Harmony of Hustle

Biggest Money Lesson That Almost Ruined My Business (But can save yours!)

• Justin Shoemaker • Episode 33

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I always thought you needed financing to grow your business. In fact because of these belief I took predatory MCA debt to try and grow at an absurd rate. This is a death sentence to most companies. In this Episode I go over exactly how we got out of it, and the lessons we learned along the way. 

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SPEAKER_00:

Guys, we are recording live. We are doing the harmony of hustle live streaming it right now on the road. It's as real as it gets. Haven't been able to get a podcast in because I've been busy, so I said, hey dude, we just got we just gotta get in. We just gotta get it in. So we're doing it, dude. Coach, it's good, it's good. Alright guys, so I got some stuff I wanted to talk about today. Umly because October was a big month for us. Um, you know, we are gonna have we will be uh debt-free this month, uh, at least from like the major MCA debt that we had, which is uh really, really important because um for those of you who don't know, getting into MCA debt is usually a death sentence for a business. You have to take up and pay back a shit ton of money. And I think I had to pay back 70k when I only borrowed like 40, and I only got 20 of that because I had to go to other stuff, so really, really bad. Um, and I learned a lot from this that I think if you are an entrepreneur and and or you're a new business owner, there is a misguided belief that you get that makes you think that you need capital to start the business. And to a certain degree, depending on the type of business you're in, you do. So I am in home services, which means I have a very expensive equipment that I have to actually have to install my unit, but that's really only a one-time cost. And for a lot of times, you can get that on a credit card, or you can take on not like an MCA debt, you could do like a line of credit, or you can do what I do now and just not pre-order it and just use it as you sell it, or order it as you sell it, and have a slightly longer cash conversion cycle, which just means you don't get paid as fast because you don't have the units on hand. And at the time, I was trying to model bigger businesses that could do next day installs, and not realizing I wasn't at that point yet. And I think a lot of entrepreneurs, when we start off in our entrepreneurial journey, we start because we want to be like these big companies, we want to model like those big companies, but we haven't gotten the infrastructure to get there yet, and that was a big mistake that I made. And what ended up happening is because I had saved a bunch of money from when I built the last company. I again I built that company as not being the owner, right? I was just an important uh director that was pushing that forward. Hey, what's up, DJ? And that was hard to swallow, I guess, for my pride, and it it caused me to believe that I needed more money to keep the business going when really the model was broken. Like I just had a busted fucking business model, and the truth is, as I understand now, you should be able to acquire two to three to four customers based off the one customer you sell, and a lot does take making some mistakes, figuring out what advertising works, figuring out your client that you want to sell, like that perfect avatar, deciding you know what price points to sell at, you know, make sure you have the team that can install at the level you want. There's obviously a bunch of other factors that level up to you being able to come to this realization, but I grew faster from going backwards, right? When I was trying to go super big, my goal, I think we we've talked about this before, is I wanted to hit a million dollars in revenue, which we hit in our first 12 months. Yeah, I lost a shit ton of money. I think we lost like 90k that month. And when I look back at it now, it was because I didn't have very effective marketing, I had way too many people in the business, I didn't have good talent installing, I had not talented people doing jobs and getting paid for jobs that didn't need to get paid for. And so there's this bunch of waste going through. And in my mind, I just said, Oh, I just need to jam more money into marketing, I need to spend more on uh getting more leads and getting more sales no matter what. But it didn't matter, right? It didn't freaking matter, and I just kept losing money, and now I have the best installer ever. I just hired a new one. My admin is a freaking savage, she's a monster, and now I'm selling systems way more than I was before, and I was able to buy more systems, and because I'm and I'm selling less clients, but I looked at my my profit over the last year, it's gone up every month. Yet I'm selling the same or less customers than I was before, we're gonna do less top line revenue this month, but I've actually made more, and I paid back 70k in debt in like five months. Crazy, right? Now imagine if I had not made all those mistakes and I just had that money, dude. We could be going crazy to the moon right now because I could be jamming that into marketing in a system that works. So if you are, you know, in a position where you're like, man, I want to grow, and you're like, hey, I need to get more money into the business. So you were thinking I'm gonna take a loan to do so, and the reason for getting that loan is strictly I want to acquire more customers. I'm telling you right now, your business is fucking broken. Like your model is fucked, and you need to fix the model first, and that is painful because then you have to take an ego death and say, damn, I kind of suck, or I need to go back and spend brain power and time on fixing something you thought was already working. And that's what I had to do, and I am now better for it. And now I have a model that really does work, and I now serve a high-end avatar. I now only do high-end installs, I only sell high-end equipment, I no longer do my cheap systems because operationally I was, you know, doing these discount deals with cheaper units and just trying to get money. And those clients end up losing me money long term because they complained more, even though the install was good, they wanted to keep coming back, and it was just a bunch of strain on the business. And they never referred clients. My the clients that pay me 10, 11 grand, we do the job perfectly. And because we are charging more, we're able to do better work. I can get them better, you know, ancillary services on top of it. They now also refer me clients who also pay higher prices. So it's it was scary at first because my total sales numbers went down, my total revenue went down, but we're doing better than ever. So crazy. I mean, it's just a hard lesson. I wish I learned way, way sooner, you know. Oh, yeah. Well, so what you just said about peacock water is is um, yeah, it's dude, this industry is scammy in that way. And one thing that we did as well is I wanted to build a business, or I should say, when I started, I built a business I thought I was supposed to build, right? I modeled the behavior and the business I'd been a part of before because obviously I thought they were working. I didn't realize there's a lot of shit in those businesses that didn't work. I then shifted my mindset with this whole learning of like, damn, I was losing all this money. The way I thought business was supposed to work didn't work, and then I just started taking chances on my own beliefs. Like, do I have to go in homes to sell? No. All right, let me try selling virtually. Oh wow, I'm selling the same amount at higher prices virtually. Okay, but there's a little more hesitation. How can I get rid of that hesitation? What if I get a lab to partner with me and I just do lab testing instead? Well, that lab test will be better, will be a better anal will give them a better analysis of their water than an in-home test. Okay, that seems like a good thing. And then I just kept doing shit like that. And now I have a business I actually enjoy working in because I don't have to go in people's homes all the time, which you know that's really not that fun. I don't care what you do. In-home sales is not great. I can, you know, now do sales consults from from my home, I can pull up lab reports, I can actually give a better presentation because I'm comfortable, they're comfortable, they're they're more willing to ask me questions, and it's just a better environment. And then I can do the in-home stuff with a technician who actually knows what they're talking about and makes the customer feel better. Because if you've ever been in like a home improvement industry, nothing kills confidence in a sales guy who doesn't know what the fuck they're talking about, promise the world to a customer, and they don't even know basic plumbing. So, you know, all of this stuff was just me trying to break the mold on how I thought the business should run and just build it for the way that I want it to run with the understanding I may make less money in the short term. And what's happened is now revenue's been going up. So that was a big lesson, right? Just if you have to get an influx of money because you want to acquire more customers, you don't actually need to. The model of the business is wrong, okay. And once you can fix that model, then you can make more money. And Alex Romose teaches this all the time. Um, it's in his books. If you haven't read them, I have them for free. I can give them to you. But it's called client finance acquisition, where you should have enough CAC to LTV where basically your cost to acquire and your lifetime value of your customer in the 30 days that you get a customer, that 30-day cash that you collect should be worth at least two to three times what your cost to acquire a customer is. So my cost to acquire a customer is around 500 bucks right now. In a 30-day cycle, I collect around eight grand. So we are doing good as far as that goes, right? Um, I kind of went through all my notes already, but uh the right avatar is so important. So I am doubling and tripling and quadrupling down on this next year. Uh, because of the MCA debt, I was kind of forced to um, excuse me, I was kind of forced to take on, we're live, baby. Um, I was forced to take on clients that I really didn't want to sell, mainly because I had to make some sort of money. And that was kind of a stressful place to be in. But now that I've really crystallized that there is a market for my higher-end services, I have basically reached out to all my hand high-end clients to really understand their buying decisions on why they moved forward to me in the first place, as well as figuring out if there's any other services they would buy that would make them buy it at an even higher ticket. Ideally, one that's 3x or 4x, my current highest ticket offering. Because going into January, guys, I have completely decided that I am no longer serving any of the mid-tier clients that I've had in the past. So, any sits, like all my 5k systems that I've been selling are going, I'm not, I'm I'm getting rid of them. Because every time I have an issue, I should say every time, but nine times out of ten, I if I have an issue that costs the business money or reputation or anything, it's always the clients that spent absurdly low with me or got like my cheapest service. And we still try to deliver the same type of level of service, even though they paid less. And it's just not appreciated as much. They don't leave good reviews, they don't refer anybody, yet they complain the most and cost me the most afterwards. And I'm like, what is the point of this? Like, why would I not just focus on on the top 30%? The ones that you know we have good relationships with. You know, it's almost like being in an abusive relationship where you want to stay in it because you're you're getting some return out of it. But you know, I like relationships and I'd rather be in good relationships with my clients, you know. What no matter what they spend, I I want, you know, I take pride in making sure we do great work and deliver good systems. So I don't want to serve people who naturally are just gonna hate everything you do anyway, right? The the eternal unhappy people, right? The ones that you could give them everything for free and they would still get pissed off. Like I just don't want to deal with those people anymore. So um I made that conscious conscious decision that we are only gonna be serving uh the people that want top premium products uh going into 20, what, 2026 next year, right? I think that's right. We're in 2025. I'm all over the place. I don't even remember. Um so yeah, going into the next year, whatever the year number is, um that's the focus. So you know, we'll see how it goes, but I think if my if my gut has shown me anything that's just gonna continue to get me better five-star reviews, it'll lower my operational drag because I won't have to pay as much money um to go back to these people. And so that's just the play, it's the bet. You know what I mean? Oh, thank you, sports. So 2026 is the new year, great. Uh, and for those of you who aren't um who are listening to this podcast and wondering why I'm talking to these random people, I am live on whatnot. So, this podcast, I do this live. I try I was doing it weekly. Obviously, the business got crazy busy, but I do this live on whatnot. Uh, if you're not following me on whatnot, get on whatnot. Um, I do these live on stream as well as record these obviously for you guys. Um, but get on there, great community. Uh, I vFriends is crushing it. Um, they've been holding it down from day one. Um, if you guys are new to vFriends, I know I could do a whole episode on that alone. Um, but definitely come over and and hang out with us. It's a lot of fun. Uh, a lot of business owners in here. So if you're a business owner, you're listening to this podcast, or you're watching it on YouTube, um, definitely come over to Whatnot because we we do uh we get it'll be a little more interactive over here. Um also one thing uh my final note I wrote down uh for this, and I'll just kind of go on my final rant is when I switched to the virtual model, one thing that I didn't realize happened is and I don't know why this is, I'm still trying to figure it out, but I got more quality leads buying and gave less discounts on virtual appointments. I don't know if it's because when you're in a home, people think they just naturally haggle, or if it's because you had to build such a stronger case online that the only people buying were, like I said before, those avatars that actually wanted premium units. Um, and it's been a really uh a very nice like winning formula where the people that don't want the good stuff won't buy online. The people that do want the good stuff will buy virtually with me, and then the people that would just want the cheap stuff are the ones that want me to go in their homes. Um, so it's like I don't have to do any of it at all. It's been pretty, it's been pretty cool to have uh to have that that reinforcement cycle of of what I've been trying to do. Um so I think all of this came from just taking the leap and breaking the mold. And I think if if I had one message based on just what's been going on the last few months, is just don't be afraid to to take that leap and you know give it give it a shot, even if it seems unconventional, because I think the reason why most businesses have stayed stuck, and granted, I'm still in the midst of learning these things, so take this for what it is, is I think we all just try to copy what we think is working with other people. We've seen people get some level of success, and I do believe to a certain degree that will get you off the ground to a certain position. But everyone that we've ever looked up to or followed, they're all an outlier in some point. You know, we don't follow the influencers we follow or listen to their advice because they've achieved average results. We follow them because they have achieved unaverage results, they've been exceptional results, which means they've become the exceptions in whatever they've been doing. So I've always been now trying to look at like what can I do that maybe isn't the status quo of the business that will, if it works, will allow me to then build the business bigger and better. And that has served me well overall. There have been bets that have not worked out, to be fair. Um, and I think that's just part of the game. But I think overall, if you can figure out a niche that no one else is really doing, even if it seems unconventional, then you can really crush it. And you know, the reason why I even got this idea for the virtual appointments for water was I listened to a roofing guy um at one of the hermosy conferences talk about how he was a roofing company, which generally roofing sales has to be done in person because you have to go inspect their roof normally. This guy was doing over$30 million a year in profit, all virtual. So when I and and roofs are way more expensive than a water system. So when I saw those numbers, I was like, wow, okay, this is there's something here. We just got to figure it out. And um, we are still you know figuring out the model. Uh, there's some some things I think we can tighten up. I think the presentations are a little long right now. Um, but you know, we are we are dialed in. We've gotten some good referrals, which I think has been a good help with that. Getting more proof over promise, uh, just showing people how this works with like real data instead of me trying to be like salesy or promising things, um, has been a really, really good way, I think, at getting people over the the line. Um, and now we can really crank on ad spend and get more lead flow. And I'm excited to talk to you guys just to see where we go. Um, you know, this this whole doc documentation of this uh podcast has been because I want I want to, I know in my heart of hearts, I'm calling the shot. This thing's gonna be a big business, or I will sell this for um a big amount of money in you know in the future at some point. I just want to have an undeniable progress or an undeniable record of what actually happened to get to that point. And I guess there's always a chance it could fail. At this point, I don't think that's a huge possibility, but there always is that chance, right? And even if that burns out, this could then show the lessons of what not to do. Um, but you know, I went back and I listened to some of the old podcast episodes, and you can kind of hear my my thought process. And I think that's probably more important than anything because all the mistakes that I have made, at the time that I made them, there was a very, in my mind, justifiable way of why I was making the decisions I was. I I had a logical tree on why I was doing certain actions, and then you can kind of see in real time how they don't work out or what the ramifications of those are. And I think that's helpful because if you're new, you don't have any type of you might have those same thoughts, you don't have any way to judge the quality of your decision making yet because you have to make the mistakes. And if you hear me talking about something and you're in the same situation and you're like, ooh, that didn't quite work out for them. Maybe I can now uh examine that a little bit closer. And there's not a lot of that content out there, you know. I think um I think there's there's not a ton of content of of of full recorded history of from the start of the company to to its natural conclusion. Um, so I've I really try to document it and I think this will um continue to grow. And I'm gonna continue to try to get more more business owners on the podcast to learn from them because you know, really this is a collaboration between all of us in the game. And once you're in the game, you get it. It it feels lonely. Um, you know, it can be stressful at time. You know, I I still haven't really paid myself out of the business um in the three years we've been running it. So, you know, and it's it's different, you know, it there's highs, there's lows, and when you're in the game, you you really feel it. And so I want to continue to create as much of a collaboration with other entrepreneurs as we can because it's definitely not a zero-sum game. Everyone can win. Um, there's always different markets to serve, and you know, literally you can thrive in the marketplace with with a bunch of competitors. Um, you know, look at all the different candies, right? Hershey's and uh what is that, Festivals, Mr. Beast. They're they're both leaders in their markets now, they're all they're still making money. Um, you got you know, Celsius and the sea bums, you got monster energy and whatever, right? So all these companies still get to win. Um, and someone might fact check me because who knows, maybe there was an acquisition and they they might all be under Pepsi now. I don't know, but whatever. You guys get it. The um the uh the thought process is the same, and um, you know, we just gotta do what we gotta do. At the end of the day, you just gotta hustle and uh not wait for perfect conditions to to do the thing that you want to do and be okay with that. And I try to live that every day. That's why I'm doing the podcast in my truck, right? I just pulled up to the hotel. I had some time before I went in. I wanted to get this podcast down. It's obviously not gonna be a long one, but you know, I've had I've had some lessons, and the biggest one is you know, I just got debt-free, and the only reason why I was able to get debt free is I fixed my money model of I I had too much bloat, I had too many people in the business. I didn't really understand that you know, where I didn't understand that I need to have better pricing to deliver better service, and I I needed to be okay turning away business, and uh being able to get better at those things is the reason why I was able to survive that storm. Um, also from an operational standpoint, with the people I had hired on, being very upfront with them with the financials and letting them know where we're at at with inside the company and where we needed to go, that was huge. And everyone took ownership of that in my business and they all came on board, right? There's there's a time where this is what I think culture is really about. Uh, they uh we had a week where payroll was looking tight and we had money coming in, but because of the way the loans were working with the people that bought, uh, I was I was supposed to get paid out on a certain date, and we did not get paid out. Everyone on the team said, Don't worry about it, just pay us on Tuesday, Wednesday.

unknown:

Right?

SPEAKER_00:

Because they all felt like they were in the fight with us. Um, you know, we're all one team here, and when everyone feels like they're a part of it, um, you can you can really one go bigger, harder, faster, stronger. Um, but you also get more grace from the team, and uh everything just works way better. So, guys, that is the podcast. I know this wasn't uh super long, but uh I had to get these thoughts out. I wanted to get this in. Um, no excuses, right? My uh the promise I made to myself going into this year as well is I'm gonna do way more creation, way more content, get more of this documentation out there, even though I get busy. Um, so this is it. It's not perfect, but that's how it goes sometimes, guys. Um, but yeah, if you're in the business, keep crushing it. If there's any way I can help you, let me know. Uh, if you're not on whatnot, come join us, come follow. I do this podcast, I try to do it weekly um as well as the other shows. And uh, yeah, guys, I'm gonna I'm gonna keep building this business, keep crushing. Um, and I will see you guys on the other side. I love y'all. Peace.