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To The Point - Home Services VIP Room Podcast
RYNOx 2025: Expansion Wars with Tommy Mello & Tom Howard
00:33:05
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- [00:00]
A
How many people in here started their own company from scratch, like, didn't buy something else? So a lot of you guys have done that. That first two years is hard, right? Let's say you get to, you know, $1 million in revenue that first year. Okay, great. If you grow 100%, the next year, you're at 2 million. If I go buy a company, I'm able to get it for cheap, and it's 5 million of revenue. I grow at 100%, I'm adding another 5 million of revenue. Speed, to me, is the thing that I. We all only have 24 hours in the day. It's all equal. And so that time, really, I want to maximize that time and return on investment doing it.
- [00:35]
B
I'll just say if you, if you master the art of greenfielding, if you were a private equity, what would you rather buy? Somebody that was great at buying perfect opportunities. Well, you got to go generate those opportunities. I can't go right now to Tampa unless I find a company like a Greenfield. I could go to every single market if I could grow the formula of how to generate clients, and I don't have to wait like I did in the beginning. I can spend a fortune. I can spend enough. I can spend more on marketing my first year than revenue. This is to the Point a Rhino experience voted one of the top home services, marketing and operations podcasts. Cutting through the bullshit and getting to the point. All right, so me and Tom were thinking about a lot of things to talk about, and he's a big fan of acquisitions. That's really what he specializes in. I. I think Greenfield is more valuable. I believe that one of the reasons we don't buy a lot of companies is our buy box is super, super tight. If they do new construction, we're not buying them. If they do Costco, we're not buying them. If they do front doors, we're not buying them. If they do commercial, we're not buying them because we're not going to mold our business model to take that on. So we've bought new construction companies that did 40%. We just dropped that revenue right off the beginning. We just cut it out. So we've got to build a budget that supports the fact of you're dropping 40% of the revenue, but it's never 40% of the EBITDA, so you might. It might be 10% of the EBITDA, but 40% of the revenue. But Tom's got a lot of compelling cases of why he loves buying companies. He's got a pretty Damn good track record. It's funny because I was telling Ishmael, he. Tom, tends to take his top few guys with him to every company. I'm joking.
- [02:23]
A
We'll go into that in a minute. Yeah. So the difference between, I know, Looking at Greenfield versus buying something, if I'm looking to go into a new market, I mean, usually when you're starting a company, how many people in here started their own company from scratch, like, didn't buy something else? So a lot of you guys have done that. That first two years is hard, right? It's like, what? Yeah, for some people, it's fun. Freaking masochistic psychopath. So, I mean, it's usually slow growing. Let's say you get to, you know, a million dollars in revenue that first year. Okay, great. If you grow 100%, the next year, you're at 2 million. If I go buy a company, I'm able to get it for cheap, and it's 5 million in revenue. When I grow to 100%, I'm adding another 5 million of revenue. It just. To me, I'm like, if I can just skip all that setting up the company and getting the basic stuff going and getting dispatchers and CSRs and managers and everything else. And I know that I'm gonna have to switch out a lot of those when we go and buy something, but at least I have something to start with. It just takes a lot of that headache out and allows me to go faster and speed, to me, is the thing that I. We all only have 24 hours in the day. It's all equal. And so that time, really, I want to maximize that time and return on investment for doing it. I think that going Greenfield to me is just. It's a pain, but I think you should do what you're good at. And if you're good at greenfielding like Tommy is, go for it and. And greenfield it.
- [03:58]
B
I'll just say if you. If you master the art of greenfielding, if you were a private equity, what would you rather buy? Somebody that was great at buying perfect opportunities. Well, you got to go generate those opportunities. I can't go right now to Tampa unless I find a company like a Greenfield. I could go to every single market if I could grow the formula of how to generate clients, and I don't have to wait like I did in the beginning. I could spend a fortune. I could spend enough. I could spend more on marketing my first year than revenue, and I couldn't do that before. I want to read you guys one of my. My CTO sent me this. Two key stats you need to know about SEO in 2025. The reason I talk about SEO is our website ranks better than anybody's in here. It's 64 domain authority so I can pop up in a new city. I already ranked number one which is awesome for greenfielding. Then I, I don't just get a GMB that makes sense for our location. I picked the right location that I could rank well in that neighborhood. I don't want to be in an industrial area. I made that mistake in Phoenix. But so here's the deal. The top three results on Google get 50 to 70% of all clicks. Number two, organic clicks drop 70% when AI overview is present on the SERP among the top 10. That's not good enough anymore. Your goal should be top three, ideally number one. Why? Because number one gets you on average 40% of all the clicks. What happens if you after you hit number one? Best case, you get the a lot of traffic. Worst case, the AI overview appears and you only get 300. But here's how to really dominate in the AI. Snippet. Structure Content for clarity. Implement structured data. Align with search intent. Get more mentions of backlinks. Follow eat principles. Keep your content fresh and updated. I feel like the reason we win is I could go in at a fraction of the cost on what you guys would pay for a VAL pack because I'm in millions of homes that I send out. So like my whole plan is it's definitely, I've done very well by buying companies and if I had a bunch of targets out there. But what's happening now? We went through a process and Tom was on our board. He convinced me to do the process and all of a sudden the multiples are going way up. So let me ask you guys something. If I find a million dollar company, let's say they're getting 8 million for the company. We got to pay 8 million. Do you think I could spend $8 million in marketing and do more in that market? It's going to take two years, but I'm going to be homegrown technicians. It's going to be my, it's going to be perfect reviews on Yelp, Google Nextdoor and social media. I just, I understand what Tom's doing and he's been super successful in it and that's how every PE company grows. But if they knew how to greenfield properly and they had a formula like Window Nation had, I think they would be coming and saying green, green building is worth a lot more money.
- [06:44]
A
Yeah, I think there's a piece of that. I'm not paying 8 million bucks for companies. And so it changes the reality of it.
- [06:52]
B
I'm getting for free.
- [06:53]
A
Most time I'm getting them for free or low, very low amounts of money. And I did a few deals that were. I've probably done a dozen deals for less than 200 grand a piece. A lot of times they're losing money or whatever. One company I had was losing $9,000 a day, and they were so happy to just get it off their hands and make it my loss instead of theirs. That just like, here you go, see you later. The issue with that is, though, that would not work for Tommy is with all of those deals, I call it, it's farming, not hunting. Right. Like, I'm going out there, I'm not targeting and hunting like a lot of these PE groups have to do, because they've got, let's say, you know, 50 locations, 100 locations, whatever, and they're just having to feed that beast. Well, they need to. If they're going to go on an acquisition run, they need to buy 20, 30 locations a year. Well, if I'm slower and I can just say, hey, I've only got like five locations or eight locations, and I can build relationships with people and all that kind of stuff and help them out. 99% of time, it's not going to lead to anything, but, okay, that's fine. 99% of the time just being a good guy and helping out and helping someone with their business. And then that 1% of the time, guess what, something goes wrong and they call me and they're like, hey, can you help out? I'm like, yeah, I can. And you want me to get you out of this? Yeah. Okay, here. Here's a couple hundred grand. I'll take it and just make your problems go away. And so done that a lot, and that's yield me great results. But if I need to go out and buy 30 companies tomorrow, I couldn't do it. I couldn't do it. Can Tommy go into 30 markets tomorrow? Yeah, he could if he wanted to. He really could. They've got the money, they can do it, they've got the plan. It's scalable. What I'm doing on the big scale is not that scalable. Most companies I buy are for very little. I was able to buy a company that was 30 million in revenue with $5 million in EBITDA and essentially almost get it for free in August, but their payout is going to be Very high. My payouts can be very high. Both sides are very happy.
- [08:56]
B
I gave them that deal.
- [08:59]
A
Actually, technically, that kind of. Yeah, it was at one of your events. That's how we met him, so. And that's where we're at. I think what's important, though Tommy and I talked about it the other night is like, when is it time to go to a new market? When is it time to go get another location? A lot of people want to pound their chest and say, hey, I've got three locations. I've got five locations. Because they make that sound cool. The reality is it's like the. The value of being able to talk to people in this room and say I have multiple locations is just total bullshit. Like, I'm sorry, pardon my French. But like, guys, there's no monetary value in that. There's no value in, like, lying to your buddies about how good your business is, how many locations you have, all that stuff. Everyone in here does it. Like, we've all exaggerated from time to time about, like, how good our company is. It's all bs. Like, these people in here don't matter. Your families matter. How much time you're able to spend at home with your families matters how much you can afford to, like, pay for things with them, like vacations and everything else with your family matters. Like, this doesn't matter. So think about the bottom line before you start thinking about going to another location. Just to say you have another location or feel like you're growing your company. And so what Tommy and I talked about is like, market share. And, um, I miscommunicate on my team. I wouldn't say get to 30% market share before you go out there. Um, there's some people that get that big and that's kind of like the max you get in the market. But I would calculate your market share. And Tommy asked me to put this up there and he. I did it at one of his events. Yeah, Garage Door Freedom. We put it on the screen of, like, how to calculate your market share. I have a million people in my town, right in my service area, in the Fresno Central California area. It's a million people between Fresno around Fresno county and when we truly calculated market share. And by the way, this is on I. Because people kept asking me for it after Tommy's event. I put it on HowardDeals.com it's a website where I just put up stuff on how I did things. And there's a video on there. If you go on the acquisition guide, put your email in it just gives it to you for free. There's no, there's. I'm not marketing anything to you. I'm not selling anything. It's just, it's there, it's free. You actually think about how to calculate your market share. We just looked at what the population is, how many people per household. That tells you how many households there are, how often they replace their air conditioners. We go down to the bottom. We figured out, oh my gosh, I thought, no, everyone told me that I couldn't do more than 10 million in revenue in the Fresno area because it's too small of a town and everything else, and it's all farming community and blah, blah, blah. We just cleared 54 million in revenue out of that market last year when people told me no greater than 10. When I calculated true market share of like, how if I could get to 25% market share, I'd be like 120, $130 million. And so I'm sitting there and honestly, I went to another market when I was at 10 million. Why? Because someone told me that I never make it past 10 million in my market, so I better go to another market. A lot of you had tons and tons and tons of space in your market to grow tons. Focus on your market. If you're in LA, Los Angeles, LA. Can theoretically sustain a billion dollar h vac and plumbing and electrical company. Theoretically. Who's doing that? Nobody. So do we need to go to another market? No. As you get closer to that size though, as you max out, your cost of marketing starts to go up. I'm feeling that in Fresno right now as we're like literally like churning through stuff and you're having to get to more and more expensive marketing avenues to get there. So it's probably time to go to another market before you hit that point. And so I just be thinking about that. Before you start getting excited about acquisitions and going greenfielding that kind of stuff.
- [12:41]
B
I'll tell you guys, we made a huge mistake. My marketing team, because we, we set up these budgets. This is a couple years ago, but Houston's a really great market. We bought their garage door doctor and we'd hit our budget and then they'd lay off of Houston to make sure every other market hit their budget. When I found out this was going on, I'm like, well, who cares about the budget? Let's just double the budget in Houston. We're winning there. We've got great technicians, better installers, better culture. So what I've started to realize this Year is we're going to put money into Houston, Denver, Detroit, Milwaukee, Tucson, Vegas, the markets that are winning the biggest. I'm double down on marketing because we've got great technicians, we've got great trainers. Everyone knows who we are, we likable, we're trusted. We're actually double down across the board on marketing and branding. Like I'm a firm believer I'm going to spend a fortune on branding even if it's not direct response. I was talking to my table about a book Dan Kennedy wrote, no bs about direct marketing. And believe it or not, you could do a lot of TV and radio and still get a huge massive response. It's not going to be as good as if you've been doing it for a year. But you can't dip your toes in and just say, oh, I'm just going to try this out for a few months and see what happens. You got to go all in on this stuff. And I got to tell you guys, like for the first time ever, I'm excited. Like the way that my cfo, he's way smarter than I am when it comes to, you know, gap accounting or whatnot. But and Cortex, our partner and they basically said we don't care what you spend in marketing in your greenfield markets or your growth markets because that's going to be an add back the way that we're doing the accounting. My CFO, the best CFOs on the planet. When you ask them what one plus one is, they'll tell you whatever you want it to be.
- [14:22]
C
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- [15:00]
A
Yeah. Anyway, if you guys are looking to do acquisitions and go into other markets, things like that, biggest things I'm saying is like one farming, not hunting. Like build those relationships. Don't go out there building relationship just to try to buy their company. Everyone's gonna see through that. It's not genuine, it's not cool. Nobody likes that. Number two is like, hey, look for that opportunity where it's gonna be a win win for both of you on both sides of that table, I want the people that I'm buying out. It's like, it's not like a chess game where I'm trying to beat them and they lose money or something like that and get in there. And next thing is, it's like in most cases, especially if it's in your town, do it as a tuck in. And don't like, try to maintain like two different brands. Because Tommy and I own a business together in Australia. And they literally had like, what was it? Like, eight brands.
- [15:51]
B
Eight brands with eight separate CMOs, with eight separate. I'm like, what are you guys doing? A different truck, eight different logos. It's like. And they thought, I love the guys, but they thought it was very clever. I mean, I had to run two brands simultaneously for a while. And then what we stop. What we do with you have two brands is you stop doing the marketing for that brand and then slowly but surely they go down to five trucks, to four trucks, to three trucks, to two, and it's all under a one. But we stopped doing the marketing. But they still had web presence, they had stickers, they still had kind of, kind of a like one or two years worth of calls coming in. The next topic I want to talk about is goal setting, commitment, getting your guys to do more. Robert Chidney wrote a book, probably one of the best book of all time. If you guys haven't read Influence by Robert Ciardini, it's probably one of the most important books, it's the seven Laws of Influence. But he says what number one is commitment. People feel strongly committed to what they say out loud. So if you could get your team to come up and you cannot make their commitments, you can't make up their KPIs, you can't make up the numbers. They've got to choose their numbers. You can't tell somebody to stop smoking. They've got to come up and do that and they need to write it down, they need to put it in a spot that everybody sees it and they need to say it in front of a big group. So they need to believe in it, they need to say it out louder. They need to see it on a daily basis and then you need to remind them weekly what their goal, what they said they were going to do. We feel very, very like bad when we let people down. So they pick their commitment. You put it in a spot, everybody could see it. And then you go over it on a weekly basis and watch what your team does, watch what they do with csrs, watch what your Dispatchers do, watch what your technicians do, watch what your installers do, and if you do it properly, you're not trying to shame them. But I got up there and I said, I know you guys are men of your word. It was all guys, technicians. I said, I know you're man of your word and I know you wouldn't lie to me. And I know if you say this and you're committed to doing this for you and your family in A one, then you're going to keep your promise. And I don't know if I want to work around people that don't keep their promises. So what is your commitment? Think very long and hard before you say you're committed to some crazy conversion rate or opportunity job average that you can't hit, because then you're lying to yourself, me and your team. And I know you don't want to let your brothers down and you'd be surprised and shocked of what these guys could hit. But I'm like, dude, you're not. Don't put those numbers. You're not going to hit those. That's ridiculous. I know your numbers. You're not that good. I don't try to shame them, but it's true that some of them just, they, they put the wishful thinking numbers. And I'm like, you're setting yourself up for failure. But, but goal setting, having your team personal. We all talk about how many people here have a good budget for the year. How many people do all your employees have a personal budget? Do you know, do they have a daily goal? Do they have KPIs that come back to what are they going to do with their money? Are they saving for a house, a vacation, a car, something to do with their kids? Do you guys know those things? So what's in it for them? Well, how. What's in it for me is all you're saying. If you're only talking about your budget and the company's budget and the EBITDA numbers, when you say, listen, what are you going to do with this? And you get behind him and you say, look, how easy is it to inspire somebody? I have a guy that was saved up for to a trip for Africa. His son is seven years old. He said, daddy, I want to go on this giraffe and I want to see these lions. And his son, at 7 years old, looked up, it was $9,000 per person, $36,000 trip. Every day he looked at a picture of his son and thought about that trip to Africa before he went into the House and said, we're going to do this trip to go on the safari. That's what motivates people.
- [19:23]
A
Yeah, I think on that, a couple of pieces that I got from that. First of all, read that book by Cialdina. I read it after Tommy brought it up at his event and it, it was mind blowing. Some of the things that were said in that book. And I was just like, wow, Number two, is that on that budget, everything in your company, how many of you have like, written a mission statement and vision statement and all that other stuff? Few of you have, like, all the business schools tell you, like, that's what you should do. The thing is, it's like we did that whole exercise and we put it on the wall and the reality is how many people in your company, if you walked in them right now and said, hey, do you know the mission and vision? Nobody. I didn't even know it. I wrote the stupid thing and put it on the wall. I don't even like, what was the point of that? And so we immediately took that down and said, okay, no one remembers it. We got it down to like two sentences. And everyone knows it because all of our company and it says, serve people. Our customers are coworkers in our community and have fun doing it. That's the whole thing. And like, just get rid of all the other crap, like, because no one's gonna remember it anyway. But you can remember two sentences we put on all your name tags and put on the wall. That way everyone remembers. Same thing should be happening with the budget. Go into your people and please do this before you tell them anything. Just walk up to your people and say, hey, what's our budget for this month? And they know, especially my department managers know. If they have to say, oh, hold on, let me check it. That's the wrong answer. It means that I'm not doing enough as a business owner to make sure that everyone knows what we're supposed to do and where we're supposed to go. You have a bunch of people on the boat that are rowing and not everyone knows where we're rowing. So what's the point if it's in a budget, on a spreadsheet, on an accountant's computer, hidden somewhere, which, by the way, when we bought the company in, in Australia, had helped them before that and helped them build the budget. And then I went back six months later, we're buying the company like, hey, what's the budget like? Oh, I gotta find it, I gotta find. Oh, no. Oh, no. And only the accountant Even knew where it was. And the accountant didn't even know what the.
- [21:27]
B
Don't buy a business in Australia. I love the team. It's just they have. I always tell them they have a lot of holidays in Australia, so keep.
- [21:36]
A
In mind with that. It's like, hey, if they don't know the budget, it doesn't matter you failed. Number two is like, if they don't know their personal budget or what's going on with their personal stuff, you failed. The big thing I asked them on that is I say go over their pay plans. If you can't go up to someone and ask them and just. Just do this. Honestly, do it. Don't prep them because don't try to get the answer you want out of them. Get the real answer. Go to them, say, hey, how much did you make today? And if they have to say, well, it's hard to say because if I hit this tier, then it could be that. And then I get this added multiplier if I get extra reviews and blah, blah, blah, blah. If you need a calculator to figure it out, you fail. Because like Tommy said, they want to know what's in it for them. If it's too complicated to understand, what you're going to have to do is pay out the money anyway, but not get the added performance because it's not really going to incentivize them for higher performance because they don't know what's coming. So then you're just like paying out these crazy things and you're paying your staff to do all these complex calculations and everything else they have to know. Hey, it better be two sentences. And this is what I tell people. Why? Because let's say you got a tech, and let's just say that it's a male tech and a wife at home, right? Male tech goes home and they get a call. It's after hours. Or let's say it's 5:00, guy's on the way home and we get an extra call that comes in and he's headed home. And they say, hey, dispatcher, hey, I got one more call for you. I need you to run one more call. He's gonna call his wife and he's gonna say, hey, I have to run a call. What is the first thing that she's gonna think about? Well, what are you gonna make if you run that extra call versus coming home? And I can guarantee you that conversation happens every single time in some way. It might not be that day, it might be that night, it might be the next morning. But if he can't explain to you how much he made on that call, how is he gonna explain that to his wife? And so I can tell you the person that's gonna be even harder on you than your tech is that you never see is that spouse being like, why in the hell are you staying out till 9 o'clock at night? My top sales guy knows, right, if he's gonna make 10% on the sale and his average tick is 26 grand. If I call that guy at 9 o'clock at night on a Saturday and say, hey, I got a 14 year old unit that's down, he won't even let me finish the sentence. If I was the one calling, I'm not the one to call him anymore. But he will literally be in the truck before I finish the sentence. And what is his wife saying? She knows he's going to make on average $2,600 in the next 90 minutes and she's gonna say, honey, run, go and stop at Louis Vuitton tomorrow morning. Like that's what's going to happen. And do you think he's incentivized? Heck yeah, he is. That's why he does it. But when we want to get complicated pay plans and all this other things and do all this stuff and confuse them, it just falls apart.
- [24:36]
B
I want to say this is probably the most important thing I'm going to say up here is I was talking to a few of my area managers and they were like talking to me about a few. I asked them about a few of the technicians that I didn't think were cutting it and they're like, yeah, they always seem to fall off. We don't need to take action and get HR involved. They're gonna quit. The bad guys kind of always fall off naturally. And I'm like, shit, I've done a very bad job. So I had a. I talked to Cortek and Doug, and Doug got on a call with 40 of our leaders and he said, here's the question. There's a why in the road. Now no one should, first of all just fire somebody. Everyone should know it's coming. And we don't believe in performance improvement plans. That's just like, oh, you got to improve, you're gonna get fired. No, like, is, you got your heart in this, but either you're gonna go and we're gonna train the crap out of you for the next 90 days and get you excited and passionate about this, or we're gonna help you get another job. And he said the question, and I love this about him, what he said is he goes, each and every one of you run a branch. You're the leader. You're almost an owner in this business. You most likely have some type of P units. Would you bet your family on this person? Would you bet the future of the company, your family, your kids lives on the success of this individual? And if not, why are they still here? And I said, thank you. This is exactly what. Because everybody's. Unfortunately, a lot of people were like, we've got four people. Like, it was a light, like 40 people. The list, 40 people that we're gonna can. And I'm like, well, listen, I want you to work with them for a few weeks and make sure that is it a will or skill problem? But, you know, having a partner that backs us up and allows us to do that than having to save everybody. We're going to work with them for the next year. We're going. Their head's not in it. They don't show up on time. Their car is a mess. Their head. You know, they treat the dispatchers like crap. That to me, like, I don't want to save people if their head's not in it. They reflect on me. They're my legacy. They're my future. And if I'm betting my family's life on them, they better be all in. And I think too often we settle.
- [26:46]
A
We're going to take questions here real quick. I'll just to finish that up on that. Whenever you're acquiring company, just do it fast and just do ex. Go through that process. Just get it done. Keep in mind, you don't have to feel like the jerk. I've got 300 employees at least. If I've got a couple of bad people that we have to terminate, I have to remember I have 300 families relying on me to make a good decision as a leader. And if you're not willing to make that hard decision, you shouldn't be a leader. And you should step down and let someone get up who's willing to do it and make the hard decisions to represent those 300 people that are putting their effort into you and coming to work every day trusting that you're going to be the strong leader that you need to be and just let it go and move on anyway. All right.
- [27:24]
B
The 300 people are actually 1200 because usually they got three other people that are relying on them to put food on their plates. So when I look at it like 1200 people are depending on And I'm going to leave these two people, screw it up and show up late and disrespect everybody else. Let's do some questions.
- [27:38]
C
Yeah, it's a hard shift. Okay, I'm going to borrow one of your guys.
- [27:44]
B
Mice.
- [27:45]
C
Anybody have any questions? We got five minutes for Q and A with these guys. Oh, you got a spare mic?
- [27:50]
B
Right here.
- [27:50]
A
Who? Raise your hand.
- [27:51]
C
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- [29:20]
A
From a percentage perspective. A new market versus a mature market. What is a a good marketing percentage to put into there?
- [29:32]
B
I'll tell you this. Aaron Gaynor has got a son, graduated from asu and he shares a lot. He's part of Next Star and, and really a giving guy. You know, if when Ghetto was doing Roy Williams, I just remember like, dude, I was like, it's kind of like you buy a car on the dealership and like it's just now you see him every, like, I got a trx. Now I see every other car is a trx. It's crazy. And every car I seen, it was like Ghetto was everywhere. I was like, look, I hear him on the radio, then I see him on tv, then I see their trucks. Then I'd be at like Circle K and then I'd see them. Then I'd be in a neighborhood, I'd see them. And the deal is, is like, I don't want to just be garage door repair Atlanta. I want you to type in A one garage door service. So to do that you're gonna spend the first year more money in marketing than you get in revenue. So 120%. The next year you should be 35% of revenue. And the next year you might be 12 to 10 to 12%. So the question is, are you willing to do that? Look, that's why I wouldn't want to be my competitor, because I'm willing to lose my ass the first two years to go in and win long term. And it's called long term greed. I had a massive PE company out last week and they said, are you long term greedy? And I said, that means my team wins and my family wins. And if you're in my competition, you'd have to join me or you're out of business. Then I'm long term greedy.
- [30:57]
A
Yeah. Now, I would not even look at it as percentage of revenue. I'd look at as cost of customer acquisition and say, how many customers do I want to acquire this year? And if it's, you know, I want to acquire a thousand customers and it's going to cost me a thousand dollars a customer when I'm in a new market, then I need to spend a million dollars, period. It doesn't like whatever the revenue comes out to, it comes out to, but whatever the cost for customer acquisition is, is it. That's why everyone asked me like, how much, what do you spend a percentage of marketing? I hate even answering the question. Last year it was 6%. But it has to do with my growth rate. If I'm going to have a higher growth rate, I should expect to spend more money based on how many acquirers, customers I have to acquire. And so the whole 10% cost of marketing, that's all. That was a rule of thumb for people that don't know how to calculate cost of marketing. Like that's the truth of it. And they're trying to make it too simple.
- [31:43]
B
Tom, I got something that's going to help everybody in here. Not everybody has a C suite with, you know, CFO, CEOs and all that. You can you go through sales manager, install manager, a service manager, an office manager, bonus incentive. How do you exactly bonus them to get higher performance? I think that would help out the masses here.
- [32:05]
A
Yeah, that one's on my, that Howard deals.com as well. I've got a video on it. Basically, I try to incentivize people based on what they can control and also do it quickly. So yeah, so you're, let's take a H Vac Service manager. He can't control the Overhead of the company. He can't control office staff, like all that kind of stuff. But he can control the labor because he sets your hourly rates and he sets your incentive plans and all that stuff for that department. He can control the material costs that way. His job, like, hey, negotiate the materials, make sure we're not wasting materials, that kind of stuff. He can help with the revenue. So basically, gross margin is what he has the most control over. So the H Vac service manager gets bonus based on the H Vac service gross margin for that month. And we do it in the month and not by the year. The reason is, is that I used to own the California Autism Center. I found out there when they were treating kids with autism, you had to give the incentive to the child, close as you can to the action that they were doing. So if you want them to color for 5 minutes, turn the time around for 5 minutes, hold gummy bears in your hand. As soon as the five minutes is up, hand them the gummy bears. What I learned treating kids with autism is it worked really well with technicians. So if. Yeah, yeah. So, but just real quick, if you wait till the end of the year to give them a bonus, it's like telling the kid, hey, if. If you act well today, I'll take you for ice cream on the way home. A kid can't think two hours in advance. That's why it never works. These people that treat kids with autism, they know to give them the incentive right away. Same thing with your text. We can't do it exactly right away, but at least like, hey, if you could do it weekly, great sales commission people, they want to get paid the next day after they sell, or the same day, if they could. They want to spend it at the casino that night and then have to do it again the next morning. The reality is it's like gross margin. So I look at gross profit dollars for the budget, and that way it forces my people. So, like, that service manager is going to look at the budget every single day. Why? Because he wants to know how much he has to hit to hit his bonus, right? So he's going to study at least his portion of the budget every day. Of, like, this is what I got to hit. So if my budget says that we need to generate $500,000 of gross profit this month in H Vac service, then he knows he's got to do that. And then he's probably going to make like four grand, five grand, three grand for the month, depending on the size of my company for that thing. So it's a fixed deal. I didn't give a percentage of it because as our company grew, all of a sudden my bonuses just got gigantic. And then plumbing manager, he would get a same thing based on the plumbing budget. The gm, because he should be controlling the whole thing. He or she should be controlling the whole thing. They get paid based on the net profit. And so it's based on what you can control. If you feel like you can't control anything and your bonus is paid on something you can't control, you lose all incentive. And again, now you're paying out the incentive if you hit it. But you didn't get any increased performance because they didn't feel like they could control it, so they didn't perform better.