Why a Pool Service Should Create Demand Before Hiring

0:00Phil, what's up, man? Can you uh meet me in the background? >> [snorts] >> Yes, I can. >> All right. >> You are muted. >> All right, rock and roll. Tell me about the business. >> All right, we are a $1.2 million pool service and repair company in Raleigh, North Carolina. >> And rock and roll. What's what's profit? >> About 50k after 145 in back owner salaries.

0:25>> So per So 200 all in. >> Yeah, yep, 195. >> Okay, right around there. Cool, that's fine. Okay, 200k bottom line. All right, what's the what's the membership price? What's turn? >> Um we're about it it depends, but average is about 4,500 a year um per client um >> Okay. What's turn though? >> Our turn What's that?

0:49>> What's turn? Yeah. >> Oh, turn. Uh we lost about 12 people this year, so 12 divided by 176, whatever that is. 12 >> Okay, so you have 90 you know, you have Yeah, okay. So you have 93% retention annually. Okay, great. So turn's not an issue. Fantastic. All right. So what do you want to have happen? What's the problem? >> Uh problem for us is we can't hire and retain and train really talented people. Um we find that we can keep people for about a year and then they either want to go do something else or they want to go into a different trade that they view as like a higher a higher opportunity like HVAC, plumbing, electrical.

1:27>> Sure. >> Um >> Sure. >> stuff like that. So we're trying to figure out a way to make it so that people want to stick around and see this as a career that it can be. >> Yeah, I'm going to I'm going to we're I'm going to guess right What's your close rate right now when you meet with people? >> Our close rate when we meet with clients or with uh leads or uh >> Well, leads to you know, to sell them.

1:49>> Yeah, selling we're about 30%. >> 30% Interesting. Okay, so this is me calling the shot. This is my guess here, Phil. Is that I'm going to bet we have to fix the sales motion, number one. Once we fix the sales motion, we can increase prices, step two. Once we can increase the prices, which will dramatically increase profit, we can then pay the guys more, so they stick. >> Mhm.

2:16Yeah, so just >> That would be my Yeah. >> Yeah, currently paid 25% of labor revenue. Um so, yeah, definitely increasing prices definitely is a way to do that. Um and that's that's the thing. We're just our close ratio, I feel like isn't high enough to warrant price increase I know we need. Right? Like I don't I don't want it to go to 5% close ratio and in order to

2:41>> Well, you I mean, did for you to get to 5% you'd have to like 10x the prices. It would be it wouldn't be close. Um so, we have to fix the sales motion. So, that's my So, like this is why like you got to pull the thread, right? So, it's like it starts with like my guys aren't staying long enough, but the reality is that like we're not charging enough, but we can't charge more because our sales process is is screwed. So, let's fix the sales process. All right. So, walk me through the sales process. >> Sales process we have currently and they basically call our office. We we do a lot of inbound. We don't We just word of mouth advertising as we need to. Um so, we we're pretty pretty well uh we we show up pretty well on Google, uh but we're spending like five 600 bucks a month on actual Google outbound.

3:22Um >> What do you mean Google ads, right? >> Uh I mean Google ads, like Google Local Services. >> Got it. And so, you're you're and it's 500 bucks a month is what you're you're you're putting into PPC, okay? >> Yep. Um >> All right. How many leads are coming from that? Any idea? >> Leads a week Leads a week are about two to three. >> Okay, from that from that 500 that you spend, right? >> Yep.

3:45>> Okay. So, I'm going to say you're getting 12 12 a month. Let's just say 10 for simple math. So, it costs you 50 bucks a lead right now. Right now, roughly. >> Mhm. >> All right. And you convert what percentage of leads? >> Uh convert about 30%. >> Okay, you're converting 30% of leads. You can get that to 50 on inbound. Um just FYI, but you're at 30%. That's fine for for the purposes of our conversation. Okay. Um So, it costs you $150, right?

4:21>> Yes. >> To get a customer who's going to pay you $4,500 a year. >> Yep. >> Not bad. >> Not >> Not a bad gig. So, let me ask you this. What percentage of your costs are variable versus fixed? >> Uh it's I don't have an exact figure. Um >> Let me ask you this. What are gross margins? >> Gross margins are about 50%.

4:46>> Okay. So, that >> They're about 25 labor and >> And that includes labor. That includes labor, right? >> Right. >> Okay. So, you're going to make So, it costs you $150 one time to make $2,250 per year in gross profit. >> Yep. >> Banger. Banger. Amazing. Okay. >> Is it >> A killer, dude. >> Do advertising, yes. >> Hell yeah.

5:13>> [laughter] >> Bro, I I've got this amazing investment opportunity. If you give me $150, I'll give you 2250 back. Just at the end of the year. All right, I'll give you I'll give you 2250 back. How much money you giving me? >> [snorts] >> I'm as many as many pennies as I can throw at you. Yeah. >> Okay. Well, how much cash you have on hand? >> Uh not a lot. Not a lot on >> Okay. >> Um we basically our That's the thing. Our Our we have two owners in the business, so we're taking out

5:41>> All right. Pause. Pause. Heard. Pause. Heard. So, what you need is a money model. So, what How much of money you're making in the first 30 days on a $150 customer? >> Uh generally, so we we just transitioned to doing a different different type of initial visit model. >> Okay. >> Currently, we're getting about 1,500 per client in the first 30 days, uh but it really depends. That's That's our average.

6:08>> Bro, so you don't even need the money. Cuz you're getting 10 to 1 up front. >> I Dude, I know. But then, so our on that 1,500, uh there's a good amount of that which is cost of goods sold cuz we're >> Sure. >> finding issues, we're repairing things. >> you make 500 on on on 1,500. Let's say you run 30% on the first one, right? Does that sound Is that sound reasonable? >> Yeah. >> Dude, you're still making 500. >> Mhm.

6:34>> On your 150. >> Yeah. >> So, why not spend more? >> The I don't know. I'm just scared, I guess. I'm scared to put >> scared, dude. >> my money where my mouth is. That's it. >> Yeah. I mean, d- I'll say this, I don't know if you were on for the beginning of this, but like this is a super classic issue. This actually happened a ton in gyms. So, gyms have fixed costs like rent and equipment leases and things like that, right? And so, the guys would have a vehicle like this that they're getting 10 to 1 on, something really strong. But what they would do is they would only spend enough money to cover all their fixed costs, but never get into the black.

7:14They literally would just like spend enough to like they they play business on defense rather than offense. >> Yeah. Yep. >> Right? Like you're you're playing right now to not be poor rather than to be rich. >> Yep. That sounds familiar. >> It >> Yeah. >> Yeah, and you're and you're willing to make the money for your team, you're willing to make the money for the landlord, you're willing to make the money for the bank, but you're not willing to make the money for you. >> Yeah. >> Real, right? >> Yep. >> Okay, [snorts] so I >> Yeah. >> As much as I would l- like I'd love to like, you know, dive into a hundred other things like this is I'll bet you right now this is the core issue is like I want you to go from $500 a month to $5,000 a month to spend. Because if you went from two to three leads a week to two three leads a day, would that materially change the business from a cash flow perspective?

7:57>> Yeah, definitely. And but that that's the thing. It's our we could we could do that, but then we run into fulfillment issues. If we it takes us six weeks to train a guy. So it's like chicken and the egg. Do we >> Six weeks is not that long big picture FYI, right? And I'll bet you could do it in three if you really had to. Right? >> Yeah. >> Okay. >> And that's >> So >> Yeah, that's that's the thing. >> When you're in equilibrium, this is a rule of thumb for me and for everybody who's listening, if you're in equilibrium where you're like I can maybe take a little bit more demand, but then I'm going to be supply constrained, get the demand, get the cash, then you'll get the resources to take the next move. And if you have to pay some guys one and a half or one and a quarter, you know, overtime to to to fill the slot, one, you're going to pay them more anyways and that's good. Fine.

8:39And I'll bet you those guys would work more for more money. >> Yeah. >> So you have flex. You have you have more capacity. You have capacity that's not stretched. So if you could stretch it, most people like you'd be amazed at what people can do if you're like incentivize them. >> Yeah. Yes, it's yeah, definitely. We could I mean, our team our team's pretty pretty strapped right now. >> Yeah. And are you are you closing? So walk me through the sales process real quick. Lead comes in, you immediately call them within 60 seconds or what?

9:08>> No, um it's basically we have um online pricing. All of our prices are online. So they hit our site, they basically sign up, and then once they sign up on the website, >> Yeah. >> we're contacting them automatically within five minutes. Um and they're basically >> Via text or call? >> Uh we basically email um from the sign up.

9:32Um we don't do any any calls right now. Not not nothing nothing automated. Nothing >> So, you could probably double You could double your conversion if you just called the leads immediately. >> Yeah. Yeah. >> So, let's say Let's say Let me Let me ask you a question. If I paid you another $1.2 million to do one thing, which is to just call your leads in 60 seconds.

9:57I'll give you one $100,000 a month. Would you do it? >> I I suppose I would, yeah. >> Well, that's what's sitting on the table right now because you're not contacting your leads fast enough. >> Yes. >> You have a double. You can get to 60%. When it's PPC inbound, they already know the price. You could You could close 60%. And that's without changing anything about the pricing, the offer, or anything. Just from contacting them fast. >> And four. I Yep. >> Okay, so we have two changes that are going to be the biggest material changes. Number one is you're going to spend way more on ads. Number two is you're going to actually going to call your leads really fast. When you do those two things, you have enough gross profit in the first 30 days to cash flow this acquisition anyways. You're then going to be willing to pay some of the guys you have time and change to do more jobs.

10:38And some of those guys are hungry, want to make more money. That's why they're leaving, right? Give them the opportunity to make more money. >> Yeah. >> And then part of that is you can also pay them a little bit more money to to train the guys faster because they're working longer hours, they'll train them faster. >> Yeah. Incentivize the trainer to to get them get them on the road faster. >> Yeah. >> So, we can open up capacity. >> I mean, I would say, "Hey, if you You can do it in 6 weeks. If you can do it in two, I'll give you a $500 bonus." >> Yeah. I think >> Right?

11:04>> Great idea. Yep. >> There you go. Rock and roll? >> Great. Yeah, thank you. >> And I put the incentive is that if you have to go back and fix one of the spots that the new trainee went to, that that guy's got to do it for free if he takes the commission. >> Yeah, yep. Yeah, we we do we do callbacks on when they're on They have >> would do it on the trainee. If I'm going to If you were to take it from six to two and you're going to sign off that this guy's good enough, I'll give you the bonus, but you got to basically certify that guy's work for the the month.

11:31>> Right. Okay, so the trainee makes a mistake if they're >> Yeah. rushing through it. The trainer goes and fixes it. >> Yeah, big papa's got to come in. Mhm. >> I see what you're saying. Yeah, yeah. I agree with >> Rock and roll? >> Rock and roll, man. Thank you so much. >> I really appreciate it, dude. Yeah, you bet. If you like this video and you're a business owner who wants to break through your current revenue ceiling, I just sold every lesson from scaling 10 businesses past 10 million and three businesses past 100 million into a completely free scaling roadmap that I've used to go from zero to one, zero to 10, and zero to 100 plus. And so you can click here and you can check it out.

12:01Again, absolutely free. And since you're a business owner, I appreciate you and uh enjoy.