Episode Summary: Next Level Pros #133 – "Increasing 30% Year Over Year with No Marketing? Will It Still Work?"

Release Date: December 26, 2024
Hosts: Chris Lee, Carter, Josh
Guests: Carter and Josh from Urban Oasis

Introduction

In Episode #133 of Next Level Pros, host Chris Lee sits down with Carter and Josh from Urban Oasis, a thriving landscaping and outdoor construction business based in Texas. The episode delves deep into Urban Oasis's remarkable journey from a humble mowing company to a booming enterprise projected to close the year with $6.3 million in revenue. The discussion explores their growth strategies, marketing approaches, financial management, and the challenges of scaling without traditional marketing.

Business Journey and Growth

Carter and Josh share the inspiring origins of Urban Oasis, highlighting their transition from a mowing business started in high school to a comprehensive design and build outdoor construction firm. They recount how the COVID-19 pandemic provided them with the opportunity to pivot and scale their business rapidly.

Carter [04:08]: "We load up my parents' car with materials from Home Depot, install a pathway based on YouTube education, and our first client was thrilled. That initial success led to a chain reaction of referrals and word-of-mouth promotion."

Starting with minimal resources and leveraging existing relationships, they managed to generate significant growth organically. By the summer of 2020, they achieved nearly $400k in the first six months, and this momentum continued, culminating in a forecasted revenue of $6.3 million for the year.

Marketing Strategies

A central theme of the episode is the effectiveness of affiliate marketing and referrals over traditional paid advertising. Urban Oasis has predominantly relied on word-of-mouth and partnerships with designers, pool builders, and homebuilders to fuel their growth.

Josh [00:15]: "Marketing is scary."

Despite their success, Carter and Josh acknowledge the untapped potential in Quadrant Two (Paid Advertising). They recognize that increasing their investment in paid marketing could amplify their growth exponentially.

Carter [07:28]: "A lot of our growth has come from partnerships and referrals. We're looking to explore paid marketing more seriously in the coming year."

Currently, their marketing spend is minimal, with less than $1,000 per month allocated to advertising. Chris emphasizes the importance of scaling their marketing budget to align with their revenue goals.

Chris [44:18]: "You're spending about 1% on advertising, but you should be allocating 5-10% of your revenue. For a $6 million business, that's $300k to $600k annually."

Financial Insights

The hosts dive into the financial health of Urban Oasis, examining their gross margins, net margins, and break-even points.

• Gross Margin: Approximately 58%
• Net Margin: 22%
• Break-Even Revenue: $279k per month

Carter [01:54]: "We're at 22% net margin and 58% gross margin."

They discuss how increasing their revenue through paid marketing could significantly enhance their profitability. Josh points out that even optimizing their current team and processes can lead to higher margins without proportional increases in overhead.

Josh [51:25]: "If we maximize our current team, our margin would instantly go up."

Scaling Challenges and Strategies

As Urban Oasis contemplates expanding to 10 cities across 3 states, Carter and Josh discuss the complexities of scaling their operations without diluting their brand or compromising on quality.

Carter [15:39]: "Scaling to 10 cities requires robust management and standardized processes to maintain our reputation."

They weigh the benefits of deepening their presence in existing markets versus spreading thin across multiple locations. Darrell, a guest contributor, advises focusing on deep penetration in current markets to build a strong foundation before branching out.

Darrell [27:33]: "Going deeper into your current markets can lead to better margins and more efficient systems."

The conversation also touches on the logistical challenges of managing multiple crews, maintaining quality, and ensuring consistent customer experiences across all locations.

Pricing and Profit Margins

Urban Oasis has experimented with adjusting their pricing strategies without negatively impacting their conversion rates.

Carter [52:53]: "We increased our prices by 10%, and our conversion rates remained largely unaffected."

Chris highlights the strategic advantage of incremental price increases and their direct impact on profitability.

Chris [53:04]: "Charging an extra dollar can increase your net profit by 12%."

This approach allows Urban Oasis to enhance their margins while delivering high-value services that justify the higher prices.

Team Culture and Internal Processes

A significant portion of the discussion focuses on the importance of team culture and internal communication. Josh emphasizes the role of mentorship and the benefits of being part of the Next Level Pros community.

Josh [60:33]: "Having mentors is extremely important. It helps us break out of our echo chamber and get fresh perspectives."

Carter shares how integrating core values and mission statements into their daily operations has strengthened their team dynamics and overall company culture.

Carter [60:46]: "Our team now not only understands our mission and values but also embodies them in their interactions and work ethic."

This cultural alignment fosters a cohesive work environment, enhancing productivity and employee satisfaction.

Lessons and Conclusions

The episode wraps up with Carter and Josh reflecting on the insights gained from their journey and their participation in the Next Level Pros community. They recognize the untapped potential of paid marketing and the necessity of strategic scaling to achieve their ambitious $30 million revenue goal over the next five years.

Josh [58:35]: "Understanding our goals based on data and logic rather than just numbers is crucial for sustainable growth."

Chris reinforces the importance of a balanced growth strategy that leverages both organic and paid marketing while maintaining high-profit margins and strong team culture.

Chris [44:53]: "Paid advertising should be your number one generator for business. It drives direct traffic and allows precise targeting of your ideal clients."

Notable Quotes

• Chris Lee [00:00]: "Paid advertising should be your number one generator for business."
• Carter [04:08]: "We installed a pathway based on YouTube education, and that initial success led to a chain reaction of referrals."
• Josh [00:15]: "Marketing is scary."
• Chris Lee [44:18]: "You're spending about 1% on advertising, but you should be allocating 5-10% of your revenue."
• Carter [52:53]: "We increased our prices by 10%, and our conversion rates remained largely unaffected."
• Josh [60:33]: "Having mentors is extremely important. It helps us break out of our echo chamber and get fresh perspectives."

Key Takeaways

1. Strategic Marketing Investment: Transitioning from primarily referral-based growth to incorporating a substantial paid advertising budget can exponentially increase revenue and market penetration.
2. Balanced Scaling: Focusing on deepening market presence in existing locations ensures better margins and more efficient operations before expanding to new areas.
3. Financial Management: Understanding and optimizing gross and net margins, alongside strategic pricing adjustments, are crucial for sustainable profitability.
4. Team Culture: Building a strong internal culture with clear missions and values fosters cohesion and enhances overall business performance.
5. Mentorship and Community: Engaging with entrepreneurial communities and mentors provides invaluable insights and guidance for navigating growth challenges.

For entrepreneurs seeking to scale their businesses effectively, this episode of Next Level Pros offers a wealth of practical insights and strategies, underscored by the real-world success story of Urban Oasis.