 Hey good afternoon everybody time Stuart here. I'm with Liz Trotter our guest today is Chris Swab. Hey Chris. This is smart business moves Hey guys, it's great to be back. I always love our conversations. So I think this is gonna be a real fun one So we were chatting just before we went live trying to figure out the last time Chris did smart business moves and We believe it was like two years ago. I think so Yeah, remember he's aging like I know it doesn't but last time we talked to him It's true. He was not married yet. He was still here. Not he was still not in Japan with his wife, right? So like things have changed. What's changed? Well It's so funny, you know, like I we're coming up on our two-year anniversary now But we're very we're a very chill couple So it feels like we're still learning the whole husband-wife thing and we're still transitioning slowly from boyfriend girlfriend to husband-wife So like so like yet like like the paperwork changed But our relationship is still really good still really like wholesome I guess you could say and we still have like the same kind of dynamic But we appreciate each other a lot more because we're apart for long So now like every evening we're together. It's like really sweet So so I think there's just like a new level of appreciation for each other I think that's kind of a big big change How long were you guys separated or separate not separated but separate almost two years I was thinking gosh, maybe good advice for people that need to strengthen their relationship, but maybe not That was quite involuntary a couple months apart to make you appreciate there. I think that's good It's pushing it So you're still figuring out the being married thing you say that like that's a Like a process that you're Complete and just check off the list I am a process guy, but I think that's one that's gonna take me a while to get through Well, when you get the process figured out do me a favor send it over to me Now that would be a useful webinar. I think for everyone It might be a business model that would have a lot more upside than anything you currently are spending your time on We're trying to joking but as many as many businesses have you know husband wife teams family members, etc I mean, I really think it would be great if there were some Some guidelines for that because people don't struggle Every day and they struggle relationships are hard when you're working this closely and this kind of a business Very true, especially from work from home now your your office with your spouse is like one foot away from each other Yeah, and you never get away You never get that little break to make you appreciate the other person You do need to build a little time away from each other Especially if you're somebody like me, I need I need a long time. So I don't know it'd be hard on me Yeah What is it today's the day of the month that The consumer price index number is published in the US. I feel like you told us that last week No, no, no, no, that's the Joltz report Job openings that there are being filled. Yeah. All right. Good. Show us Talking about inflation from, you know, one month to one month and it keeps getting higher and it's been eight point Something the last few months. I think it was like eight point eight last month. It's nine point one percent inflation for for this month Or for last month for Jen That's just killer, isn't it? What is Tom what is the I'm sure that there is a measure or an exact definition about What what an actual recession is is it like two months? Isn't it something like that? That that has to do with economic growth and those numbers come out on a quarterly basis so those numbers haven't come out for a second quarter yet, but Technically two consecutive quarters of what they call negative GDP is Is a recession and quarter one they had a negative print and You know, there's kind of there's a chance that that that quarter two will be There's a lot of weird things going on the way they measure a lot of what has to do with imports and exports and The exchange rate the dollar is so strong against everybody else's currency that We're not exporting anything because foreign country can't afford to buy anything because their money doesn't go as far as it used to I guess you're kind of on the other side of that Chris He takes a whole lot of yins to make a dollar now doesn't it? It's funny you say that I was just on my mind It's I feel really bad for people here being paid in yen, but I'm doing great My businesses are us so I get paid in dollars and the yen is that like I think it's a 24 25 year low now So when I first moved here in 2017 originally the yen was about a hundred seven hundred eight to a dollar It contrasts up to when I'm living here the second time. It's now I think 137 or 138 yen to the dollar So it's it's like I'm getting a 30% discount roughly on everything. Well, I know people buying houses here Who are her it's like they're getting a 30% discount on a house, you know, that's it's pretty wild when your savings are hundreds of thousands on something It's it's big. Yeah, the euro just reached parity with the dollar. I think yesterday or the day before And there's some people speculating and it might drop to you know like 90 to a dollar not even you know, not even below parity Wow That is a Eurozone is in trouble right now Something we said when you can print your own money. That's one of the things that the US has going for it at the moment. Well Going for it or going against it kind of depends on That Us travelers we can just wherever, you know, we can take advantage of that but Yeah, not much right now Well, okay guys, let's get off this talk because we're gonna just gonna depress a bunch of people People are already nervous about the whole recession talk, right? There's a number that comes out tomorrow and then we'll drop it it's called the producer price index, which is kind of the thing that is the predecessor to consumer price index the producer price is that's a lot of that is all the Stuff that the manufacturers make that go into and commodities and stuff kind of kind of factor into that and month after month the PP Yeah thank you and has been going up and Every time that goes up it pretty much implies or at least is a pretty good indication that you're gonna see the consumer price index going up the next month because the inputs keep going up then So we'll be watching that number tomorrow too So we can talk about that. I give you something to talk about next week. All right. I got it on my list So next week when you ask me what day this I'll have the answer right Cool, well, we've got a little like this but a lot of positive today. I've got a lot of positive notes for us So There's some irony here though because We're shifting gears a little bit We're calling it audible because hey, we were fortunate enough to have Chris to help us out We were like talking about what you've been working on Chris and Chris has been working on this plan in terms of how to Make the best of a bad economy if we are you know slipping into a recession That doesn't necessarily mean that that has to be a bad thing, you know for us as as business owners if we anticipate and plan properly can actually Create a lot of opportunity for us. I think that's what you've been working on Chris Exactly it this this really this really came out of the need in my own cleaning business Me and my management team, of course, we speak every day and every week about you know, what's going wrong? What's going right and for us There there's just this kind of constant presence of negative news right now I know the news is always kind of negative but in particular You know everyone is talking about a global recession And so in our cleaning groups that we're all in Everyone's talking about a recession a hiring crisis and so on and so you know that kind of stick in the back Of your head and you start to think maybe the leads are gonna dry up Maybe it's gonna be harder to hire people. How are we gonna juggle all this? We start having kind of an informal series of talks at the end of our management calls If we could recession proof a business and of course 100 percent recession proofing anything isn't possible If we could if we could have an ideal business for for experiencing a downturn in the home services industry What would that look like and how could we start to implement some of that? Vision into what we're actually doing in our day to day here So that when we look at our business from the outside, it's much more robust It's got a safety net and it's much it's much more able to withstand a prolonged dip in for example sales So um, we started just looking at past recessions in the home services industry and how they've affected With a particular focus on the cleaning industry How they've affected companies in that industry Uh, we started looking at some of the current trends in business going into the future And we looked at three different areas that you know, we're doing okay on But maybe in a recession you need to have more of a focus on those three areas than you do Even in a normal business environment And we just started implementing kind of a daily and a monthly check for those three different areas That we could start to kind of continuously improve over time So we've basically mapped out an informal plan that we're using and we're starting to pair with some of the clients in my v.a company For a recession proofing company So that's kind of um, what we've been working on a little bit and I thought it just kind of a great it fit in well with this week's topic Certainly is timely Okay, so what are the three things chris? Yeah, so I'll say three things and I'll jump off and no so so um Essentially I'll go in I'll go in depth on each but um, it's a three step framework It's not it's not like a perfect framework. It's just three areas that are really affected in recessions so so one is Typically there's a prolonged dip in sales. You see a higher churn rate. There's more cancellations There's reduced frequency So in general on all fronts both the marketing and the sales fronts You're seeing a lot less business come in and a lot of your lead sources Are not as serious about booking For things like move in move out cleans You may actually see an increase as people are moving out of their homes But but for other things like, you know bi-weekly you're going to see an increase So for us one of the big ones is how we maximize value on the back end and make ourselves much more For example profitable on each clean that we do. How can we increase the average ticket price? How can we work on our upsells? Things like that We look we work on as well on lean operations. So there's a great book I always recommend to people that we can go over called profit first. I'm sure you guys heard of it It's really big in our industry But but we talk about building an emergency fund We talk about how to ask vendors for discounts and we have templates for that that we use And we work on getting our key numbers Going in the right direction so that we're able to run more linearly and increase our profit that way on each clean That we do as well so that we have a bigger buffer than we normally would And we're able to set aside a little bit more each month for our rainy day fund So so maximizing value on the back end is one lean operations is two And the third one is efficient operations Because if you can increase the efficiency with which your team is working and the effectiveness with which they're doing work Your cost per hour that you're spending on va's or how many hours you need an office manager or production manager, for example drops So you're able to be run run a little more lean as well So more efficient operations directly ties in to your lean operations Which directly ties in to maximizing the value on the back end So it's a three-step framework that's meant to be self-reinforcing. Each part should be playing into each other Um, so those are like that's like the three that that I have in mind to kind of talk a little bit about today I love it. Well, don't think you're just walking off now because we definitely want to hear Yes Is very interested in this topic too, we had sort of a town hall meeting in our circles last week and She was really into it. Yeah, so I know she's she's very intrigued. I'm sure right now And you know, we've been You know talking for a while now. It's kind of Funny how the industry has evolved, you know, there there was a time that companies would house cleaning companies would compare their Excuse me performance based on Top-line revenue, you know, how many how many homes do you clean? You know, what you're, you know, are you a million dollar company or not? And you know, all that's awesome. But at the end of the day, it's about the bottom line This is what we really are doing this and um You know, even even business models were built in a way that's a ton of discussion about, you know, building your funnel and what are your conversion rates and And you know all that's important, but you know being profitable Is what what happens after you make the sale and it sounds like that's kind of what you're kind of drilling on at this point. It's um Sometimes you can't make it up in volume and when the volume starts going away it's even more important to to manage what happens after the sale and um That's what we do in main central. So that's kind of uh, Definitely hitting my sweet spot That's exactly right volume is going to decrease on things like marketing sources and conversion rates going to go down So you need to work on your conversion rate even more There are a few ways that you can bring in new customers One of the ones that we're exploring right now is acquiring smaller companies where the owners just screw it. I'm done A lot of people are closing up shop like they did at the beginning of kovat So there are some ways you can you can build partnerships with people in related services like No nursing or liquor stores that see a huge increase during recessions Um, so there's certain industries that actually become more in demand during recessions that stores Are you going to see that now where we're certain companies are just kind of saying i'm i'm done with it because of Like lack of demand I've seen some people give up over the last year. So because of the labor situation So I guess a lot of reasons why you might want to quit. Um, but are you starting to hear people like Feeling at their their demand is starting to draw out It's 80 percent hiring still it there really is a hiring crisis going on right now in our industry It's it's it's probably the number one issue at this moment. Um, and it has been the past year and a half I'd say every group are in every day You see five threads about trying to hire people. It's it's a problem Um, but I am yes, I'm personally starting to see Some people who are who are very small. They're You know 10 000 a month or less. They're not very deep. It's not often their full-time thing People who have it as a side hustle or their solo team, for example, a lot of them I see are are leaving the industry um, I don't know if I see Um bigger companies getting out yet. I think there's a point where you're big enough in your market That that you're safe Relatively safe and I don't want to say recession proof I know that's the topic but but but you're where you're relatively safe from going out of business You can reach kind of a certain size in your service area where the view of the big fish And I'm not really seeing that but but in my va company, for example, we have a lot of clean companies We're seeing a big increase in the number of owners who are selling To to uh bigger cleaning companies their their customer list or selling entirely emerging So we've seen uh, you know during covid we had two or three companies Sell and say we're done like they were happy with service, but they were done with the industry entirely But now we're seeing You know every quarter There's a couple people starting to sell now. So there is a big increase in people I would say getting out It I don't want to well big is not the right word because it's not like I see thousands of them going out or anything But but in my little circle that I know I've seen an increase. That's that's quite unusual compared to previous years Relative to what you have been saying you've seen it out today Correct. Yes How about in in in in your world, but have you Seen anyone I guess I'm asking is I really have it not to say that it isn't happening I'm sure it is if you're seeing it. I'm I've been looking for it. I've been looking at data I've been trying to see if there's been like a definition of of demand and I've heard some people speculating about it and saying that they think they've lost some demand But I haven't seen any data yet that I think it's coming. I just just I'm wondering if we're we we we see a storm coming and we're bailing before Rain stars I haven't heard anything about anybody wanting to sell get out of the business Except for locally. I know local companies. I'm small companies, but In the last three weeks, we've had seven different clients that are talking about their leads being Way lower than they were then they had anticipated so One of the companies was expecting a slowdown. It's her slow time of year But her slowdown is even Much more drastic than she had expected in the last three weeks So it got about seven companies that are so not a lot but And it's only over a last three-week period so You know, I don't really know. I don't really have anything more than that. It's like this tiny little sliver of It's very tricky to know right now. It's so early so So, you know, there's very possibly a storm coming But I think the cool thing that you're going to be sharing with us here chris is You know, even in good times you can be more profitable if you're like Efficient ops lean ops and maximize value Seems to me that these are business practices. You'd want to adopt regardless of the economic conditions Yes, um, you know if people I'd love to just maybe mention a little bit of the research for two minutes if that's okay If if you guys have a chance this evening or you know over the next few days There's a couple different reports on past recessions in the home service industry and growth in the home service industry Which are really fantastic to look through The department of labor and harvard case studies They're they're a good source for kind of like national level statistics around recessions But they're not they're not really good for our industry specifically But home advisor and angie when they were two separate companies. They did separate reports Um, uh home advisor, I think mom was in 2018 and angie did one in 2020 On past research into how recessions have actually affected the home service industry And what the the total market growth is going to look like over the next few years with or without a recession So if you search, um angie home advisor recession report Um, I forget the exact name of it, but if you search that it will come up It's a really detailed breakdown in our industry and there was a lot of good insights around demand around frequency Um and other and other kind of tidbits that we can actually really work with And they've been a really good source. I know they're probably the most annoying People in the world to call you besides the out But but they're in the home service industry as well, right? So getting me number one because they're trying to sell it to us So yeah, they have a lot of data. So I love that And and we're just you know, we're just we're just individuals But they have a whole research team that took a lot of research into this So um take a look at their report because it was very informative for us in our meetings with my team um A couple am I am I okay to to to share a couple things or Yeah, why are we here? Um, please Sorry, I don't mean I didn't mean to take over. I just thought this is like, uh, it's really interesting No I'm much further here. You speak then Listen to myself or less. I mean we We hear our souls all the time. That's why you're here, Chris From you two years, Chris, come on. Yeah, it's been a while I've been a bit of a ghost in the industry reset. Um Just just enjoying life So I guess I'll you guys you want me to start with some negatives or some positive positives Whichever one you want to talk about that's where I'm going. Cool. Let's get the negative out of the way Okay Because then we're going to go with the positive and all the plan that we have so I'm looking at a high note. Yeah, exactly. Yeah. Yeah, we started on the the negative one. So let's get it out of the way and you know So there are in the reports the the ones that I just mentioned There are a couple things that I think are really important for informing your marketing strategy Informating your sales strategy and how you talk with clients about service. So, um One of the big ones which is kind of the ones that we all expect that there is a prolonged dip in sales Particularly for residential. There's less of a dip for commercial. I think because there's contracts in place Stability is a lot more important. Um, but there is there is a pre-sustained dip in residential sales But compared to other industries, what's interesting is the home service industry as a whole they didn't have data specifically for cleaning on this sees less Sees less, uh, what would you say? It's it's uh less Purchasing behavior change compared to other industries. So there is a dip in home service sales Across the board painting lawn care cleaning everything but compared to other industries It's more protected during a recession and it's actually, um, the cleaning industry in particular is one of the fastest growing of all industries Um, that the department of labor ranked So they have a rank list every year of the fastest growing industries and specifically cleaning is one of the top ones so so between Between cleaning growing still and being somewhat protected from a recession compared to other industries We're actually in a fairly good Place to actually continue thriving and growing even if there is a downturn. So This is the negatives chris. You're giving us the negatives right now. I'm loving your negative I know I'm trying to put a little icing on the top, you know Here's a positive aspect to it Um, that is interesting. I mean, there was a time that house cleaning was considered You know a discretionary purchase and I guess it's all relative but Um, I mean like really like maybe just a luxury that was one of the first things you're just going to give up If money gets a little bit tight And I'm curious it seems like as time goes on that's being shifted more and more to You know, I'm I'm not going to clean my home anymore than I'm going to be changing the oil in my car. I don't know how to do either It's it's not an option. I'm gonna have to hire somebody You'll find this interesting. It's just a side note, but I thought I mentioned it It was either it was either a Harvard or mit business school case study But they looked at the nine past recessions in the u.s And the home service industry Progressively with each recession got less impacted So if you go back nine recessions the home service industry got hit really hard You you go back seven recessions. It got hit hard, but a little less hard You go back three recessions it barely got hit at all You go back to the the minor one that we had during the covid pandemic and we grew So the home service industry is getting more and more resilient decade after decade to downturns It's just it's just a really interesting side note that we're actually thriving despite everything going on in the world So, um, you think that I'm shifting from, you know, this is discretionary spending to this is We're an essential service. Basically. I can't You know get rid of my cleaning service anymore than I can Turn off the electricity to my home I think it's that we're spending a lot more time in our home But but one of the big things is that the two largest population cohorts that are alive right now boomers and millennials Are all entering their life stages focused around home buying focused around aging in their home So there's a lot more need for home services as more people are living in homes And more people are aging and becoming elderly in homes. They need more home services as well So so that's actually what people still really cares about cleaning and now they can't do it But they still really really care about having a clean home So the boomers, you know having a clean home is like a a point of pride on top of You know safety health all the other good stuff. But if they can't do it I just uh, I forgot to mention. I'm so sorry the research that I did is all focused on the u.s So so for people in Canada or the uk or france, um, I I didn't I didn't tailor specifically to that Just because it's not the market that we're in so I just wanted to note that real quick. Um, let's see So this is this is I see what you're saying chris. This is so negative I don't know how I'm going to be able to handle all this negativity. Okay, I'll tell you I'll tell you some real negatives All right So there there is a sustained dip in sales for residential, but you're also going to see a higher churn rate It's probably going to almost double it won't quite it's not going to go quite two times But if you're losing five clients a month, you might start losing eight or nine Um, so there's a higher churn rate. You're going to see an increased dispute So stripe and some other payment processors had some interesting data around mute rates per year And so we looked at dispute rates in in uh recession years Um, it's strike only had it for one year because they're kind of a new company relatively You know compared to pay power something but we looked at dispute rates and saw the rate increase sharply During recession years and and I know for us during the initial phase of the covid pandemic Our dispute rate skyrocketed with strike. We weren't actually doing anything differently same great cleaners People were finding issues with the smallest thing and instead of asking for you know A free extra or a week clean or 10 off they would ask for a hundred percent refund And if we didn't give it to them they dispute it so so there was an increased disputes Uh, and there was increased Reputational damage and what I mean by that is you're going to get more negative news in a recession Um, then you would otherwise so you have to focus even more On getting positive reviews than you would normally because you're actually fighting against Um, negativity rather than growing with positivity during a recession Right. Um, it's a little bit of a mindset shift But it's something you have to be aware about just because unfortunately our average star ratings on google or thumbtack or whatever is so important And lastly, you do see a big damages claim increase as well with insurance. So people claiming Cleaners broke something or claiming something is missing. You do see an increase with that as well So on the residential side, you should expect to see those numbers change So sales churn disputes damages and negative reviews are all going in the direction that you don't want them to go a little bit more um In terms of uh, frequency of cleans. This applies to both residential and janitorial people reduce the frequency of their clean So if you have a lot of bi-weekly clients, they might go to monthly if you have a lot of monthly They might go to seasonal cleaning like a spring deep clean or something. So there is a fairly big drop off in Uh, frequency people still people still need planes But they just reduce their, you know, they reduce the they typically go down one level in their frequency with your plan And with commercial some people some of the small businesses, for example If you're a gym, you know, you might need three you might have you might have three daily quick cleans or something Or someone on the floor all the time. They might reduce that down to once a day If you're a small office, you might reduce the scope of service and try and renegotiate contract terms So there is some renegotiations that go on commercial and there's also a decrease in frequency that goes on with commercial But it's far less pronounced Than it is with residential. So commercial is a little bit more recession proof. If you will Then janitorial than residential, sorry That's going to be true in this recession though. Just because the commercial space Is so that the landscape is so much different now since kovat, right? Oh, yeah, well, this is um Toma if I if I'm correct that I think your company does more commercial. Is that right? No, you're residential Okay For space, you know, uh commercial space office retail, you know, even industrial You know having it cleaned is maintenance they refer to it as building maintenance the same as You know, they're not in business if they aren't cleaning. It's uh, it really isn't negotiable They will maybe renegotiate on a track and try to skin you down the scope of work and get some money on other just That uh, you know, they're struggling financially, but they're not going to cancel completely if they do they're out of business I think that's the main thing is the scope of what's involved in the price But they still need the service. So there's opportunity to make it work I think it's such a great point, Liz, especially because so many offices so many offices are not being used now Right. So many people are working from home permanently. I know there's a little there's a little shift back into the office Yeah, at least in the uk there's a even the government's pushing it really hard They're like you have to get back into the office, but um I'm wondering though because of that because it's not as packed or busy as it was I wonder if they could fall into the the reduced frequency To the same degree as residential might right just drop it down a notch. So instead of Being clean twice a week. They're going to go to once a week or instead of weekly They're going to go to bi-weekly or you know going down one since they have fewer Fewer people in their buildings maybe seeing less need I don't know with covid taking it up a notch again. That might change things, but You know chris, uh, what is today? Wednesday, I think it was a couple of days ago. Maybe monday Holland came out with they passed along holland making Remote work the law. It's like unless there's some compelling reason why you Have to go into work with your legal right to be able to do that job from home Wow, that's that is really surprising. That's I like it though Yeah, anytime there's more flexibility in work. I think it's generally a good thing for the workers That's that's a really surprising law, especially in europe that things in europe tend to move a little bit more Like slowly than in the u.s. So it's good to see that happen so early You know, I didn't I don't have any data for it But it'd be very interesting if someone were able to find out who's watching if there's a breakdown in the the differences That different size businesses Utilized different different services in a recession like if you're a small business like a small medical office Maybe you cut back more than a giant 500 employee company does right if you The the research that I looked at was just commercial as a whole just janitorial versus residential They didn't differentiate by size of company So it wasn't it was detailed to get some insights, but it wasn't a super You know detailed 300 page breakdown or anything if you're small business lately, you know What are you describing? Yeah, absolutely. You can can pull it in house So Reallocate some some some payroll dollars that you're going to be you know investing in any way to Do the general clean on the early office, but Multi-tenant space larger offices. That's not not an option Yeah, I wonder if there would be a shift to in-house as well, you know, maybe they contract out to a company But maybe they hire someone in house instead No, that that depends what happens to the labor market, you know currently in the u.s When there's for all practical purposes two job openings for everybody looking for a job that's You know bringing it in house for a large organization. They're gonna have to step up for that probably They put most most organizations are having a hard time hiring people to Perform the activities. That's their their their core product or service It's it's such a tough situation when you have enough business to grow but not enough people Talk about the ultimate frustration. It's a good president, but you know Yeah, you know, this is uh We've used the term unprecedented times I guess for for a long time and you know the hits just keep coming. Um The whole inflationary aspect of this makes it very unique We haven't been really really dealt with inflation for like 40 years So the idea I guess the term that they use for that is called stagflation where The economy goes into a recession. There's contraction and economic growth at the same time prices continue to go up but That very well might be what we're dealing with here and um What's the old saying, you know, it's a it's a it's a recession if my my neighbor loses his job It's a depression if I lose my job Um You know the whole idea of a recession. There's certain people in the market that are Struggling financially and they're having to make choices but Well, I share the people and in a given market Are still working and they're still going to behave pretty much the way that that that they were before But the inflation part of this affects everyone so You know, I don't have any answers for that, but I'm just pointing that out that you know The data the data that that that we're working with here Doesn't probably doesn't address the unique situation that that that we're heading into It's it's interesting you say then and it just this isn't part of the notes I have but just kind of an interesting thought What we're talking about today is in part becoming more profitable. It's being more lean It's tightening our belts a little bit. It's all the small changes in the right direction we can make Yeah Consumers are going to be thinking those same things But our hope as a business is that they don't tighten their belt, right? So while we're tightening our belt, we're hoping no one else does because we want them to continue using us So it's kind of a or that if they tighten Or that if they tighten their belt not in this area Not in this area. Yeah Like some other area Is is uh, is uber eats or your cleaner more important? We're hoping we're hoping the cleaner gets out on top there But um, you know part of this equation i'm presuming is kind of keeping an eye on your cost you want to tighten your belt on the cost side, but you know The whole labor part of this is costing more now than it used to and by all accounts Our labor is going to be costing more six months from now a year from now than it does at the moment so You know, we want to be as efficient as we can and and as lean as we can but For most companies we're going to have to pass some of that along along to our clients, which yes Well, I really want to hear more about some of your thoughts around lean operations and Um, well specifically lean operations, but also efficiency and Like what kind of leaving percentages are you looking at making how much of a change? Have you been able to see or make or what are your ideas? Use the term efficient ops in lean ops if if I if I got that right You maybe just explain the difference between the two Good catch. I differentiate between the food, but in reality, they're not they're they're they're kind of two sides of the same coin two different sides of the same coin The way i'm defining lean operations is Uh profitability It's it's your actual like bookkeeping numbers. It's how you're able to run your business with as little operating expenses as possible While maximizing the dollar value that you're bringing in so there's a bigger difference between your operating expenses and your profit So when you talk about operating expenses, you're talking about your non direct labor costs Correct. It's your software cost. It might be the cost You could include cost of supplies and retiree gas. You can include that too But but your basic wages of cleaners, for example It's probably not going to change that much if you're still as fully booked as possible so you look at each individual cost, but I presume you would look at them In aggregate you mentioned software costs. I'm sorry. I'm sensitive to that I I I see companies Like trying to you know be more profitable by lowering their operating costs by going cheap on their software and in doing so they're spending five times ten times more than what they're saving on software and other other expenses So So this is where the balance comes in and and you guys will like this one for So i'm not throwing you under the bus. Don't worry so actually One of the things I want to touch on is is software on tool expenses You a lot of people have dozens of subscriptions for their business to various tools But and that that's fine if you have the extra profit right now, but you won't always have that extra margin But what you want to do is you want to find as many all-in-one tools as possible right now Because with an all-in-one tool like made central you do 10 20 30 different things that are really useful for a business owner You're not just doing one thing Like google calendar and then you have to have another for your booking site, you know You guys have a lot under one umbrella So right now one of the ways that you're able to save costs Is by going for all-in-one softwares that do more than one thing that you need So for example your booking software might be able to book customers You might be able to do the scheduling charge cards send email and text reminders to clients That that's one great tool that does five 10 different things another one is Don't go with something basic like mail chimp for your email automation Go with something more powerful like active campaign, which is like a whole marketing automation software It's not just emails. They actually they have funnels that you can build in there They have text campaigns that you can build out right So go start to go towards the direction of all-in-one and bundled tools So you can have three or five great tools that you're running your business on 90 well instead of going for 25 different tools that you're paying for different subscriptions on Just because you want a little bit you want to try and make your setup perfect or whatever, right? So you're going to you're going to want to go for The fewest possible tools that you can use and still do the job and that means softwares like made central Are going to become even more essential because people are going to have to be canceling You know half their subscriptions that they have right now And that goes for marketing too as well. So a lot of us have You know five different marketing sources that we're paying for and I'm I'm so guilty of this I just can't stop exploring marketing sources But but but when we do a market marketing ROI analysis, we look at every business quarter Which platform is giving us the highest return for our dollars? Which has the lowest cost of acquisition and so on And for us what we're doing now is we're kind of going with the 80 20 rule where we're looking for the 20 percent of marketing That we're doing that's giving us 80 percent of the results And we're focusing all our dollars on that one platform and reserving a little bit extra for the second platform That's also giving us business like for us. That's the google ecosystem. That's google my business It's google adwords google local service ads that ecosystem Gives us 80 percent of our new customers So we're maximizing our dollar value in that direction And we're leaving a little bit extra for thumbtack and for seo because those two are also big sources for us so Basically you want to do a marketing ROI analysis and cut down all the unnecessary expenses in your marketing And and change it all over the direction for what's working And it's something again These are all things that you should be doing anyway But they're things that become twice as essential in this kind of environment that we might be entering into So that that's kind of what I mean by lean operations is It's the balance between Spending on what you need to spend on but optimizing every dollar that you're spending So that's what I mean by lean It's kind of a little bit of a minimalist philosophy if you will where you're you're not You're not depriving yourself of a tool that you need or new business But you're just making sure that it's actually going to where it's supposed to be going And then the difference between ad and efficient operations Just real quick just to clarify is I'm specifying efficient operations for the way that you run your business So lean operations is the expenses that your business incurs to be run And efficient operations is the actual way that you're running the business day to day The way that you handle your to-do lists your daily workflow the way that you manage your teams Where your money's being spent in the office and and so piece that you use so so lean is related to cost Efficient related to how you're actually working All right, so cost and methodology together we want to be doing working on both of those Most most cleaning businesses have The unique way of running your business, you know, or at least You know, they think they do that, you know, well, that's not the way that I do business This is the way that I do business. This is the way that we do it. It's almost like You know, I I use the term everybody wants to paint from all masterpiece you know, and I mean, that's good and you know, you're taking the risk of being an entrepreneur that's your privilege But if I'm hearing you right sometimes, you know, especially Times start getting getting tough. Um It might be worth taking a hard look at that and abandoning some of the Of the workflows and processes that You it might be your own twist, but it might not be serving you well in a down economy Yeah, that's exactly right. I think the number one skill out of any of this if there's one thing you take away from the talk it's that Cultivating adaptability Is the number one thing that you're gonna need to get through a recession because you're gonna have to change the way you work You're gonna have to change the tools that use where you market where you hire A lot of things are going to change fundamentally in the way that you do business So you have to cultivate an attitude of being able to adapt to whatever the current situation is Rather than sitting and being annoyed that it's not, you know It's not easy money anymore or it's not, you know, it's not the way you used to do business This is how we've always done it. This has always worked. It needs to just fix itself again Exactly. It's really hard to do that initial inertia But once you do it feels really good to put those changes in, you know, I just went through a period of my VA company of that Um, we were we were very comfortable with the way we were doing business Um, and and on our onboarding process in the way that we hired VA's and everything But we were hitting some pretty hard limits to growth And we found that there was a client VA ratio that we had At that time where we we couldn't really exceed that without without the service declining in quality And so we would grow and then people would drop off and we'd grow and we couldn't we couldn't break this balance And it's it's because we got comfortable with our daily workflow and the way that we did things and the way things were set up And and I finally got off my my butt and I started to change some things and we're in a much More growth oriented place now again because we've changed the way we're doing things We outgrew that stage of our business and out and that way of doing things and and if you want to think of it in a positive way It's a growth thing as well The fact that you're just surviving in a recession at all when so many small businesses are closing is good and it's it's commendable But you you it's it's kind of like that whole um Things some people talk about you can go in a downward spiral or an upward spiral, but you can't stay in the same place I feel like a recession is it really exemplifies that you might survive in a recession, but you're slowly draining away Customers are churning. They're not coming in as quick. You're starting to get to a break-even place You have to be growth oriented and you have to start to be spiraling upwards again And that involves changes to what you're currently doing So so chris you're really in a in a unique place within the the the residential cleaning space I mean you run your own residential cleaning company, but you're also have a VA service that you provide Service, I mean probably a number of industries, but a number of your clients. I I believe are house cleaning companies 85 percent maybe we do pressure in lawn care and stuff, but but obviously being in the cleaning industry. It's most of cleaning okay, so you're able to I suspect you have discussions with with with owners of house cleaning businesses Along the lines of what you're sharing with us. I mean you're providing Some of the some of the some of the support, you know VA's to help with with some of these key processes do You guys ever get into discussions of you know, you might be able to Uh get some efficiency in your operations by by changing some workflows. Is that A product, you know a service you offer or is that like a byproduct of the service you offer? It is it's it's it's built into it as much as we can so One of the things we do with new clients is I I have a delegation fault I give them access to if they want it Right, I have a whole series on on how to work efficiently in your company So we we break it down. It's a whole productivity system that we use I covered some of that in our last talk a little bit that that's that's kind of taken directly from those two years ago It's that yeah, and you've had a lot of guests since then so you're like, what's this Remember he did the two parts. I remember it was really good. Yeah, I remember he did hit he did hit on a lot of this You know what they say it's it's it's it's it's not what someone said it's the feeling they left you with Right, that's it's kind of like that. Like I know chris was talking about something It was awesome. I know it was awesome. I really liked him Thank you Yeah, so to answer your question. Yes, we um We we we build it into when we're onboarding people We have a whole delegation fault and process that we take root for how to work efficiently And I'm always talking with clients about Different recommended systems they can use for different areas and we kind of tailored as much as we can to people Because we have a dedicated VA. It's it's not a service where there's a whole team attending your business You you work with one person day in and day out So they learn the systems and the tools that you're using in your business They learn how you quote with clients. They learn how you follow up And and everyone every business on the planet is going to have areas that they're weaker in Compared to the ones that they're stronger in there's no one has Full balance across all of them. Although it's a great goal to have And so we we we make suggestions. We do check-ins with client at you know, you know Day one week one month one, you know at the one year anniversary We do check-ins at different points and we make suggestions based on the way the VA is working. We say hey look We don't want to tell you what to do in your business But here's three areas that we'd love to help you on these tool for this tool for that a way of doing this If you implement these we really think it's going to be really positive based off what we're seeing in other markets in your industry So so so we do provide that it's kind of informal. It's not like a of course you can buy I have the local business MBA which has all my systems and stuff, but it's not it's not just systems Right. It's just that's a part of it But it does sound like some best practices that you're Recommending to people like people that are successful. We see them using this we see them doing this Yeah, yeah, yeah all the time. We don't want to just be like a middleman. We want to be Well, the way we view it We're kind of apart. It's a long-term partnership with each client. I sincerely I mean that that's the way we view it It's not just a client that we're building every month It's it's a partnership We want to be with you guys for 10 or 20 years if we can right And so we want to integrate ourselves and work with you closely So if we can help not just on sales and marketing and daily operations If we can help you get set up and running more efficiently if we can save you more money Then we're spending then you're spending on us That's a wonderful place to be in that relationship. So we're always trying to make ourselves as useful as possible in different areas So Do you ever I guess my experience a lot of times I mean everything you're you're you're you're sharing with us here at a logical standpoint Makes all the sense of the world But when you really get into to making tough changes within within your your cleaning business a lot of times there's Fear and emotion a lot of other things going, you know, that that you're competing with What can you share with us in the last, you know, a few minutes that we have here to to help people Take what logically makes sense and actually fight through the other You know things that that that get in the way of Of actually making it happen So you you're wanting a little bit more kind of business philosophy mental side of things Well, you know what you're saying makes a lot of sense. I just you know In my experience as you you tell people something it makes sense. Yeah, that makes sense But they're not going to implement it because it's hard or it's scary. I'm afraid I'm going to lose employees I'm going to lose customers Whatever I'm doing is work so far. If I change it, it might not work anymore An example a good example is Everybody understands logically that you need to raise your prices Right where the prices for everything's going up or going probably going into a recession You need to raise your prices. Everybody's like yes. Yes. Yes. Did you raise your prices? Well, not yet because blah blah blah. Well, I have to wait. Well You know, I can't afford to because of this. I'm afraid I'm going to lose this so How do you how do you help people get? over themselves Or do you sure I can I can give a couple specific steps in a minute, but but for me Um This is more business philosophy side of thing and I know everyone has their own philosophy of doing business But for me, it's it's all about Balance and efficiency For me, um, and I promise this ties into your question. I won't go off too too much. I'll crack The reason I started my business it wasn't to make a lot of money it was to have as much Freedom as I could in my daily life to do what I wanted to travel to be with my wife and so on And that necessitated a very efficient and lean operation I I couldn't I couldn't be in the office eight hours a day stealing the stuff I had to be in In the office my computer and in my tiny little apartment corner I had to be in the office so to speak For an hour or two a day because that's when my team were awake. So so the nature of my lifestyle Forced my business to adapt to me and what I'm seeing right now is a lot of people are adapting to their businesses and and I think we need to reorient We need to reorient ourselves In the right direction and our business to start to be working for us again. So so philosophically what I mean by that is During a pandemic or during a recession, of course, they're different one can tie into the other and so on as they are partially with supply chains, but The mentality that you have to take in your business is totally different than in a normal environment one of the things you can you can work on to to be able to implement this work is to is to change your mindset just a little bit from being uh being overly concerned about dropping every client that you can and and taking more of a um A numbers-based approach So what I mean by that is if you have Uh, let's say you have 100 by weekly clients or just to make it super simple I give 100 by week clients each client is like 120 bucks every clean Maybe that's a little bit on the low end now nowadays, but but just to make it simple. Um, and you raise your price by 15 percent Let's say so you're raising it by what? 12 uh 6 18 dollars. So they're gonna be uh, so it's gonna be 138 dollars a clean now, right? So so If you raise it by 15 percent You're probably thinking the worst-case scenario is like 25 percent of my clients drop me. It's too expensive, right? Your your your thought process is that if you raise your prices a little bit You're actually going to come out behind rather than ahead Because you're going to lose enough clients with the price increase that that the loss from those clients Is greater than the gain that you make from the price increase, right? That's that's kind of what's going on even if I don't even if people aren't verbalizing that That's what's going on in the back of their heads, right? Right, but but what you don't realize is you're losing out more by staying at the same price Because inflation's eating away at your profit margins all all the prices and tools that you have are going up Your cleaners are going to need a higher rate So if you're staying at the same price the loss that you have by staying at the same price Is most likely in reality going to be greater than the loss that you lose from a few clients with a price increase So it's sitting down and actually having a little bit of math on the table in front of you To work out what the probabilities are of a loss and a gain for each change that you make in your business So one thing I like to do is Um, I recommend that people have a three to six a month emergency fund at a minimum And they say oh, yeah, that's great, but my operating expenses are $12,000 a month How can I just get $36,000 for a three month emergency fund, right? Where's that money going to come from and I say what you're going to do is you're going to email Every vendor that you have for every every tool inventory Every everything that you have every vendor that you deal with as a business cost What you're going to do is you're going to email them and you're going to ask for a small discount You're not going to ask for like a year free or 50 off You're going to ask for between five and 15 off your base price that you have with them because you want to stay with them But your expenses are high Two thirds of them are going to say yes at least temporarily Maybe they'll give you two to three months free. Maybe they'll give you 10 off your monthly plan Take all of the savings that you get from all of those vendors and put it directly into building your emergency Your emergency fund So you're basically redirecting your sources to building a safety net instead of growing again Whereas in a normal environment, you might take all those savings and reinvest it back into marketing You're reinvesting it into your emergency fund You're and you're reinvesting it into making sure that your company isn't going to go under on a moment's notice so what I'm saying here is In order to get over the fear of changes in your company, you need to be able to Take a numbers based approach so you can rationalize and think out what each change in your business is going to do You need to take an adaptable mindset In terms of changing the way that you work in your culture If you can do those two things at a minimum and increase the efficiency with which you're working I think you're going to be so much better positioned Just from a mental standpoint to be comfortable making changes in your business And know that you're going in the right direction Sorry, that was I know it was really long That's awesome. Um It's funny how quickly an hour can you go by How is it already an hour is gone or two years for that matter? I can't Chris if anybody Wants to continue the discussion get more information or learn more about the services You provide for your VA service. I believe this is the website. They would want to go to That's correct. We just did a site refresh. So Yeah, go to local.com And they can get a receptionist if they need just phone related work or a virtual assistant if they want actual admin support And if they want some support Improving efficiency if they want some support they can use the exact systems I use in my company We can help them set that up Drop the URL and chat so everybody will have that awesome Any any last thoughts here chris? um I always love look. I really love when I get on with you guys. It's always really fun a lot of interviewers are They're like question bang question, you know, it's very it's very it's very direct It's very strict almost if you will with the structure. So it's really nice to have a fair Yeah, um I would say um I know an hour went by quick. Um, I talked briefly about this three-step framework that I have Um, and some of the thoughts around the future. I know we didn't get to go into those details I I have all these notes available. I'll post them in the in group if that's okay Or send them directly to you so everyone can have those Um, since we didn't you know, there's only so much you can do in an hour But but I want to make sure that you guys have a specific list of steps that you can do That'd be great chris. Thank you so much Yeah, if you want to if you want to share your your notes with us, we'll uh post that for download on cbt Cool. Yeah, I'm cleaning profit builders too, Tom. Sure Yeah awesome Oh, it was a blast. It always is. Well, thanks so much chris tell your wife. We said thank you for uh Letting you come on here spending some time with us. I know you guys cherish your time together Yeah, she's still asleep. She's still sleeping right there for god. It's only 7 a.m over there Usually the other way around she's a flight attendant. So she's always getting up at 3 a.m And i'm like why are you waking me up to stop this time? It's the other way around this time. I got her Nice Thanks chris See you guys uh next wednesday father pocket star. Bye. Bye