 go into. Hey, good afternoon everybody. Tom Stewart here, this is Smart Business Moves. Liz isn't gonna be able to make it today. I think that she had too much fun in Vegas last week and she's still recovering. But our guest today is Dan Platter with Blue Skies. Hey Dan, how are you today? I'm doing awesome, thanks Tom. Sorry that Liz can't be here, but I know what you mean. Vegas can have that effect on people. So maybe it was good that I didn't make it to Vegas last week. Otherwise, you know, you wouldn't have to be here. The stories you'll never hear, you know. Oh, some of them still make it back. You know, some of them still make it back. It was an awesome time for, you know, those of you who were there, I know you know what I mean. And for those of you who weren't, you know, it was the first time from a ARCSI standpoint that we've been able to do that in the last couple of years. We had to do a virtual event, I guess, last year, which is better than nothing, but far cry from being able to get together. You know, under the circumstances, we had a decent turnout, not one of the most heavily populated shows. I guess COVID's still kind of a thing out there, but got a lot of good education. You had your man, Sean Day out there, Dan, and he was taking care of business. Yeah, he's talking about employee stuff. Sean and I wrote out a show called The Experience, which is for restoration and carpet cleaning companies out in Vegas a couple of months ago. And kind of the same thing, it was like half staff. It was 50% of the usual turnout. So I think that's kind of the vibe here for a minute while everybody figures out what the heck's going on with COVID still. But they're getting it wound up in 2022. They're gonna be doing it in Chicago. They're gonna be doing it earlier. Like I think it's the first week in October. So more information will be coming out about that, but I would hope by then everything would feel more normal and it would be a well-attended event. That'll be good for me, because like you and I were talking earlier before we went live, they always have it right in early November, which also coincides with the deer hunting rut. And so in early November, I block off my schedule to go chase whitetails around the woods. So maybe if it's October 1st, I can still sneak out and join the fun. Yeah, absolutely. You need to, hey, Danit's with us today. Dan, I don't know if I, I didn't point out, but if you look over on the right-hand side, you've got some controls and one says comments. Oh yeah, comments. We're streaming on like several different Facebook pages and some YouTube channels. And whenever anybody jumps into the comment, you'll see it there. Hey, Linda, how are you doing today? There we go. For you, folks are just joining us. Liz is taking the day off. We're joking that she's recovering from her trip to Vegas. But anyway, she'll be back with us next Monday. Dan, your world within Blue Skies is, I mean, I know that you wear a lot of hats. You're the CEO. So ultimately, you're responsible for everything. Forced to do all the hats. Yeah, yeah, I'm a weird accounting nerd. And you wouldn't know it by looking at me or listening to me, but I graduated college with accounting, finance and econ degrees. And my strategy was if I know how to manage money, that'll probably help me make more money. And at the time, money seemed like an important thing to be made coming out of college. So I did accounting and finance in the corporate world for just shy of a decade and steered it more towards finance. I kind of, when you're in college, you just get this like liberal arts education, but they don't actually tell you how it applies to anything. And so I got into the real world and then I kind of realized like, okay, economics is all theory, accounting is all like data prep and then finance is making decisions with the data. And I was like, man, like that finance piece of it, that's really sexy to me because decisions are what makes the money. I wanna make the money. So I started my career in accounting in the corporate world and then shortly thereafter, like I said, realized like, oh crap, like I don't actually get to make any decisions. I'm behind the scenes of everything. So I steered my career towards finance and I started doing what I was at Cargo, which is a big private agriculture company. I think like up there with the largest privately held companies in the world, usually it's them and Coke industries like trading places. And I did what we deemed risk management, which was really what I deemed slinging chicken feed. So we had brought eggs in and tankers and those eggs came from chickens and those chickens ate corn, soybean meal and then some other stuff. And my job was to trade futures and options contracts to try to hedge the price of the egg. You know, we had like a mathematical formula divides with all the farmers. And so my suppliers were farmers in Wisconsin and Minnesota and Iowa and Illinois and Indiana and my customers were McDonald's and Denny's and IHOP. So it was kind of fun. I got to go like go out into the middle of nowhere and visit, you know, some really like blue collar farmers. And then the next day I'd be in Chicago at McDonald's corporate headquarters talking to their treasury department, like talking about options contracts to try to keep the dollar burrito a dollar on the dollar menu, you know? Which like, I'm not trying to say anything about my replacement cause he's a good guy. But the minute I left that dollar burrito was no longer a dollar. And man, that was like my go-to. That was my go-to. So you know who to blame for that. You don't want to call him out my name though because you- I'm not going to give you his info. I'm not going to give you his info cause he is a nice guy. He'll blow him up on Twitter if his name gets out. That's right, that's right. But yeah, like there was a point in time where I was like, I'm pushing, at the time I was pushing 30 years old and I was like, well, if I'm going to do something entrepreneurial I feel like I should do it sooner rather than later. So if I suck at it or I don't like it, I can like get back into the corporate world and have a good job again. Yeah, and so that was back in 2016. I joined Blue Skies and I had already been kind of moonlighting with Blue Skies behind the scenes. So from 2010 when we got our start, 2011 we bought our first window cleaning business, 2015 we bought our first home cleaning business and somewhere around like 2012, 2013 I had jumped in and I started and I didn't realize this at the time but it kind of sets the tone for the bookkeeping we do now but when I first started with Blue Skies and Mike Dahlke who's my business partner, he was a buddy of mine. He was my financial advisor actually before he left that world and started buying small businesses. And what I helped him with was setting up the books and figuring out how to measure ourselves to get data that we could make decisions with. And so we spent many a night at Starbucks to our wives dismay getting all hopped up on coffee at 10 o'clock working on spreadsheets to try to figure out the business model. You sure it was Starbucks? You know, actually it's funny. I see a lot of you there. I'm just, you know. It's funny you called that out because it was actually Caribou coffee but I never say Caribou because it's like a regional coffee chain like some people wouldn't know who Caribou is but I say Starbucks because everybody would know who Starbucks is but it wasn't Starbucks. So he caught me. It was Caribou. We lived like two miles apart and it was a mile from each of us. So I didn't realize it like I said at the time but that was like what got me really interested in small business was the business model and figuring out how to have it make money and have it make money consistently and protected. So there wasn't a lot of risk on the table. And so that started back in like 2011, 2012 where I started helping with that and eventually my life got into a position where it was a easy, justifiable time for me to leave the corporate world and have more fun doing this sort of stuff. So back in 2016, I kind of replaced him at Blue Sky so he could go do more investing related stuff which is what he was really passionate about. And then I could bail out of the corporate world and do more operations related stuff. And we were still running these cleaning businesses. So we still have three home cleaning businesses. We've had more but we've gotten sold some as we go and we have a couple of window cleaning businesses as well. Again, we've had some others but we've bought and sold as we've gone. And really it was back in 2018 that we started getting tapped and actually it wasn't our original idea or our original intent but we had friends of ours in the industry that had said, hey, you guys must hire a lot of people. Can you hire some for me? And we're like, well, I guess so. And at about the same time it was like, how do you guys do all your books? Your businesses are so weird and complicated. How do you keep track of that all? And it's like, well, we just like, here's how we built it out and blah, blah, blah. And they're like, well, can you like jump into my quick books and do that? Or just like, guess so. So that was the impetus for, we already had this admin company, this Blue Sky's admin service company that we have existed at the time but it was only internally facing. So we did the accounting, the bookkeeping, the marketing, the recruiting for internal companies. And we would build them, they would pay us like they were an external client but we just never thought about serving external clients until external clients were like, dudes, you guys built this thing. And now I'm probably a little bit similar to you which is like, you're building this thing because nobody's got a solution for the CRM that you want and so you start building it and eventually somebody sees it and is like, damn that thing is cool. I remember coming down to visit you and looking at Made Central and being like, yeah, that does like everything that you would want a thing to do to run your business. And so it was kind of the same draw and we started building all these tools and eventually somebody else asked us to do it form and now here we are. Yeah, before you know it, you're in a whole nother business and that was never really the initial plan, it just kind of happened. But now that you're here. I will say, oh, go ahead. No, you go ahead, Dan. I was gonna say, I will say, and like I said, I didn't realize it at the time but this is my, you know, I love the entrepreneurial world and the small business world but doing the bookkeeping for other business owners is the most fun I've had. And it brought me back to when I used to help Mike sitting in the Caribou coffee, like with his business model, I get to do that again except now I get to do it for a couple hundred bookkeeping clients and hopefully, you know, a couple thousand sooner rather than later to kind of share best practices and share what we know and hopefully do, I talked earlier about I view myself as more of a finance person than an accountant and I'm trying to help business owners understand that bookkeeping isn't an accounting activity. It helps accounting, like it helps your CPA do the taxes at the end of the year. They love it if you do good bookkeeping but your accountant can do your taxes with bank statements. They don't need a QuickBooks account. They might tell you they need it because they really don't want you to show up with a box full of receipts and bank statements and have to do your taxes with it. And they might charge you a little bit more if you do. Yep, yep. And so, but that's not the reason why we do bookkeeping is like, yeah, it saves some money and it makes your CPA's life easier but bookkeeping the way we do it is truly a finance activity. It's truly designed to make decisions. It's not just about putting some data into a thing to have an end result. The end result is in our control. It's the decisions we make every day about how we run our business. And so, I didn't realize when I was doing it for Dulkie back in the day that that's my favorite thing to do is to help those business owners. And at the time it was helping him and now it's helping a couple hundred other clients run their businesses. But I think that's where the beauty of it is. And what you're describing is something that at least my experience having done a lot of training and coaching over the years as well as working with major central users is a lot of people have CPA's and I'm sure they do a wonderful job of filing their taxes. But there really isn't any business accounting associated with that. They'll get like, no, not to get too geeky but you'll get like a P and L statement that doesn't even break out your cost to get sold. It's just here all your expenses and for taxes that works fine. But if you're trying to run a business it's not worth the paper it's printed on. Yeah, and it confuses you into thinking a P and L is something for tax purposes. Like it's not organized in a way to help you make decisions. It's not timely in a way that helps you make decisions. I always laugh when they're like, yeah, I've got a bookkeeper. You know, like every quarter I get something and I'm like, man, you wait for a whole quarter to know how you're doing. You get it like in the middle of the following quarter, even. But I get it like a CPA. I like to break accounting down into three groups of activities that all get called accounting but have totally different purposes. So step one, I like to call a mother-in-law work. And I say that as a like endearing term because it's actually my business partner's mother-in-law that does this for us and she crushes it and I could never do this. And we don't do this in our business either but accounts receivable, accounts payable and payroll. It always gets called accounting but there's no actual accounting. There's no debits, there's no credits. Nobody needs an accounting degree to do it. You just need to like have the software and follow a process but anybody can send an invoice and make a phone call to collect on the AR. Anybody can go online and pay a bill or whatever the case is. Anybody can jump onto Gusto, enter ours, enter commission reports or whatever and hit the button to execute payroll. You don't need to have any accounting experience to do those things. You just need to be super reliable, super consistent and timely with it. So that's bucket number one. I like to call it mother-in-law work. They're dynamite at it. The bucket, I'm gonna skip bucket number two because that's where we fit in. Bucket number three is your CPA and their tax experts and they're great at the tactical end of that. Some of them can get a little bit strategic with it but most of them don't understand the home service industry and so kind of like you pointed out, even if they ran a P&L for you, it's not gonna be organized in a way that actually helps you understand your business. It's like, yep, here's your revenue and here's all your expenses and here's how much money you made. So they're really good at the tax side of things and again, I kind of view that as a tactical thing which is it's the end result. It's minimizing your liability but it's not helping you make decisions to make more money. It's helping you, it's them kind of making the decision to help you lose less money to the government and there's some things you can do throughout the year but most of the things you do throughout the year should increase your tax liability. Like by all means you wanna be making more money, not less money and then you wanna figure out how to pay the least amount of taxes on it but they're great at that. I tend to, I was actually on a call today with a client that we're just starting with and his CPA and the CPA was just like, just for the love of God, keep me out of all these day to day things. Like I don't want anything to do with the books. I don't wanna have to tell it like where this thing goes and what that thing is and make this journal entry. Like somebody do all the bookkeeping throughout the year so I can do my thing once the year's wrapped up and you guys have this thing reconciled but like CPAs generally don't like to mess with that stuff. It's too in the weeds. It's too much about running the business and they're not business people, they're CPAs. So they don't wanna worry about how you're paying your labor and what your acquisition cost on your marketing is and things that you and I would be thinking like as a business owner I gotta know what these numbers are to run my business. They're just like, yeah, I just need to know what your net income is and make sure you've got these different buckets captured that maybe have a different tax impact so I can do my job. So that's where we ended up fitting in is we're not CPAs. Although we do have somebody on our staff that's a CPA. So at some point I think we'll be able to do people's taxes or kind of having her take some classes so we can get into that world too. But today we don't do that. We don't do the AR, the AP, the payroll because it's just always better and faster and easier done in-house by somebody that's there, preferably a mother-in-law in my experience because they're so good at it. But we fit in between which is bookkeeping and like I said, it's more of a finance activity in that we're categorizing transactions. We're still reconciling accounts and stuff like that but we're grouping things in the way that we as home service business owners make decisions. And so if we can help a business owner understand what their cost of goods sold is and what that means and who to hold accountable with it or what their marketing spend is as a percent of the revenue and what their acquisition cost is or what their administrative overhead is and what that drag looks like versus this versus that and what it looks like over time and what it looks like over the best companies and industry, all of a sudden they're just that much more powerful of a business owner to make trade-off based decisions about where their money is best invested. And we do, so we do that, but I've also found that again, a big piece of it is timeliness. So we do it weekly instead of monthly or quarterly or however often a CPA would do it by doing it weekly not only is everything in the right spot and grouped in a way that helps them run their business better but they have data every single week instead of waiting for the end of the month or at the end of the quarter or whatever it is. Sorry for my rant. I'm passionate about it. No, that's awesome. And you're filling a need. I see that the other part of the equation, I'm kind of curious how you guys plug into this is I've got the data that I need but a lot of times the cleaning business owners don't really understand what it's telling them or what actions to take. I've heard this described in some circles as like a virtual CFO. Do you guys do any coaching, any feedback, any action plan based on what your financials are telling us these are some steps you might wanna take? Yeah, so every month we send a P&L report out and I try to like one page it. I don't want somebody to have to look at an entire P&L report because I'm an accounting nerd and even if you send me a P&L with revenue, 40 different line items of expenses and then net income. That's inhumane. That's just not right. Yeah, so like I'm even gonna just like look at the top, look at the bottom and then the rest of this. And I'm paying for this. I can be miserable without you. Yeah, exactly, exactly. Like what's this list of numbers you just sent me? So we group it into five different categories of expenses and when we send out a P&L report, we just show those five. We have all the details below but I just tell people like don't look at the details unless something is off of your business model. So we send it every month. It shows all of the months individually but then it also shows the year to date total. So you can kind of see how are they trending? How are they doing for the entire year so far? And like I said, it's the five different types of decisions we make in the categories of expenses. So we talked about cost of goods sold already. That's gonna be anything that's production related. So it's gonna be the labor. It's gonna be the supplies that they're using. It's gonna be damages and repairs. Anything that's like happening out in the field, we want to call cost of goods sold because it's part of delivering the job to Mrs. Jones. There's always like some gray area ones in there. Workers comp we put in there because safety happens in the field. Merchant processing we put in there because we have to decide if we wanna check from them or like getting paid as part of the job, we don't have to pay somebody to run checks around which is usually our production manager who falls into cost of goods sold or we gotta pay a credit card company and we gotta pay an employee to like, put their information into the system. So production related decisions we're generally holding a production manager or operations manager accountable for that. And so we isolate that as a specific set of decisions and a person to hold accountable. We have marketing for all of our client acquisition related decisions. So whether it's the ad spend who were paying to run the ads, our software costs, our website, not all software but like marketing specific software lead flow based software like Responsibit or something like that that's online pricing tool. So we group marketing is, what's our client acquisition decision set looking like? We have administrative overhead for what our people infrastructure decisions are. That would be people like you and I that are in the office not out at cleaning stuff. It's bookkeepers, it's lawyers, it's your office manager, your virtual assistant, a sales person, anybody that's not out cleaning stuff goes into that administrative overhead. And I see that bucket tends to get way out of line as people scale. And so I love having that as a specific breakout where it's like when we send that P and L it's red, yellow or green. Like you shouldn't spend more than X on that category. And if you start getting high on that category the only way to get it back down is you either gotta fire somebody or they need to like grow your revenue which is why you hired in the first place is they gotta go add some value and grow your revenue. So that's a super meaningful bucket to measure that people infrastructure. The fourth one is fixed overhead. So that's like your non-people infrastructure. That is your rent, utilities, software like Made Central would be. What else do we put in there? Liability insurance, all the fixed monthly bills that whether you do generally whether you do twice as much revenue next month or half as much revenue next month those bills are still gonna say the same. They are your infrastructure. And again, if you're high on that you either need to like cut expenses or grow revenue there's not a whole lot of trade-offs. And the last bucket is your variable overhead. So fixed overhead, like I said is all your non-people infrastructure it tends to be proactive stuff where you sign up for something and you pay a monthly bill. Variable overhead is not proactive. It's all reactive stuff. It's stuff like employee engagement, recruiting repairs and maintenance, meals and entertainment events in education where generally there's something goes wrong and you got to pay to fix it or an opportunity presents itself and you got to pay to pursue it. But it's more like frugality based decisions of you're not signing up for something for the longterm you're just signing up for this thing this one time and are you gonna go in what hotel you're gonna stay in and stuff like that. So it's more frugality based stuff. So when we send a P and L to our clients it's those five categories and then each month, each of those categories is graded red, yellow, green based on the business model. And we do it for all sorts of different industries but we have a home cleaning specific target for each one of those. And each month that you're either red, yellow or green are you spending too much on your cost of goods sold? Are you close or are you beating it? And not all months are created equal. I like to look at March from this last year was a good example, March and April back to back. March had 23 business days and only four payrolls for those of us that pay weekly. So you have three extra days of making money like everybody was all green on everything. And then the next month, April, I think had 21 business days and five payrolls. So everybody was all red on everything. And I'm like, it's okay. Like not all months are created equal they have different numbers of days in them. I mean, that's a 10% shift in revenue just from two extra days, right? It doesn't feel like a whole lot but two days is a whole lot of revenue in a home cleaning business that's built on recurring services. So we always kind of point back to that year end total of, yeah, you're going to have some ups and downs in any given month with seasonality or just anomalies of different months like that. But we can always see how we're trending year to date and that's going to point us to the areas that are maybe red on that P&L where it says, here's a thing to address in your business. And then let's dig into the details of that. But if my cost of goods sold is 58% with all my labor all my supplies, all my workers comp, damages repairs. If my cost of goods sold is 58% in the home cleaning business I'm just going to move on. I'm not going to, there's not a problem there to be solved. I might be losing money in my business, but it's not there. It might be in the admin line. Maybe I just hired too many people to go out and do sales or my phone team is inefficient or something like that or my marketing isn't converting right. So this can help point us to where the problems aren't our business. So I like to use the term we're not trying to boil the whole ocean. When we look at our P&L, we don't need to solve all the problems. We just need to solve the worst ones. Solve the ones that incrementally will make the most difference. And so it's a little easier when you just have to look at five line items instead of 40. So we'd like to take that approach. So the red-yellow green approach, do you have your own benchmarks that you use for that? Yep. So we kind of look at all of our clients in specific industries. And then we can devise what is kind of, I won't say we shoot for industry best. We just shoot for industry sustainable. So some geographies can get better margins than others obviously, but everybody can hit in home cleaning like a 10% net profit margin would be a good healthy profit margin. Assuming the owner is taking a paycheck and they are an expense of the business to not just taking distributions. Window cleaning, we shoot for more like 15 and power washing even shoots for 20. So different industries will have different net income targets. But then the spend in each category, again, we just have so many clients and we have so much data that we can see what the upper echelon of companies are doing and say, here's what we wanna be shooting for in that category to be running a sustainable, successful business model. So, you guys have been doing this for a while and I guess observation, setting here post COVID or I'll say it's post COVID, I guess it's still kind of COVID, but late COVID. Yeah, compared to say two years ago and the years preceding that everything was just kind of constant. Whatever you were paying for labor was kind of the same year after year, maybe a little bit, but no big changes there. This whole concept of inflation was relatively a non-issue. Here recently though, last year and a half, I talked to a lot of businesses that they're paying 50% more for their line labor than they did a year and a half ago. All, a lot of the other inputs, expenses for their businesses have gone up a lot. So, speak a little bit about what maybe worked in 2019 and 2018 and 2017. A lot of people were running their businesses using checkbook accounting, if you will, and as long as you might even stumble across and just kind of get lucky, but you've got a recipe and a mix that it's working, as long as nothing else changes, you're going to be good, but sitting here at 2021 with 6.2% inflation on this way to seven, and who knows what we're going to be playing for labor a year from now. How does that make the work that you're doing even more important? Yeah, so there's two pieces of that. One is labor is the biggest piece, right? I think like costs of materials and stuff like that are going up, but labor is going up the most like labor is hard to find right now. And I know Sean talked about that when he was down in Vegas at ISSA and Arcsy, but labor is really hard to find to begin with. And the labor that we need to pay to have somebody go clean is getting more expensive faster and faster and faster. So combine that with the fact that like 60% of our expense in a home cleaning business is labor, the rest is marketing, software, infrastructure, stuff like that, but between the cost of good sold labor and the administrative labor, somewhere around like 60% of our expenses are labor. So when we're running a home cleaning business, labor going up has a super drastic impact. There's not a way around that, right? Like we have to pay people what it takes to be competitive and we're competing with Amazon warehouses and what the fast food joints are paying, which now like on all the windows by all the places we operate is 15 bucks an hour. And every machine shop, anybody with a blue collar job, our employee, that's the substitute for our employees. They can go work at any of these places because we're not using highly skilled labor. So they have a lot of substitutions and those substitutions went from paying below 15 bucks an hour to now pushing 20 bucks an hour or more in a lot of places. The simple math says we have to pay that. Our business doesn't exist without employees. So we had to pay what the market costs and in turn, so do our clients, right? We have to pass that through because we're running a 10% net profit margin business. We can't absorb that sort of price increase. So if our cost goes up 20%, so too does our price. I know we just did a 15% price increase a couple of months ago on all of our home cleaning businesses. And I don't know if it was quite enough. We might have to do another one next year. We'll kind of see what wages keep doing. We haven't had a big issue with our supply spend getting out of line. Like cleaning chemicals and stuff like that is a little bit high, but it's not out of our business model. Our marketing costs haven't gone up so much and we spend quite a bit on marketing. Our liability insurance is getting a little bit more expensive, but it's not unruly. It's really the labor that's crushing us. But so I'll say, if labor goes up your costs just have to go up. And if you're going to lose clients because of it, that's just fine. If they're not willing to pay for what it costs to have somebody clean their home, they're opting out. But more and more, we know that the demand is there, right? Like demand for home cleaning is at an all time high and there's going to be a recession at some point here and demand is going to come down because we're a luxury, not a necessity, but we're getting closer to being a necessity. Younger generations are- I think a lot of us saw them it's as much of a necessity as a lot of other things though. Consumers will give up a lot of other discretionary expenses before giving up their house cleaning. And I think more and more and more, that's the case with younger and younger and younger generations like my folks will not outsource a thing. They're finally starting to come around. They're in their mid to late sixties and they're starting to come around with the idea of outsourcing stuff. But I mean like they're not short on the money to do it but they'll be damned if they would hire somebody to mow their lawn, right? They will drive an hour back from having funds somewhere to make sure they can get back and beat the weather to mow the lawn rather than hiring to somebody to mow their lawn. But I don't see that out of the younger generations that are just starting to buy homes now. It's like a built in cost of owning a home is paying somebody to clean it. Not for everybody, but that demand has been continually increasing. So even if we get a recession people are still gonna get their homes cleaned. Maybe we lose a little bit but I don't see the demand going away. It's just gonna be who's willing to pay the higher cost for the labor. We're their labor source. They're hiring our company to find them good cleaners and train them good cleaners. And so we're just the middleman. We're just like whether we use employees or subcontractors doesn't really matter. We're the middleman to make that experience of finding labor to clean your home pleasant and to hold that home cleaner accountable and make sure that the job gets done correctly and insurance and all that stuff. So I do think even though like, yeah the demand is there, the labor is gonna be more expensive and it's just gonna be a matter of matching capacity and demand. Is how do you make sure you're paying the employees enough and your customers are paying you enough so you can keep being the middleman? I mean, one of the hottest topics in the industry and we touched upon this already is, how do we find labor? A lot of discussion about that in Vegas last week. And for good reason. That needs to be a high priority and we need to be doing everything that we reasonably can to do that. But the other side of the equation is just economics. If there's more demand than there is supply then you're not charging enough. So one of the ways that we fix this problem of, I can't find enough labor is charge more. And a few customers will say, I really can't afford that, but that's fine because the others who take it are gonna be paying you more and you can make more money and clean fewer homes doing it. Yep, yep. Yeah, we tend to get as business owners, we get handcuffed by employees that need stuff from us and customers that need stuff from us. And sometimes we lose sight that it's our job to run a profitable business and that our families require that of us. It's easy to let the influence of customers that are maybe not thrilled about a price increase or employees that are not thrilled that they gotta go back and do this redo or whatever the case is. But at the end of the day, it's just a math, like we're just running a big math problem. Part of some of the work that we do, like in Made Central, we emphasize the point that, yeah, your families need you to make a profit. I mean, you need to build value in your business. But at the end of the day, your clients really need you to make a profit and your employees need you to make a profit because if you're not making a profit, you're gonna provide lousy service and you're gonna be a lousy place to work that nobody wins if you aren't being profitable. Yep, yeah, I think you nailed it. One other part of the capacity and demand challenge that everybody's facing, the people that I see overcome it the fastest and easiest where like when prices are really going up, especially labor, are those that pay commission instead of hourly because when you raise prices, your employees get a raise at the exact same time. And so if the employees need to make more, one is it's in their control. If they need more money and they're working hourly, they can't control how much money they make because like the only way would be to drag the clock out, right? But if they're making commission, they can hustle their asses up and maybe get another house on their schedule and make more money. So they have control over how much money they make to some extent. They don't have control over the commission rate per se and they don't have control over how many new homes you're selling and how many clients are on their route all the time. But commission style pay tends to help business owners, A, like incentivize their employees the right way. So the employee has some control over how much money they make and the employee can give themselves a raise just by working more efficiently. Whereas hourly, they actually give themselves a pay decrease if they work more efficiently. And then when you're looking at how much your cleaners are making on average, you say like, man, our cleaners need to make a little bit more money. They're working hard, they're efficient. We know they're efficient because of the way their paychecks work. Let's do a 10% price increase because then our cleaners automatically get a 10% pay raise as well. And so you don't have to try to manage two different things. Your labor and your pricing is directly connected. And so you only need to do one thing to pass that cost along. It's simply just raising prices. And you might even do it when we just did our 15% price increase. We first did it with brand new clients for a month or two to see how well it was absorbed. And like this happens every time. And so I shouldn't be surprised. Maybe I'm like surprised how not surprising it is anymore. If that makes any sense. Whenever we do a price increase, it's like you get two, you know, Karen's that complain about it. But other than that, everybody's like, yep, I get it. Sounds good, especially with new clients because they don't have a basis, right? When you change the price to somebody that's been getting cleaned for six years at the same price, they're usually pissed and they're pissed because you should have given the price increase a long time ago. You view it as you did him a favor, like man, I should have increased your price. I think we're back and you haven't raised my prices in six years. Why are you doing this now? And it's like you're complaining about that? You're welcome. You want me to retroactively recoup all the price increases I should have given you? Like you're missing the point. I've given you a discount for the last five years. So yeah, now's a good time to do a price increase. But man, it's like, yeah, we lost a few customers when we did that 15% price increase, but then they went out and shopped around and realized nobody else had any labor either. And so now they're coming back because they still don't want to clean their own house and they just had to reckon with the fact that it's 15% more expensive to get your house cleaned now. That's just the way it is. At the moment, I think consumers are kind of programmed that prices are going up because they're seeing it at the grocery store, they're seeing it at the gas pump, they're hearing about it in the news. So you don't have to do a lot of explaining to your customers to why you're raising your rates. They know that. Yep, yep, it's going around. And I don't, I mean, if you think about how much money was pumped into the society, even with like our PPP loans that many of us took, that money doesn't not have an impact. Like the only thing that happens, I mean, I'm super thankful for it. It totally helped some of our businesses stay afloat. But it doesn't change anybody's like position in society, if you will. Like nobody's better off than they were before relative to everybody else. It's just like just the water level goes up. So when money is injected like that, all that happens is prices have to go up to like keep an equilibrium. So it takes a little bit of time but what we're seeing is the obvious end result of a whole bunch of money stashed into a system, which just means people are gonna spend more, which means prices are gonna go up because the labor's not there and the businesses have to pay. So it's exactly what we'd expect to see. It's just if you're reluctant to change or that one customer that's gonna complain about an obvious coming price increase is gonna cause you to like lose sleep, you're gonna have a hard time coping with it. But back to the like, if you just treat it like a math problem of what does it cost me to get the labor that I need to do, the job we need to do, then if it's 20% more than I'm paying today, 20% price increase and it's as simple as that. And you started the discussion about your days with Cargill and your job was basically kind of playing the commodities and helping companies hedge, keeping the cost of that beam breed below a dollar, I guess, or at a dollar at McDonald's that your successor kind of dropped the ball on. It was a market dynamic, but I still, the timing of it, the timing of it is still true. I have some similar stories, but we won't go there. Anyway, the point is it's about getting predictable outcomes and it's never easy to get predictable outcomes, but it was easier getting them in like 2019, 2018, 2017 than what it's going to be 2021, 2022. So a lot of things that are changing really fast and the work that you're doing and just the whole idea of having the right accounting systems in place and the right data pretty much on a real-time basis, just because you didn't have it in the past doesn't mean that you're not going to need it now and in the future. Yeah, one of the trends I'm seeing kind of across all the home services is the desire to scale. It used to be a lot of single owner operators with maybe a helper and that was a way to make a living. And now there's just like, there's this trend of much greater demand as more and more home owners want to outsource stuff. There's also this trend of more and more small business owners don't want to be small. They see somebody scaling, they want to scale too. And so they scale, but they try to scale using the tools that got them to be a $100,000 company with them and some help. And now they want to be a million dollar company and they're used to running their business out of their bank account, which works totally fine. I get asked all the time like when's the right time to hire a bookkeeper? When should I use you Dan? And I honestly tell them like, right when you're making like $100,000 and you have to start hiring people to help you when you scale. Because up until that point you can generally run your business from your bank account. You're already seeing all the things and you're in the day to day, you can make the decisions you need to make pretty well with your gut. The minute you start hiring other people to go out and do the work, which by the way is super, super expensive and usually what I see happen, not usually what happens when people fail to scale is they fail to understand how expensive it is to scale both in terms of the marketing investment and the labor investment because they're used to getting paid to go clean. In the minute they're off the truck so to speak and they're not the one out cleaning and generating a paycheck for themselves. In home cleaning it takes two, three, four people to go out and clean to make you enough money to replace what you got paid when you were out cleaning. After that like then it starts scaling and making more money but when you first hire one, two people it costs you more because you're paying them to go out and clean. You got to go out and sell but you have to sell a whole lot of stuff just to replace your income from when you were cleaning. So I think that's the big thing is more and more people want to scale but they're trying to scale using their bank account and maybe paper schedules or something like that and they're not on a CRM like Made Central yet and maybe they don't have the bookkeeping yet but once you start hitting that $100,000 level and you start hiring multiple people and now you're thinking about maybe do I hire an office manager next or whatever all of a sudden those five buckets of expenses come in really handy to figure out who to hire next, how much should I pay them? If I hire an office person where does our revenue need to be to like stay in line? Like what does in line mean? And so it starts to get way more useful as you scale to have the bookkeeping done efficiently. If you have the data I guess you can put together a forecast you can put together a plan, a budget and if you understand how the numbers work together you can actually see how you might be less profitable sometimes from a strategic standpoint if you want to grow you give up profit in the name of growth realizing you're going to be a lot more profitable once you kind of get to the other side but you need a better price. You're taking care of future time at some point like the current time can forgo some money spend it on marketing investments. Well, I'm in noodles for a while but we're going to be doing quite nice down the road. That's right. That's right. Like I feel like that's the name of the game is you can take money now but you're only sacrificing money later if you take the money now as profit you're taking it your 10X taking it out of your future pocket and sometimes you got to do that because you need the money to live in whatever the case is now but you got to understand like this is your stock market your business and especially your marketing is your investment. That's your stock market. So if you take the money instead of investing in your business you're not going to get the return that the stock market would provide and 10 years from now you're going to be running the same business instead of a business 10X the size and 10X is profitable. For a lot of us if you're a small business unless you've been at it for a long time and have accumulated a lot of wealth your biggest investment is your business and you really need to think of it as that and do the things that you need to do to grow its value not just necessarily try to pull every dollar out of it that you can. Yep, yep. I have a lot of conversations especially this time of year and especially with my pressure washing guys it's the like the pressure washing guys that are the ultimate like toy heads they just like they just want to talk you know gallons per minute and PSI this and PSI that and you know whatever the case is they all want their equipment toys. Hopefully we don't have as bad of a problem with toys because we don't have the same level of capital investment but nonetheless I tell everybody the two investments that are by far the most important in our businesses and this is like extreme for home cleaning the two most important investments we make are in recruiting and in marketing because we are just capacity and demand businesses we need to grow capacity and demand as fast and efficiently as possible at the same rate because if our demand grows if we're marketing too hard and we don't have the capacity to fulfill it or if people quit our life sucks so we have to make sure we have the capacity and it's got to be trained up and it's got to be efficient and timely and consider it and you know be doing a good job in the field but likewise if our capacity is too high and our demand is not there then our capacity is pissed off because their paycheck is small and they don't have enough houses on their route or whatever the case is so it's like this never ending battle of capacity and demand and those are the two things that we always need to be investing and we don't need the best vacuums in the world we don't need the best mops in the world the person running it if they're good they'll make it work if they're not good it doesn't matter what piece of equipment you put in their hands is they're just gonna do a shitty job yeah as you scale your business it's nice to have nice things but every time I have a business owner it's like I wanna buy these I wanna buy those you're not buying it for you you're buying it for a 20 year old kid so like if it's you and you're buying yourself a vehicle or you're buying yourself a vacuum or a pressure washer or whatever it is like maybe you would buy something nice but you're buying this for a 20 year old kid who you just met like what really is the investment the investment is go find more 20 year old kids in case this one doesn't work out you're gonna find some really good ones and they're gonna stick around you wanna spend money on employee engagement and find the A players and keep them and then you wanna find great customers and send your A players out there to keep them but the vacuum doesn't matter the mop doesn't matter it's the recruiting and the marketing that matters those are what make you the money yeah that's been the case forever I guess seeing some things happening over the years though I mean technology is evolving and 10 years ago technology was like running QuickBooks desktop maybe and some other type of program that you used a floppy disk to load to your local computer but with smart phones and the ability to do more detailed work measurement I'd like your opinion on going beyond a sales based model where it's about getting leads and getting a bunch of people and cleaning a bunch of homes versus a profit based model where you're doing those things but you're also managing your cost of goods sold you're managing your back room expenses you're making sure that your pricing is right where 10 years ago success was how many homes are you cleaning and how much revenue you're generating I think we're in a world now where success needs to be how much profit are you making yeah I see a transition happening but nobody still nobody's at the point where they're like my profit is this and usually if they talk profit margin they don't know what it is so they say it wrong they think they've got it right but I've seen people like my profit margin is 40% I'm just like but it's not like it's like it actually can't be maybe you're not like because you're not paying yourself or you know something like that or you're doing something illegal or something yeah or you're spending zero on marketing and you're the one out cleaning everything like that like you're not true to what you're saying but I think it's just because you don't understand like exactly what you're saying it is but most people are still like here's my revenue cost be damned this is how much we did this is how much we made which I always think is funny it's like how much did you make oh like a mill it's like but did you actually make a million or did you just generate a million and then how much did you actually get to keep oh we're in debt up to our eyeballs you know so I think you're right Tom I think people are starting to see what actually pays the bills to that point I always like to make the point to people when you save money on expenses you get to keep all of it so let's say you change the supplies that you buy or whatever and you save a percent I don't know just for example and you're doing 10,000 a month so a percent is $100 you saved $100 a month $100 a month is 1,200 bucks a year that's right back to your pocket like you did one little thing you saved $1,200 like $1,200 is real money and this is obviously a small business I'd be talking about now to replace that $1,200 that you just made I went right back in your pocket in a business model where we generate a 10% net profit margin you would have to sell $12,000 of new revenue to make the same $1,200 so revenue is neat and it's fun but it puts money in your pocket a hell of a lot slower than saving money does if you can cut some expenses and get your business model in line you get to keep all of it if you grow revenue you get to keep 10% of it you gotta do both right if you're gonna scale and if future time's gonna be sitting on a beach somewhere current time's gotta scale the business a little bit and so revenue's gotta grow but if you can do it profitably like A, if you can do it profitably you can scale it faster because you're making more money that you can reinvest in the business but B, like I said if you can save on those expenses it all comes back in your pocket you can be on a beach a hell of a lot faster you'll be sitting on money that you might even choose to invest in somebody else's business instead of your own like when you make money you can go put it in the stock market you can go IRA it or 401K it or put it in the HSA health insurance plan or whole life insurance like for retirement vehicles or you can spend it on your marketing or you can invest in somebody else's business where Mike who I talked about earlier he and I are talking just today about investment in somebody else's business that we wanna make so at some point if you're making enough money you run out of investments to make in your own business and you start looking at other people that need help and maybe invest in their business so there's fun to be had. Yeah, at some point you're making money and then you got a whole nother I almost call it problems I mean it's a good problem to have but what are you gonna do with the money that you're making, right? Yeah, invest in your own business until you can't anymore and then you gotta go find somebody else's business to invest in. But the overarching point is that we've got a whole nother set of tools and services and the service that you provide Dan is part of this that we don't just have to manage our businesses based on sales and how many homes we're cleaning we can actually start doing a lot more to manage our businesses to drive profit and like you said if you look at your expenses as a percent of revenue every percent you lower any expense you have a million dollar business and you lower it one percent that's an extra $10,000 on the bottom line in your pocket that you didn't have before and that's not hard to do if you've got the right tools in place. Yeah, we do an activity every year where we do a P&L detail report in QuickBooks where we basically look at different segments of our P&L and try to find those expenses. I don't want this to sound like a kick on you Tom but software tends to be a place where people sign up for things and forget they're paying for it. So software is a good one to look at and see what you're paying for. If it's made sense- Absolutely, if you're not using it you're wasting your money. Yep, yep. And so I see software do's and subscriptions a lot of stuff like lands in and just hangs out and there's always some marketing stuff that people are signed up for or paying and it's getting no acquisition costs and they're just not measuring it. So doing a P&L detail report like that to try to find a hundred bucks here, a hundred bucks there like I said, it might seem piddly to save 50 bucks a month on something but if you go save 50 bucks a month on something that's 600 bucks for the year that's the same as selling $6,000 worth. That's like selling the best weekly client you've got. So go save 50 bucks a month. They're like it is equivalent to selling the lights out massive weekly customer. So. So the idea is to make investments and stuff that's gonna make you more money. Back to your software analogy the flip side of it though is there's some people who wanna buy software based on price and it's not really about what things cost you it's about how much money are you gonna make with it. Doesn't always mean that you wanna spend by the most expensive either but you wanna be looking at your investments or anything that you spend in terms of all I'm putting this much cash out but this is how much cash I have coming back to me. Yeah, it's an investment, it's not an expense so there's gotta be a return on it. And I try to that kind of goes back to like the 10X when you're spending money similar to if you save money you know it's the same as making 10 times that amount of revenue. If you're gonna spend money that spend needs to get you 10X in revenue to pay for itself. So when you look at made central how much more revenue do you need to generate to make that investment make sense? When you look at going to ISSA or Arcsy and you got to travel and the meals and whatever how much do you need to grow your business and revenue to cover that expense? What do you need to gain from there that's gonna help you scale your business? So I think if you look at all of your expenses as investments that need to generate a return and in our business need to basically generate 10X the amount of revenue is what you paid it starts framing things up as to what you expect to get out of something instead of just spending money because I think I need this thing you gotta think through what it's actually gonna do and how much productivity it's gonna increase and revenue it's gonna generate so that you can make it make it work make it last. Well Dan we're quickly approaching the top of the hour here but I wanna make sure that everybody knows how to get a hold of you if they wanna know more about the services that you guys provide. This is your website. I drop the URL into chat. Any other I guess ways that you would like people to reach out to you if they wanna know more about your services? Well for sure hit the website there and I apologize that it looks like a 1980s website it's being refreshed as we speak actually but up at the top there's the target budget tabs. It's all free stuff like I think because I made them I have a hard time valuing them I have been told by multiple other people there's probably a thousand to $2,000 value for that target budget sheet. You basically put in your sales expectations by month and it builds out the budget by expense line of how much you should spend on every single line item of your P&L and it rolls it into those five categories of decision making that we talked about. So literally you put in 12 sales targets one each month and it will build out your budget for you and you can override the percentages with what you think you'll spend either from a percentage standpoint or from a dollar amount standpoint there's a tab for payroll and you can put in hourly or commission based pay there's a tab for marketing expenses and you can put in acquisition costs you don't have to like get that nerdy on it it can work with you putting in a sales forecast or you can go like super deep in like your marketing acquisition costs and stuff like that and it's free I built it for everybody because I kept having people ask me like hey how do I budget for all this stuff and I was like well I already know how much you should spend on everything so let me just build it for you all so that's free go download it go get it there's also a chart of accounts in there under the new free budget templates there's the chart of accounts that we use and you can download that chart of accounts into an Excel spreadsheet and upload it right into your QuickBooks you'd have to merge your stuff into it but then you have the exact design that rolls into that budget sheet and it has the five groupings of expenses so you don't need to look at 40 line items you can look at the five and this would give you a chart of accounts that actually helps you manage your business as opposed to the thing that your CPA gives you which is just for paying your taxes Yep, yep so whether you like me or not whether you like bookkeeping or not get those things for free and if you're like that's cool Dan but I'll put these in but I don't really wanna do my own bookkeeping then fill out the form on our website there and say hey I'm interested and you guys doing some bookkeeping for me and we'll do a demo I'll kind of show you behind the scenes of what we do and then show you the pricing and you can decide for your own order that there's some people that actually don't want to do their own bookkeeping You know I'd say I have found two people that liked to do their own bookkeeping and we have a couple hundred clients two that liked to do their own bookkeeping and only one that actually was doing it right cause like it's just a little bit you gotta know not saying don't give it a try if you're into that sort of thing but if you're not an accountant maybe don't do your own books and if you're not like yay bookkeeping then let people like us do it for you our pricing starts at 150 bucks a month to do the bookkeeping and like I said because we do it as a finance activity I like to think the value in the data you get to help you make decisions should easily pay for your bookkeeping it should be an investment and not an expense it should always pay for itself over and over and over again. Yeah, if you don't have more money in the bank at the end of the month than what you would have if you weren't paying for it you shouldn't be paying for it. Exactly, exactly, so. But what you guys are doing I think is certainly a service to the industry cause everybody needs to be managing their businesses based on you know real timely financial statements who you know break the cost out in a way where you can actually make you know intelligent decisions make smart business moves with. Smart business moves is what it's all about. So Dan, thank you for being with us today thanks for sharing some awesome information. Today's Monday, Thanksgiving's Thursday we're not gonna be here Wednesday we're gonna kind of be getting ready for the whole Thanksgiving thing we'll be back next Monday, okay? So we'll see you five o'clock Eastern next Monday till then take care, thanks again Dan. You bet, thanks Tom, see you guys.