 Hey, good afternoon everybody. Tom Stewart here. I'm with Liz Trotter and this is smart business moves Hey y'all We're Live it is August 10th, and this is leadership month We're bringing leadership today You know Tom you and I really do both like this topic so even though we got thrown a little curve ball today This is a good topic. I think for us to get a little curve ball No, we're gonna have fun with us. We will dug out some of our favorite leadership books So we're gonna be talking about them and And I guess our audience can participate as well and we can drop some titles and chat and You know do a little deep dive on that But you know what today is I? Bet some kind of data came from somewhere that we need to hear about Today is the day that the consumer price index numbers come out every month All right, why don't you know what Tom? Have you ever explained to the audience what the consumer price index is? It's a survey not probably have it. We'll take just a second This is done through the Department of Labor not sure why maybe they didn't know where else to stick it but there is Right then and they didn't know where out maybe you know, maybe maybe that's a logical place I don't know Like a labor thing to me seems like it's more of a commerce thing, but it is tied to employment. That's a component of it But there is what they call a basket of goods And I don't know what that is exactly what to probably Google it and figure it out But it's a representative sample of stuff that consumers buy hence consumer price index And it measures the change in price from those items from one month to the next and also compares it from You know this month this year to August of well in this case it would be July of last year and The whole Thing is if the price goes up, you know if the average price increase is five percent higher this year for that same basket of goods than what it was last year then inflation is five percent and We've been tracking those numbers Recently because the numbers have been getting high the year over year number for June was like 9.1% Which is as high as we've seen it in like 47 years you have to go back to like the early 80s to have to define the number that I And you know, I guess I kind of remember the early 80s, but I really wasn't At least not the stuff that you would find in the basket of goods Maybe Because just a quick Google tells us that the things that are in the basket of goods only stay in there for four years And then they come out and then do you have a list of some of the things that's in the basket? Well, I thought it was actually pretty interesting. So it changes all the time based on the different Prices so items for sampling at each outlet are selected randomly based on odds Proportional to how much spending they attract relative to category alternatives in term of brand variety and size or weight so It changes and there are a total this is interesting. I thought Basic indexes for a 211 good services and housing item categories for 32 geographic area areas Subdividing all US urban areas. So it's a pretty Big deal when they're choosing these. I'm like there's a lot of reading here. That's just what I got you know off the Quick Google search, but there's when they try to deconstruct the basket of goods. That's not an easy answer No, like corn I was expecting 211 things corn rent, you know something but no And there are different components of it and in some segments are up a lot more than others Housing especially like rent right housing is double digits crazy Expensive which is taking money away from the consumer for other things There's two CPI numbers one is the overall number and then they have another number. They call the course consumer price index where You know While they do this, I'm not sure but they take out energy which includes gasoline fuel They take out food because those are typically more volatile and So the core was like six point one percent I believe which was a five percent I mean point five percent a half percent increase over what it was a Month ago No, a year ago rather is point three percent over month a month So core is going up higher and supposedly that's what the Federal Reserve looks at more when they're figuring out How much they want to raise their interest rates? So The inflation numbers dropped, but I'll share my screen here show you a graph just so we don't get to it Excited just because the rate of inflation dropped doesn't mean that The problem is fixed that just means that the graph is dropped here and it was up here It's still Compared to you know, historically what it has been over the last Plus years Crazy hi, I really like the graph the graph really illustrates it well and quickly We are we've got a long way to go before we're we're out of the woods on this and prices And this means that prices are still going to continue to go up for the foreseeable future. There's People are thinking that you know, it might be a couple of years down the road before we actually see inflation rates getting down to You know two percent two percent's kind of what the Federal Reserve wants it to be But they're going to continue to raise interest rates Maybe not as as as bigger increases as what they've had recently, but maybe they will we really don't know There's a speculation that the jobs market will be cooling off because of all of this and I've been just reading that supposedly You know more work not supposedly more more companies have been announcing that they're going to be like doing some layoffs or stop hiring Supposedly the labor market is getting softer. Have you heard much from The people you work with in your success circles, are they having an easier time finding running technicians these days so everybody has In a much better state right now everybody there are about 65 people in the circles and Across the board. I would say 97% of all of the companies are like. Yeah, things are better We are either fully staffed or over staff, but people still aren't Unnervous There's still like How's it Nobody has confidence that it's going to stay this way for long just because coming off of such hard hiring times People are still nervous I'm guessing it's going to get Easier and easier to find people. I mean saying easy. It's a relative term But I'm thinking it's going to be You know relative sense that there's going to be more people in the marketplace looking for work Which is which is good news on the flip side of it, you know as inflation goes up and people are You know fuel prices are down. That's a good thing, but housing costs, especially rental Rates are going up at an alarming rate and when people are happy to make the same rentals, that's a good That's good news for I'm not bemoaning that one And we had it we went through a period of time too when it was a real struggle to get people to pay their rent So it's kind of like this seems fair All right, this seems really fair You have rentals so Okay that's what we have to look forward to and tomorrow the Producer price index number comes out and it'll be interesting to see you know if that's You know, so thinking that that was going to come down a little bit too because a lot of that gets into commodities and raw materials and stuff that As a rule those prices have been coming down quite a bit Okay, so Tom, so let's take this information that we got that you brought to us. Thank you and How do we translate that into our topic of the month leadership, right? How do we use that information as the leaders of our companies? What do we what do we need to be thinking about talking about? planning for any any thoughts there one of the Key responsibilities, you know, we talk about this in in in foundations and When we do foundations next March will be talk one of the things we'll be talking about is You know, what is what are the job responsibilities of a CEO talk about leadership? CEO is the head leader in every organization and you know, there are a lot of business owners that that join us We don't always think of ourselves as CEOs, but we are we're the Officer the top manager top leader in our business and probably the most not probably the most important thing that the CEO needs to do with the organization is lead the strategic planning part of the business and You know as the labor market changes as You know prices change as consumer Ability to buy your service changes all of that really gets into, you know your strategy What is your current strategy and what adjustments do you make to your strategy? Based upon changing conditions, you know, we should all have a plan and we all should have started You know our year with a plan and a budget These are the major Rocks if you will that we were going to be managing in our Business throughout the year, but it's really important to keep an eye on the situation that your business is is is doing business in and as the situation changes as you You know get new data if the situation changes you need to often change with it Right You at least have to be looking at it and thinking about how does this going to impact me and our business? How are we do we need to change and if we do what do we need to change? So you can be looking at it and I think the the biggest thing there is you need to have it be a plan and Not even if your plan is not right a plan that is not the perfect plan is better than no plan Where you're just being buffeted by whatever comes along, right? so I think a lot of times what at least what I run into in the circles is People don't want to They don't want to create a plan because they don't know But I don't know what's going to happen. Nobody knows. Nobody knows what's going to happen It's not you think anybody had a clue that COVID was gonna happen the way that it did right And everybody's plans were like poof gone. That's it I have no idea scrap that start over But that's okay. You have a place to start from so you got to have something to start from and move forward but you know, it's really really kind of awesome about that is a Lot of the businesses that that I work with that I know made a lot of changes in their business model and their strategy because of COVID Help them better deal with it and as part of that They're a lot more efficient. They're a lot more profitable now They're making the generating more gross profit off of the homes that they clean is a combination of pricing It's a combination of better using their workforce solo cleaners driving their own car leaving from home Which is a competitive advantage moving into, you know, the situation we have now with inflation and our costs going up Our labor rates are still going up salaries are still going up the numbers that came out today show That salaries are still going up. We're gonna have to pay more in the future than we are now to hire the same talent Okay, fine. We're gonna have to either Be more efficient with that so we can generate more revenue the same amount of labor and or we need to raise our rates and You know in part to answer your question We've been beating that drum for for a good while now, but we need to improve our pricing raise our rates We still need to be doing that It's gonna get harder though once, you know, if the leads start slowing down a little bit if You know, we don't I'm starting to see some numbers that that lead me to believe that that that there is You know from the industry Maybe we're starting to see a little bit of slowdown and in the demand for house cleaning services and to stand to figure that would happen because of So there's so much money to go around and for people that happen to make a decision that they need to cut back on their house Well, I think another thing that we're seeing more of too is People get nervous and so they either pause or cancel their cleaning not to say they won't come back again when they realize Oh, I don't know how to clean I don't want to clean right, but they get nervous and they kind of panic So I know that over the course of June and July quite a few of the few of the companies that I work with saw Like wow numbers lost numbers that they had not seen and they weren't anticipating. They weren't expecting that and also Decrease leads coming in like oh, okay Gonna have to put a little bit more money out To to get those leads or at least got to put a little focus there and have to start doing something more than just Letting it run on autopilot. So we are seeing that The traditional reaction to that is okay demand starting to soften. I better back off on my the rates that I'm charging Yeah, I Would argue that you know, I mean it depends. There's a lot of different ways you can apply that You know that the top line, you know what you're charging per hour, you know, maybe you need to Slow that down a little bit But you always have homes that you're you're providing service to on a recurring basis that are underpriced and we want to be looking at those regardless and You know if you do that using the right tools you can Basically replace them that the gross profit that that you're getting off of those Several times over by doing rate increases. You might want to cleaning fewer homes and making more money doing it and All right, I'm glad you I'm really glad you brought that up because That is a real sticking point for people. They're like they don't want fewer customers They just they constantly are focusing on that customer number. I want to grow my customer base, you know I've got 300 customers. I want 350. I've got 350. I want 400 but really You and I are always saying you need to focus more on when you focus more on gross profit And I'm always focusing more on net profit, right? I'm like, I want you to reduce expenses too and get more money in in your in your purse there Yes, Tom, make sure that you have more money in your purse. So that you Used to see my purse I have seen your purse very large looks like a briefcase But either here or there but you're always focusing really much more on gross profit Like let's just get and be making more money off of each each labor Hour that we're sticking out there in the world, right? Make have more money coming back to us That gross profit is the fuel that powers everything all the good stuff that you aspire to do in your business we all had these visions of What we the good that we were going to do in the world and for our families and for ourselves by Being entrepreneurs and owner own business then you start doing it and you get smacked upside the head with the reality of You know how hard it is and you get smacked up beside the head enough You can't even forget, you know what it was that you're trying to do when you started But all those good things that that that you were aspiring to when you started all happened with gross profit You know, that's how you make better jobs. That's how you make provide better service. That's how you you know Provide a better, you know living in value for your for taking the risk of owning a business and Operating expenses are an issue. That's important too, but I Guess having studied the numbers and have have you know coached a number of cleaning businesses over the years The ones that are struggling to pay the bills not all the time, but more time and not is a gross profit issue They're not making enough The homes they're cleaning Rather than some expense item absolutely had totally agreed if they don't get that payroll percent of revenue number in check It doesn't really matter anything else that that's got to be the first concern The number one place that that everybody has to hit It's just too large of a chunk of the money that's leaving your company or our companies Focus on the gross profit from recurring clients and the quality of service during these inflationary times. Hey Robin You see Robin. Thanks for being here absolutely more so now and ever because You know, it's very possible that it's going to be a little bit tougher very early to say to what degree and how bad and for how long but You know, I think that we're starting to see see it a little bit in the numbers. I think that You see a lot of numbers. I mean that's I mean you're a data guy anyway And you enjoy looking at all those numbers. So you do spend a lot of time looking at it I mean, I I always look to you to know what's going on just because I know you do look at all of that stuff all the time And and you do have numbers to look at. Well, we we've started doing this program and We made central called McDrive. I'm kidding I came up with like immediately I was like, oh McDrive. He's gonna talk about McDrive Where where where where we help users of a central C You know what we refer to them as core KPIs, but you know where their numbers are and Where they potentially could be relative to to other people that use me central and It's it's it's kind of a coaching program it is a coaching program and we get an opportunity to look at a lot of numbers as part of that and The revenue number might might be the number of homes the number of homes are being cleaned each month be more precisely as Is is showing us starting to take down a little bit? All right, so let's let's talk about that though because that's kind of what we started with is the idea that Okay, that you shouldn't be focusing on the number of homes as much but Tom No, I'm just laughing because it here's the other part of that story for Those of you don't know our pricing model and made central is really based on the number of homes you clean each month And I've noticed that a number of our partners aren't quite clean as many homes each month as they notice it That's like, you know our billing may central billing has dropped a little bit Doesn't Where do we come up with that pricing model? I don't know So, you know what now? I think it works really well because you're gonna be really focused on helping people to get more clients But it is funny that you're focusing on number of clients instead of like making more money and gross profit Right. I'm doing the wrong thing. It's like Don't worry as you raise your rate for your homes make more money. That's good for them, you know I mean central makes less money, but yeah I don't know. He's I think you're talking yourself into price increases. Is that what it's just Yeah, you're not gonna be popular today Tom, sorry Also focusing a low-cost marketing efforts email and door hangers interesting Is that working for you Robin? Yeah, I want to hear about that too. Yeah I know a lot of people are going doing some door hanger work a lot more than we had seen over the past couple years More monthly clients being added Yeah, that seems like that's kind of a normal thing that'll happen People can't afford to have their houses clean twice a month because they're struggling a little bit Email is working. Oh, wow. Email is working. That's awesome. What's your what's your rate on email? What are you tell us some numbers? Open rate Return rate. What what are you doing there? I'd love to hear about that email has been such a dog for Like the last couple of years love to hear that that's working again. Yeah, there's Just changes I understand like Gmail has been making some changes that's making it a little bit harder to get Everybody's working against us from digital marketing, you know Apple and everything they're doing on that side, you know, they've made changes to make digital marketing They're doing Tom. What are they doing? Oh, well, it's this is more on the on the on the on the ad side And it particularly tying into Facebook marketing. They're making a lot more difficult to be Facebook marketing not necessarily email, but Understand Google is doing some things to make email more more difficult to yeah Everybody wants their piece of the pie. Everybody wants to be making a little bit more money. So a lot I heard that the Justice Department is looking at charging Google with some Exactly what it was but it's something to do with with monopolistic practices So, wow This or not. All right. How could that not help us? That would have to help us. Yeah, some of the other like Handy Yeah The guy who I've seen a hand or hand who used to run handy that got bought by Angie and now I've seen run he's the CEO of handy but Companies like that are getting all over Google because that earlier fair shape Google's getting more into Hey, you don't need to go those guys. We you know here. We'll recommend, you know vendors to you I saw an interview from from them this morning and they're talking about that You know the demand for the service that they sell was dropping But the number of home service contractors that are signing up with with Angie Yeah, pretty sharply, which means they're not getting as much work as they used to through their normal channels And they're they're feeling like they have to reach out because Angie is not that makes sense though I mean, that's not just house cleaning. That's right Speaks to What we're talking about that things are typing right when they start going to Places like Angie. Do you think with inflation that we are reaching a ceiling on price increases to be passed on the client? A little bit about that No, I wouldn't I wouldn't look at it that way we need to be mindful. I mean, it's You know Econ 101, you know, you raise your prices that Increases the supply side. It's easier to hire people because theoretically you can pay more It's going to go down But you know, we need to look at price increases more practically Everybody has customers that should be getting a rate adjusted. That's my belief. We should always be doing rated adjustments We talked about you should always be recruiting Yeah, you should always be recruiting, but you should always be doing great adjustments We in the MC live event the main central live event that that we've done the last several times most recently a few weeks ago you weren't town you Your event as well we We show a graph and we see this from company to company where you can look at the average revenue per hour for a recurring home It can look like a solid number. It might be like 60 70 dollars I was like, wow, that is awesome But you graph it from the home that's got the lowest revenue per hour to the home that's got the highest revenue per hour You got a ton of homes that are down there 30 40 dollars an hour for later And if you raise those rates you do rate adjustments there then you're you can go from You know, you can increase your average rate by six or seven bucks in the examples that that we've shown In all bottom line, basically you're doubling your net profit if you're able to do that And you can do I mean it's You think about how hard you have to work over the course of the month Do all the things that you need to do to clean all the homes that you need to clean and get those people to pay you And pay your bills and have something left over and say that you can double that amount by doing some rate adjustments It's silly not to do that little extra stuff. Yeah um, we are so afraid that of losing customers and Actually just that they're just afraid of losing customers that it's hard to get past that I wish we could come actually i'm going to challenge you. This is something that you are really good at You need to find a way to Get to create some sort of a visualization for people to be able to understand how It is more important to raise your rates and clean you are better off cleaning fewer jobs And making more money people just can't grasp their They can't grasp that idea. They kind of get it when you're talking. They're like, yes, that makes sense That makes sense now. It's time to do price increases, but I don't want to lose any clients All right, they can't they can't get the things together there Okay This is going to sound like we scripted this but if anybody that really knows how we do this knows that that couldn't happen because we never script anything That would require too much Different foundations. So yeah, that's true foundations. We we we do script that All right. I love it. What do we got here tom? We have Let me see if I can Yeah, make it bigger It's hard but when the numbers are so tiny I have a huge screen My business partner made me go out and buy this ginormous screen I'm working from from from the office. It's kind of silly. I've got my I never work here But I need to start I need to start coming in the office I never do either. It's terrible. All right, bigger. You can make it bigger because look you have the whole right hand side of your screen is Yeah, but some things are going to be falling off, but They are okay. We'll make we'll make this work. Okay. Oh, that's so much better tom. Okay, so The format that we typically use when you build spreadsheets for modeling is the numbers that we're supposed to change are kind of this peach color and that's kind of a convention that Excel uses so we just stick with it and everything else here calculates and the way this works is Say you've got a bill rate per job and what does make it up and say $200 a job I think that's maybe that's a little high for most people call it As an average. Yeah It's like the company that's maybe they're doing 500 Jobs a month. Okay. Okay so What would be happening there is 500 jobs a month at 175? That would be a revenue of 87 500 a month revenue Um, let's pretend that your payroll to revenue number is 40 percent. Okay So at that point you're going to have to get sold would be 35 000 Payroll to revenue Approxied for cost to get sold So I need to explain that more. I mean if you were with us Years ago, we we took a like a walk through the the wilderness for like a month talking about this Was it only a month? All right, so I know a lot of so we're running into this a little bit So I do want to clarify this so a lot of you have bookkeepers That don't think that You have any cost of goods sold and they don't have your charter account set up this way And they don't want to set it up this way Tom, can you explain a little bit of what what we're calling cost of goods sold and why we're why we're using a cost of goods sold model Yeah, most bookkeepers. Let's say bookkeepers. I'm gonna say cpa's. Yeah accountants. Thank you their job their job At least they think their job is to do your taxes And to do your taxes all they care about is Revenue, which is the money that people paid you they care about all your expenses in one big bucket They don't really even care what those expenses are In whatever is leftovers net profit. That's what you're you're you're paying taxes on We not only I mean, it's just kind of general practice from a management accounting standpoint But you separate your variable cost from your Variable costs traditionally are referred to as cost of goods So The thinking point comes in from like a nerdy accounting standpoint. We're not selling goods or selling services fine services It's the same thing Come closer to your speaker If you could Okay, much better um Cost of services sold so If you clean one extra home What additional costs do you realize? and You know, you're using a little more window cleaner You're you know using you know another vacuum cleaner bag But all of that's really what they call in material from an accounting standpoint In the bigger sense, you want to know what that is and you want to track it and you want to know it But for day-to-day planning purposes, I suggest for most cleaning companies don't get You know, you spend more time, you know trying to to get a really accurate number and not enough time Managing your business based on what you already know so I want to say proxy what I'm really talking about is Uh, this payroll to revenue number, which is basically the amount of Every dollar that comes in from cleaning what percentage of that goes to to the technicians that that that are cleaning the home for you and you can calculate that on a weekly basis by looking at your Payroll and payroll expenses that go to your your your cleaning technicians divided by the revenue that those technicians generated That's another discussion, but it's it's an easy calculation to do and you need to be tracking that every payroll period So my payroll to revenue is 40. What that means is 40 cents out of every dollar that comes in Is variable it goes to my technicians. We're going to call that cost a good solve So this 35 thousand dollars basically is 40 percent of the 87 five So every home I clean 40 cents out of every dollar is going to go there At the end of the month, whatever's left over is the difference to take my revenue across to good solve Which is this 52 500 dollars? What's the money I use to pay all my other bills pay my rent? okay All the fun stuff you want to do parties or your employees marketing the extra help that you're going to have in your office Yeah, your office staff um What's left over after that is all that stuff For companies that are struggling though to make the numbers work to make enough money to have enough money in the bank to Make payroll and to pay the other bills and keep a roof over your head And and actually have profit left over for that a reward for taking the risk and doing all the hard work More times than not it's because this percentage here is too high And this number the cost to get sold is a ratio to revenues too high And if it's too high You're never going to clean enough homes to make enough money Do the things that you want to do So that's why we we worry about uh payroll to revenue so much or or or gross profit So if I want to raise rates, uh, it scares me Because if I do that i'm going to lose customers. Yes, I raise my rates all my customers are going to fire me Or maybe not all of them but enough of them that I can't afford it yeah so What this is is a calculator That allows us to Once we know what our average bill rate is and how many jobs that we're doing And what our payroll to revenue is we can play what if analysis The fancy word for that is sensitivity analysis, but it's like what if games, okay? Yeah, what if And if you see right here, I set the rate increase to zero and expected job loss to zero I've got two columns here with numbers in them One of them says Hourly or allowed hours pay and the other is fees but Flip fee split pay or commission pay so If I raise my rates 10 percent So allowed hours just for people that don't know allowed hours is the same thing as job ticket hour job ticket hour And then fee split is the same thing as percentage All right or commission some people call it commitment too. All right, so we're good If I raise my rates across the board 10 percent My bill rate per job goes from 175 to 192 50 In both columns. Okay. Yep For the moment, I'm going to say I'm losing zero jobs or zero percent So I'm still doing 500 jobs a month, but my revenue goes up to 96,000 to 50 If I'm paying hourly or job ticket hour My cost of goods sold is still at $35,000 because I'm paying Based on the allowed hours or I'm just paying a flat hourly rate. Okay So over here my cost of goods sold or payroll to revenue is 40 percent It goes down to 36.36 percent Because I did the rate increase and I'm getting more money, but my cost to get sold is the same My gross profit goes up to 61,000 from 52. I got an extra gross profit of 8,750 That's the same as cleaning an extra 45 jobs a month In terms of gross profit without having to clean anything more That's like a nine percent increase in In gross profit nice Sweet nice. Yeah And if I go over to fee split It looks a little bit different when I get down here to cost a good sold because I'm paying commission. So if I raise My bill rate that gets passed over to my technicians So in that case my cost to get sold is still fixed at 40 percent. So my payroll Goes up to 38 five, which leaves me 57 750 I've got 5200 leftovers extra gross profit. That's another 27 Palms. Okay. Yeah What happens if we say, okay, well, I'm going to do a 10% rate increase I'm going to lose some of my customers, but out of the 500 how many do we think we quit? Would 50 quit? Wow, that's a lot. I don't think 50 are quitting now With 25 I don't know. I've never done a rate increase with more than at the end of it Two or three Quitting maybe usually tell people in the circles tom that if you're losing If you're losing three percent or less, dude, that's that's good So let's see three percent so All these numbers up here remain the same Because this is before the expected job loss Yeah, I'm going to scroll down here. And this is after the expected job loss. So Losing three percent. Basically. I'm losing 15 jobs a month Which gives me 485 I applied the new bill rate to 485 jobs. I've got revenue of 93 three Cost a good sold to 33 nine gross profit of 59 Extra revenue almost 7,600 $900 an extra revenue with the rate increase and a 3% loss That's an extra 35 homes or 7% So I've got an extra $6,900 Left over every month and I wouldn't have had before with a 10% increase and a 3% customer loss Yeah, and that's after the customer those 3% customers. They're gone. Yeah, there's a customer Those 15 jobs are gone one And if I'm doing and people say yeah, but I pay commission so it's you know Give you that calculation too. And it winds up to be $3,500 extra That you would would have left over After you're doing the same calculation with with with commission pay And the cool thing about commission pay is your technicians are now making more money as well So you're keeping up with with with inflation and you don't have to give anybody raises You don't have to do anything there. So And over the hourly part, you know, this is all awesome You know, you got 6,900 left over But if inflation is why you're doing this Your technicians are getting hit harder than you know, it's it's hard. It's not harder than anybody Keep your business going to keep them going. You're going to want to pass some of that along to them. Anyway, right But you'll have it to do it is the cool part. This is how you create better jobs. This is how you You know create, you know better service. This is how you create a more awesome company is by Generating more gross profit a stronger company That can withstand much more So maybe maybe it's five percent, you know, I don't think it would be I mean three percent And this is what happens. We talk about this in foundations. It's like it's a negotiation Very rarely does somebody say, okay, I got your rate increase letter. I quit That's a rate increase letter, but dog. I still want my home clean. Can I talk to you about it? And they might not ask that way, but you know, you'll want to talk to them about it It's like, you know, I can't afford this. Okay. Well, let's figure out what we can do And maybe we can adjust the scope of work. Maybe we can You know, maybe there's a couple bucks, you know, you can can can take off the maybe there's something you can do to To make it a win-win without losing All right, so this is the argument that I get on this tom when I try to talk to people, you know We had get this argument in foundations too people say No, I'm not going to negotiate my price. My price is my price. I'm a business I shouldn't have to negotiate my price. They take it or they leave it Well, um That's one way to look at it and one of your core values and if You know, that's the way you want to do it. I mean you it's your business You can get your your your your privilege do it. I can tell you though if you want to be more profitable It doesn't mean that you just basically just give it away and do what, you know, all your you're, you know Negotiation doesn't mean giving in Negotiation means looking for something that looks like a win-win that you can keep the customer and still add To this gross profit number Still make more money If you negotiate negotiate well, you will have more gross profit. You'll have more net profit You'll be creating more value for you your employees your customers Everybody wins And an interesting just a little tiny I'm not going to call it a fact because it's not a fact but Point of reference The businesses that we've ever had that conversation with have all been small And we don't have that conversation with large businesses that are regularly Putting price increases in and are growing that conversation doesn't come up. They're happy to negotiate. They understand the idea of negotiation So it's it's a sticking point with a mindset many times this idea that No, I have to do this because otherwise i'm not a real company. It's just a a little bit of a A misnomer I think about What people think a real company is sometimes so well it's I get that but you you really Don't want to As a rule, I mean there could be you know Situationally, you've got a customer that you want to get rid of for other reasons and you give them a rate increase And and hope that they say they can't afford it You say I understand we'll miss you Um, good luck. Mrs. Johnson. Yes. I hear some here are some companies in the area that you might be interested in So you're you know, you're less favorite competitor Less favorite business owners All right. This is awesome. Tom. Thank you. Um, maybe is it possible to share this? Sure You can can drop me an email tom at made central.com and i'll i'll be glad to to share it with you until you can run your own what-if analysis and The thing that I think is really cool is if you really are concerned. Okay, what if I yeah that thanks Tom That's what I was talking about 10 percent 10 percent. I'm doing commission. Okay. I'm I'm losing my but I go to even 10 loss Which is unfathomable I didn't like that. That's not even part of my working vocabulary. I don't know where that came from That's hard to believe. You know, I've still got $2,600 over here on hourly enough I'm doing fee split and a 10 loss and 10 increase Hey, I wouldn't want to do that. That's not a trade. That's not a trade worth making. Nope, but then you can all So two things there. You're probably not increasing all 500 of those jobs all at one time So let's say that you did raise it too much, right? You raised it too high You use 10 and for whatever reason your market can't handle it. You just raised them three months ago. Whatever Whatever the reason is and You have You've gotten 10 percent of your people that said, nope. I'm not doing it. Here's the time to negotiate. Okay Maybe this was not your best strategic move You don't have to every time you do something in your company If it doesn't work out, it doesn't mean that you have to stay wedded to that Most of the decisions that we're making we can change we can change our minds You know what? This was not my best decision You find out that your favorite customer mrs. Johnson who's been with you for 15 years and has always paid really well And has never been a problem. She says she's gonna have to cancel. She can't afford it You might want to rethink that y'all you might want to rethink that maybe this wasn't Maybe this wasn't the time. Maybe it wasn't maybe there was something wrong with your letter I don't know but maybe rethink it And that's one of the reasons why we recommend that you not Raise every single person all the same time. Right Tom. Yes, absolutely You want to ideally especially in 2022 There was a time when rate increases were a lot more Arduous, I mean it was just a lot of work and a lot of you know, a lot of manual stuff going on. It was You know, god, I hate you know So I hate being rate increases Yeah, and it literally took resources a ton of time to do that you had to Individually find them do the math on how much this one client needs to be. Oh my gosh. It was so hard So hard, but you can you can you can do this with a few clickable buttons in 2022 in which case You want to get on some type of cadence at least once a month. You want to be looking at You know customers that you've had at an old rate and You know when inflation is 1% or less that an annual increase probably makes sense The rate increases that we've been doing within castle keepers We say that you know, we're having to do rate increase for all the reasons that we're inflation and so on and so forth And we can't promise you that this will be the last increase you'll see this year We set the expectation That you know, this isn't necessarily an annual thing anymore because Great inflation dropped from 9.1 percent to 8.5 percent, but that still means year over year You know prices are going up another 8 percent. So You know doing two and three percent re it increases in an annual basis. You're way falling behind. Yeah I really like the strategy of Of talking to the clients and explaining that this might not be This might not be the we we hope that it will be the last one this year, but I like to use the verbage. We're not optimistic the way things are going Wouldn't hold my breath. Yeah, because things are tough So tom, I'm so glad that we have six more minutes here that we can talk about leadership books Well, we had a plan we had a plan Just like this is a perfect example You have a plan if things go in a different direction, you can change your plan And it's a great thing about running your own business You know, I've told you about my father-in-law who uh was a colonel in the marine corps and one of his favorite savings was Make a plan and deviate because like He was like on the battlefield and you know, well, it's flying and so forth So you always went out with a plan But as soon as the bullets start flying You deviated from that plan based on new information Oh goodness, they're coming from over there now. So instead of, you know, we're going to do something different Yeah, and business is kind of the same way, you know once you need a plan, but You know, once it's gay time and once things actually start happening and especially knowing your numbers And once you're able to start seeing the numbers You deviate based on those numbers And I'm telling people all the time in the circles So like I want to see their plan in advance because we do quarterly plans, right? And so we work by quarter Yes, you have to have a plan But if you're sticking to your plan all the time, there's a problem there You have you're you're not actually evaluating what's happening You should be more often than not you should be changing your plan up as you get closer That's that's the standard. That's what we want Change based on what is the incoming data that you have currently If you're not doing that Chances aren't good that you're growing in a smart way because If everything around you Is static if everything around you never changes Then you could argue that well, I'm not going to change anything if it ain't broke don't fix it But everything around us is changing and changing faster now than it then it used to from inflation and the labor market what's happening, you know and on the consumer side And if we aren't making changes along with that plus we need to be making changes to grow our business What what core kpis are we improving a lot and they're not going to improve Occasionally they'll improve accidentally Sometimes they'll get better for reasons you don't even I did nothing and and we're making more money. I've seen that happen Yep, me too. It's an accident. Yeah, definitely making more money. I don't even know what happened And we have also really seen small companies get very lucky For quite a long time You can get very lucky with a lot of stuff doing just some basic stuff, but at some time Luck runs out Then you have to start being a little bit more strategic And I'm really I'm really thinking the economy is going to get tougher here over the months ahead and I'm really thinking That there's going to be You know the competitive forces are going to change and I wouldn't surprise me to see some some of our competitors Deciding if they no longer want to be competitors and get out of business It could be some acquisition opportunities And this gets into I mean a lot of things if anything any big purchases you're thinking about making I mean if you need to make it now or or think you found a real deal Go ahead and do it But if it's something that you know, I could do that now or I could do it six months or a year from now I'm I would be waiting six months or a year from now odds are you're gonna gonna find better opportunities Huh? I think that was a really good little piece of the advice to leave people with for this leadership topic today Even though we didn't hit any of our stacks of books Yeah, I gotta put all these back now, but What's that one that you left in that stack over there tom What's that one? This is an awesome book everybody should have a hundred or so of these And if you don't I know where you can get a hundred or so Um, it actually is it actually is a a good book So, uh, we just happen to have a lot of them if you want one We'll let us know and when we see you at foundations or at one of the next I promise you will be giving these away at foundations. Um, or maybe some other life of that. I kind of I saw this on the bookshelf. So no when we will talk about this today Yeah, why haven't we gotten it out? We have about a hundred or so of these. We um, we inherited them You got a good deal. That was a good deal. That was at the Marcus Sheridan event and where was it down Tucson? Tucson not Tulsa not Tulsa Those are different places. Yeah, it was a good time there All right. Well robin. Thanks for joining us live today and having a lot of interesting input for us. Appreciate that And what are we doing next week, Tom? Um, but uh, we we we're going to deviate a little bit from from leadership air and air and lash is going to be with us from ARC si And we're going to be playing playing phc jeopardy um, so it's phc technician certification program, uh the arc see recognized online training program for cleaning technicians We have a jeopardy game that we actually introduced a convention last year. Yeah, it was fun We're uh air is going to join us and we're going to we're going to play jeopardy. So if you think you know your your your stuff when it comes to the science of cleaning and the chemistry and safety and methods of materials and equipment and so on and so forth Come on and we'll test that we'll get to compete against each other in a live Say jeopardy, but really isn't jeopardy. I I'm not I'm not saying that right. It's like a bar trivia game We all get an account we can all like play on our phones and answer the questions and we can stay you know, everybody's score at the end of each question and Yeah, I don't know it's a bar Maybe we can have a drink while we're doing it For you guys, that's a little bit later than us two o'clock in the afternoon. I guess you can drink it too, right? What's your point? All right, y'all bring beer, I guess It is the top of the hour. So we'll be here next wednesday with erin and Phc trivia until then you guys have a good week. Take care. Thanks. We'll see you next week. Bye. Bye. Yeah