181 - The Reality of Year One: Sales, Cash Flow, and Life as a Franchisee with Clayton Edrington

0:00You projected that you wouldn't make any money the first year, or at least you wouldn't pay yourself anything the first year. What did you think your sales were going to be in year one? I put the magic nice$1 million number out there. I prepared myself mentally for it to be a lot worse. You're three months in. How has it gone the first three and a half months?

0:19All right, Clayton, my first question is, why do roofers make so much money? You like that? Just right out of the gate? That's an amazing question. I don't know. I'm waiting for that day to come, but we'll see. Find out one day. Well, okay. So when I sold my businesses, I didn't know much about franchising. And it's been a big curiosity for me to figure out how does it work? Why would I go with a franchise? And there's a million different franchises out there. You're the owner and operator of a, is it Bumblebee Roofing? Just Bumble. Bumble Roofing of South Sound. Sorry. Bumble Roofing. And how big is Bumble as a franchise?

1:02Yeah, I think we're up to almost 30 owners, I believe. Locations all across the US. The founding location in LA is in Texas, Colorado, Idaho, East Coast, all up and down it. So good amount. So I have a good friend of mine, Cole Simpson. He's a roofer. He's with the Mighty Dog brand, which is Horsepower Brands. Is Bumble owned by like a larger brand owner or is it just bumble. Yeah. It's owned by empower brands. Yeah. They're pretty big as well. Just like horsepower. They own quality insulation, spirit fence and rail, a bunch of bigger brands like that. So home services are super hot. Everyone's like, Ooh, I got to get an HVAC company or I got to do plumbing or whatever window window washing.

1:42Roofing is one of those though. Like roofing is a home services company that people look at and say, man, that seems like a cool business. How did you get into it? Yeah. I mean, honestly, I went down the exact same train of thought as you just mentioned. Initially, when I started looking at franchises, I looked at everything. I looked at pressure washing. I looked at HVAC. I looked at plumbing. I looked at insulation. I looked at paint striping. Pretty much everything. Oh, dang. Yeah. I went through quite a process to actually find the one that I landed on. But yeah, roofing to me was the most attractive business model.

2:18I could see the ability to scale quickly to high revenue with relatively low capital involved with it. So can you kind of explain what the business model is for roofing? Because I didn't know how these roofing companies work. Can you talk about how you make money really quick? Yeah. So our business model is pretty simple. You know, you have your marketing arm of things, your sales side of things, and then what I'll just bucket is like production side of things. Production is managed by us, but the actual execution of the labor is subbed out. So if you really want to distill it down to something simple, we are a marketing and sales machine that oversees the production side of things as well.

3:02I think it's interesting. I didn't really realize that, but sales is really the main function. Like you just said, you're a sales and marketing machine, and then you're subbing everything else out, which I always thought like, oh, roofing company, I got to get whatever, all the equipment, all the guys, yada, yada, yada. But the actual startup costs are not what you think that they would be to start a roof. There are still startup costs, but it's not the same type of capital intensive that you'd actually need to be a full on soup to nuts roofing company that's going out and actually doing the fulfillment as well.

3:33Right? Yep, exactly. Okay. What did you do before this? So prior to this, I was in the tech industry, worked at Amazon for like four or five years. Tech consulting before that. I do have a formal education in civil engineering. So I have some construction side to me, you know, some heavy civil type of construction, but zero roofing experience at all going into this. So it sounds like you kind of knew you wanted to get into entrepreneurship. How did you get in down the road of, hey, I want to do franchising? It's a great question. And it kind of started off as, you know, I had this entrepreneurial itch.

4:11A lot of my community, family and friends own businesses. and I've always wanted to own one. Call me a wantrepreneur or whatever you want. I've always been kind of like that. I don't think it's a bad term. We were all wantrepreneurs at some point. Exactly. And the golden handcuffs of Amazon, it's hard to step away from that. So I kind of had this itch and I went down the path of like, oh, let me try this SaaS startup. I kind of put half effort into something like that. Let me try some tech consulting of my own, put some effort into that. Then I started thinking about the idea of buying a business.

4:44I did not get fully invested into the whole ETA route, but I did explore it, had a couple conversations, but I kind of came to the conclusion of, I'm not sure I'm comfortable giving up a personal guarantee and a ton of debt all for something that maybe I don't know exactly how to grow the revenue of that business and execute perfectly. It just seems super risky to me being humble, like who am I to step into a$15 million plumbing company and be like, we're going to change everything. We're going to fix all of your problems and grow revenue by 30%. June 26th, 1 PM Eastern, you, me, live webinar with my friend, Connor Gross, who I asked to come on and talk about all thing franchises.

5:25We're going to talk about how much franchises really make, how to find the right one, what to avoid. It's totally free, but seats are limited because I'm trying to get it really intimate so you can ask as many questions as possible. I've gotten a ton of questions from you about franchises. So I thought, why not bring on an expert? I'll see you then Lincoln bio. Yeah. Then I came across franchising kind of on accident. I think it was on a podcast. It might've been actually Chris's podcast that I came across it. I started to explore that a little bit more. I previously had a perception, a bad perception of franchising, just stereotypical kind of ideas behind that.

5:58But digging into it more, I was like, okay, maybe this is a path I could go down. That's a happy medium between starting something on my own and actually buying something. How long was that process? So you said you were getting the edge, you're doing tech consulting. How long was the process between like, yeah, I want to get into entrepreneurship all the way to February, spoiler alert, you launched your brand in February. How long was that? So from the time I started seriously looking at franchises, I'd say it was prior to that, maybe like April is when I kicked it off. I had a pretty tough, long process going through it or what I thought was.

6:33April of 2024? Yes, yep. You feel like that was too long? To me, it was. Dude, that's funny. I want to move quick. Well, I'm sure a lot of people listening will be like, yeah, that's not that long. I mean, it feels like a long time when you're in the middle of it and you're like just trying to figure out how to get into it. But I think your experience is right down the middle of the road. In fact, probably on the quicker side, less than a year where you hop into it. Why the sweaty businesses? You know tech, you worked in Amazon, you're a civil engineer, and here you are owning a roofing company.

7:06But you tested all these other things out. You said like paint striping and window, like whatever else. Why the sweaty? The like final straw for me for leaving Amazon, you know, I had amazing manager, amazing team, all that good stuff. But it's tough being behind Slack and the rest of your teams halfway across the country or the world. You know, like I mentioned before, I have a super close, you know, community connection involvement. And it felt like almost like a double life, right? Like I'm behind this computer all day grinding for Amazon. And then after work, I go see my friends, you know, and we have this whole community type of concept going, but I'm not able to relate to a lot of that.

7:44Right. It's like, how do I explain to them what's going on within Amazon and Luxembourg for them to really understand? So you said golden handcuffs at Amazon. Can you tell me how much, like how much were you making at Amazon a year? Good amount over 300 ,000. I think my last year was like 330 ,000 or something. Are you married? I am. Okay. so you're making over 300 grand a year. What, what did your wife say when you were like, yeah, I think I'm going to go start a roofing company. So I think I'm extremely lucky or I know I'm extremely lucky with my wife. She's also in the tech industry. She actually works for AWS now after I left Amazon, but she was extremely supportive.

8:25She really, I think is all on board, if not more of this dream than I am. So that was a huge part of it as well is making sure that, you know, she's on board and able to support So did you talk to her up front? Were you like, hey, I'm thinking of leaving. This is kind of my plan. Or was it like later down the road where, surprise, I found a franchise I like? No, it was a conversation from the beginning. You know, she heard me complaining all the time about Amazon and trying to find ways out in these startups I was trying. So she knew and she was prepared. I think a lot of people who are listening that maybe in the same situation that you were in are probably asking the question, like, how did you prepare?

9:00Were you thinking about, okay, I got to save up X number of dollars to have some runway to look? Were you thinking, I'll look at the same time that I'm saving? And excuse me, that is I'm working, so I won't have to like lose an income. Was there a certain dollar amount that you wanted to hit? Like, for you, as you were preparing to make the jump? How did you think about kind of bridging that gap? Yeah. So in my mind, the gap that I need to bridge was don't take any income for a year and obviously cover the franchise costs and startup costs. So I wanted to be pretty low risk with this. That's the reason I chose the franchise, like I mentioned.

9:41So it really, for me, was preparing for like mentally, okay, year without a salary and all of your startup costs. And a year without a salary being after you start it? Or did you look for a year? A year without a salary. While I was looking, I was fully employed at Amazon. Okay, okay. So you were just thinking like, hey, first year, I'm going to launch this business. I'm not making any money. So that's what you planned for. Exactly. Yep, yep. Hey, I don't know if you remember this, but when we started this podcast, we entered into a social contract. I would spend time, energy, and money producing this podcast, interviewing these individuals and giving you insights into how to build, buy, start, grow your business.

10:16and you would like, subscribe, and leave me five-star review. Now, out of that, we both get to talk to really cool people and hear really cool insights. We both get a ton of value, but I just want to help you keep your word. So would you do me a favor? Will you go leave a five-star review for me on Apple or Spotify? It would really help. And if you want, even share this with a friend. A question I would have is how much were you working at Amazon? Like, okay, I know you're making 300 plus a year. How many hours a week are you working at Amazon? ebbs and flows. That's for sure. I mean, there were some parts of my career where you're grinding, you know, all night, all day.

10:54So however many hours you want to associate to that. There are other times wasn't doing too much. Also a funny timing of all of this is my first daughter was born in the spring. So I was on paternity leave for three months. So I had a lot of time to do this searching. So that was a huge benefit. The reason I ask is because I have a wife as well. And I was working for the company that purchased my last company. So it was a larger company. They purchased my last company. They wanted me to work for them for a period of time. And I did. I knew them really well. They were awesome. They took really good care of me and they paid me really good money.

11:29The stuff they were asking me to do, it wasn't super demanding. And I got to the point where I was like, Jess, I got to quit. I was like, what, what do you mean? Like, just do whatever you're going to do on the side and just keep collecting the paycheck. You know what I mean? Internally, I was just like, I can't feel good about that. I got to quit. Is that kind of how you thought about, hey, I can't have a side hustle while I'm doing this stuff at Amazon? You're spot on. So I went on that paternity leave and then I came back in the fall. And that was when I was really in the thick of it. I signed my franchise agreement in October.

12:01And that's when that feeling came in. It's another double life that I'm living, right? Yeah, yeah. It's a lot of guilt. And I even ended my employment at Amazon on after a good stock vest so that I didn't keep dragging that on. I probably could have drug it on for quite some time, but you're spot on. Okay. Here's a question I have for you. How long did you work at Amazon? Four and a half years or a little bit over four. Let's say you just have some good money in stock. How do you think about that stock now? Like now that it's vested, do you, I've always wondered this from people who like got maybe large equity grants.

12:34And again, you're not telling me how much you got, but do you think like, oh, it's just there. That's my retirement. Or Are you selling a little bit at a time to diversify? What do you do? At the advice of my financial advisor, I was selling. We were selling most of the way. So I just viewed it as part of my income, but it would just be delayed six months or whatever the best period was. Oh, interesting. Was it options or were they RSUs? RSUs. Wow, man. Okay. So do you own any Amazon stock at this point? We do, but just not an oversized amount. Just something diversified. Do you ever go back and look and be like, oh man, if I wouldn't have sold or the other way, I don't know because I haven't looked at Amazon stock, but like, oh, glad I did sell.

13:17Do you ever do the like, what if math? We've had both of that, especially with my wife working there. And you know, previously she's worked at Disney and up and down a ton. We've had a lot of that. Don't get me started on Disney. Don't get me started on Disney, man. I've held, I love Disney and I've held Disney for like 10 years and Disney's just still in the 90s, low hundreds. And I'm like, what? Why is it trading? Anyways, I freaking love Disney because I just think the intellectual property they have and yet they're stagnant. You were like paint striping all these other random businesses. Give me the list of like the other franchises that you looked at.

13:55Yeah. Plumbing, HVAC, insulation, pressure washing. Walk me through how you thought about the right franchise for you? I ended up landing on a pretty new franchise in franchise terms. And to me, I think there's kind of two paths of franchisees, of people that are looking for this. There are the type of people who want this plug and play, business in a box, give me all the structure, and it's just going to be a solid financial investment. Or there's the other side where I fall, or I see myself falling, is someone who is willing to to grind and treat it like a startup. And they're just looking for fuel to pour onto the fire, right?

14:35So that's kind of the more of the approach that I was looking for. And having, being an early franchisee, I think there's a lot of additional opportunity there. And they're still providing that, that fuel to help me grow fast. Okay. So for you, it was about the feel of the opportunity. It wasn't like, oh, this is the type of work that I like. This is the type of experience that I have. This is the geography that I want to be in. Like, obviously those are important factors in making a decision, but those were not the driving factors. Yours was? Those are important, obviously. But for me, it really was just like the business model and what's the potential of this business.

15:06Okay. So the business model of a roofing, not necessarily of the brand, the franchisor. Correct. Yeah. I mean, they go hand in hand, but yeah, mostly of the brand. One of the things I always think about is like, does it matter? Like, let's say you got in early with Bumble Roofing. What does it matter if you got in early. It's not like you have a, do you have an equity stake in all of Bumble Roofing? Or like, does that make sense? Like, help me understand why that's important. Yeah, yeah. So one is territory, right? That's something ran across a ton is territory availability. You know, I'm south of Seattle, it's a decent size market.

15:40So there's that. And then the other side of it is being able to help grow and shape the brand itself. A little bit intangible, you know, and we'll see how this plays out. But in my mind, that's pretty important to me being able to provide input into how things are going to shape out and what sort of long-term support we need. What does that mean when you say like help to shape the brand long-term? So the franchisor is not just like, Hey bro, here's our playbook, take it and leave it. Like are they, do they have like a workshop, not workshop, but like a work group that's like helping them improve the brand that you can be a part of?

16:14Exactly. Especially being early on, you know, they're taking feedback from all of us franchisees. It's not just like a take or leave it type of situation. it's you know what's working what's not working let's hear this feedback and improve on it they're going through you know a growth is a business just like i am so i think it's an important partnership that we keep going on maybe i'm selfish for me i'd have a hard time thinking like well i just help them get way better and i'm going to get more franchisees and they're going to make way more money and how do you think about it is like oh well this improves or increases the value of my local location?

16:49So helping the mothership helps me or do they like, do you have like an extra stipend? Do you get paid differently if you're, you know what I mean? Like how do you think about being compensated for helping them build their brand? Yeah, I mean, compensated in terms of like, you know, some sort of kickback doesn't exist, right? Doesn't exist, okay. The way I see myself being compensated is yeah, helping my brand grow, you know, from a national accounts perspective, from the support I need perspective to help scale this business. I just view that as a partnership that's going to pay off in the long term.

17:22Okay, so when you were looking at all these different brands, how did they communicate that to you? Like, how did you walk away like, oh, cool, not only is this a good brand and it's a good market, it's a good territory, but there's somebody I'm going to be able to collaborate with. It's not going to be a top-down approach necessarily. I think it was a combination of meeting the team and actually feeling them out, feeling out their personalities, and then looking at a bit of the track record. right like i mentioned it's it's owned by empower brands which owns other large brands that have been through this process so you know when i went out there and actually did my confirmation day kind of trip they confirmation day yeah yeah is it a religion or it's called e-day sorry not confirmation day what okay you had me for a second i was like welcome to bumble confirmation day next you're gonna tell me they're based in provo utah and i'm like out you know no no not Not quite.

18:15Okay. American FARC, not Provo, Utah. Come on. Sorry. Okay. You said E-Day? Yeah. Yeah. Like they're Empower Day. It's basically like your Discovery Day. You get to go out there, learn about them, meet everyone that's associated with a brand and just get an actual feel for it in person. How did you go about identifying brands that might work for you? I should ask you this earlier, but like there are so many franchises and there's crappy franchises, great franchises. how did you go about identifying the ones that you even were interested in let alone going to the e-day right yeah yeah good question so i initially like i mentioned started out heard about a pressure washing podcast or a pressure washing company through podcasts felt them out and that was the first first company i talked to i saw a post about them on x i messaged someone randomly, just asking their thoughts and their experience behind it.

19:09And then they mentioned that they worked with a franchise consultant, Connor Gross is who I used, and I ended up connecting with him and we kind of hit it off. So I decided to go down the path of using him to help me navigate all this and then find the right brand. Did he come to you and was like, tell me about yourself when you're like late on the couch and told him about your deepest, darkest dreams? A big therapy session. But kind of, right? Like, I mean, he had to get to know you a little bit before he could make recommendations. Yeah, no, it is true. You definitely need to get to know the person as a franchise consultant, which he did.

19:44And the biggest part too, is me feeling out him and you know, he's a very casual laid back person. We just kind of hit it off immediately. So I felt like he could grasp and represent what I was looking for super quick, which is the franchise consulting. How much does that cost you? like do you have to pay them like so you you're not paying them a like retainer or anything up front nope nope zero how do they get paid they get paid by the franchisor yeah exactly it's like buying a house having a real estate agent buyer never pays anything just the seller so how much time did he like devote to you like because it's not probably not an easy process to kind of go through was it like one call one time here are some things or was it like let's have a weekly call to check in?

20:25No. Yeah. At least weekly. You know, when we're in the thick of it, we're talking maybe even daily, like pretty often. The only time we weren't talking was like lag time of like, okay, I know you're meeting with them on Wednesday. Like, let me know how it goes after you meet with them. But it's a good amount of communication. So upfront, did you set out like, Hey, I'm looking for here, the parameters for a franchise, but also this is how much I want to put down. Cause you said that you're like, I, you basically planned for the first year, not making any money and buying into the franchise. When you were looking at the franchises to join, how important was the money in, right?

21:00Like the investment in, or was it way down on your list? It's definitely important. I definitely have a cap to it of how much I was looking to invest. I was kind of, you know, shooting as big as I could. So I, you know, I explained that, yeah, I do have this kind of cash cap of what I have on hand, but like bring me any opportunity that looks attractive and I'll figure out a way, you know, if I need to finance it or however to make it happen. So when you got in with Beehive, what were they looking at? Because I know that these franchisors have a pretty strict criteria of what kind of franchisees they want to bring on.

21:36From what I've heard, like, obviously, they're going to interview you. There's a net worth requirement. There's like a liquid capital requirement. There's a buy-in requirement. And then I believe you also have to fund up the business. I don't know exactly. how did it work with Bumble? Yeah, yeah. So I think they do definitely have some sort of formal minimum of net worth. I think they advertise like 250K net worth, 50K liquid. But in my mind, like I mentioned, you're going to need a lot more than that to have a low risk type of scenario. It's all dependent on your risk tolerance of how much you want to actually put out.

22:11So when I started, I bought two territories, which ended up being somewhere around$90 ,000. as well as a truck with the full wrap on it. I think that ended up being like$45 ,000. You didn't finance it? You paid like just straight cash for it? I did. I paid cash. Why? Lucky enough to be in a position where I could do that. Even if you're lucky enough, why not finance it? Was it just like a mental thing of like, I won't have to worry about debt? Yeah, yeah. That's definitely a huge piece of it. Not having to worry about debt and that being a more low risk scenario as well as just rates of the time.

22:47And making that sense. Yeah, they're insane. That's true. That's very true. So$250 ,000 net worth requirement,$50 ,000 buy-in for the territory. Obviously, you spent 90 because you wanted to get two territories. What were the territories you got? Kind of the heart of where I lived, Coma, Washington, and a little bit north going up into Federal Way. And then I actually ended up buying a third one that's bringing me up into Seattle now. Oh, that's awesome, man. Okay. So$50 ,000 in, and then do they have like a recommended, this is how much you need to spend in order to fund up? Even though we were talking about, it's not a huge capital investment.

23:27I'm sure, like you said, you have the truck. What other types of investments do you have to make before you even launch? Yeah. So you have, you know, some fixed ones, like you have your drone is highly recommended. This catch all system, like net system that goes around the customer's house, small things like that, as well as, you know, insurance, which is super expensive. for roofing. Those are kind of the investments that you got to put up front. Okay. So you're looking at all of this and you're thinking, all right,$50 ,000 in, how much on top of that do you think you needed to put in to get started?

24:00Another$53 ,000? Yeah. So then you kind of look at your variable costs that are going to be coming in. So marketing, I knew I wanted to be pretty aggressive with it. So I forecasted just saying like, okay, 10 % of whatever forecasted revenue I want to do is going to go towards marketing. So say you're targeting a million dollar your first year, that's at least 10, you know, around 10 grand a month going towards marketing. The thing that I'm getting at is like, let's just say you put in a hundred thousand dollars, right? I'm just saying that that's the number, a hundred thousand dollars. And you're looking at this and you're like, all right, cool.