 Hey, good afternoon everybody Tom Stewart here with Liz Trotter our guest today is Megan likes. This is smart business moves Hello, okay you guys we are not late because of me. I just want to put that out there Wait, we're not late because of me either, right? It's Tom. No, this is all the time It's always my fault. It's always my fault And then I ask a lot of questions so Tom you're not you're not trying to play the victim for us all of a sudden are you no, I mean, it's not playing Oh for Tom with this hundred dollar mouse over here you're gonna Megan I was telling Liz that you know I've never used a mouse that cost more than $20 in my life, but I splurged on this thing here is a logitech And it's like a hundred dollar mouse and It is so awesome. I don't even have to touch it. I can just with my my mind It'll move and do what it's supposed to do it is It's it's it's haven't if you ever want to splurge on any type of computer what not By this mouse, okay, I would like your affiliate link and because I'm realizing since I moved houses like three Two months ago two months ago feels like ten years ago, and I still don't actually have my mouse So you're I'm still using a trackpad at my desk right now at home. So yeah, send me your affiliate link We would have one list we don't have an affiliate link doing not now We need to have a sidebar conversation about this because I have I have some ideas But yes, it's very easy right now. You have two agenda items to talk to Megan about yeah. Oh boy I'm writing stuff down now. I can remember one thing Two things All right. How are you? We haven't seen you in a while. I know it's been a minute I can't remember the last time I was on the show, but you guys have gotten like big You guys have like a full calendar and you have a handler and it's like a whole thing. I love it It's I'm impressed. You professionalize the Daily Show to a new level I don't ever heard the saying Megan putting lipstick on a pig. Have you ever heard that thing? There you go. There you go. I like it If only you have the sausages made I was trying to share this out so that people can follow along with us because I think I think based on our brief Conversation, but may or may not have made us late. This is gonna be really fun. We're gonna this will be really helpful You guys know what happened yesterday and in again today, I do not Market we're not gonna talk about the market But we are gonna talk about the consumer price index because that's relevant to to what we're doing here Inflation I don't know what he's gonna say and I just him like I'm a doomsday. So my head We're already at like 42% inflation for the last 12 holy months. So tell me what you're gonna tell us Tom I love it. I want to hear it. Okay. Well, I'm trying to figure out how to make my new computer or Or something, huh? Here we go something Yeah, how about that? 42 inch screens on his desk Megan. I'm sorry. Did you say 42 to 42 inch screens? So he's 84 inches of monitor Four computers when he showed me the picture. I was like that looks like four computers or four screens. Yeah Okay, what are you gonna show us? Change that makes me happy, but well, you're gonna show me it was actually though expected to go down because gas prices are down and everything else and they announced this yesterday and you know, it's inflation is still increasing and You know stop market. Obviously, I didn't didn't do well yesterday. I think it did a little bit better today, but You know, I guess the thing we do this every every month Megan we do this and then we the jolts report comes out talking about, you know, there's two job openings for every person looking for a job Yeah, we're running the business. We need to know these things and we're gonna be talking about profitability today and being profitable and a highly inflationary world is Uncharted territory for anybody running a business today and last time, you know, we had inflation like this That was 40 plus years ago, right? Not seeing this so can you show us the chart that shows us this? Can you show us the the rolling 12 months number? I think that's the one I like to throw in people's face Our city averages so right now you're gonna make me look on the CPI Really fun episode we're like everybody go on your computers It should be here, right I feel like you just need to home data latest number That's where I am here But it doesn't give me the graph Stull is stull Tell a joke Liz. I want to I want to see a graph. I'm over here efforting as well But my mouse is not as silent as Tom's. Okay. I found it. Okay go to Go to the top economic releases No, sorry go up I'll keep going up. Oh you moved away. You're still there click on Bureau of Labor statistics again You were so close. All right. Now we need can you make that bigger? Yeah To win screen it is huge Okay, here. Can I share? You may share, why don't we do that you did it you did it click on This is nobody's idea of fun. This is not anybody's idea. Okay I want to come out this before we went on Megan was complimenting us for what a great job We've been doing with the shop. I did that publicly. It wasn't even okay Click on economic releases. This is worth though. This is worth the pain. Go ahead. Okay. All right No, just click it like use your fans like click it all the way. Yeah, I Am doing the drop down. Okay. Try latest releases Yeah, and then at the very the very first one in consumer price index. Oh Down below down below. No, okay. That that'll work consumer price index summary Perfect. Okay. Now scroll down. Oh We did it. Okay pause. That's the that's the table that I like and on the far right It has the unadjusted 12 months ended August 2022. So 8.3 percent. We did all that work to find 8.3 percent as our number I'm exhausted You're awesome. Okay, so 8.3 percent means that if you've not raised your prices by at least 8.3 percent in the past 12 months, you've lost money. It's come straight from your pocket as an owner, right? interesting things on here like Fuel oil 68.8 percent So if you have company cars and you're paying for gas if you're reimbursing employees for gas and you've not accounted for that in your pricing 70% increase in the past 12 months I Like to think about the food number. So like food at home 13.5 percent cost of eggs cost of milk cost of you know orange juice if you haven't given your employees raises by 13.5 percent like they're losing money from you as an employer and maybe looking around I don't know. Oh, how do you interpret this Tom? I stick up hearing my voice your turn. No, you're you're all over it I just you know use the mouse. I agree, you know About this a lot how important it is to stay on top of your pricing now more so than ever even if you know I've been in business 20 years and I've never really, you know, done a rate increase more than once a year Well, that was then and this is now and you might have to do several in great increases a year to Keep up with with with what's going on inflation because you know the 8.3 is year over year And they're talking about it's not even going down that number keeps getting bigger But even totally true. I gave a talk in May and it was 9.6 So I haven't actually looked at this in space. So we've gone down This is true. It got bigger it got month-over-month bigger by a smidge point over here. Yeah, you lie. It was When we have rolling 12 months, you know, we were also accounting for you know, last fall This is the this is the the headline number the core number Which doesn't have energy and food for whatever reason that's supposed to be more significant that either I think it will give it to you in words. It's not super great, but it did have it. Yeah, go up. Yeah, and all those small word Yeah, in there. I think it will have Three for seasonal adjustment increases in shelter food medical care with the largest Increases for most offset by 10.6% decline in the gasoline index Food index continues to rot. I mean, this is why are we talking about this? It's depressing No Yeah, we need to know we need to How to be profitable, right? Yeah So third paragraph first line the index for all items less food and energy rose 0.6% in August So we looked at the weighted one. It was only 0.1 But that was because gas went down so gas helped take us to the way So this is basically telling us if you want to keep up the inflation You have to be raising your prices by at least 1% every month Well, and if you scroll down Tom, it will say more than 1% actually Yeah, like 1 to 2% just to keep up with inflation every month you you realize Megan that I I teach a philosophy of you know, the power of negative thinking Are you familiar with that? No, sure power and negative thinking stop screen change and watch you Know if you're being serious or not It's a thing you can Google it, you know, it's kind of the the opposite end of the spectrum of like, you know being Polly Anish is on one end and and Managing based on negative thinking is the other and it doesn't mean that you're you're losing or you you know You think that that that all hope is lost But it's looking at any opportunity or any situation or any decision that needs to be made and Asking, okay, what are all the ways that this could go bad? What are all of the unintended consequences, you know what it lives you've worked with me before, you know, I'm pretty good at this Like can you stop sharing so I can see you change change the word negative to critical Like whenever he says this I'm like I always like to think of it in terms of the power of critical thinking because that does it's not as much of a Trigger as the power of negative thinking So we're talking about like the productiveness that comes from disaster planning. Is that is that what we're talking about? It's not no disaster planning is a lot more disciplined and a lot more work negative thinking is like, okay before we do those Books written about it there if they call it negative thinking, but I'll accept it's too much of a trigger Yeah, well when he says it to me I'm like I don't want to be here like that sounds toxic and like I don't want to be in a place of negative thinking like wrong show Like the the barricade goes up so quickly that you can't make your point Tom So that's why you have to go critical Yeah, just It's good to know it's good to know the unintended consequences and what can go wrong and Take steps to keep those bad things from happening. So you're getting the good outcomes that that that you're wanting and Have you read the worry cure? Huh? Have you read the worry cure? No There's a book called the worry cure and I I am a like a chronic warrior to a very big fault like and I am Third generation like chronic warrior and I am less chronically a warrior than my mother and my mother's mother But I I like my husband gets in a car and I spend the entire time I know he's in a car thinking about the car crash that's going to happen Because I'm a woman this happens like subconsciously while I'm having this meeting Right and while I'm like cooking dinner and while I you know like it's amazing what your brain can do And the worry cure helped me realize like what is unproductive worry? Right and what is rumination? And I feel like this all fits into your negative thinking idea If you can turn it into a productive exercise that doesn't waste brain power You can actually have like better outcomes and you can appreciate better I feel like that's where you're headed with it is the the productive worry part of it And you know, maybe a maybe a uh, uh easier way to swallow it is you know, what if tight thinking defensive driving courses I'm used to be a defensive driving instructor back when You know back in the day. I needed to do it because all my people were wrecking all of my cars and Hey, one of the one of them they teach is doing what if you know And you know, what if thinking that you're driving down the road and you're supposed to look at the car coming at you And you're supposed to be asking yourself What would I do if the tire blew out and that car came into you know, my lane where what would I do? And this is part of what they teach you for the national safety council defensive driving course four hours. Um I digress deeply That was the worst course ever. I can't believe we're talking about it live This is the this is the rabbit holes we end up on can we bring it back to why I wanted to talk to you, please? Yes, please All right, so I reached out because I have been A tenet says wow, tenet is bringing you back. Wow It's been a while We haven't I mean, I don't know She tagged you in a group tom, but you're not in the group And she's really excited to see you at foundations. So I just side note there another side note Oh, it's gonna be awesome. Yes, I know to the side note. I love all the side notes It keeps us on our toes Okay I had this huge breakthrough this huge epiphany about like who is Megan likes and what is she doing with her life? And you guys are related. So bear with me for just a minute. So I I have been stuck for four years for four years. I have been beating down this door of bookkeeping I've been saying that business owners have to have Good books like to me it was like a finite thing And if they're doing less than a million dollars per year, I want them to do them themselves And I'm going to go out and I'm going to teach them how to do it So it's not big and scary and I'm not going to teach them how to be accountants And this is the only thing That I'm going to sell in a course Like that that was the only thing I sold for four years Did I mean to stand you say that it's important for bookkeepers to have good books and you're Charging you have a course and you're charging people to tell them that Yeah, basically I was I thought that was like a mr. Obvious moment. They mean but Yeah, I know I have a giant conflict of interest here, but that's okay. That's not some no, that's good. That's good I I agree with you wholeheartedly, but over 200 students also agreed with me and went through that course And I think Liz is a graduate of that course. Yeah, okay. It's it's a good course. I am not bashing the course Here's the complaint about the course Everybody listening to this or except for maybe tom and liz But maybe even them to a degree nobody likes to talk about bookkeeping Bookkeeping is not it's not sexy. It's not fun. It's a necessary evil and it's it's just Nobody likes it. Nobody likes talking about and what I realized two months ago is I actually don't like talking about bookkeeping either I like I know it's important But the thing I like talking about when I really broke it down is in my four weeks to better bookkeeping course Week four is when we put those books to use week four is when we start using those books To make better decisions with our business. That is my passion That's what I like to do and I felt like I couldn't talk about that until I knew that the people I was talking to had good data So here's the epiphany and here's where you you guys come in. So good data I'm learning Uh denit says she's ready to take the course again. Uh denit was like the funniest graduate She took the course. She was a great student and not to brag on you But I have a nice testimony from denit proving that she was a great student and she Followed her assessments like she made the progress. I wanted her to make but at the end of it She's like Megan. I still hate it I hate it so much and I'm like, you know, that's a valid thing to say to me That's a laugh. So she's she's sharing that she's grown to like her numbers and I Broccoli, right? That's right. That's right. And there's a play on words there. I've grown to like Megan likes I get to own the word like so Okay, so my the the fun part is taking data to make better decisions in our business and I I think You know, Tom's like, but you're a cpa. You're a bookkeeper. And I'm like, I am but what I What I've decided to start identifying as a very californian thing to say is um a financial a financial translator I feel like that's what I am I translate financial information And I've decided over the past two months. It doesn't need to come from quick books specifically Now the cpa part of me is going to argue with all of you that say you don't need books because like Your cpa needs books and I've got a tax deadline tomorrow of three clients who don't believe in the power of books and are Making me work till midnight tonight to get this tax deadline done, right? We need books for compliance reasons We need books Probably to get better management decisions, but to really grow a business There's a couple of kpis which we've had this conversation together before They don't have to come from books. They can come from a crm So I've been doing lots of lives lately and I've been really excited about something called labor efficiency Which you're both gonna be like duh, we own cleaning companies and I'm gonna be like, yeah But in window cleaning nobody talks about labor efficiency and lawn care nobody talks about labor efficiency In pressure washing nobody talk in garage door installation. Nobody talks about labor efficiency So I'm late to this party by several years and I've been talking a lot about labor efficiency And your users keep sending me messages and saying I'm an idiot because made central does it for them And I'm like So certainly can we talk about that? Like can we or do do you want to talk about bookkeepers and cps? I like talking about efficiency But we also have to clarify y'all Because there are two terms they get used kind of interchangeably so Productivity and efficiency and so tom um, you need to bring some clarity to the conversation about How made central defines it? I have a feeling that megan might be talking about what we call productivity Maybe oh good. Please. I and I I'm trying to like find a notepad. I really want to take digital notes So I'm not being rid. I'm just taking notes. I'm ready to share you want me to show your screen man My screen. No, it's popped up like it's trying to Oh earlier earlier earlier. I wanted to because uh, I was on the cpi Oh, okay. I'm with you um Yeah The there's two there's two metrics. Well, there's a ton of metrics, but in this conversation. Let's talk about productivity and efficiency productivity talks about In a house cleaning context how Well, are we using our time when we're clocked into a job or cleaning a home? It's a ratio of the time that we predict it will take to clean the home and made central we call it the allowed time which is An engineered number which figures out the number of labor hours it would take for your average cleaner to clean it and We call that like the normal time and it's it's what somebody who has a productivity 100% would take to clean it The actual time is how long it actually took and you take the average or the allowed time and divided by the actual time And that's the productivity so If we're able to clean it faster than what the allowed time is we have a productivity of greater than 100% If it takes longer than the allowed time or the expected time we have a productivity of less than 100% And we can spend the next hour talking about all the different things you can do with just that productivity number But it's a very powerful tool I didn't know this until recently and i'm obsessed. So yes, that is what now, but what is labor efficiency then? Efficiency over a hundred percent. They're they're efficient Right You're gonna like this. This is gonna be good I'm right. There's there's actually three different types of efficiencies that that that we track um at a company level we have what we call a company company efficiency, which is the Job time or the aggregate job time for a day or a team or for the entire company for some period of time divided by the aggregate clock time so You take all the job times Yeah, I'm together and for that same period of time you take the entire clock time which includes the job times But it also includes drive time or any other time when they're on the clock, but like so this is like uh Payroll hours compared to Product hours compared to budgeted hours So you're talking about payroll hours compared to what? Compared to job hours the thinking the thinking being you're making hours, which is budgeted or it is actual Well, there's for for for for this example, let's let's just say actual actual Job hours divided by actual clock hours gives you the company efficiency rate so if You know, I had six job hours and if I was on the clock eight hours doing it it would be six divided by eight So my efficiency would be 75 percent. Yes Which means 25 percent of my clock hours or paid hours using using your lexicon Weren't making me any money. I was looking out of a windshield. Yes I agree. Okay. I'm also tracking that because I find that interesting because you won't remember to be as high as You want that to be as close to a hundred as it could be We do a couple I live in california. So it's like a weird I want that number to be as close to like 80 percent as it can be right because I'm paying them for drive time I'm paying them for their Their rest breaks. I'm paying them to load up the vehicles and unload the vehicles. So Okay 80 percent is Is your hundred percent because I'm in california and I have to pay for that stuff, right? and of course I know a lot of people in our industry after looking at made central and seeing what their Efficiency factor was figured out. You know what I can have my technicians wake up in the morning pick up their phone See what homes they're cleaning drive their own car to the first house And save all that loading up and at the office and everything else and they're not on the clock Until they're starting their first job And then if you're able to schedule their first job and clean their neighbor's house on the second job And when they finish their second job They're basically done and they punch out of the job and the clock because then you're driving home You really can't have an efficiency. That's not a hundred percent, but it's 28 pretty close Yeah, well, you just have them do one job Right all day long they go clock in they clean all day long and then they take a They go home I feel like you guys are like plugs for what I wanted to talk about. That's exactly what I love talking You know, like if you get a higher average ticket, then you are more efficient, right? Like so the bigger the job the more efficient we're going to be we don't have This setup. We don't have the cleanup. We have less kibitzing with less clients. We don't have the drive time Uh, yeah, I love that. I gave it. I actually gave a podcast interview about that exact topic this morning I'm I'm on board But labor efficiency, that's what I I I think I also I'm more excited about productivity This idea of budget time versus actual time and then Liz is going to tell us all about how we can like motivate and inspire our team to be more productive with incentive pay and performance pay and stuff like that, right? So there's a lot of different things that we can do to get them to be more productive tools, right? Tons of different things on different supplies But that productivity number we definitely want to be getting that number We want both those numbers high high high high high And one of the things that made central does that I really love that we don't talk about a lot is the idea of normalizing That normalizing the hour. So if you have 20 cleaning professionals and you know, three of them are just rock stars that are always clean faster And then you have 10 Hey, Kevin I haven't seen Kevin in a while either That are not rock stars and clean really really slow We get kind of this idea of normalized hours. So, you know Like what the true average right of what somebody is We can get it done in yet true average But also like how many business owners don't who don't use made central Aren't tracking their productivity and they have no idea who their rock stars are their guts as they know who their rock stars are But they also Maybe like I think most owners probably know who the rock stars are I take that back But we don't know the range between an a player and a d player We don't know that productivity hours can vary like I did I did an analysis using Um service titan for a client recently and we had a range from like $42 an hour to $397 an hour Across 40 employees, right and like the owner. There's no way the owner knew that And and I I love it as the accountant who never goes to the shop. I'm like, oh, so this is a new guy, right? And they're like, uh, he's been here like four years. I'm like, oh So he's going through divorce or he has cancer or like, you know, like tell me what's going on They're like, I have no idea. I'm like, well, you need to go sit this guy down like yesterday because you're losing your shirt Um, and I feel like that's what this data does and I love so normalizing is one thing but ranking like transparency to rank our staff And show them like my top performer he now that I'm tracking this every week. He's performing at three times the rate of a new trainee And I'm like, okay. So my training clearly is not Talking about productivity and efficiency like clearly my training is not spending enough time on speed And quality is important. I want to see this ranked with my quality and you know QDS does a great job of ranking my staff by quality and response rate But now I've added a whole new element here of But it's a component you definitely need to be tracking that quality component at the same time or You can get yourself into some some big trouble some Spirals that are going the wrong way, right? To productive You know what? I just didn't clean the kitchen in any of the houses I cleaned today. I was ridiculously productive I filled it. I did you see how fast I was like those 150 percent I had we as a team averaged 130 percent last week In terms of our productivity percentage as a company wide and I was like, uh, what happened in leadership meeting yesterday And my field supervisor was like, well Megan didn't you notice there's 110 degrees outside I was like, oh, so we just need to pretend like it's 110 degrees every week And we're gonna be that efficient and he's like, yeah, our quality score is fine We're at 4.6 out of five with a 57 percent response rate. So we were fine, but apparently when it's hot they move faster No, I would think they would move slower, but I guess they just want to get done Well, we let them we gave them light days and Everyone's trying to get out before it got hot because where I live it doesn't really get hot till three in the afternoon. So yeah Anyway, I weren't cleaning at 3 30 and going really extra fast because I'm like Are doing windows at 3 30 in the afternoon and be extra fast They're like in the morning trying to hammer it out. So they're not having to work. Oh, that makes sense Yeah, it was kind of fun. Well, this is this has been like my epiphany. So I I've been like kind of focused on Maybe eight different kpi's that can come from different places and I've been putting them up Like I notice a lot of companies don't have a kpi tracker Like they they just use one one source of truth, right like quick books For example quick books has historically been my source of truth And the reality is There's things that we can do in our home services that make it easier like differentiating between sales by day Production by day and receipts by day Like if you don't have credit card on file Those can be three very different numbers and your sales number by day Should be a leading indicator of future production by day Um in needs or excuse have it easy. Give it. Yeah, I like to discount you because you you know You're on recurring schedule and your schedule doesn't vary like mine does and you're not as dependent on sales for tomorrow But I think it's still important to know are we getting new clients coming in? It's a phone ringing like At what extent is it ringing? Uh, it's still valuable to know the difference between production per day and receipts per day Like for jeff he could never reconcile those two numbers. Like I don't understand why I'm broke this week And I'm like because your ar went up by 200 percent. Oh Okay, now I get it Oh and house cleaning what's you know, I mean a lot of things are important But in you know in the spirit of of sales you're you're you're most you're because cost and In any service business is the salaries that go to to your direct labor your cost to consult the people that are Cleaning the windows or in our case, you know cleaning cleaning homes. So you want to Maximize your your your return on on that limited resource, especially in 2022 because when you you know For most of us it's really hard to To find the help that we we we need Anyone thing though like we have so many interviews this week. It's weird. Does anybody else help that? Huge shift from last week the place I'm seeing it Because I have people across the country that I talk to every day That we're seeing some people that are like Still I can't find anybody Same ad same exact ad as in another part of the country. It's like Finally the floodgates have opened My all the applicants I feel like our floodgates open on monday and jeff woke up and he's like, oh my gosh I have 10 year view scheduled this week and to be clear less than two percent of applicants make it to that interview stage And hire who so, you know imagine to have 10 What is that 200 like with 200 good applications last week? What that's crazy a lot So if you can take that productivity number and If there's a if there's a four hour house to be clean, but You know that liz is going to be cleaning it. She's really fast. She has a productivity of 130 you can See that well really we would expect liz to clean that four hour house in three hours because of her historical productivity You might have an opportunity to give her an extra home that day where she's filling her day out maximizing the amount of revenue that she's going to be generating and Stay there for a second like that is a thing that we don't know. We don't talk about it all either capacity like maximizing revenue per day I think we think about it in terms of hours but we don't think of it in terms of Dollar amounts and and I and I think that's where I'm trying to head But I'm learning my words here because it's all new to me is like through this productivity If we can get that with a labor rate Then we can get that with a production goal And then we can get that into a capacity number and then we can really set a schedule for success Because in in the profits to freedom group we're going to talk about later Break even point to me is something that most people have no idea. They're like, huh? What like they're losing money every day And they have no idea that they're losing money every day because they've set a sales goal or production goal That has nothing to do with their actual company Right because it's based on a labor rate that has nothing to do with their actual company now We talk a lot about companies that are Silently going bankrupt and they have no idea and they're out shopping You know and you asked the question, how did you go broke and the answer is well Slowly at first and then very fast at the end You don't know what's happening until you get close to the end and then it's like it happens really fast Yeah Yeah, then it's like chaos, right? Wait, so so how do we determine capacity tom? You lit up when I started to talk about that Oh, well capacity if you've got your allowed times and if you know What you're available workforce is and everybody's productivity You can manipulate that and and a piece of software that tells you And you can do it based on revenue dollars or you can bait do it based on on allowed hours How many hours you have available each day and you just those hours But they're related right so revenue dollars are related to allowed hours because somebody sold somebody This is the the conversation keep having somebody has made a decision that this house is going to take this long Hopefully a piece of software has used a labor rate times the you know How long the estimate how long it's going to take and that's how we've come up with a price for the customer, right? There's a relation And if you're using like a standard, you know rate per allowed hour for everything that you do then It's tightly correlated But if you have different scopes of work that you bill at different hourly rates But you've got the same workforce That's able of to do multiple scopes then It gets a little more complicated and doing it on hours actually gets you a little little closer Then you can take the hours and you can adjust those even by what your company efficiency is because you don't want to Sell clock hours you want to sell anticipated job hours And we do all of that then you can look at like all of the you know Like the month ahead and what days you've got available hours and that's how you schedule That's how you make sure nobody goes home early because they didn't have any work So i'm a thousand percent on board. Here's my question labor rate If the labor rate's wrong then everything else is wrong. So how do we figure out the labor rate? When you say the labor rates wrong I'm saying so how much do we bill out per hour per man hour? well Right like every company needs to come up with that number on their own and they need to plug it into a pricing They need to plug it made central somewhere. It needs to say this technician Because this much per hour doing this task, right? Yeah, so how do we choose that dollar amount like what I feel like that's been the fun part I've been working through is like how do we calculate that dollar amount because my dollar amount should be very different than a window cleaning company In my town's dollar amount because my company is very different than their company. We We aren't selling hours. I mean some people do and situationally, you know, you can you can sell You know, somebody's time by hour. That's not not my recommendation. Certainly not my preference You just told me you are you're not telling the client that you're doing a Well, I don't know the hour Yes, but not externally. Yeah, that's my point. So hell no we never tell a client how many hours I think it's gonna take or Well, we will but you know, not how much we're gonna charge per hour But my point is like to make the price right for the job We've had to make an assumption of how long the job's gonna take and how much we want to make Per hour and how much we want to make per hour. I'm calling labor rate And I'm realizing that most you have no idea how to calculate it And I would argue it's important to know how much you want to make per job But that really doesn't have any bearing on what the market's willing to pay for that You know part of that is doing a little bit of market research and figuring out what the market is is supporting for that particular job like if you're Talking about doing a house cleaning job like general, you know maintenance every other week type cleaning You can do some market research and figure out, you know, what your competition is charging for for comparable service and So if somebody's shopping you need to So much Wait a minute. Hold on. I want to make sure I think that you guys are I think we agree, but I don't agree with that last statement Window while you explain so I'm gonna stand up, but please explain all right, so Tom I'm pretty sure that the thing that she's talking about is the thing that you say a lot also Don't set your labor rate only based on what the market is paying right now because Who knows what your expenses are? We don't know what your direct labor is We don't know what your indirect labor is and so you have to set your prices starting that way You have to come from what you have now the data that you have now set the prices there Not go out there. See what everybody else is charging and then charge but On the flip side both things count in the end you do have to know that number to be able to Make sure that you are competitive otherwise you could be You could do two things that are crazy Some of you might call somebody and they're charging $32 an hour And you literally have labor costs of $30 More like $35 More likely upside-down, but Carrie night like she works with you guys now she She was on the top me. We never compete on price like ever. No, no, no, no, no, no I'm not talking about competing on price. I'm talking about just knowing what the market is Okay, I interrupted you. I'm sorry. I'll give you I'll give you I'll give you a comparison If we're really commercial cleaning Like big jobs a lot of those are what they call open bid where I'll tell you what I'm going to charge to do You know this particular job every month. I'm going to charge you, you know $50,000 to clean your building and this is how I came up with that. It's going to take this many people This is what I'm paying per hour fully loaded. It's going to be this either supplies big big big big I'm making 2% profit. So that's why I'm charging you that If you don't want to pay me that fine. Tell me what you want me to take out of this and I can do it Basically, you tell me what you're willing to pay and I'm telling you what I'll do in consideration for that I'm telling you an hour, but it is still an hour calculation time. You're still saying I think that's all that megan is saying is that it is But I'm also saying but I'm also saying mrs. Jones cleaning her house every week Doesn't give two hoots about What my costs are she just wants to get her home cleaned, right? Yeah And I can say well, I got to charge that because if you're gonna If you can explain and you should be able to explain that we're doing something unique here Or we're doing, you know, there's a premium service And these are all of the things that we're doing for you and to do this in a responsible environmentally friendly and being you know doing and you know being able to hire the quality People that that that you want us to hire. This is what we're, you know, this is what we need to charge for that And there there are a thousand percent agree and there we're not competing on price there We're articulating value And but I feel like maid services like I've seen successful maid service companies doing $9,500 per hour labor rate like there's no reason that we can't be doing $9,500 Yeah, and I think I'm gonna be going on to my phone So I'm gonna be gone for a minute and then I'll be back Okay, we'll be we'll be right here Nothing happened to me. I was not attacked nothing happened. Okay good She locked herself in a car one time and the windows were rolled out I was I was literally thinking that the last time I was on the show I feel like Liz was in a car and we were worried about her like over We were trying to die 9-1-1 I'm not in this time I'm glad Okay, but then there are there are maid service companies that are saying like I can't get more than 45 per You know like so this is what I wanted to talk about that labor rate like and it's a confidence thing I think let me let me just get back to the Knowing your market you still want to you still want to know your market though because you might run all your numbers and think that You know It's just why I charge your premium and the person you're selling to might be laughing because they've gotten to where the quotes And you're the lowest one. Okay fair. Okay You want to know you want to know what your competitors are doing compared to what you're doing And if you can have a differentiated product where you should be able to price it at a premium You need to know what that price is So you're not competing on you're not trying to be the lowest cost But you want to be the highest cost, but without knowing what your competitors are doing You don't even know what the heck that is well and where I went was like I didn't think you were gonna say you wanted to be the lowest cost But I thought you were saying we need to be competitive and I'm like no we're not being competitive But we do need to be able to differentiate like we do need to under like personally We use responsiveness as like our our sale system software that plugs in front of a serum And the idea is that like I'm only competing against myself like I'm going to give the client Good better best options I'm going to let them price anchor against my pricing and I could cure less If they get other quotes or not because I've differentiated and I know I'm going to be the premium service But even as a premium service something I still struggle with is like what is the labor rate? I need to be charging to get the margins I want right like what is that dollar amount per hour What's the target? What's the goal? And and then behind that, you know, like if you triple your prices today or you triple your labor rate today Your conversion rate is going to take a hit and you might not end up ahead in terms of your total sales in the future So then it's become this game of like, okay proceed value and communicating my differentiators and all of that and The way that that that we do that would be though looking at several jobs that we would quote based on All the competitive forces and how we differentiate ourselves and where we think that we could get maximum Revenue for that and then using the allowed hour Calculations that we do and and all the data that we have Take that dollar amount divided by the loud loud hours and that is the labor rate and you do that for a number of jobs That's what I was wanting you to say so say it one more time because I feel like that's the goal that nobody talks about So say that whole thing one more time. I gotta shut my window while you do okay, we Take a number of jobs and we figure out But the maximum revenue the maximum bill rate that we can get for those jobs based upon the differentiated product that That we're off and whatever our scope of work is what will the market bear for that? What can we actually get and explain? This is why we're charging and this is why we're more than other people are this whatever that is Do that a number of times and divide it by the allowed hours and basically you're backing into what you want to be Belling per hour because that's what you're going to be able to sell To maximize you know get maximum price So I I'm going to like switch that for me just slightly from what you said and tell me if we're still on the same page But like decide by day how much so like a break even point by day Plus a profit margin right if you can figure out that dollar amount then divided by allowed hours Right the budgeted hours that's going to be your desired labor rate and I did the simpler you can keep it the better and Are we on the same page still? Maybe you know my job. I think it's hard like I You might say it's easy You do you do it average. I mean I guess For for for for us and in most companies they say for the moment based on Market conditions and what our costs are and what we think the market can bear. We're going to charge $70 an hour for this scope of work and That's what we apply to the allowed hours that that that we calculate for every job the hard part Is calculating the allowed hours. That's where the work is. That's where the art is That's really where it comes down to and then it's just doing multiplication with whatever your your you know decided bill rate is Yeah, I yeah, that's true. I was gonna say I think we choose our hard But now I'm realizing you're right because this whole thing started with productivity and productivity has to do with time Not with money But times the right number equals the right amount of money. I think that I think So we're starting you're like chicken before the egg. You're starting at hours When we teach this when we teach this We just like I don't even want to talk about dollars when you're quoting forget about dollars Tell me how long it's going to take you tell me how long it's going to take and then it gets really easy at that point Well, tell me how long it's going to take and tell me how much you want to make, right? You have to know both of those Which you think you can make I'm all about price You can make as much as you want like this is america, right? Like that's not the point. How much? Yeah, how much do you think it's a good point though where if you're charging a thousand dollars to clean somebody's home They're going to say no thanks. So you you you even you need to want to be able to differentiate and certainly help people understand that That you have a unique product that's worth paying a premium for but you know, at some point you're going to you're going to you're going to lose overall profit because you're not closing enough jobs because You're so much higher than the next best alternative. So price matters, but Pricing is really underappreciated. This is a whole another disguise. You know what Megan? You need to come back again We need to talk about pricing. Well, we're talking but can you put Dom's comment on the thing because I think it's relevant Can you throw his up there? I haven't been paying attention. I'm sorry That's okay, but I like I like Dom's comment because like I get a little stuck in my california world and Dom's like Yeah, not everybody wants to be premium some of them. They want to do volume, right? Like and I think commercial is a good example of that commercial They don't really care about premiums or I mean you can argue with me that they kind of care But they don't care as much as they do in residential But okay, I mean I completely agree with with with the statement Dom But I think that we probably agree that you don't want to like be competing, you know come to us. We're the lowest cost Provider. I mean that's a strategy. Some people do it. You know, god bless them Um But if that's not if you're not competing on the lowest cost you need to explain why you're not so even if you're You know, uh A middle of the road product charging a middle of the road price. It's like well, this is why we charge what we I think Jill always got a higher bill rate if you're able to tell people This is why we charge what we charge and differentiate. This is what you get for this. This is Why It's not the lowest price you're gonna find Yep, exactly Exactly. I like it Oh, he's saying me you and meg but some do Yep I don't know what he it's fine. I'm closing down things because you were glitching there for a second So i'm trying to close my other screen here Megan you've got a program that you're doing and we're Got a little bit of time left, but we're we're boy an hour sure flies you want to tell us What you're working on It sure does so when I have this epiphany that we don't have to talk about bookkeeping Like that if I'm a financial translator I can translate data that's not just coming from quickbooks online, although still a huge fan of quickbooks online And uh, and so I started thinking about like what is the data that needs translating like what is the data? What are the kpis that we we're interested in and then what are the levers we pull to change those kpis? So I looked through all the classes I've taught over the past four years and there's over 50 of them now 50 master classes on profitability on money on Profits in business and I put them together with my favorite six So I pulled out my favorite six and my favorite six talk about like how do you build a kpi tracker for your business? How do you set a financial goal and actually meet it? How do you make a budget? How do you cash flow plan? How do you price for profits every time? I put together these top six classes and I put them in the order that I thought that they should be taught like So what's the foundation that we're based on like? What is the biggest thing for our buck in terms of learning? Using the data that we have available to us in our businesses And then how do we like put that on steroids like how do we keep going until we can set ourselves up for success? So it's a six week live course. I haven't been teaching live courses lately I've been busy doing other things six week live course called six weeks to financial freedom And it's when you say live course is that live like live online? live online, okay Was it live like we're going to come out to california and set in your living room? Do we need to have a conversation about that? Are you coming to california? I might be at some point I feel like I saw something with elder out of hills and I was like I offended that I didn't hear about this No, not me. I wasn't Okay, maybe it was Liz. Maybe I'm picking a fight with the wrong person, but I I feel like one of you is coming really close to me and like close to me I mean like within an hour and I'm gonna be offended if I don't get this like see you guys around life But that's okay. Um, this is live online. She's doing a workshop out your way. Yes A workshop in elder out of hills like soonish. I think Okay, um So this is live online on the zoom. So once a week for six weeks tuesdays at uh, 3 p.m. Eastern 12 p.m. Pacific and uh, it's part of my membership groups. The idea is that it's like How do you how do you measure data consistently to improve your profitability? And how do we like how do we actually track this like how when I have students that tell me like Oh, my my net profit went up 30 after a class in the first six weeks. I'm like I would love to I would like tell me more like that's that's the kind of impact we're talking about and making it measurable Tell me about your membership group. So you have a membership group and if you're a member of your membership group that's a bit redundant, but This is included. This is this is part of what you get That's right. And my membership group used to have a terrible name. It's called profitable business accountability group The it was really bad Yeah, so now it's called profits to freedom.com. Oh, I love that. It's so much better So much better profits to freedom.com and it has like a monthly q&a with me So if you need to ask a cpa question, you can actually have office hours with a real cpa And then as a monthly class with my friends because I I'm not a know-it-all like I don't know at all um, so monthly class with my friends and And it's been around since covid it started in february of 2020 and uh, We're reviving it with this six-week class because What i'm realizing is like I want my members to have a common understanding and I want them to have like I want them to go through this together And then we can do continued learning but until we fix these six financial things in our business Yep, there you go. That's it and it starts in five days. Holy cow. It's starting soon I'm going to take the link and I'm going to drop it in chat And there's a coupon code for your people. It's sbm number 50 For $50 off their monthly subscription forever And you can cancel whenever so if you want to just hang out with me for one month, that's fine But it's a six-week course. Do you see what I did there? I'm hoping you give me at least two months of your time I'm hoping you give me at least two months of your time to really make a difference and uh And yeah, that's it So, you know, it's so awesome about this, you know, it's important to have good books financial, you know records and you know bookkeepers will will do that for you if you know, they they know what they're doing and and Um do their job well and it's important, you know cpa's play a role They do your taxes and and and kind of keep your job to trouble with the irs and maybe even save you a little bit on taxes Um, there's very few people out there that actually do the managerial accounting and basically Use those numbers to help you run your business better. And that's what you're doing So if you're looking for help from your bookkeeper, if you're looking for help from your your cpa, they all play a different role And Liz is filling a very unique and valuable spot here Yeah, and to be totally transparent if you need help with bookkeeping I do have a firm that does that I do still have likes accounting company But there's not much capacity for the teaching so all of my likes accounting clients get into this membership group for free Because that's how they get the added learning. That's how we put good books on steroids, right? Is we actually give the education of what happens with the books? So Yeah, that that's what I wanted to share and I wanted to talk to you about labor efficiency and I wanted to publicly give you a pat on the back about Uh made central because I might literally my facebook messages have been blowing up, you know made central just does that for you You know, you know made central would just have that if you had it and I was like, I did not know that but now I do Thank you for sharing Yeah, it's it's it's awesome. And I I appreciate that I do we um It's important. It's important, you know to uh run a profitable cleaning business and and and those metrics are a big part of it Uh, I'm gonna say publicly that Tom and I are gonna have a side chat about made central and quick books online in the nearest future So I'm excited about that. We are we're gonna we're gonna we're gonna spend some time Digging and looking for opportunities to create more value Without being said, I'm assuming list said that she was going to be okay. I haven't heard from her. She's never made it back Um, did we send the search party? Is that what we do? I I don't know I could Give you tell you some stories, but we're out of time. So we'll have to save them for another day Megan thank you so much So fast and it's always fun. So thanks. You are you are you're an awesome guest You truly are you need to do this on a regular basis All right. Good. Carrie. Did you hear it? I'm a good guest. I am All right Take care. Wednesday five o'clock. Bye. Bye