How I Would Build a $10M Service Business (If I Had to Start Over) | Ep 1004

0:00I'm about to help a complete stranger build a$7 million per year business. I'm going to give him a step-by-step roadmap on exactly what he needs to do. And 90 days later, we're going to check in with him to see what actually happened. And for all the business owners watching, I've scaled 10 businesses past 10 million, three past 100 million. And I've realized an important lesson, which is that businesses behave in patterns at all levels. And so you can take any of the principles and tactics and apply them to your specific business and industry at its current size. There are far more similarities than there are differences.

0:26And so with that being said, let's go meet Kaleb. Ready to rock? I'm ready to rock and roll, brother. All right. Tell me about the business. So first off, my name is Caleb with a K. I own Keys Roofing Company. Also with a K. Yeah, right. Alex, nice to meet you. So we are a premium and luxury roofing, gutter, and downspout contractor in St. Louis, Missouri.

0:47So we've been in business for two months. The current revenue, we're a little bit shy of$41 ,000. Profit is$24 ,248, so I'm at about 59%. So you're doing like$20 ,000 a month-ish right now. Correct. Correct. The goal within the next three years is going to be$7 to$10 million. Okay. Love that. So how do you get customers? So the way that we get customers, two primary acquisition channels currently is door knocking. So I do a ton of canvassing and then also referrals, whether that's doing a great job for the person that I currently meet or people within my internal network. So walk me through the money stuff.

1:22Yeah. So with the money stuff, I have two streams of revenue. with the full replacements, my average ticket year after year is about 18 to 25 ,000. The greatest thing about being the solution for the smaller problems is these jobs, Alex, they typically chunk up to those jobs. So if I'm coming through and I replace one downspout for somebody, I've run a gutters, what have you, nobody else will even show up to even attack that job, which then qualifies me to get the next job and all their future jobs. How many doors do you need to knock to get a sale? Oh, man, I have a high close rate on that. So if I knock 20 doors, I'm getting a sale.

1:59Yeah. Like it's like that. Yeah. No, it's like that. It's like that. It's like that. All right. What's stopping you right now? So what's currently stopping me is having more salespeople. Because if I have two more salespeople, one project manager, I'm 100 % confident. Seven to 10 million is very doable. All right, hop onto the side and then we'll dive into it. Awesome.

2:23Okay. So, um, the big thing that you right now have to deal with is like, there's one of you and there's, you don't have that many, like it's a small business, right? And I'm not saying that as a slide, I'm saying just factually. Right. Um, and so you're going to be resource constrained, both time and money. And so I want to focus all efforts on the highest return stuff that you can do right now. Um, what's very good about your business right now, honestly, is you, because at any given point, you can knock 20 doors and you get a deal. Yep. Right. And so that reliability of being able to just basically go get money is something that a lot of entrepreneurs don't know how to do.

2:57And that gives you a lot of what I'll call it like cats have nine lives, like entrepreneurs need as many lives as they can. And knowing how to go get money is one of the ways to do that. So I think it's super good. There's a couple of key decisions that I wanted to like walk through because one of the considerations I had was like, okay, was there a world where we could get repair average tickets up more meaningfully. And so say 7K is gross profit on the replacements. Sure. Does that sound fair? Yeah. Okay. So if we have 7K replacements, right, what is the gross profit on a repair? Oh, I mean like 64%.

3:29And that average ticket is 1 ,500? Yep. So$1 ,100 gross profit on repairs. So I'll tell you where I was originally thinking was basically, is there a world where let's say we get this gross profit up to two thousand dollars is there a world where you think you could sell three times as many repairs as you could replacements 100 000 right so this is what got more interesting to me was like i love when it's like when when there's something that's been cast aside by other people right like no one wants to do this particular thing but then you orient a business in such a way that you can actually make really good gross profits on it part of me was running out the idea of like what if we just did repairs and you did an absolute like you just became it systemized the living shit out of it right so what is the aggregate amount of all repairs, what would that ticket look like?

4:11So if you did everything minus replacement, these should really be selling for like 2 ,500 to 5k. The reason that this is interesting to me is that like, if we can get this thing to two, three, you know, 4k, this becomes an incredibly interesting business. Yeah. Just from the sheer volume that you can do and the reliability of revenue. Because the obvious one is cool. We do repairs and then we try and upsell the roofs, like that's fine but i just like that you have this angle a lot let's just run this out and like run out a version of the future okay so let's just say that we try and get really really sexy with our repair sales motion sure all right so all the repairs we try and get our foot in the door quite literally right we get our repairs and then they go to um have their onboarding call with Amanda, right?

4:58Prior to the onboarding call, I would love to have them watch a VSL that talks about the benefits of what you guys do. It's a long-term investment, blah, blah, blah, right? And then Amanda then tries to close them on a mini close of, okay, you got this thing, but you probably don't need this. You probably don't need this, but what you really are going to probably want to take care of is this and this, which my partner didn't have enough time to talk about. But given what we now know about it, because we did a little bit more work than just talking to you, we're all going to be there. We're going to have the dumpsters out.

5:27We're going to have the tarps open. It's like, you might like the hood's going to get popped. Right. So you might as well just have us fix everything while we're here. Getting the first sale is the hard part. Getting the proximate sale is significantly easier. Way easier. Right. Can I ask you a question about this? So with the VSL, so I have a high quality YouTube channel, is a VSL kind of the same as a YouTube or is that different? It's, it's as more specific purpose. As you scale the sales team, you might want this video to be more targeted in terms of like more selly. Okay. Right. And so the VL cell structure looks more like this, which is you have your intro and then you have your promise of like, hey, in this video, I'm going to explain X, Y and Z, which is the promise that they want.

6:01You're going to have an amazing roof and blah, blah, blah. And it's going to help you avoid this pain that you've probably dealt with in the past X, Y and Z. And so you might not believe me because you just met me. And so let me just give you some proof of Angie and Daniel and so and so that are all around this area have houses as big or bigger than yours. So you can feel like I work with people of your caliber. And so in this video, I'll show you the plan of how we actually do that. And so then we have old way, new way, which is the way that the current industry looks is this. And our special K process is X, Y, and Z.

6:30And that's why it's very different than the old way of doing things. And then we say, okay, now clients typically have a couple of questions around this stuff. And so we have objection number one through whatever, N, objections that they have. And with each of those, you just break the belief. So you're like, they think this, here's why that's wrong, or they didn't know this. this is what's right and here's proof and so you know angela actually a similar question she owns whatever house down the street and she thought this it actually works like this instead and so here's proof right so each one of those is basically that's just a belief breaking mechanism over and over again and so that way your sales guy when he comes back after doing you know walk in the house and this is like a seven minute video whatever um you can be like oh the video give you a little bit more context it's completely edifies them edifies the company gives a shitload of social proof and stats.

7:18And so like, I would also bring in something like, uh, you know, uh, houses that have some sort of roofing plan, um, resell at a higher value. Like I would put those pieces into it. So it's like, you're actually not really paying for this. You're going to pay for either way. It's just, you get to enjoy the house without all the issues the whole time, but it ends up reflecting your home value. I see. So you might as well just like, the worst thing you can do is fix all these things the day that you sell the house and you could have just had a nice roof this whole time and sold it for the same value, but instead you're just fixing your house for the next guy.

7:46Makes sense. Okay. That's how I would sell it. Sure. Right. And so this is before you actually close, but then you, before you talk to Amanda, right, they should still watch another one. So they watch one when you're on camp, like on property. And then, cause this is about the first sale. Understood. The VSL that they're going to talk to from Amanda. So this is VSLs in general. Okay. But the VSL that they're going to see when they talk to Amanda is about the other stuff. Got it. So it's just, it's just framing the conversation. So this is probably more of a little bit more about us and working with us in general this is going to be more about other things that people don't know about like their ruse so it's you get the difference i'm picking up okay got it yep now i think that in terms of scale usually you go all in on door to door okay it's what you're good at yeah like i don't think we need to be cute about this sure and just get really violent with it nice i'm down for that yeah i just it's like i'm full focused on this if you just every 20 doors and maybe it's every 40 for your guys or every 50 for them, whatever.

8:45Like it's like, I want to go make money. It's like, great. So you know, your commissions, I don't know what would a commission on this bay. So we do 10 % on repairs. So let's say the average, uh, repair, we can get that to like 4k revenue. All right. So 4k revenue, they're going to get 400 bucks. Yep. Right. Divide it by, uh, 50 doors. So it's like, want to go make 10 bucks, knock that door. Want to make another 10 bucks, knock that door. Want to make another 10 bucks, knock that door. It's just like, it just makes it really straightforward board for them. So it's like, how much money do you want to make?

9:12Just not coming to doors. That's the piece. Right. And I think you building out this DDD army is like the clear straight shot. Okay. So what are you doing on the backend when you deliver the house? So like full jobs finished is what you're saying. So we have like a cleanup process too. So like I come through, make sure that the house is better looking than how we left it. And then the first thing that we're going to do is ask them for a Google review. I also, I come from a background of like financial advising and mortgage. so I want to make sure LTV is high and the way that you do that is you actually stay in good contact with your clients I get a lot of business just by I call these people every six months to a year yeah I have detailed notes hey how's your kids doing let me give you a cool little thing what you got okay so you're gonna do your like you're gonna get your review and you're gonna get your reel so what I do is give an incentive yeah so I want to say hey so what most people do is they sign up for our diamond roofing hallway, whatever you want, VIP.

10:08And it's$15 to$20 a month. It's just paid annually. So it's$180 to$240. It depends on the market, right? You can go a little higher if you want to. And we put$2 for every$1 that you put on this into future repairs. Typically, people need to get their roof checked once a year. And so we'll come out for that to check on everything, make sure it's up to date, and we'll take it out of the repair that we have to do. Okay. Okay. So you're more talking about like the maintenance program, like something like that. Okay. Yeah. I like that. Yeah. And then if you want to, and this is like where we can get a little bit niftier, it's like you can make this$500 a year, but if you just leave us a review, we'll knock it down to$200.

10:51Okay. And now we have a little carrot for them. But at the end of the day, we don't even care about the money. We care about the fact that we're going to have an appointment once a year that we're going to go out to see the person. and then sell more stuff. Let's do that. Good idea, dude. Yeah. I should do this for a living.

11:11So because you're starting out, it's funny because the bigger the business, the more tailored the advice has to be because there's just more moving pieces and considerations. The earlier, like at the hypothetical extreme in the beginning, the first step of starting a business is always the same, which is that you will need to start an LLC of some kind so that you can accept money. Yeah, yeah. Right. So it's like if every if you're at zero, the steps are identical. And if you're at a zillion, their steps are entirely unique. You're a few steps from zero, eight weeks. Right. Yeah. And so the process here is really, really straightforward.

11:43We need to add to tweak this front end VSL, add a back end VSL. Amanda needs to follow a script in terms of like, I like the mini close. So the menu, the mini process works like this. Step one is that Amanda is going to unsell what they don't need. So she gains trust. She's like, hey, looks like you're this is fine. looks like this is it you probably have a couple years on this don't worry about that don't worry about that and then they're like oh wow she's not going to try and upsell me a bunch of shit and you're like yeah the second thing um is we're going to we're going to prescribe what we do think they need so you don't need this you don't need this you don't need this you don't need this but what i am saying is you're probably going to need this and this and this now would you prefer a or b gotcha would you rather have a male or female person doing the install would you rather start on monday or tuesday would you rather like yeah it doesn't matter like would you rather the neon nails or the white coffee or water it's a fake yeah it's a fake choice but it just makes the clothes a lot easier and then for card on file great you just put that on the card that we already the payment method we have on file awesome that's the script yeah so welcome we're excited to really have you i looked at some of the images um it looks great look yeah your gutters look great the bubble wall looks great you know beautiful home that you got here so i don't think you're gonna need this and this and this you are gonna probably need to take care of this.

12:57And so would you rather this or this? Great. You want to take care of that with the card you haven't filed? I mean, we already have the hood popped up. That worked for you? Great. Nice. Yeah. Super smooth. Yes. And we're good about this too. So we could definitely do that. Buttery. Nice. And so that's a script for Amanda to follow. Cold. Love to see it. This is the process because all we're doing is we're going to increase average ticket with this via menu, uh, sell process, the two VSLs, one for you and then one for her. We're going to get more reoccurring business on the backend with our little membership that we're going to credit towards any repairs, you're going to need to do it either way.

13:28So you might as well just not even feel it. Sure. And then we should have to scale it door to door. Got it. I had a speed incentive in play too. It's all margin. Yeah. Oh, for sure. So the way I think about like the reason that I'm such a big proponent of speed, right? Is let's say that you've got, you got house A, B, C, we'll put a little, we'll put some roofs on it for, for keys, right? So we've got house A, B, C. If like, we have to do this amount of work and this amount of work's to take the same amount of resources. But if C wants to pay us an extra thousand dollars and A is still very much within the window of like an acceptable time period to get the repair done, we might as well just make it C, B, A or C, A, B, whatever.

14:07But literally just reshifting the order of the work by allowing people to spend more to go first just makes more money. Correct. And so when you do the end of your repair thing, it's like, hey, you know, we always try to be really fast, but for a lot of our clients, you know, time is money. We have a 20 % priority boost. So if you want us to get this done for sure by the end of the week, and if we don't charge it, we basically put you to the front of the line and then you don't have to worry about it. Okay. I'm with that. Yeah, that's good. Because if I mix that, I have like a prepayment incentive.

14:36So yeah, and I mean, speed's all margin. And in this business, margin matters a lot. Ton. So I would say you can tack that onto the initial here. Yeah. But if we can get the average ticket up to that 2, 3, 4K because of this motion, and then you add your speed piece in, all of a sudden you guys can start doing 2, 3, 4 repairs a day. It's like doing a full roof replacement a day. That's what I'm saying. That's why I love the repairs because I'm not competing with anybody on it. These guys think they're too good for it. Yeah. I just like it because if I can, I love high volume businesses. Yeah. Just because there's more stability.

15:09The reps get way more, like the sales reps get way more reps. And because the sales cycle is much shorter, there's way less administrative headache with the insurance and the payment that's delayed. There's basically no cash flow constraints with the business. And you can just, and then you just add more of these. And that literally becomes the machine. There's a lot of things that are very exciting right now. And it's also new and whatever. Sure. But like, we need to knock more doors and we sell more repairs. Gotcha. How's that set? That says really well with me. I mean, I came here for some clear direction, and I feel I have actionable steps on when it's to have happen.

15:43So it's just a matter of debriefing it with the team and putting systems in play. Simple? Very. Cool. Appreciate you, man. Nice to meet you, bro. I think we have a little scaling roadmap. What's headcount right now? Four, five, once Alejandro, my sales guy, joins. Alejandro. Alejandro. Where are we at? So that's going to be one to four to five to nine. Yep. You're right in this little transition here. So what we were talking about today was basically specializing our product. Okay. Right. From a marketing perspective, the free stuff you've already on your way with this in terms of making the content.

16:16So you're on the right direction with that. Sure. From a sales perspective, you're going to probably have to track this maybe a little bit more than you are right now because right now it's you. But as the team scales up, this is going to probably be the next piece that you're going to want to have to install. and then you do it sounds like you have better tracking on the back end because you have some experience there but in order to get to this next level over here that's what we have to basically check this box off and you have about half of them so i think you are ready to like gas this so um with this i want you to think about salespeople as your new customers or your avatar yeah and some of the marketing that you're going to do is to go get these guys so that all of a sudden you can have four guys on your team or five guys on your team and you can probably easily manage that on your own.

17:00And then that's, what's going to allow you to unlock this. I think, and that's again, with, with volume comes reliability and with reliability, you can get, you can, you can decrease costs because you can forecast. And so fundamentally what you're, what you're discussing is like, I can start forecasting out that if I know I'm going to hit this volume, then I can cut my cost basis in half or by two thirds. It's like, okay, yeah. And that's how business is done. Yeah. Right. In the beginning, it's always super rocky because everything's really volatile and it's feast or famine. That's why I like the reliability of this in the beginning.

17:26So we get cashflow and there's a heartbeat in the business. and then everyone just kind of like water starts flowing through the pipes straightforward though yeah like it well i want every entrepreneur to win and so i think what's more important or more interesting is what actually happened when he executed all the stuff um that outlined for him over the next 90 days and so that's we're going to show you give me the update so what was what was revenue three months ago again so it was a little under 32 000 and then um i guess it's been 90 days since then ish so uh what is it now so right now i am at 250 000 hell yeah like yeah it's like 247 oh yeah but it's been rolling bro like when i came on i was sub 20 reviews so i'm at 62 five-star reviews 85 services built salt and collected on whereas i was at 32 over there hired the repair tech it's been a lot of stuff dude yeah i've never tried this hard in my entire freaking life and i absolutely love this which things did you do that made the biggest impact So I went all in on door to door first off, and I had to figure out how to structure that.

18:29Alex, who genuinely helped me the most, I would say. So I actually went and got an ERP system. So it's like a custom CRM that is built for us. It is allowing me to run the jobs the way that I want. So now that I have the repair tech, I am doing three to five services every single day. My guy, it's been wild too, because he actually ended up having meniscus surgery yesterday. And his brother filled in his role. So when they both come on at the same time, I'm going to take that three to five services a day, and it's really going to look like six to eight. And I am just going to win by just absolute violence.

19:05I have decided. I think the first thing we said was go all in on door-to-door as primary growth engine. Yes. The VSL. So I'm shooting the VSL come next week. Your prescription idea has been monumental, too, in terms of I'm going to talk to people about, Hey, let's say all the gutter guards. There's one option that, no, you don't want this because of X, Y, Z. And then I'm prescribing what they need. So that consultative aspect to selling is increasing trust a lot. And then people are just taking up recommendations. The menu upsell, baby. Yeah. So, so tweak the, tweak the motion went all in on door to door, tweak the tech so you could sell more.

19:44Um, and yeah, and you're getting in only the, the big dogs in terms of producers, right? Oh, yeah. It sounds like a pretty productive 90 days. All right. And so that was this episode of Scale or Fail. Stay tuned for the next one.