Zwei Firmen, eine Marge: Beton-Unternehmer optimiert Gewinn

0:00Unternehmer/Gast Oh, hi. Alex, please. >> What's up, man? Hormozi hotline. We've got 5 minutes. Top line, bottom line. What's What's holding you back? >> The top line is $5 million. Bottom line >> is half million dollars. Um that is split between two businesses though, which is also my main thing holding me back. >> row. >> I have a Yeah, I know. I know.

0:25So, I have a marketing agency for concrete contractors. >> one set of problems when you could have two? >> [laughter] >> I know. I know. So, essentially I started Caesar's Concrete not with me. It was my father-in-law. Obviously, that's why Caesar's Concrete cuz his name Caesar. So, I'm 50% of that business and we've scaled it up to $4 million over the past 8 years. >> All right. >> And over the past 2 years, I was kind of running like a bit of a side hustle. A marketing agency for concrete contractors. We've recently scaled it up to a little over $80,000 a month. And that income has now surpassed my concrete business income. And the main challenge that I have is I really want to get into the marketing agency full-time and not have two businesses.

1:05>> Yeah. >> But the problem is >> Yeah. >> the concrete company is not profitable enough to hire a like top-level business operator. And I have to keep my >> I got you. I got I got you. So, let me Okay, let me love you. So, uh we got 10% margins. Literally, all we have to do is fix the cash flow and our margin of the business. And then once we do that, we can then get you out of it and then ideally sell it if that's what you I mean, if that's dream. Is it dream? Yeah. >> Which would you Would you rather sell it or just keep it in cash flow

1:33>> Keep it in cash flow mainly for my family cuz my father-in-law wants to take over my position. Yeah. >> Okay, great. Okay. So, then walk me through cuz I'm going to guess that you have a pricing issue. That's going to be my guess here cuz that typically happens in in that style business, especially when it's handed down multiple generations uh because, you know, interestingly enough, um the dollar has changed a lot, you know, in the last, you know, 10 years. And it's How old's is the business?

1:58Alex >> Uh the business is 14 years old, and I came in 8 years ago. >> Yeah. So, I would I would guess how many times has price raised and by what percentage from year one to year 14? >> Oh, man. Like since then, we've like tripled prices. >> Oh, good. Okay, good. >> Our gross profit's actually like 50%, which is way above industry average, but >> All right. >> I feel like we're bleeding money out of the back end and it's because I haven't been >> Let me pause you real quick. I want you to erase one term from your vocabulary forever, which is industry average.

2:26>> Okay. >> No, everyone's broke, dude. Why would you Like you know, American average is is is in debt, fat, and divorced twice. Like who gives a what the industry average is? Like there are people who are printing in every industry. So, I just like the reason I I hate it is because it basically lowers our acceptable bar of what we believe to be good enough. >> Right. Okay. >> And it frames all of our decisions around well, it's better than this. Well, of course we're like beating everyone is the standard. Obviously, we beat everyone. But it's it's it's us against us. So, I I just like I care zero about what the average is. Anyways, sorry. Just a belief breaker for you.

3:00Anyways. So, um you're running 50% gross margins, and and then you have, you know, 40% is is what's and the gross margins are >> like that's pretty inefficient, and I feel like the main reason it's inefficient is because I'm not focusing on it full time because I have my marketing agency. >> Of course. Of course. >> So, I feel like I'm caught between like a rock and a hard place here. >> A concrete >> to give up on the family business. >> Yeah, it's rock and con- and concrete. >> Yeah, there we go. >> No, I hear you. I hear you, dude. I mean, you're in a tough spot because the concrete business is what is in what we we refer to affectionately as a swamp.

3:31So, the reason that it's in the swamp you you I mean, you are experiencing the math example, but I'm explaining I'm going to give you a little bit more time because your thing's going to be really relevant to a lot of people. So, when you have a business that's between one and three million, you're at you know, four, whatever, but like right in that ballpark, okay? If you have a 10% or 20% margin business, then you've got you know, 400, 800,000 dollars a year in profit. And so, in order to get to the next level, one of two things There's more work that must be done. And so, option one is that you work that next job. You do two full-time jobs, your current job and the next job. Or, you take a massive bet and you bring someone in, but that next person you take a massive bet on because they absorb half or more of the profit of the business.

4:12And that's why it's the rock and the hard place when you're at that spot. That's why it's called the swamp. It's very difficult like it's difficult because you just have to like take a massive risk or you just have to basically just risk your personal life um and sacrifice it in order to get ahead. But right now you have this other mistress that you're seeing on the side and you just can't work double time to get over the hump. >> want her to be my wife. >> No, and I hear you. I hear you. I hear you. But this other girl is your baby mama, right? She's got your kid, she's in your life forever. So, uh that was a perfect analogy.

4:39Side note. >> Thank you for setting [laughter] him up today. >> Yeah, yeah, that was a great great setup. Okay. So, what do we do with baby mama? So, we still need a way to we need to improve cash flow. And part of it's going to come from pricing and the other part of it probably comes from operational efficiencies. Probably going to be a combination of these things. So, talk me through your pricing process right now for how you bid your bid your deals. And also, just tell me who are you doing concrete for? >> Mainly homeowners. >> Okay, great. Oh, dude, residential you're going to have way more power. Way more power. That's great.

5:09>> So, mainly homeowners and as far as how we price our projects, it's all like on a custom project basis on like man hours times the man hour hourly rate plus materials times markup. >> Yeah. So. >> It's really complex, which is maybe why we've had like a hard time like getting other people to sell it as well. >> Yes. So, we we need to switch from cost plus pricing to value-based pricing. >> So, the customer doesn't see that. We present the total price. That's just how we come up with the price. >> Well, of course right. Yeah, that's even more important.

5:36>> Yeah, yeah, like they don't even see it. And so, like the goal like the like you just like you want the price to be as high as humanly possible without getting the salesperson to crack smile, okay? That's That's our goal here. Uh >> [laughter] >> We're laughing already. >> Yeah. No, but like I I say I say that's, you know, somewhat in jest, but the the main the main point here is that the sweet spot on pricing is not where we close the most deals, but where we make the make the most money, which is after the peak of close rates. Which means that we should expect to lose more deals and make more money. Because if you were to raise your prices again like you understand the math here. If you were to raise your prices by 10% consistently, you double the profit of the business.

6:18>> Great. >> Right. So, you have a massive opportunity here. And so like and you're making up like the customer doesn't even know what the hours are. Right. So, who cares? >> Yeah. >> Right? >> Yeah. Yeah, it I mean, is it really a pricing thing? So, you really think it's a pricing thing and not the operational efficiency? >> Oh, I'm sure I'm >> So, you think I should focus on fixing that before >> It will be easier. It will be easier. Well, I mean, yes.

6:43Because right now baby mama needs her alimony and she needs her child support, right? And so you've got to you've got to take care of her because you've made the decision that you're going to stay in this kid's life forever, right? You want to be a good dad, that's fine. I respect that. Because you're trying to be a good son realistically in this situation, right? And so >> Mhm. >> [clears throat] >> operational efficiency for sure a great way to improve a business in general. Great great idea. Which one's easier? For sure sales process and pricing. Cuz you can do that immediately.

7:11>> Yeah. >> You get like literally it it takes a week of training for the sales guys maybe. And then you just say a different number at the end of the conversation. >> But >> Okay. >> Yeah, but since we come up with our price like so custom, we don't present it in person to the customer and I feel like that's like a huge problem and why our close rates could be so low. Would you agree? >> Wait, what are your close rates? >> 10%. >> Oh, dude. We have we have a sales motion issue. We have a sales motion issue. Yeah, so the reason that you're you're you're hesitant to do prices because the sales process sucks. That's the issue.

7:39>> if already like our close rates are already so bad, so it's kind of hard to imagine it getting >> Thank you for calling. >> Yeah, so so we have to fit So in order of operations here, fix sales motion, number one. Number two, change pricing pricing the way we are doing our pricing. Number three, once we do those two things, like the nice thing that you have right now is you have a gigantic opportunity, which is exciting, because if you're closing 10%, you could probably get a triple there. You could probably get to 30%.

8:07Maybe even 40, right? If you're doing a good job. And and you could add 10% to your price consistently, easily. And by doing that, you would have an 8x sitting in your business in terms of profit. Eight. Eight. >> Yeah, that makes your sound more attractive too. >> Yes, it is more exciting. Also also I will say this, let me ask you let me ask you a hypothetical question.

8:33If if you were to fix this business, right? And you were able to go you take your sales motion and it took the close rates from 10% to 30 5%, okay? That's right that that's what it should be at right now, okay? I want to be clear. So if you're at 35%, your revenue right now would go from four to like 14. Okay? That's thing one. Now, if we also were able to implement a I'll just say 10%, which is still it's absurd I think you go more than that.

8:59But you have a 10% price raise, okay? Now we're going from we have a 3 and 1/2 x on 500k, so it's really a 3 and 1/2 x on a million. So we're doing 3 and 1/2 million in EBITDA now. Does this business become more interesting? >> Well, I mean yeah, the obvious answer is yes, but I'm still not in love >> No, no. >> And mainly I mean, to be fair, we can't just sell that much overnight. We do have a bunch of capital expenditures, etc. But

9:26>> Okay, well we'll deal with that constraint as it comes. >> Yeah. >> We'll deal with that constraint as it comes. Cuz there's also in your industry there's tons of financing partners that will help with that stuff. >> Yeah. >> But but if you were to do that and if you were to get crazy, cuz that's what we're going to do, cuz why not, right? And you were to do a 20% price raise, not a 10% price raise. That would give you a triple in profitability, okay? So, then all of a sudden that 1.5 * 3.5 becomes whatever, more than 5 million. I think it's like 6 or something like that, okay? So, it's like 5.7 or something like that million. If you got to 5.7, this company can sell for $30 million.

10:00>> Or or you have enough dry powder to hire an operator. >> Yeah, of course. You can do that. Okay. So, let's So, let's just like cuz I don't have time to fix all these issues. We're just going to We're just trying to focus on one of them. So, right now, walk me through the sales process. I know this is good for the people who are listening, which is why I'm taking a little longer on this. >> Okay. Okay, yeah. So, essentially we get a lead, they book an appointment with our sales rep, and it's over the phone. We do like an initial discovery call, where we also give rough pricing. Based on how that goes, like if the customer's like, "Hey, cool. I like you guys. I like what you're about, and the price sounds good." Then we go out, we like see the job in person, we do actual measurements, and they go all the way back to the office, you know, put everything like put all the numbers together, and then email off the quote.

10:40>> Bro. >> CRAZY. >> BRO. BRO. WHAT are we doing? All right. All right. All right. >> This is not a pricing consultation. This is a sales process. >> Okay. So, here here's what we're going to do. All right. So, we're we're just never going to email quotes ever again. Let's just like Let's just write like So, I solemnly swear that I will never email a quote to a customer again. >> Okay. I have my hand on my chest. >> Okay, thank you. So, here's what's going to happen. So, what you're going to do is on that set call, which is what it is, you're going to qualify the customer, and you're going to give a range that's super sky high. All right.

11:09So, you're going to be like, "It could be between 5,000 and 50,000." And honestly, it's going to depend a lot on, you know, on what you got going on. When I get out there, I'll have a much better idea, because honestly, if I were to give you a quote right now, it'd be like me telling you what's wrong with your car and you haven't brought it in the shop yet. That makes sense? Of course it does. And you know what? If somebody gives you a hardcore quote right now over the phone, I'd run the other way. Because Right? And that's So, then you position against it, gives you more authority, and then they're like, "Oh, I love these guys. They're great." Okay. That's the set, right?

11:35>> The second part of the second part of that is actually the most important, because they're talking to multiple people, and you just you thwart that completely. >> Yeah. You hammer them. So, then then you say, "And to be clear, um the way that the way that we do this is that when we come in person, because we we uh we we pride ourselves in our speed, we're going to come out with the intention of collecting the dep- like basically giving the quote and collec- and and collecting the deposit so we can get this going."

12:03>> Right. Okay. >> So, we set the intention that we close at the visit. And dude, your in-person Like if you do nothing else, your in-person close rate is going to be three times higher than your your email close rate. Not even like not even a question. >> Yeah, I mean, if we did that, that would solve all of that business's problems, which then it would allow me to hire an operator. >> That's right. >> If we fix our close rate. >> Good job, man. Pew pew. Okay, great. So, let's do that, and then when you do these when you do these quotes, just say, "Hey, whatever that normal math that you're currently doing is, just triple just add 20% to it. Just do that." Just do your exact normal math that you're doing right now, and then just add 20%.

12:34>> Okay. Sounds good. >> And then if you if you want to get if you want to get nasty with it, you can tell the the sales guy he'll get extra 2% of an extra 2%. >> Okay. Will do. >> All right. Love this for us. Thanks, dude. Congratulations on the business, and thank you for donating books on behalf of all the entrepreneurs that you did donate for. >> All right. Thanks, guys. >> Appreciate you. >> Good job, man. >> Was that fun? Was that cool for you guys? >> So good. >> Yes? >> So good.

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