Restoration Domination Show for Contractors & Entrepreneurs
Rico Garcia reveals all of his experience, successes & failures in the Water Mitigation, Mold Remediation & Restoration industry so that you can grow your Contracting business to new heights. We will share killer marketing tips, how to increase revenue, find new income sources in your business and other tips, tricks, strategies and tactical advice so that you can be ahead of the curve in your business Discover how you can create the business of your dreams that is not only helpful to the customers you serve but also provide you with the freedom you want. Learn what it takes to achieve a multi-million Dollar business from guest, and from time tested strategies that can provide you the time and freedom to do what you love.This is a mix of interviews, special co-hosts and solo shows from Rico you're not going to want to miss. Hit subscribe, and get ready to Dominate your industry.
Restoration Domination Show for Contractors & Entrepreneurs
Ep 119: Mastering the Art of Scaling: Brett Lawton's Journey in Construction and Restoration
Discover the remarkable journey of Brett Lawton, CEO of Lawton Construction and Restoration, as he shares his insights on scaling a service-based business. From his humble beginnings in construction to transforming a family-run operation into a bustling multi-location enterprise, Brett unpacks the challenges and triumphs along the way. Learn how he mastered the art of scaling by understanding essential metrics, building robust infrastructure, and navigating the complexities of growth. Brett's story is a masterclass in turning potential pitfalls into stepping stones for success.
Gain a deeper understanding of the strategies behind managing labor efficiency and scalability. Brett candidly explains the transition from owner-operator to a larger operation, highlighting the importance of setting clear expectations with Key Function Flow Maps (KFFMs) and the role of analytics and technology in streamlining processes. Explore the evolving landscape of skilled labor and the growing demand for tech-savvy workers. Brett provides compelling insights into how trade careers are becoming increasingly lucrative, urging us to rethink our perceptions of the industry.
Finally, tackle the tough issues of working with Third Party Administrators (TPAs) and the significance of diversifying work sources to maintain efficiency and customer satisfaction. Brett emphasizes the value of building strong relationships and leveraging networks for business growth, sharing how connections with entrepreneurial groups can open doors to new markets. With practical advice and a wealth of experience, Brett invites listeners to engage with experts and resources that will aid in mastering business growth strategies. Stay connected with Brett and the Restoration Domination podcast for ongoing tips and motivation.
Welcome to the Restoration Domination Podcast, where you learn actionable advice that moves the needle and helps service-based businesses dominate. Here's your host, Rico Garcia Jr.
Speaker 2:What is going on? Dominators Rico Garcia here, super excited about this particular episode. Brett, thank you so much for joining us today. Are you ready to help us dominate?
Speaker 3:Yes, sir, thanks for having me.
Speaker 2:Awesome man Cool. Hey, for those that may not be familiar with the name and the organization, do me a quick favor and just introduce yourself. Let everybody know exactly who you are and what you're doing in the industry.
Speaker 3:Sure. Well, my name is Brett Lawton. I'm CEO of Lawton Construction and Restoration. We're a full-service restoration contractor in Northern California and Northern Nevada. We do textile restoration, GC construction, abatement, mitigation, the whole thing.
Speaker 2:Nice. So give us a little bit of background about how you got into the business and, eventually, what I want to do on this conversation is I want to really pick your brain and let the audience, you know, kind of get a uh, you know, a 30,000 foot view of what you personally believe. Uh, for anybody who's entering the business now, what kind of mindset they need to be going into this business with in order to really make it successful. Cause there's a lot of individuals out there there, as you know, that are really struggling. They see the financial gains, but they haven't cracked the code yet, right?
Speaker 2:So honestly you've been in the game for a while. Kind of take us to the beginning about how you got into the business and some of the changes that you've seen.
Speaker 3:Sure, we'll do an origin story. So I got into construction when I was about 16 years old, working for my dad just doing GC construction. My dad moved up from Bakersfield in the 70s, came up to Northern California and then started doing some work with AAA insurance back in the day, back when it was just paper estimating. I jumped in when I was 16, graduated early, started working with my dad just working for him full-time. Around 2006 2008 we rebranded the lot in construction and restoration. I took over as ceo at that point.
Speaker 3:At that point we only had a couple trucks. We were mainly gc contractors, we were only doing the reconstruction side and at that time I was meeting adjusters and I started seeing how the mitigation teams were coming out and they were doing a lot less work for the same scope of work that we were doing. So I'd see $10,000 for us. I'm there with Mrs Smith picking out paint colors and baseboard. They're there for $10,000 for four or five days dropping off blue machines. So I'm like man, I want to get into that. So I got certified water mitigation. I CRC certified. So you know, got certified water mitigation, icrc certified, started dabbling with that with AAA insurance.
Speaker 3:Took a while to get past the gatekeepers. Then we started doing water mitigation and then from there learned about asbestos abatement, then got asbestos abatement certified in California, started doing that, then doing bio cleanup and then from there we're doing subbing out a lot of our packouts, and then from there I started seeing the same thing. I'm like well, it's kind of our same wheelhouse. Why can't we bring textile into? You know our same business model, so that we brought in contents and got the warehouse for that. So we started pretty much scaled from 2006, 2008 from like two trucks and then scaled all the way up to about 2020 where we had about 150 employees, three locations, about, I'd say, about 80 trucks. And then now we've scaled back a little bit now trying to go, you know, profit first now, and I can kind of get into that in more detail later.
Speaker 2:Yeah, that's awesome man. So what during that growth period? Right, because a lot of people hear the story and they're like man. Wow, okay, you know, it seems like everybody just has this miraculous growth story. And they're like man, wow, okay, you know, it seems like everybody just has this miraculous growth. It's a feel good story, like everybody's, like man, they're like you know, we're breaking tons of money, but it's not always an easy road, right.
Speaker 2:So what were some of the biggest growing pains right For the people that are listening and or watching and they're like man, okay, what is it where? Where are the landmines that you should be willing to expect and almost be willing to step on and know that if you can get past that, you'll be okay?
Speaker 3:sure I understand. I mean we'll start. We mean it's not all. It's not all happy kumbaya, that's for sure. I mean we're still going through growing pains and we're still stepping on landmines. So I mean when, in the early stages, let's start in the. I mean we're still going through growing pains and we're still stepping on landmines. So I mean in the early stages, let's just start. In the early stages.
Speaker 3:When you're an owner operator, say, I mean you are the man right, you got a couple of trucks. It's left hand, right hand. You look at your bank statement, you know what your payroll is. It's pretty much basic stuff. So you really do know all facets of your business because it's really small.
Speaker 3:When you start scaling up, what you don't take into consideration is all the metrics and analytics it takes to run a business, and that's what I think I failed at. And what a lot of business owners fail at is the idea of scaling sounds sexy, but the amount of work behind the scene that takes to put the brick and mortar and the foundation in. It's not just hiring people and buying trucks, it's all the infrastructure that goes into it. I mean you go from a couple trucks to looking in the parking lot, knowing your managers are working to. You get to a size where the trucks in the parking lot people sitting at desks don't mean you're making money. And that changed a lot, especially more recently, as the insurance has got more regulated, pricing's being cut, your margins are less, so everything comes into play and that's why I want to touch on analytics and how to run your business off of spreadsheets more than just off of basically looking at your trucks on the road. But yeah, it's a definite learning curve, for sure.
Speaker 2:Yeah, no-transcript us, right. And look, we get exhausted right, we get tired because you're thinking about payroll, you're thinking about the projects that you got to go do and everything else, what your next? Deal is coming from you know, chasing down money from insurance, You've got all of these things, and sometimes we kind of push that off until we've already scaled or started to scale right. And I'm using scale in various terms. Right, Because scaling from owner operator to your first, you know, three to four employees, that's a scaling system from five employees to 10, 15.
Speaker 3:It's a big big difference, right. Absolutely yeah.
Speaker 2:So when did you start really putting pen to paper and start organizing and getting everything out of your head onto SOPs and really having systems for your business, or is it still?
Speaker 3:consistently an evolution. It's still consistently an evolution, but back probably around 2016,. We started putting more effort into that, but it was still archaic at that point. And also the industry has made us shift because in the earlier days we were making money. Even without all the metrics in there, even without our labor efficiency rates, even with messing up a whole bunch of stuff and screwing things up, the margins were better. So the industry, as it gets tighter, forces you to become a better business owner, like every industry, because competition I mean it just makes you have to be leaner and meaner. So as we started learning that our margins are going down, as we kept scaling up, our net profit was going down. So we're getting bigger and bigger. We're looking more sexy to banks and more sexy to venture capitalists, but we weren't bringing as much home. And then we actually went to having a couple of downturn years from 2020 to 2023. We lost money in scaling and those were our biggest years. And so we learned a lot of lessons with regards to how many managers it takes and how many offices you can run and all the different mid-level managers.
Speaker 3:You have all these giant payrolls that start sucking up all the GP right, because when you're writing a scope, whether it's Xactimate or Solitaire, you have labor and materials. That's what you're selling right At the bottom line. You have your profit and overhead. All your office staff is just feeding off of that, right. So you've got project coordinators, project managers, estimators, marketers, office staff, ar, ap all of them are feeding off of that same exactimate scope, right. And you you think you're going to make money. You were making money when you were the ar person, ap person. You had two trucks. You could keep all that.
Speaker 3:Right now, as you scale up a little bit, estimate hasn't changed. You just got to do a shit ton more of it now at volume to make up for it. Otherwise, if you're stuck in that mid-level spot, it's almost like a death sentence because you're not making enough gross volume to justify the jump in the amount of payroll. It takes an HR division, all these different divisions. When you go from 20 employees to 50 employees, 50 employees to 80 employees, 80 employees to 100, everything's a milestone leap. That involves infrastructure and additional teams, additional managers, and all of that you don't take into consideration until you're in it and you know. And then I think I always say we're controlled by volume. So if they say, if you're a heavy tpa, um restoration contractor, like we are, we have so much opportunity and they call us up hey, can you take this territory, can you take that territory? We've got all this work and they just keep feeding your work. Well, that that's controlled by volume.
Speaker 3:It's like you talked about earlier. You're chasing that new shiny nugget and you're not paying attention to your business. You're being a yes man or a yes person chasing after that new dollar while you're just letting Rome burn behind you. It's this carnage behind you. You're chasing it because all of us are salespeople at heart, right, that's why we got into this. We all love that dopamine hit. But what you realize? So so I mean, I'm the same way. You look back and go, oh, holy shit, like all of this, all this more volume, has made me a bad business owner and you know, so opportunistic. I want to go after it, but I don't have the infrastructure, so we're squandering it. So that we had to, really, you know, and we had, we call, we call that right relationship review. We started going over what TPAs work for us, scaling back and then start building the infrastructure to support the different programs and different vendors and different, you know, because every vendor is different, and if you can't do all that, you really have your team spinning in circles.
Speaker 2:So here's a what I think is a tough question, because I don't think anybody really has the concrete answer, because every business is so different, but I want to get your take on it.
Speaker 3:Yeah.
Speaker 2:When is the right time to scale Right? Because, again, even as an owner operator, I mean it's you're keeping a hundred, but basically, for all intents and purposes, you're keeping a hundred percent of the money right. You send out a $30,000 invoice, you whatever you know, you cover your assistants, you know whoever was helping you on the project, whatever material costs you had. For the rest, for the most part, you're pocketing the rest of the money right, which is where I think a lot of people in the beginning they're like holy shit, I just won the lottery. I do a few projects a month and we're kind of here and there's truth to that.
Speaker 2:Actually you start getting bigger and you start hopefully your days are packed and you're in high demand and you're like, okay, I need to start bringing people on. But at what point is there a metric? Is there a number? Is there a percentage? Is there a dollar figure that business owners should look at and say, okay, are we really ready to scale? And what kind of mental shifts does the owner need to take? Because, again, going back to your point, every time you scale and you bring on more people.
Speaker 2:You have more responsibility, more weight on your shoulders. There's less money. That's going to you right, correct? Responsibility more weight on your shoulders, there's less money that's going to you right Correct In a roundabout way. You have to be really really comfortable either with your existing lifestyle and knowing that more money is coming in but you're not really going to touch that money Exactly. Talk to us about that.
Speaker 3:Sure. Well, there's a couple of good points in there. I'll see what I can do to decode that a little bit. So I would say in the beginning, when it comes to scaling up, I mean, for us it was opportunity. So I started scaling based off of opportunity. There was a need in the industry. We were getting more leads, more leads than I could get to. So I know what my operational capacity is.
Speaker 3:So let's just go over labor efficiency rate. If you're an owner-operator, your labor efficiency rate is insane. You're probably 100x multiplier because you have all the initiative. It's on you, you. You're the man right.
Speaker 3:When you bring on managers, what do you expect their labor efficiency to be? So for me, you can only do so much in a day. So, like when I was driving my truck, I couldn't go to more than 10 jobs a day. Even writing scope on site. Even being a bit trying to be a bad-ass like that was exhausting and that takes a toll on you. That takes a toll on your family. You know, if you're working weekends, you're doing night calls like it's. It's taxing. So there's no way to stay a single shop and do all that at scale. And do you know and think you're going to do more than like a million dollars of revenue and there's nothing wrong with a million dollars of revenue whatsoever but like you're just not going to do that alone, without you know, five or six technicians and yourself, maybe one office staff, you're gonna, you're burn out.
Speaker 3:So for me, it was the opportunity. I wanted to scale, wanted to get into more areas, wanted to get bigger than that, and then also wanted to have time for my family, because we all read the books and we always have this pipe dream of I'm going to build this and I'm going to sit back. You know what I mean. So we're all chasing, like, oh, I've been doing this, you know. So I, the first 10 years, I just grinded. I mean, I was in the field doing inspections, and then I'm like man, I got to, I want to start becoming, I want to be an entrepreneur. Now I want to want a business, I want to be a CEO. And then you start shifting gears right. You start hiring people.
Speaker 3:My first mistake was hiring people thinking they're going to be the next me, people realizing that they're not going to do the same amount of work as you, so now their labor efficiency rate is different. And then also with regards to their bonus, how much work they can get done, their efficiency rate. All that is difficult when you're an owner-operator and you're expecting someone to be a miniature you. That just doesn't exist. So we call them KFFMs key function flow maps. With regards to what I expect an estimator whether it be a write and run, which is a project manager, estimator combo, or a project manager and estimator separate. They have a KFFM and, based off their salary and their bonus request, we pump in the numbers. It tells them what their gross revenue needs to be, what their net profit needs to be, how many jobs they need to do, what their cycle time needs to be. All of that shit pumps it out and they have to sign it.
Speaker 3:And's just been a very recent one, I, but we've done and it's been freaking pivotal for us because I could hold their feet to the fire. Because, as you know, when you're interviewing people, if you're an owner operator, everybody coming to you just jump ship into the company and they all, they all interview great, I could do it all. We all, we all know the cautionary tale. How many people jump ship and then, in this industry especially, it's a, it's a revolving door of the same guy, different shirt. We all know the guy. They jump around from restoration company to restoration company. They go over here, get certified, take that certification. Go over here, get a pay raise. It's a very tumultuous industry, right?
Speaker 3:So for me, having those numbers set up and holding them to the fire in the first 90 days was pivotal, and we weren't doing that. First 90 days was pivotal and we weren't doing that. So back two, three years ago we we had they had over over 10 in-house estimators and we hadn't figured out the KFFM yet and these guys were just, they were just not even close to even breaking even and it took us too long to catch up. So we burned through all of our cashflow by making those bad decisions. So my big no-transcript, right? So, like you know, all the analytic programs we're using that runs Microsoft Word, that blends QuickBooks with Xactimate, with Stash Solitaire, with JOC, they're all there now, like a few years ago, we had to go out there and seek them out and we found them. Now they're like right in your face. So I'd say, go there, talk to the guys that are talking about analytics, all the boring trade show people that have to have all the boring iPads up to show you how to run your business.
Speaker 2:Those are the ones you want to talk to those are the ones you want to talk to.
Speaker 3:That's how you run your freaking business. Everybody wants to go. Look at the new moisture meter and the new dryout machine and the new semi truck. Screw all that. You don't know how to run your business.
Speaker 2:That's always been ludicrous. I mean, and you know, there's so many, there's so many people in the industry to talk about the equipment it's like, and they, they bore. Oh my god, like the equipment it's like nobody gives a shit about it in theory like yeah maybe it's a little bit more efficient, but like it's not going to move the needle enough correct you really need to have systems in place.
Speaker 2:Yes, and understand the movie, the mechanics of your, and understand the mechanics of your business and the mechanics of your personnel and the mechanics of your management team in order for you to become efficient.
Speaker 3:Even to go backtrack a little bit. So you say you're an owner-operator, you don't have the infrastructure of all that. You got to figure out your labor efficiency rates. So you can go even Google, look at basic construction trends to see labor labor efficiency rate. Is it 20x? If 15x is 30x, what are you paying your guys? You're paying your guy 35 bucks an hour. Is he a 20x employee? Technician is he a 10x employee? What's the median? If you don't even know that? You don't even know. But you don't know if your technicians are a baseline.
Speaker 3:So if you don't know that yet and you're an owner-operator, I'd start there. Do you know? Are your technicians a C-rate, B-rate player, A players? Where are they at? Are they just a body with a pulse? I mean you need to know.
Speaker 3:But before you scale from there, if you're starting with that, like that's how most owner-operators start with technicians, then they usually organic growth. Is you hire a project manager that now takes on that portion of it? Right, and most owner operators usually dabble in estimating and back office and the PM runs their projects and the same employees that used to work for you now work for your PM. Well, you better have the right employees in place. Otherwise you're going to have, you know, a whole bunch of issues just right there in the beginning and then turnover ratio there. And you don't want to have turnover ratio when you hire a new project manager because now he has no one to run Right. So I would start with your labor efficiency rates and just doing basic stuff like that. You can just do them off of Google spreadsheets and then same with the same with the project manager too.
Speaker 2:One of the I think this is kind of a good segue here is you know talking about scaling. Obviously, good segue here is you know talking about scaling. Obviously, in our business you scale when, when you scale regardless of what you do on a marketing side, right, or regardless of whether you sign up with traditional programs and you start getting all of these calls and all these leads, you can't be just a one man show, right, or you can't even when you scale. You need people in this business. Topics for a very, very long time, and I think it's always going to remain hot, is how difficult it is to find good quality personnel.
Speaker 2:Oh, yeah, talk to us about that and talk to us about what you feel the labor market landscape looks like and what's required nowadays from a, from an employer to you know, to to really bring in and to create an attractive environment for a good quality employee, because a lot of employees don't want to work now for 15, $20 an hour. I mean it's very difficult to make a living, you know, at 15, 20, $25 an hour right Correct, especially if it's a family man, or whatever the case may be.
Speaker 2:Exactly so that clearly puts a lot of pressure even on the company right. Because hey you want to get good quality people. Well, you need to have a good compensation package, right.
Speaker 3:Correct, absolutely.
Speaker 2:Talk to us about the general labor market and where an organization needs to be in order to attract those top players.
Speaker 3:I mean so in the labor market. With regards to actual skilled labor in the field, we know that the price has gone, has skyrocketed, minimum wage has skyrocketed. I'm here in Northern California, so I mean $15 an hour doesn't even exist in my world, like its baseline is $20 minimum and then from there it goes up. So for us to find good skilled technicians, actually what we're looking for mainly is people that have IT experience with regards to how to run iPads, their iPhones, laptops on site. Everything now is all techie.
Speaker 3:So the old school guys that come in, all the abatement guys that can't run tech, they have a use to me, but they're not the next generation. I want technicians that can do everything remote on site, because that's part of the labor efficiency rate. So when I'm looking for new talent, I'm looking for people to have some kind of construction skills, also some basic computer skills, obviously clean driving, record, all these things, and also the emotional intelligence to deal with clientele that can also go at a job site and also make the homeowner feel happy, and that, to me, is the most important part. A lot of these guys have the skill set, but they're too rough around the edges and there's a time and place for that. Most of us are in people's homes while they're still there, so we're looking for people that fit the mold for that as well, and we have a whole HR team now To do what most companies are trying to do, which is basically polished turds which is basically polished turds, correct, exactly, exactly.
Speaker 3:And that's where the labor efficiency rate comes in. So for us, for our HR team, we have them come in. The same thing we give them their labor efficiency rate. So we give them their bid sheets. And same thing. It's a three-month trial period. So it's baptism by fire. We send them out there. If they say they can do water mitigation they have their certs we send them out. Manager oversees them, checks in on quality control, sees if they're doing it as per our standards. If they keep faltering over three times, we cut them.
Speaker 3:But like it's a constant revolving door. So I mean we've had technicians that have been here 15 years. We have had technicians that last two weeks, it's just so. I mean you're always going to have that. As you're scaling too, you're going to have both of those. And you also have predatory employees. We've had.
Speaker 3:We've had our first class action Paga case, where we hired people and they're literally trained and they come in here predatory, to try to sue you and you don't even realize it. And as you get bigger, when you get over 100 employees, you become a target and then attorneys seek you out because they. So that's a very dangerous spot. We learned the hard way on that. So that's a whole nother episode right there, exactly exactly. But you know, for me, my hr team, I gave them basic always. Obviously we can do the cliche things. We have our core values and our core purpose and like our core, we say we're gonna hire and fire based off of our core values. So our hr team goes over our core values and goes over our work ethic, tenacity, hard work, being being, you know, humility. Do these things appeal to you? And that they say yes, and then you know we usually bring them on.
Speaker 2:But like we look for red flags, obviously yeah, the general responsiveness to the job market, though how have you seen that over the years? Do you feel that people are lining up at the door like several years ago, or do you find that the younger talent, frankly, is more concerned about just making money?
Speaker 3:online? Oh, 100 percent. There's a giant generational gap between people who are looking for jobs now it seems like, and there are a few of the next generation that are actually workers, but it's not the norm. So in general we have a huge gap. Most of our technicians are literally almost senior citizens and then we have them late 30s. But looking for new up and coming out of high school hardly any applications whatsoever. We go to the colleges, we do their college days there, we sponsor it. High school hardly any applications whatsoever we've got, you know. We go to the colleges, we do, you know, their, their, their college days there, we sponsor it. We get hardly any.
Speaker 3:Everybody wants to be an engineer. Everyone wants to sit behind a desk. Everyone wants to be an architect. There, no one, no one says I want to go pound a hammer and like, but and when I, when I do speaking gigs and stuff, I tell everybody I'm like you're missing out on a huge market because there's a whole generation of people that don't have to do shit anymore so that I'm all. You make more money pounding that hammer. Now I mean, so then you're going to be sitting at a desk because you, uh, you have a commodity that most people don't have. You can fix things and that's why I think trade schools are super important. Um again, for for kids coming out of high school, because you can make a great living coming out of high school being a plumber, hvac, single, trade person, because you are a commodity, you're not the norm.
Speaker 2:Yeah, no, exactly. I think eventually, what's going to end up happening is is that you know that pay rate pendulum is just going to swing to where, if you are skilled, labor that quick and easy hundred thousand dollar, $150,000 a year job is going to be in the trades it's not going to be the office job anymore. Right, it's not going to be it's like holy shit, I got my bachelor's degree.
Speaker 3:Exactly Basically guaranteed a position now.
Speaker 2:That's not going to happen anymore.
Speaker 3:Yeah Well, perfect analogy of that is the minimum wage for, like, all the fast food places there. But it's like, oh, but celebrating minimum wage being raised with celebrating minimum wage being raised. Well, all of us that are business guys and entrepreneurs knew we're like they're phasing themselves out of the market. Now you look at all these places that are all just robots. Well, they literally signed their own death warrant by wanting this pay raise. You think that these giant franchises that keep paying these rates they're going to find out a way to make it obsolete completely. So now that whole. Pretty soon, the next five years, fast Food will probably be mainly 80% automated. So all those jobs are gone.
Speaker 2:All those jobs are gone. You go into a McDonald's now, which I don't recommend. Many people go into McDonald's, but if you do, you'll notice it's like you've got one person behind the counter, and then you've got four kiosks, right.
Speaker 1:Yep Bingo what is?
Speaker 2:it Checkers or rallies or depending on where you're at. I think there's a company they've got. If you go through like their drive-through, it's a hundred percent ai, that's wild robot, that talks to you and it takes your order and which, by the way, it is the perfect employee. It asks all the right questions. Would you like to wear their version of super sizes? You know I had bacon. Would you like to wear their version?
Speaker 3:of super sizes.
Speaker 2:Would you like to add bacon Would? You like a milkshake, like every single customer. It's asking those questions, like if you can train the hell out of an employee to say, hey, every time you get a customer, make sure that you ask them for an upgrade for a dessert, and if they'd like a shake, they'll probably do that out of a thousand times. They'll probably do that 60% of the time. Oh, if that, yeah, right, like yeah, yeah, sure, sure, yeah, you've got this system that automatically is just taking your order.
Speaker 3:It takes it perfectly. And more 100?
Speaker 2:yeah, it's probably increasing your ticket.
Speaker 3:Your average order value oh, absolutely doing the thing every time. It never misses.
Speaker 2:Yep, so it's like you know, you look at this stuff and you look at the landscape. You're like holy shit, yeah, you guys are really phasing yourselves out of the market correct yep what does that do? Right, like what. What does that do?
Speaker 3:and again, I think it really does present an opportunity, for you know that pendulum swing I, I agree, and I think it's going to shift back to to um, to the trades again, because those are a few of the things that have that automation is still far, far away from. So. I mean even project coordinating, project managing. So much ai technology and outsourcing is happening. Companies like ours are utilizing every possible way to not pay the amount of the pay rate we have to pay in california even for a project coordinator, project.
Speaker 3:Go back, you know a 75, 80 000 salary for somebody who takes notes is no longer attainable. With the same exact to make bid sheet, you know that person used to be 55 000, you know, five years ago. Then it's 65, now it's now it's 85. Like you're damn, you're at a hundred thousand dollars for an admin position I can outsource for probably 20 000 or an end up for you. I could probably automate it for free, right. So and these, so these are the kind of you know, desk jobs that are going to be going away. So now you know it's a cautionary tale, but unfortunately business is rough and like you can't go out of business, you feel bad for people, but in general, at the end of the day you have to keep the doors open. You got to do what you got to do so.
Speaker 2:A hundred percent, A yeah 100%. Let's talk about. You said that your company is TPA heavy. Talk to us about your perception of any potential pitfalls on being so TPA heavy. Yeah, sure, and mitigate that right. Yep, and this is again. This is one of those stories that it's not exclusive to you, it's pretty much everybody in the business right, oh yeah, correct.
Speaker 3:Yeah, it's pretty much the norm now, so kind of give us your view on that.
Speaker 3:I mean TPA when it first came out was like the best thing ever, right, because it was guaranteed work, they were up and coming, all the insurance companies wanted to go with them. It was literally just like your gateway into getting just tons of work, as long as you could follow their compliance. As you know, it shifted from that in the early days to now this over-regulated, red tape, bureaucratic nightmare where you have multiple layers of management all chipping away at your profit margin, all cutting, and you have to hire teams inside of your company. For us at Lawton, if we want to work for a certain TPA say they're very strict we've got to hire project coordinators that know just everything about all the regulations just to get an estimate approved. So I've got an estimator, a project coordinator and a PM that know how to work with this TPA and the amount of admin work. So a $3,000 scope probably has 30 to 40 notes, maybe 15 revisions. That means my estimator is touching that thing 15 times average of a couple hours. You're spending a couple of weeks dicking around with a $3,000 estimate, whereas before it was boom, boom like one and done, and so the natural progression of that has been we kind of got to a boiling point just recently.
Speaker 3:I think a lot of restoration companies are jumping ship and we had to take a look back, like I said earlier about right relationships, with regards to which tpas are working with us, that are working side by side with us and not against us. Because in our industry we noticed, like, as a contractor, all for some reason, like we are, we're demonized. For some reason, even though we are the ones restoring, we're the only missing piece. For some reason, even though we are the ones restoring, we're the only missing piece. For some reason, we're the ones that are always being gone after as being predatorial, charging too much, but literally it's the opposite, it's being nickel to dime the other way around.
Speaker 3:Your estimate for $3,000 has an upload of 8%. You got to pay 8% to a TPA middleman and then from there then the adjuster takes that $3,000 estimate, chews it apart, takes it back down for $2,600. And then you have to take 8% off of that and you're going back and forth as your office staff and overhead is working there, not making any money, just fighting over that scope, back and forth, office staff, admin time, and you start realizing you go. This is insane, the amount of time and effort it takes to get this done. You realize that at scale is kind of how you go out of business and we were doing over $20 million just last year in just TPA and we lost our ass because the amount of admin staff it took like we we had like over over 20 office staff to do that and the margins are just shit Right. So that's why so my caution and not getting better.
Speaker 3:And, like I said, honestly, it keeps the doors open. It keeps your. I'm not saying not do it, just don't make it your only wheelhouse, because putting all your eggs in one basket, that's not your way to success and freedom. That keeps your guys busy, keeps consistent work coming in. It's a great avenue to have when things are slow, of course, but you got to spread out past there because it's to me. It also teaches you to run a sloppy company.
Speaker 3:I built my company around TPA regulations and not around how to build my company to make money. For years we worry more about approvals and timelines and upload scores and cycle times than we did about profit first and about customer service, because our customer was the TPA, our customer is the adjuster. We got to make everybody happy. It's miss smith and the tpa and this person who want everybody happy and they're never all happy, right, so so so my cautionary tale is you build an infrastructure around that. It teaches you to be a bad business owner because your labor efficiency rate is shit like you make, if I told you. I told you I had a business model for you and you had to hire former office staff, but also it's less money you can make over here. You tell me to take a hike, right, but for some reason all these restoration guys go oh, how much work do you have? Oh, I can't wait. Oh, I mean, we get all excited but we don't realize we're being controlled by volume.
Speaker 2:We're not going to make money at that if all we do is that because the infrastructure takes too much right it's the busy so, yeah, it's the busy work, correct it's the busy work and a lot of times like people confuse being busy with being efficient or being bingo.
Speaker 3:It's great. Yeah, with making money correct, exactly it's like well, great well, hold on.
Speaker 2:Let's take a step back here, but are you making money and this?
Speaker 3:is correct now in the industry it's kind of like whoa, yeah, out, I mean, and we lost a lot Talk about retaining staff, we lost a lot of managers. So they wake up in the morning to nothing but emails, escalated emails, revision emails escalated, and like their heart, like your heart rate is like at a huge high level because you feel like the world's collapsing, because everybody wants this stuff done now and it's like very demanding, it's very and it's all above the tree line like all these little items that might be adjusting base service charges but it takes, it sucks up your manager's time. They have no time for exponential thinking, no time for sales, no time for customer service. They're just at their computer. Try not to get yelled at by whatever TPA or adjuster is sending out their next revision or they're going to cut us off or you know, we receive the email. If you don't get these uploaded today, we're shutting you off, like it's always height, height and flight, like and it wears on you, it wears on your team and a lot of guys and we lost a lot of managers saying that we won't do it.
Speaker 3:And I I've been doing all the interviewing now from and I have pms that'll send out their resumes and they'll state right on there no tpa. I've actually been seeing that on the resumes now I was like holy shit, I've never seen that. But I've seen some guys that have been ops managers for bigger companies that burnt out. They just know they want to work B2B. They don't want to work with TPAs, right.
Speaker 2:So that's one side right. So how are you offsetting that? What kind of offsetting actions have you put into place to kind of get some of that direct, you know B2C type business?
Speaker 3:Yeah, I mean. So we started brick and mortar with hiring a couple marketers to really go after property management. My ops manager was really pushing for us to diversify a bit and so our first main course was going after GC contractors, property management companies, stuff that's already symbiotic to what we're doing and just trying to get out of that wheelhouse. We had some pretty decent success there and like the real, the real thing is getting your foot in the door and like we started writing what's called emergency response programs. So you go to a property management company with emergency response program and obviously they've been pitched by 10 different companies, right, so you got to have a really good marketing person to go in there or even go speak yourself and try to get, try to get those doors open. I think really honestly depends on where you're at in california. Man, I'm gonna be dead on it, I don't want to get sued, so I choose really good. So I mean I mean we're in a sue happy state over here. So I think the whole um, the marketing with regards to which I mean obviously law of attraction, it's it's good to be charismatic and good looking, but if you're just sending out, you know a bunch of, uh, really pretty people that have no industry experience, you're not going to get very far. So I mean I like to have people actually have industry experience.
Speaker 3:I like my sales people actually come from construction a little bit, I mean, because otherwise, so they go pitch something. Yeah, they go. They go to a party magic company, they go. What about this? They'll be like oh, here's our pamphlet. Like you like wine, like like I'm like shit? I mean, exactly, you gotta at least get your foot in the door. So we started there and then obviously, as you know, we we linked up with you and you've been super helpful, helping us on the seo piece, which has is that we're super old school. I know I look younger, but like I was trying to keep that under wraps.
Speaker 2:I didn't want to know Promotional piece, now that you kind of put that out there.
Speaker 3:I mean I'm ready and I know.
Speaker 2:Is a marketing client of ours, and let me just give you a quick shout out. A quick shout out, brett, because look A, I've done a fuck ton of podcasts and I've gotten to peek behind a lot of the curtains of some of the companies that have been that we perceive to be extremely successful, some of those that we perceive to be not so successful. And then my line literally blows up and my email is blowing up every single day, with people just kind of saying hey, can you help me with marketing?
Speaker 3:And.
Speaker 2:I'll tell you one thing that really separates you and your caliber of individual as a business owner is we jumped on the phone on a zoom call and I was like, hey, brad, this is what you need. You need A, b and C. You're like, let's fucking do it. Let me get back to you. It wasn't a let me think about it.
Speaker 2:It was like I'm not sure it wasn't 35 different questions. It was like right there on the spot, attacking the action and saying, okay, cool, this is, this makes sense, let's, let's move forward. And that, to me, this, this is one of those things that, as a business owner and as someone who has gotten tons and tons of applications from the marketing side man, I've spoken to so many of these business owners and everybody wants the exact same thing. Everybody wants more business. Nobody, very, very few people, are willing to do what it takes in order to get there. It's the growing pain, it's the fear of what's on the other side, and one of the things that I appreciate about you and your organization, it's like, hey, look what needs to be done, let's do it and just move forward and I think as a CEO, that's your job when you get to a certain caliber.
Speaker 3:It's not to sit there and micromanage, it's to make the big decisions quickly and I always like that the death by meeting book as well. Like you can sit there and overanalyze something. You just want to get the bottom line. I'm the bottom page kind of person. The rest of my team lives in analytics. I like to live in the very small section right there and just make it actionable and then hold people accountable. That's really it. Basically.
Speaker 2:It so um, and then we've been doing route marketers and, uh, real quick cause this is kind of a topic about what some of the best methods are, uh, to really maximize, um, your, your route marketers, or your business development team, or whatever it is that your job type for them. Um, you and I have spoken briefly about some of my philosophies and my ideas about how you can maximize that Cause again. X amount of hours in the day you can only share hands and kiss so many babies.
Speaker 3:Exactly.
Speaker 2:There's some really cool automated things that you can do on the backend, but so far, in your experience, what do you feel are some of the most effective ways to leave a lasting impression and to continuously circle back around to these people? To? Romance them for lack of a better word to say look, this is the company that I want to do business with.
Speaker 3:Yep, I mean in the early stages. We've had our first marketing lady. She was doing a great job, but she was going out to too many different companies. We had probably 600 different leads in our CRM software and it wasn't really producing much and so just like too much TPA work. The right relationship is what you need to go after. Okay, where do I have an in with these certain companies?
Speaker 3:And for us, our size company, has actually been networking even with my in my network. So, being a local entrepreneur and being in different entrepreneur groups and I'm also I'm also a member of EO and my chapter forum I get front door access to a lot of other elite business owners. I've used that as a gateway in. So some of the bigger product management companies I've gotten are actually in different forums and they meet with me. I deploy my marketing team I already have a direct line and I'm more of the. I kick the door in and then my team goes from there and then from there, that relationship doesn't take 15 phone calls because it'd be like me and you talking. You know me, I know. You see your property management guy, you like me, you're going to give me a shot as long as I don't fuck up, I'm already there. Versus sitting at a marketer, a cold call. It's like a 1 in 100 chance of having that work right. One-on-one relationship and friendships are usually 90% success. So some of our bigger property management companies have actually come that way. And then from that, from that, that guy like, so that you have a big wig CEO at a big property management company. Well, guess what? He knows other management companies. So now you use that as a gateway into the next.
Speaker 3:All you, if you're, if you're a smaller shop, you're doing less than 20 million. All you need is five or six bigger property management companies. If they got 500 plus stores each, that's a lot. You don't need as many as you think if they actually produce. And that's the right relationships part. And so we went from having our marketers just do overall marketing to being sales reps where they handle the whole account.
Speaker 3:So I shifted our first marketers entire sales package based off of basically, you eat what you kill, so it's not, it's not just go out and you do it all you. You find a company that's your company, you keep that company, you're, you're the pr person for it, you're the after out, like that's yours. And if you get that. You get a profit. Share off that entire account, whether or not they call you or not, to every office, if they're, if they're in nevada and east bay, whatever they're at. You get a piece of that, as long as we keep the account nice. So, whether it be like mercy, housing or you know anything, conrad or a different federal contract, if she grabs that that she gets to keep it and then. So now I don't have her going a thousand spots she can now do a route of 20 versus a route of 200.
Speaker 3:Yeah, so I would. I would say yes, exactly. I would suggest that first and as a local business owner, you're the gateway in first, like you're the dude, right, I mean your marketing team. I don't care how attractive or how great they are, at the end of the day they got to like your team. So for me the gateway was me in, and then from there, marketing team backing it up and then from there our actual workers being able to do what they say they can do. So that's one avenue.
Speaker 3:And then I went in every avenue. I hired another marketing person and he comes from a government, federal background and he already knows that wheelhouse. So as you grow in business. You can't know it all right. So, like, if I want to go into a new market, I'm not going to learn it myself, I'm going to hire somebody that says they can do it. I'm going to to, I'm going to, but I'm going to write them a KFFM, I'm going to write them a business scale, how long they had to do it. They sign it and then you show me if you're the man. You show me you have. You have 90 days to prove it, or six or six, or whatever six months, whatever it is, and then they go out there and they prove it to you. So that's. I look for marketing experience and whatever fact, whatever area I want to get into, that I don't personally know yeah, yeah.
Speaker 2:So obviously we covered a lot of ground, um, yeah we did you know we, we could probably do. What is it that you that I didn't cover, that I didn't ask that you really wish that more people within the restoration business knew, or at least thought about and contemplated?
Speaker 3:I mean I think, when it comes to scaling up, and with regards to my I mean I think people within the restoration business new or at least thought about and contemplated. I mean I think, when it comes to scaling up and with regards to, I mean I think, focus on your education. If you're a younger owner, business owner, like when I started out, young, you have nothing but energy and time. Which you lack is experience. As you get older, you got a bunch of experience, but you're tired, you're cranky. You know what I mean. Like as you get, get older, like you just don't have the same pep on your step. So if you're a young entrepreneur, young business owners, use that to your advantage. Soak up as much knowledge as possible. Read the right books you know. Read, read scaling up, read. Read the e-myth like there's, there's so many good books out there.
Speaker 3:Yeah, profit first, and those are ones that you know people don't think about. It's like you. You get so built in your business. You you're taking all these different ideas like there's some basic business principles that if you follow will, will echo through time. I don't care how the book was written in the 70s or written last week. There's a certain principles that you should never falter from and profit first. A huge one about that. If you can't keep a little bit of profit every single month in your business, then you know you're running a business wrong, right? Um, like, unless you're vc backed or you're being acquired by someone or a bunch of capital and you're in a scaling, but, like, that's not the norm, right, if you're the normal brick and mortar with its own set of apps, absolutely, absolutely, yeah, sure, exactly, well, yes, there's gonna. I mean, there's a honeymoon period and then there's a divorce.
Speaker 2:Yeah, pretty much that's kind of how it works, you know yeah awesome man, so cool. So let me ask you this if, if anybody listening anybody you know who's watching to the podcast uh, they're like man brett just seems like one of the coolest guys I've ever seen. Um, they want to go ahead and reach out. What's the best way? For them to reach out to you.
Speaker 3:I mean, they can email me, they can go on my Instagram. It's Brett underscore LCR. I gave you the link to my LinkedIn page as well, and that's all going to be, by the way, Dominators.
Speaker 2:All of Brett's information is going to be in the video description below, as well as in the show notes. Final thoughts Brett, Anything else that you want to go ahead and leave us dominators with Some additional food for thought. Maybe an additional nugget there.
Speaker 3:I'm trying to think Honestly, I can't think of anything. I think we went over almost all of it, but I wish I had a final punchline for you.
Speaker 2:That's what happens when you cut a lot of ground.
Speaker 3:Exactly yeah.
Speaker 2:By the way, for those dominators out there, every time that I do speak to Brett Brett's an extremely busy guy. I'm busy, so we don't get to connect probably as much as we would like, and we enjoy this company, but every time we talk it's literally at this speed Exactly, I know right. Which is totally amazing, that's awesome. At this speed Exactly.
Speaker 3:I know right, that's awesome yeah thanks for having me.
Speaker 2:Thank you so much for taking the time out of your day sharing with us your story in the restoration.
Speaker 3:Absolutely. You're amazing. It was a blast.
Speaker 2:Your amazing growth and you know again what you're doing inside of your organization is absolutely amazing. I'm super excited to be working with you guys.
Speaker 3:Absolutely. We are too man Part of the team, so again, dominators.
Speaker 2:Make sure that you check out the video description and the show notes below. If you have any questions for Brett he's a super cool guy Reach out to him If there's anything he can help you out with. He most certainly will, and with that, make sure that you tune in for our next episode and, as always, hustle, hack dominate. I'll catch you guys on the next one.
Speaker 1:You've been listening to Restoration Domination, your number one resource for tips, tricks and hacks to help your business grow. Subscribe to our channel and follow us for more Restoration Domination, and follow our host at Rico Garcia Jr on Facebook, instagram, tiktok and LinkedIn. Till next time, this is Restoration Domination. Hustle, hustle, hack, hack, dominate, dominate.