Profit & Grit with Tyler
Profit and Grit is the no-BS weekly podcast for home service business owners and blue collar entrepreneurs. Each episode features real strategies from successful contractors and industry experts in HVAC, plumbing, electrical, roofing, and other trades. Hosted by Tyler Martin, a fractional CFO for home service businesses and the trades, Profit & Grit dives into growth, cash flow, hiring, pricing, and leadership. If you own or want to grow a business in the trades, this home service podcast will help you build a stronger, more profitable company.
Profit & Grit with Tyler
The Pay-for-Performance Model That Attracts A-Players - Mike Andes
Most owners think profit comes from endless growth. Mike Andes says profit comes from clarity, knowing your close rates, raising prices with intent, and building systems that work without you.
Mike built Augusta Lawn Care into 190+ locations across three countries, all while creating a pay-for-performance model that rewards A-players and keeps crews accountable. After a near-death accident with a PTO shaft, he realized his business couldn’t survive if everything depended on him. That turning point forced him to design systems, create margin, and eventually launch tools like Copilot CRM and P4P Software to help other home service owners avoid the same traps.
In this episode, Mike shares why most home service companies are underpriced, the simple metric that tells you exactly when to raise rates, and how choosing growth mode vs profit mode is the decision that shapes every other move. We also dig into solving seasonality, the biggest killer of margins in the trades, and why separating labor from materials is the key to paying crews more while staying profitable.
What You Will Learn in This Episode:
• Why a PTO shaft accident forced Mike to rebuild his business on systems, not sweat
• How pay-for-performance works in the trades, and why it attracts top talent
• The close rate thresholds that signal when to raise prices
• Why picking between growth mode or profit mode simplifies decision-making
• How budgeted hours reveal efficiency and drive accurate pricing
• Five strategies to beat seasonality and protect margins year-round
• Why separating labor from materials is critical for fair pay and profitability
• The hidden danger of letting hourly pay drag down your best people
• How raising prices by 20% can double your profit without doubling your headaches
• Mike’s lesson: clarity beats chaos, and the math tells the truth about your business
More From Profit & Grit
Book your complimentary Financial Insight Session with Tyler Martin, fractional CFO for home services and the trades, here:
http://cfointrocall.com
Learn more at http://cfomadeeasy.com
Follow the show for weekly interviews with HVAC, plumbing, and home service owners and experts who share what it really takes to grow, scale, and profit in the trades.
If you listen to any of the following shows, we’re sure you’ll love ours too!
To The Point Home Services Podcast, Toolbox for the Trades, Masters of Home Service, Home Service Business Coach With David Moerman, BlueCollar.CEO, The Home Service Expert Podcast, Next Level Pros, Blue Collar Business Podcast, Home Service Millionaire with Mike Andes, The Contractor Fight with Tom Reber and Blue Collar Success Group
🎙️ Profit & Grit by Tyler Martin
Real stories. Real strategy. Real results for service-based business owners.
🔗 Website: ProfitAndGrit.com
📍 LinkedIn: linkedin.com/in/thinktyler
📸 Instagram & TikTok: @profitandgrit
Tyler Martin, a fractional CFO for home services and the trades
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I pay crews over$30 an hour to mow lawns and I still make a profit. Hourly pay is killing your business.
SPEAKER_00:Welcome to Profit and Grit with Tyler, where blue collar owners and insiders spill the real story behind their hustle, building businesses that thrive through sweat and smarts. We'll dig into their journeys from scaling chaos to growing the bottom line with lessons and grit that pay off big. Here's your host, the blue collar CFO, Tyler Martin.
SPEAKER_01:So today we have Mike Andes joining us. He's a guy who's quietly built one of the most systematized, tech-powered service businesses out there. He's the founder of Augusta Lawn Care, now with over 170 franchise locations. He's also the creator of Copilot CRM. This is a CRM. It's used by home service businesses like HVAC, plumbing, electrical, and of course lawn care. This conversation dives into how his near-death experience forced Mike to systematize everything, why he pays more to his staff to save more, and how automation is changing the game. And last but not least, what nearly took him out completely. Let's chat with Mike now. Hey Mike, welcome to the Prophet and Great Show. How are you doing today? Fantastic. Thanks for having me on, Tyler. Thanks for being here. Hey, could you give me just a quick summary? I'd love to know a little bit about what you do professionally and then a personal note about yourself.
SPEAKER_02:Yeah. So we have 190 plus locations here at Augusta Lawn Care. I'm the founder. They're franchised in the US, Canada, and Australia. And then we do a bunch of media on do turnarounds fly around the country, trying to help other small business owners in the home service industry. And then also have software at Copilot CRM for home service business owners to hopefully scale up their company.
SPEAKER_01:Yeah, that's great. And I do just want to, you mentioned it, but I want to dig a little deeper. I love your YouTube videos. I think there is so much educational material in those. You go out around and you actually go to their locations. You deal with turnaround situations. And I think it is such a cool one, I think it helps a lot of business owners feel like they're not the only ones struggling because I think a lot of times we feel that way. At least that's what I hear from my own clients. And then two, there's just a wealth of knowledge in there in terms of how you the advice that they get, the the things that they need to do to improve their business. So that's a huge resource too. I don't want to, I I know it's just we're just in the opening, but I don't want to gloss over that because I think it's such a great resource.
SPEAKER_02:Yeah, I think the the goal in that is to try to have education by observation instead of education by theory. It's pretty easy to walk up to a whiteboard and start showing all the theory of business, but sometimes it's just easier to see it in other people and be like, okay, I'm not the only one. And at the very least, it's like, hey, I'm not the only one struggling. Because so often the times the only things you see on social media or on YouTube is the wins and people doing well. Uh, and so if you are struggling, you're not the only one. And furthermore, there is the possibility you can turn it around given certain business principles being changed.
SPEAKER_01:How often when you get into those scenarios, do you ever have like a preconceived feeling like, oh man, there's just no hope here? Or are you always going in really positive? Like you felt like there, you know, no matter what, you're gonna be able to have an impact?
SPEAKER_02:There's certainly, you know, you get jaded after a while of seeing so many that don't take execute, you know, execute after you leave. And so, but I'm pleasantly surprised. Even the other day we were out in Tennessee and we went to a location that was doing a million dollars in revenue. And I went and told the team, like, I don't think this guy's gonna change. Uh, there's just been too much history of him not taking uh instruction and education and executing. By the end of talking to him, I think, okay, hey, you know what? I think there's a plan in place. I think he's humble enough to learn. And I think that's really the first step. And if they don't have that humility, then they can't change the business quickly. And a lot of times when we're going in, they're on the brink of collapse. And so if they don't change quickly, the business can fail. And so um, it's kind of a high stakes situation. But I certainly have been wrong on some of those occasions when I'm like, I don't think they're gonna change, or vice versa. I'm like, oh yeah, they're gonna do great. And then six weeks later, nothing's changed.
SPEAKER_01:I think that's one of the hardest things in my professional services is you want to help people. And it took me a long time to understand this is you know, it's really up to them. Like you can give them knowledge, you can give them processes, you can have the roadmap, but the execution, I think, is where people really stumble. Like they just, I don't know why it is, but just as humans, we have trouble just actually moving forward.
SPEAKER_02:Yeah, no, and and and that's the part I really identify with in terms of being stuck and feeling like you're working 80, 90 hours a week, there's no money in the bank account, you don't know what to do. And it's not necessarily that I'm super smart coming in and showing what's wrong in the business. I think most people could look at someone else's business and be like, oh, yeah, change these five things. But it's a it's just a different perspective. And if as long as someone's willing to be humble enough to listen to someone else that does have a third-party view, uh a lot of times the business can be changed uh and turned around. Yeah, that's good stuff.
SPEAKER_01:Okay, where I'd love to start out with, you had a wake-up call, I guess I would call it for lack of better words. And your entire business model changed after you had a PTO shaft accident. And as I understand it, PTO is like this circling type of uh shaft that sounds pretty scary. Can you take us through that? What happened?
SPEAKER_02:Yeah, the power takeoff is underneath a dump truck, kind of spins underneath and is what powers the actual dumping mechanism. And so I had a big dump truck, uh 4L7000, like a 1991 old dump truck. And we were uh that morning, I was going to a job site, I was gonna dump three yards of cobble, show the crew around the job, and then go back to the office and then do estimates the rest of the day. And unfortunately, the the lever inside of the cab had broken that turned the shaft on, the PTO. And so I was going underneath the dump truck and just manually turned it on. And I I had done that probably 20, 30 times that week already. But I went underneath that morning, I had a hoodie on, and the hoodie got caught in the PTO once it got started. And so kind of within a split second, it was cinched up my my t-shirt and then my sweater around my neck. And I thought, you know, I kind of had a split second that being pinched up against the uh gearbox kind of hit my um, you can still kind of see the some of the scars in the bicep. And so that kind of kept me from spinning over and over. And that's usually what happens is is if you get caught in a PTO. And so um, yeah, it was kind of a wake-up call, a couple weeks of not being able to work, realizing the business was built on my personality, me working a hundred hours a week instead of systems and procedures. And so that was kind of like the turning point. I had already gone to get my master's in business. And so I already knew like theoretically how a business should should operate on systems, but spending the next few months turning the business, my own business around, creating systems and procedures, uh, and then documenting that uh on YouTube and landscape business course just to be able to give that back to the community. Uh so hopefully someone else avoided all the mistakes I made.
SPEAKER_01:What happened like within your business itself when you were gone for those few like weeks? Like what was taking place?
SPEAKER_02:Yeah, like fortunately, I had a couple of really, really good people that kept the business afloat. But I think from a financial perspective, if I had dependents and had to be taking money out of the business, I probably would have gone bankrupt otherwise. Fortunately, I was single, I was living at home, my expenses are super low. So I was able to get through it. But when you're really, really tight on cash, and like I was, if I would have been having to take out personal expenses, it would have been you know catastrophic. And so I think there's a lot of people in the home services and many businesses that are living, you know, basically paycheck to paycheck. And an event like that would wipe them out. And so I realized that I had no systems. I'm I was literally on the hospital bed, FaceTiming my crew, so showing them the next job site, because I didn't have systems around job notes and estimate videos and showing them what they should be doing. I was the bottleneck for all of that. And so kind of deconstraining the business and taking out the bottlenecks, allowing the entrepreneur to focus on being more of the architect instead of working inside the business is really the objective of a lot of the systems that we talk about.
SPEAKER_01:Wow. Did that that experience in some way shape, reshape or change your leadership style?
SPEAKER_02:I think it probably shaped a lot of the why, why we do the content, why we do the software, why I did the franchise, why I started making videos on YouTube, why it's all free. I simply just want to prevent the person that I was at, you know, 19, 20 years old trying to figure all that out and making tons of mistakes. I want to prevent the person that is 30, 40 years old, has multiple kids, and a spouse that they're trying to take care of. If that happened to them, it would have been a probably bankruptcy. And so hopefully trying to prevent them from that pain. And I know it's like to be there. And I just want to hopefully prevent that from other people going to the same thing.
SPEAKER_01:Yeah. Okay. I want to shift gears a little bit. I want to talk about this model that you have, this P for P pay for performance. You pay, I think, somewhere around$30 an hour for folks to mow lawns, which is a pretty fair rate. I mean, that's a good, good rate. What's the purpose of that model? What's your thought process on it? Kind of take me through how it works.
SPEAKER_02:Yeah, so P for P is stands for pay for performance. It's not like it's super new. There's certain like piece work and there's commission-based pay, et cetera. So the essence of it is like the harder you work, the more money you make. And I think most business owners want to pay their employees based upon that way, but then they have like 10 different reasons why it won't work. Well, I have shop time. What happens if I need them to uh work with someone that is of lesser skill? What if I'm they're training? Uh, what happens if someone makes a mistake? Is it are they gonna go super fast and make a bunch of damages to my customer's property and then they're making a bunch of money at the same time? So there were all these reasons as to why P4P wouldn't work. And that's why most people don't do P4P. But we just systematically went through each of those things I just mentioned and many more and figured out a way to calibrate that and make sure we could keep track of it for big projects, for mowing routes, for shop time, for training, all of these things. And so that was really the essence of it. We created software on it, but ultimately the the training of it can be done in Excel if it needs to be, is originally where we started it. And so yeah, it was just a function of like, I want to pay people based upon how hard they work. Basically, it's just a percentage of the labor revenue they earn for the business is what they they get in their paycheck. Uh and we obviously honor a certain minimum base pay and making sure that they're getting overtime and um all the laws are dotted and crossed. But uh, we're making sure that if you're willing to show up, work harder, put more effort in, you do make more money. And so uh if you're able to pay your average employee, you know, eight,$10,$12 more per hour than the going rate in your market, you get the best talent. And the best team members want to work with hardworking people. And so the the number one way to discourage an A player is put them with a whole bunch of B and C players that are simply just trying to pass the time throughout the day. And when you pay someone by the hour, it's that you're simply incentivizing them to make the job take longer. Whereas from a business owner's perspective, you make more money the shorter the job takes. And so the goal with P for P is just get everyone aligned, going the same direction, which is let's get this job done efficiently and to the cust satisfaction of the customer. And if we might meet those two requirements, we should all be able to make more money. And uh by doing that, we eliminate a lot of waste.
SPEAKER_01:Yeah. How do you handle? So I totally get you the hourly people are gonna stretch it out, pay for performance, they're gonna try to drive revenue. But I also have heard sometimes people will kind of just rush through the work. And so they may not give as good a quality work just because they're trying to get to the next job and they're trying to get it done. How do you counteract that or or mitigate that from happening?
unknown:Yeah.
SPEAKER_02:So we have a function called yellow slips. And so P per P rewards quantity, the speed at which you're doing work. Sure. And so you have to have a countermeasure of quality, otherwise, to your point, people would just rush through things. And so yellow slips or callbacks or complaints from customers trigger yellow slip. And when a yellow slip pops up and someone has to go back to the property, well, the labor revenue has already been earned. So them going back to the property and fixing the mistake, et cetera, has there's no more revenue being made. It's gonna sink their P for P. Also, they have to then read that yellow slip in front of the team as an educational purpose to be able to teach everyone, hey, this is what I did wrong, here's what I had to go do, here's the customer's name, their address, and you know, this is the mistake I made and how I rectified it. And it's not necessarily like a berating of them, but it's it's more of a function of us all learning. And many times the thing is too, once you institute P for P and then you have profit sharing, if someone's consistently doing this and we're losing customers, they're making damage cases, now it's affecting the profitability of the whole business and the entire team will push that person out. And so many times when it comes to hourly labors, you can go weeks and months go by before you fire someone. Then all of a sudden you hear all these stories versus when the entire team is trying to be as productive and efficient and profitable as possible. Now, within a day or two, if someone's doing that sort of thing, uh, if they're going too fast, if they're making damage cases, if they're damaging equipment, if they're slacking off, the team is immediately trying to reject them and push them out. And so it's it's really a self-cleansing mechanism for the team out in the field. And yellow slips really keep that person from ever making a bonus. And if someone keeps hitting base pay, eventually that's the person we're gonna have to let go because they're underperforming and they're bringing that on the average uh, you know, crew uh efficiency.
SPEAKER_01:Sure. I love, you know, as a leader, I can tell you you're a good leader and you're humble because you frame the yellow slips and having to share it in front of the group as it's a tool for education. And I totally agree with you. I think that's a great angle to look at it. But the truth of it also is it's human nature. No one that has pride in their work wants to stand up in front of their group, regardless of educational or not. And so it's also a deterrent, for lack of better words, without you having to say, hey, I'm trying to put you down or this is punitive or whatever. I mean, it kind of just self-governs itself in that regard, I guess is what I'd say, which is pretty cool.
SPEAKER_02:Yeah, like you want your team if the accountability is taking full ownership of the wins and the losses that you have. And so the wins are like the job was done more efficiently than you thought. You figure out a way to get the job done faster. Uh the customers were super happy. Great, you're gonna make way more money on P4P. But also, on the downside, if you make a mistake, if you forget something, if you don't do a walkthrough, if you damage property, there's downsides to that. And so it's a self-regulated system that we're now as the owner, I'm not having to micromanage or tell people what they're doing wrong. It self-monitors, the team tells each other, they hold each other accountable. And in front of each other during a team meeting, we all learn. But also, yes, there's actually absolutely social pressure when it comes to I would rather take the hit financially and go work a little bit longer at this job than have a yellow slip and have to tell my entire team what I did wrong.
SPEAKER_01:When you go out to these turnarounds, I'll call them, when you're talking with people, I'm sure this comes up, this type of model. What's the pushback you get? Like, what do owners say to you on why or do they give you pushback? Because I know within my own career, sometimes I get pushback. Oh, we just can't do it that way. Oh, we don't want to do it that way. What do you get pushback ever when you go out there?
SPEAKER_02:Most of the time, the reason people actually don't is one, all the different reasons why they think it can't work in terms of like, well, I have big projects and I have small jobs. I have really skilled employees and I have lower level skilled employees. I have people who do are drivers, I have non-drivers. So like there's those reasons. But I actually think the biggest reason most people don't do P4P is because they don't actually have accurate budget hours. They don't know how long the estimates are not accurate. And so if you don't have accurate budget hours, if you don't know what your hourly rate is, then if you institute P4P, it's going to show that to your team that you don't know what you're actually talking about. And then there's huge cultural backlash. And so most of the time, like the foundation that being able to do P4P is you have an hourly rate, you have budget hours on every single task, every single job, you know what your labor rates are. Uh, and if you don't do that, then you just you launch P4P. And if your budget hours are 10 and it takes them 30, well, they're all hitting base pay and going to be super mad at you. And so you've got to have a certain level of accuracy. And this also forces the business to be able to simplify and standardize the services so you can have accurate estimates. Because if you do have inaccurate estimates, it now affects the paycheck of the team and they're gonna hold you accountable to that.
SPEAKER_01:Yeah. Would this work for something in your mind, like for like an HVAC company or a plumbing company, where I do think, like, you know, I think with Pricebook, they have a pretty complex amount of different things. Could it work in a model like that? What's your thought process?
SPEAKER_02:Yeah, as long as you have the very minimum you want to have what labor revenue is generated for the business and then the product revenue. Because the product revenue is things like, you know, if you're installing a new furnace or an AC unit, like you're not gonna give a cut of that revenue to the technician. The technician earns the value they add is the labor. And so how efficient they perform that labor is the mechanism by which I'm gonna measure their performance. And so as long as you distinguish between the material markup or the product markup and the labor, then you should be able to do this, no problem. We actually have like using the P4P software, we have like restaurants that do this, we have some like all crazy amounts of other services that you wouldn't ever think actually use P4P. But they just simply, okay, if if we are cleaning hotel rooms, for example, if we can just say, okay, the budget hours in each room, two hours. Great. That's what's allocated. If they do it in 30 minutes, they get paid as if they did it, it took two. If they take three hours, they get paid as if they did two. So like it's just a function of do you have the labor broken out from the product? And that for HVAC, that's usually the biggest thing I see people not doing. Is like they're like, well, the new furnace is$5,000. Well, what's the breakout of the material and the markup of that material versus the labor revenue? So as long as you break out labor revenue, then you can do it. Got it.
SPEAKER_01:Okay. Do you have any data in terms of like how it changed your numbers in terms of whether it be increased efficiency, productivity, or any type of data points?
SPEAKER_02:Yeah, like the reason I believe in is because like the year I instituted it was the the year after my accident. And it was because like the business had no money. People that deserved pay increases in the business weren't getting them. People that had just been around for a long time were making more money, but they didn't really earn it. They weren't working as fast. There's new people making less money per hour, but making the business three times as much because they are hustling. Like it just didn't make any sense. There was no meritocracy. It was like very, very random. And so I did it as a really a matter of I had to do this. Like I had to switch to this model to make money. And so the year after we did it, I went from basically break-even to$280,000 of distributions from that first location. And I went from working 80, 90 hours a week at the office to one hour a week. And so I know the power from from like from my perspective as the owner. And so when I I talked this passionately about it and we built the software and everything for it, it's just because like I just want people to use it. I want people to be able to see the the influence in their business. I want to see the culture change in the industry as a whole, where team members feel like they have a place to go. The harder they work, the more money they do make. Uh and you know, merit is rewarded.
SPEAKER_01:Yeah, very cool. Good stuff. Hey, I want to uh switch gears into just your whole technology. So you've built Co-Pilot CRM. It's a product that leans into or is for, I should say, for home service businesses. I'd love to talk about like what's the upside of using that? How does that fit into your own business? Who is it ideally designed for? Is it any certain types of home service businesses? That would be a good starting point for me.
SPEAKER_02:Yeah, I think it's really designed for someone to build their business over a million in revenue. Uh, if someone's wanting to go a lot smaller, you probably need something as powerful as Copilot. And so we built it as like there's lots of different software. There's so many different options. And so there were just so many different areas where like none of them fit exactly what we needed at Augusta and what I wanted in the software. So the reason we built it was like, hey, we can just we just need to take control of this. And we know it'll be a bumpy couple of years to kind of get up to speed, get the team and the engineering, all that done, and uh getting that team nailed down. But once done, we can have the ability to kind of fill in a lot of the holes that I saw. And so it really focuses mostly on like getting more customers. So whether we mass texting all of your customers, mass emailing. Um, there's a lot of this functionality, even around like budgeted hours and using that as like how to schedule, like it's all based on budget hours. Budget hours is the is the premise for scheduling, it's the premise for dispatch, it's the premise for my pricing, it's the premise for my pay for performance. And so we just built it all around like the core concepts that we talk about.
SPEAKER_01:And that's that's really why we did it. Got it. And how is AI playing into that now? And where do you in fact, what general question? Where do you think AI plays right now with home service businesses? And then how does it also interact with your software?
SPEAKER_02:Yeah, I think right now it really increases the efficiency of the admin person. So they should be able to produce 30, 40% more because emails can get automatically written for them, estimates can get drawn up for them immediately, pricing can get done immediately. Um, they can take transcripts from a video that the estimator made and immediately make an estimate just using, you know, AI and the transcripts. So there's a lot of power in terms of the admin side that it can get much more efficient, as well as on the sales side to be able to automate a lot of tasks in terms of follow-up, text and email based upon certain triggers, what you do with it. So there's a lot of power there. I think in the future, uh scheduling and dispatch, um, if someone has accurate budget hours, if they have accurate pricing, if they actually put all the data around their team into the software, there should, if they have budget hours, for example, there should be an ability to use AI to be able to automatically schedule jobs. Customer could click accept and immediately they know the date of service. That's where I where I think it'll go in the future. But right now, I think a lot of it is the time of the admin person writing emails, digesting information, finding information, uh creating pricing proposals.
SPEAKER_01:That that's the part that really can be sped up. Yeah. You know, you mentioned about, you know, there's other packages out there. I'm not going to name any of them, but there's other packages out there, and you didn't really find one that did what you wanted. What was it specifically? I imagine part of it is the P4P. Was there anything else that you were seeing that, hey, this just doesn't fit what I wanted to do?
SPEAKER_02:Yeah, P4P was a big part of because we all operate on pay for performance. And basically, it would take about one minute per day per employee to manually do the numbers. And so it wasn't huge, but when you start getting 15, 20 employees and then you time that by 20 days and in no calendar weekdays in a in a month, that starts to add up. And so being able to sync all that information to pay P4Psoftware.com, all of it just automatically creates the time cards, creates the reports, gives the efficiency scores, has a dashboard, that saves us a lot of time. Also, the ability to be able to, like when we schedule a job, use budget hours to look on the calendar and say, okay, when is the next available slot? So we lean so heavily on budget hours because we just believe that's the core element of everything in the business, whether it be scheduling, dispatching, pricing, everything. And so that was really the main focus. And then also to really use it as a marketing engine. It's very difficult and costly, I should say, when you take another platform and you have to connect it with something else to like do mass texting, for example, and do mass email well. And so that was some of the reasons. I think the main thing is as we look forward to what AI is going to do, it's also a matter of like 10, 20 down years down the road where robotics are going to be. We knew we wanted to have a leg up in that. And most important is I saw so many softwares doing a great job, honestly, in the industry. And I really could care less when we use Copilers, like, get organized, get in a CRM. That's my main thing. But the whole I saw is people were given so much information, so much reports, but they didn't, and it was clear like okay, great, my close ratio down. What am I supposed to do about that? Like, why? And so I believe that all the information inside of a CRM is the only thing that's required that I need as a coach to be able to tell someone what to do. And so when I go on turnarounds, like the first half of my talk with them is just like exploratory, like what's your close ratio, what percentage of your revenues recurring, you know, how far is your service area? And these things are already inside of the CRM. And so our goal is to be able to tell the business owner what to do next, like when to hire, when to raise prices, which services they should cut out. These are things that I think we can do with software and the information is there. It's just a matter of how do we synthesize this and give it someone with full accuracy. So like if you just let the software tell you what to do, it'll tell you when to hire, it'll tell you when to raise prices, it'll tell you how your close ratio can be impacted, it'll tell you what emails to send. And that's really the objective down the road is for it to tell people what to do.
SPEAKER_01:Yeah. You know, you kind of answered the question, but I still want to ask it and just get your feedback. What do you see when when you do go and talk with these uh companies that that need a turnaround or in a bad situation? What are the KPIs that they do miss most? Because I'm I'm envisioning you're asking them like all these questions and they're probably giving you a blank stare.
SPEAKER_02:Yeah, like the cornerstone is close ratio, because the most basic is like what percentage of your estimates that you send get accepted? Because if that's under 30%, we have a big problem with funnel, like the sales process typically, follow-up process, interact with the customer, the way that we're communicating with them. Um, if it's over 70%, usually it's a pricing, like immediately raise your prices. This is low-hanging fruit. And then if it's somewhere in between, it's like, how do we optimize this? How do we take all the leaks in the sales process and fix all of them to where now it goes from 50% to 70%? And then I can raise prices. I think the ultimate lever in every business is to raise prices. And so if I can just my close ratio high enough by optimizing my entire sales process, I can raise prices. Because if you can raise prices by 20% in your home service business, you double your profits. And so the whole objective of a home service business should be create high enough stickiness with your customers that when you raise prices by 20%, they stay with you. If you just generate, just if that's your only focus, then you'll double profits. And so I think the vast majority of us never raise prices. We always stay in growth mode. We're always trying to get more trucks, get more employees, get more debt, get more revenue, but we never actually stop and like, okay, like instead of doing that, I'm just going to stop marketing, stop hiring, stop buying more trucks, and raise my prices. Because when you do that, you just doubled your profit. And so that's really my focus is uh pushing uh business owners to do that. Because with that doubling of profit, you now have the cash flow to be able to take the business to the next level. Maybe wait six or 12 months, but you now have the cash flow to do so.
SPEAKER_01:So do you have some general rules in terms of like where your marketing budget should be as a percentage of revenue, what your operating overhead should be, what your net profit margin. Do you some have some general guidelines of where you'd like to see businesses at?
SPEAKER_02:I try to simplify it much more because it's so industry specific. It's based upon so many different factors in terms of how much capital you have, how fast you're trying to grow. I just try to say, say, are you in growth mode or you're in profit mode? Growth mode is when you hit capacity and you have so much work coming in that you can't you cannot stay up with it. When you hit that capacity, do you buy more trucks and hire more people? If so, you're in growth mode. On the flip side, if you hit capacity and you have so much work coming in, you're all your employees are working full time, your trucks are out every single day, and you hit when you hit capacity there, if you raise prices and you do not hire people and you do not buy more trucks, then you're in profit mode. And I believe it needs to be a binary decision. And someone's like, I want to try to grow and increase profits this year. I believe you're trying to straddle those two things and makes it very difficult to make decisions in the business. It's like, are we trying to grow or are we trying to become more profitable? And those are two very contrary things because when you raise prices, you you push down your close ratio. And so I think I just try to keep it very simple in terms of that, instead of saying, like, oh, a certain percentage, because like if you're doing 15%, does that mean you're doing good and I should not raise my prices? No, if you can raise your price by 15% more, you just double your profit. Like, there's nothing wrong with 30% margins. And so I think the vast majority of us just never get to where we raise prices and we're always in this grow, grow, grow thing, like growing a bigger business for some reason, as if it's gonna like lead to an acquisition or something like when less than 1% of us are gonna get bought out. So, like, let's make a business that makes profit, and then doing that will allow us to have the cash flow if needs be down the road to grow.
SPEAKER_01:Right. Good stuff. Hey, I want to kind of step back a little bit and talk about an issue that you had. You at one point lost about 70% of your customers, and it was attributed to delegating to the wrong person. And I know you have since systematized and a lot of things have changed, but I'd love to just kind of go back to that moment because I think there's a good learning lesson. What happened there?
SPEAKER_02:Yeah, like whenever you do a price increase, it has to be done right. And so at the very beginning, when I raised prices, I didn't know what I was doing. I thought it was like it was based upon the time of year. I thought it was based upon, you know, am I am I busy right now? There was no mechanism for like when do I raise prices with confidence? It's like it shouldn't be based on like, oh, I need money in the bank, I should raise prices. It's more a function of what are my capacities in terms of my assets? Like, are all my trucks being used every single day? And then my employees, are all my employees being used every day? Do they have to work overtime? And so if you hit that point, you actually need to lose customers. If you're already overworking everyone, all your trucks are being used every day. You either have to go buy trucks and hire more people, or you have to raise prices to lose customers. And so instead of raising prices willy-and-illy, or like, I got to time it right during like the spring rush, or when everyone else is busy, or like during the offseason, do I give them three weeks? Like, look, I'm gonna get to the point where I need to lose a chunk of my customers. And at the very beginning, I just basically say, hey, I need more money, I will raise prices. Well, if you lose all your customers because you are priced out of the market, you're not doing a great job, your quality is low, you're gonna lose a ton of customers. And so being much more precise in terms of when do I raise prices, knowing that I do need to lose customers. And I'm actually, I'm actually like, this happens all the time at Augusta. People are like, they hit capacity and they raise prices by 20, 25%, and they don't lose hardly maybe one or two percent of their customers. And like, oh, snap, I should have raised their price, my price is more. And so doing that in a much more surgical and precise way is really the thing that I missed early on. And when you raise price at the wrong time, when you raise prices based upon things besides capacity, that's when you lose money.
SPEAKER_01:Yeah. So what was the story there? And maybe I have my data wrong. So feel free to tell me if I'm off here. I think you did you lose about 70% of your customers as it was part of delegating to the wrong person? Like, did that was that related to pricing and someone just kind of unilaterally did prior, or how what is the story there? Is there a story there?
SPEAKER_02:Uh, not really. It was really just a function of my inability to be able to know how to raise prices. Know what do you communicate to customers? Do you give them a long time uh prior to the price increase? It was ultimately my fault and just my ignorance back in the day. And now seeing, you know, even this past month, I think about 40 or 50 locations that are gust to raise prices by a minimum of 20%. And now, like the average person loses three to five percent of their customers when they do that. Like if you lost three five percent of your customers, but you doubled your profits, like we should peek keep pushing this button. But back in the day, like not having a rhyme or reason or a method to when to raise prices, because that is the goal, in my opinion, of every home service business. Create high enough quality of a service to where when you raise prices, customers do not leave. And then just getting to that point and um determining what that point is. Like, when will I raise prices? Okay, well, you know, I need to hit capacity. Okay, well, what is your capacity? Well, how how much revenue could I do? How many customers could I serve given the number of trucks I have and the number of employees I have? Okay, that's my capacity. When I hit it, I'm raising prices. And so getting really clear on that is is really the prism by which price increases should be looked through.
SPEAKER_01:Yeah, it sounds like you you're just saying, hey, make it a lot more functional and have have a game plan in terms of how you're raising pricing. I know a lot of us as small business owners, I see this all the time. We're just there's not really a rhyme or reason to it. It's just because, or we we, it's not necessarily because we're at capacity. It's not necessarily because we're either in profit or growth mode. And I like that you kind of have a roadmap. What do you typically see when you go to these turnarounds? Are they usually underpriced? I think the vast majority of home services are.
SPEAKER_02:Really? As long as you're producing a good product to the customer. The thing that really determines whether or not you should raise prices is your capacity and then. Near close ratio. If you're only closing 10% of your jobs, you're gonna have a real hard time raising prices because now your customer acquisition cost is so brutal. Uh to you have to get 10 people in the door via your ads in order to just get one paying customer. That's a very hard model. And it's usually very difficult to replace just return from your recurring customers with that model. That being said, if you're 70, 80, 90% uh close rate, you'd probably be raising prices because the customer, every single time you give them an asset, votes on your pricing. It's not your whether or not you're a higher hourly rate than your competition. It's not if customers say you're expensive. Your close rate is the thing that actually determines whether or not you're too high priced or what your pricing is. If you're closing 80, 90% of your jobs, I don't care what you say, you are not at highest in the market, and customers do not think you're too expensive. So I would think like looking at the j, you know, objectively at the close rate allows me to determine is someone overpriced and is there room to be able to move those prices higher?
SPEAKER_01:So what is that sweet spot? Is it about 60%? If you're closing 6%, you're probably priced right. Is that a is that a fair statement?
SPEAKER_02:Yeah, my my kind of ethos is like 30 to 50% is kind of you're in profit mode. Okay. Uh 50 to 70%, I'm in growth mode. I'm trying to optimize and trying to reduce my customer acquisition cost by increasing my close rate and optimize that. And if I'm over 70%, it's almost a no-brainer raise your prices immediately by a significant chunk. And if I'm under 30%, usually it's everyone jumps to I'm overpriced, but usually there's problems in the sales funnel. Uh, like, do you actually follow up? How fast do you get to the customer? Can you do the pricing over the phone? There's a lot of other things I'm looking at first. But if all those things are patched up, then maybe, maybe you're overpriced.
SPEAKER_01:Got it. Okay. Last area I want to just kind of talk with you about. So you were at a very high price conference. I think it might even be like a$20,000 conference, and someone approached you and you were challenged at a live event, and they approached you, and it sounded like they were a little bit aggressive, maybe even. Can you tell us the story behind that? Yeah.
SPEAKER_02:So I was on a panel at a conference, and basically their perspective was like, you know, hey, why are we talking about hiring and getting more employees when we can't even fill our own schedule? And the reason was in part because like this individual was a solo operator. They had been that for probably 10, 15 years, and they just couldn't figure out like, why are we talking about hiring and growing a team if we can't even keep our team busy? And so what I was kind of trying to explain to him is like, look, right now you don't have the constraint of labor, but there's really four reasons why a business will stop growing. And it's what I call it the four-oil framework. It's either liquidity, so money. If you don't have enough money, you can't grow the business. The next thing is like if I take that money and I turn it into leads, the second L in the four-O framework, well, then I get more customers. Well, that might be your constraint. And for him, his constraint was leads. He didn't have enough leads. And if you had enough leads, if you were completely overwhelmed with leads, then the next constraint would be labor. And that's what we were talking about in the time on the panels like, how do you hire people? What's the culture? What's your interview process, all these aspects? But he hadn't even got to that constraint. And even down the road, if you ever solved that problem and had five, 10, 15 team members and laborers, he would then have another constraint of late leadership. Like you need a general manager, you need an office manager, you need a sales manager. And so this is just the constraint and the cycle that business goes through. Uh, because even once you get great leadership, you now have a liquidity problem because those leaders are overhead. And so that's just the cycle of business. And I think a lot of times we are always wanting to have the next stage of like he had a constraint of leads and he's like, I can't, why in the world is labor a constraint for other people? Your business is smaller and you have not yet got enough leads to make labor a constraint. And so the reason I have the for L framework is because I I want I want people to identify what is my current constraint, why is this business not growing? And then focus all of your time and attention on that. And for that individual that was kind of frustrated, it was a function of like, look, let's focus on getting more leads. Because if you do, if you just have so many leads pouring out of your eyeballs, you would then have to hire more people. And then what we're talking about would be relevant to you. And so I think realizing that not all information is pertinent to you as a business owner is important. It's the size of business and the constraint they're facing, is really the thing that determines what you should be focused on. And for him, he should not be focused on labor and hiring employees. He should be focused on getting more leads, so many leads that he has to hire someone. And so that was kind of the essence of that confrontation.
SPEAKER_01:And you know, one thing that I'll hear a lot, especially like since you brought up he's kind of a solo, a lot of times they'll bring up, hey, I don't have enough business to keep someone full time. So I'm having trouble hiring someone. What's your answer to that?
SPEAKER_02:Again, go get so many leads that it becomes insane that you would not go find someone. Like, well, I can't find anyone. Well, then raise your prices because you have so many leads coming in to where your clothes ratio is a little lower, but now you have enough margin on those jobs to go hire someone for more money, like five, ten dollars more an hour. And so each of these constraints can be solved. But the reason that we I try to narrow down just the four areas is because otherwise you see a hundred different things you can change in the business. Oh, is it my website? Is it my marketing? Is it you know, how am I doing my follow-up function? Is my uniform showing I do I change the brand? Do I need to have different wraps on my truck? It's like, no, like we just need more leads. How do I get more leads? I need to get attention. Okay, is that I have plenty of money? Great, run ads. Okay, how do I do that? Go get an agency if you need to. Do I do I have a great website? Like, do I wrap my truck? Okay, I don't have money. Okay, great. Go knock on doors, go on Facebook groups, go on a next door, talk to people about your service. And so there's always a way to fix the constraints. Most of the time, it's a function of do we have the actual intentional fortitude and the desire enough to go do the things that are hard and knock on people's doors, you know, figure out how to make a website, figure out how to design a logo. These are the things that like most people conceptually know, but they rarely do.
SPEAKER_01:Yeah. It's amazing. I I probably interviewed in between my two podcasts, I don't know, 300 seven and eight-figure business owners. And the ones that always perform at the highest level. I mean, I'm just all these names are popping into my head as you say that. They're the ones that have, you know, some guy, his name was Jacob, literally learned how to code his own website and built a back end and never done a day of coding. I mean, there's all these endless stories of the people that really are willing. Dallin Husso does a pool service company. He's now a multi-million dollar company. He he went out and literally went with a net door to door, just knocking to get his first clients. I mean, he hadn't even no idea to turn into a business. So it's all these stories of people that are willing to kind of go above and beyond. I don't even know if it's above and beyond, but do the hard stuff, like you said, to just move the ball forward in the same vein of things that we're talking about, just hiring people and stuff. What about seasonality in your business? How do you deal with that? Because I'm sure depending on what area of the country you're in, there's probably winter seasonality that that shuts down business. How do you do that? One, from a cash flow standpoint, and two, from uh uh not laying people off, or or how do you mitigate that if possible?
SPEAKER_02:Yes, like this is ultimately why I think that home services are a terrible business, is because most of us have a huge seasonal problem. And so we talk about lawn care and landscaping, usually four to five months, revenue drops off a cliff, leaves drop off a cliff. And so I think that for most home service businesses and most service businesses in general, the seasonal problem is the issue because for four or five months of the year, if you lose money, you can be really profitable in the other seven or eight months, but now it nets out to very low margin. And so the whole book about the off season, it kind of goes through five different ways to solve it. Um it's all free. MikeGandy's dot com slash workshop. It's all free, all the training. But there's five different ways to fix it. One being, you know, shut down, and that is like lay everyone off, uh, give them a return to work bonus. The second one is do more and better. So still advertise during the offseason, knowing you have a higher customer acquisition cost, but then upsell those customers consistently and streamline that process so you can increase the lifetime value and make sense of spending more on customer acquisition costs. The third one is adjacent services. These are services that are alongside of your current service that you don't need to guide a bunch of new trucks and equipment. You don't need to hire new people. You can just train your existing team and do those services during the off-season when you're slow otherwise. The fourth is doing a recurring or a maintenance package of what you currently do during your busy season, but maintain or do some sort of recurring subscription during the off-season to keep revenue coming in. And then the fifth way is adding a completely new brand. Um, so we did this at Augusta even last year, it's like Augustalights.com. It's all Christmas lights. We create a whole new brand around it in order to solve the off-season problem for our owners. So those are the five different ways. Uh, it's just a function of getting creative, doing some math, and figuring out when is the demand for this adjacent service or this other brand or this other thing I need to add and bolt onto the business. Because having where your revenue drops by more than 50% in any month of the year. So if your best month is 100 grand, if you ever drop below 50 grand, we have you contract what I call seasonitis, made up term. Um, but it's like that disease is what kills so many home service businesses. And so solving that is the root of many of our problems when it comes to home service industry. If you take one quarter out of most home service businesses, they'd have a 25, 30% profit margin business. But that one quarter that's negative 20, 30%, drags them back down to single-digit profit margins. And so solving that should be the focus for the vast majority of us.
SPEAKER_01:Yeah, good stuff. Hey, here's what I want to wrap up. I'd love to know do you have a mantra that you live by or any type of saying or just mindset?
SPEAKER_02:Yeah, one I've had for a long time is just sacrifice or regret. You choose. And ultimately, just like either sacrifice a day or down the road, you will regret not making those sacrifices because you will not have the things that you attain and desire to have. And so it's a decision you make every day. Do I actually sacrifice and go knock on the doors when I don't feel like it? Or will I not knock on the doors, feel comfortable today, but down the road not have what I my goals are? And so the question is do you love mediocrity and comfort more than the goals that you aspire to have? And making that decision, uh, that's a decision you're making every day and every hour, uh, when you're voting every single hour with what you're doing with your time.
SPEAKER_01:Yeah, that applies to so many things too, like your diet, even like are you willing to sacrifice on what you eat today, or do you want to regret tomorrow for what you ate today? Type of thing. And it that's a big one. Sacrifice is hard for us in our culture because we're kind of a instant, want it now instant type thing, but that's really what gets gained. So that's a powerful one. Hey, so your main website is mikeandes.com. A so mike-n-d-es.com. I'll of course put that in the show notes. There's several other ones. There's P4P software. Those are the number four uh P for the number four software.com, uh copilotcrm.com. But as I understand it, if we go to your homepage, that's mikeandies.com, you can kind of get to all those uh pages. Obviously, your YouTube channel I should mention too, people should watch. I think it's really educational. So hey Mike, I can't thank you enough. You are a wealth of information. How many books total do you have? I know I have the turnaround P for P. I didn't even know you had an off-season book.
SPEAKER_02:Yeah, those three. So they're all free if you go to MikeGandy.com. There's all video training that basically takes the concepts of the book and you can just watch the videos. So uh otherwise, you if you'd like audio, like yes, you can go to Audible or Amazon. But otherwise, just get it on the on Mike Andy. It's all free.
SPEAKER_01:Awesome, man. Thanks so much. I really appreciate you being on the show and love, love hearing all your wisdom and what you shared. My pleasure. Thanks so much, Tyler. Thank you. That was Mike Andy, someone who's not only scaled 170 plus locations, but he's also lived through the grind of being the guy in the truck with no systems and no margin for error. What really stuck with me is how simple the levers can be when you're willing to look at the numbers honestly. Close rates tell you when to raise prices. Budgeted hours show whether your team is actually efficient. And profit doesn't come from doing more jobs necessarily. It comes from pricing with intent and knowing whether you're in a growth mode or a profit mode. As a fractional CFO, I see the same thing in businesses I work with almost daily. Most owners don't need more chaos. They need more clarity. They need to know where the cash is going, when to raise prices, and how to make decisions that keep them profitable year-round. If you'd like to see how this applies to your business, please feel free to book an intro call at cfointrocall.com or cfomadeasy.com. This is a no-pressure discussion, just a conversation about where you're at and where you want to go. And most of all, thank you so much for listening to Profit and Grit. Truly appreciate it. And I will see you next week.
