it, put it in a document,

in a canvas, put everything where you want, and then you go and you test it in the world. But all of a sudden, now you have a written decision, so you can test, okay, I said A, but now I'm experiencing, I'm looking and I'm seeing it's working, it's not working, do I need to update my decision? And people just skip it. They're not intentional about their testing.

Yeah, they're saying yes, yes to everything. So how would you test? How would you get market signal if what I'm doing is correct? they're not correct. Profitability. But profitability is an average of all the few activities. Well, you've got to be very specific on the actions you're taking. I mean, that's what you got to delineate.

That's what this is. So if someone wanted to work with you, how do you do that? Do you just charge them a one-time fee to go out there or it just depends? No, so I walked them through the framework. So the goal of the activity is to create this one source of truth, which is really your growth model or your optimized business model. And what I do with them is I take their team And I take them and either we do an offside And they come to me or I come to them

And I walk them through an offside or retreat Where we basically make those decisions together And I bring the team I bring the owner Sometimes I bring the investors or key stakeholders All the people that need to make a decision in one room And I facilitate each question And we go in a linear way

What are we trying to achieve here? What is our ultimate goal? Which from all of the customers that we're serving today, which one are we focusing on? What are what we called strategic advantage or core competencies? What do I need, know how to do extremely well that if I'm able to articulate this is going to save me from doing stuff that I'm not good at? Where am I focusing on?

And then at the bottom is like, how do I find customers, convert them, create a delight experience, and make sure that they keep coming back. High level. What's the game plan? And then they go and they execute it. And they do it. And they don't need me anymore. And I meet them once a year when I need to refresh those decisions.

My whole belief is a lot of strong founders don't need operational help. If you are at $2 million in sales, you know how to sail. Your job or my job is to help you focus on the more profitable sides. Because once you have this, you don't need me to tell you how you do your job. And then how does someone reach out to you, Aaron? Fractional.compartners. It's the website. It's also where the playbook is available for free.

It's not even a lead magnet. So what usually people do is if they use EOS or entrepreneurial operating system, they just do this exercise and it replaces their vision traction organizer. So basically it changes their overall plan and then they still use EOS to do the quarterly priorities. The challenge, if you get anything from today, operations is great once you have a super tight model. and you chose a direction. If you haven't chose a direction, you can use systems and meetings all day long

and it's not going to do anything. So take a moment, take three days, whatever usually takes two to three days, bring everybody in the room, make some decisions, and then go execute. How many people do you think are going to do that? I usually found that most people that do it are in, like, distressed.

So either then... So the people are... Do you think what are the chances that they do it? 15%. 15? 15. 15%. But that's why I made it DIY. You don't even need me.

Just do it, regardless of me. I love this. So fractional dot partners. Correct. And any books that change your life that you are like a must read? I read a book called The Road Less Stupid by Keith Cunningham. Are you familiar? I've heard of it, but I don't think I've read it.

Change my life. Basically what you've done. taught me that made me build this model is ask better questions, make more money. Yeah. So I just built a canvas with the right questions to ask for specific companies. And then if they answer those correctly, profit will follow. But if people just never ask them these questions before, so they never need to make a decision, right?

So if you can have a pointed question and come up with a method of how to get to that answer, you will choose a more profitable path. And it's all about just one more sentence. It's all about finding the path of least resistance going back to the beginning. You can be successful and you can grind and you can hustle, but at some point it's going to break. The question is, not how do I grind harder? The question is, what is the path of least resistance?

So I built something here. I built a business. What do I have internally that I can double down on that is the easy. path to get me to where I want to be. There are many paths. There's no right or wrong path, and there's no recipe. But there's a process of choosing the right one for you. That is the key, where it's the least amount of effort.

You take historical data? Correct. And that'll give you the answer. That would give you part of the answer. If you can take the historical data and connect it with, like, decisions of what you're experiencing and seeing what your team is experiencing and you merged it to, then you get a super, I don't want to, it's not easy. None of it is easy. but a simple path to get to where you want to be.

It's a lot of like framework and analogies, but I just want to get to my end result in the fastest, easiest path possible. So let's just look at what works. Let's look at what I have. Let's be a little bit more intentional around. Intentional. Intentional, yes.

Yeah, I think that's where most people miss it. And I don't blame them. Because they grind. Well, we're entrepreneurial and we like to say yes to things. So one day I heard this guy say, I don't know how to say no. so I say yes, but just not now. Let's revisit that in a year.

Yes, yes. And it's easier for entrepreneurs to say yes, but let's revisit it in a year. I love it. So I think that's the goal. So any other things closing us out, brother, I really appreciate it, Aaron. Don't get distressed. So before you scale, pause with me, without me, whatever you do. Pause and really try to identify what is the 20% that moves the other 80%?

not when it comes to your revenue, but when it comes to your profit and look at it from the profit, because when you sell a business, you sell it on a profit multiple, not on a revenue multiple, depends on the business, but most of the time,

on a profit multiple, you don't pay your college, your kids' college tuition with revenue. It's with profit. And the idea here is not to just to borrow more money or to raise capital. The idea here is to build a machine that is so profitable

that sell fund the growth and gives you the optionality to decide, okay, I want to accelerate this let's take some capital either through debt or through equity but really like fall in love with a super tight machine that I know that I can put a dollar in and spits out a dollar 50 even if it's a million dollar revenue I don't care I really don't care I'll take 10 10 small businesses and one big one that doesn't make any money I love it cool I hope this is

golden man I hope this was I know we talked a lot about like high level stuff but I hope that people can pause. Before you run your next quarterly priority or quarterly session, pause. Before you make any big decision, pause. What you've built version one of your business doesn't need to be the version you actually scale. Design version two. Yeah.

There's multiple versions. Your business now is very different than the business you started with. Oh, way different. You have to be intentional about creating these versions. So good. That's it. That's my take. Mike drop.

You're great. Appreciate you doing this today, brother. Thank you for having. This was great.