 Hey, good afternoon everybody. Tom Stewart here. I'm with Liz Trotter. This is smart business moves All right, so we need you guys on the call today to like Be commenting and help us out. Neither one of us is just feeling it today. We're both like It's been a grind, I don't know maybe I stayed up too late watching the football game last night I Games on at night. I thought they were on during the middle of the day No, I super ball started around 6 30 Eastern time. Well, it depends where you are Yeah, yeah, yeah, okay. So yeah, I was thinking that it usually starts somewhere around 1 o'clock 2 o'clock 3 o'clock But that makes sense. Maybe they do like pregame stuff or something. I remember hearing about that Earlier You know, I did something this weekend We went to Costco and they had like this pork shoulders pork bite on sale. It's really cheap and stuff Shoulder or but which one I think it was bite. Oh, okay, but you make barbecue out of it pull pork Okay, it's like, well, you know, this is bargains. I got this, you know, 14 pound piece of meat And then figured out everything to cook it with so I had to go get a get a Stoker and I kind of knew where this was going and you know, they have like the really fancy electric ones with the computers in it That spit the lips out that no no no old school. So I got the kind that you kind of to tend to yourself I knew if I wanted to have this for the super ball, I needed to start cooking it Saturday So I started Saturday evening and set my alarm to go off like every hour and a half and You know somewhere around 2 o'clock, you know, Sunday morning. It was like, you know, this is worse than having an infant Two o'clock in the morning. You had to you had to get up about every hour and a half to kind of play with the fire Make sure the temperature is right and you know, I was having an infant. It's Okay, let's go see why they're crying now. Okay. Is it a food thing? Is it a diaper thing? What is it? No good No, it was it was it was pretty good You know, I've heard a few things too because this is the first time I've ever did anything like that Um, are you gonna keep that smoker? Are you gonna trade it in on an electric one? Yeah, I'm I'm gonna I'm old school I'm gonna I'm gonna learn how to do this. Everybody can just plug in You know, if it's my business if it's about making if it's about profit. Yeah, okay We're gonna automate it. We're gonna go for that. But this is kind of it's kind of like camping in a way you just kind of Take the rustic approach and and it's gonna be something that you're gonna feel good about when you're done. Hey, Linda Like, uh, look look at the meat that I can make My brother Uh, I mean, I love to tease him about it. But boy that man makes a mean brisket Uh, you know, I love the what's the name of that place I love to go to tom with the bird ends So swig and swine swig and swine. I love that place. They make some good meat. But man, my brother's meat Yeah, he he makes a delicious brisket. They I can't get enough of they were my inspiration actually because we did We did we we brought some of that home friday night. That was really good And it's like, you know, we I just need to figure out how to do this myself Yeah, so good. You got to learn how to make those burnt ends too. Yeah So good so good that place has such good meat. Uh, I love to go there. It's definitely my favorite over theses definitely You had a pit between the two Hey guys, uh, good to see you. How are you guys's monday's going tom and i we're not having the best mondays of of all time But hopefully you guys are having a better monday anybody having just a rock in monday Share with us and pick up our spirits y'all I think it's happy It's all good. We um We're talking before we went live about, you know, what's happened over the last couple of days And I guess there was one thing that came up that would be worth talking about a little bit um This was a post, um, I did friday and in several places about What the but the current thinking is regarding minimum wage I guess even the president's come out and told everybody Last night as part of the whole super bowl interview thing that They don't believe that they're going to be able to get the minimum wage increase through as part of the whole COVID relief package um He's got a post up above that tom that makes more sense. Yeah Okay Of the victory sprayer Did you hear about the recall? No on the victory sprayer No, what's going on? I will grab the info real quick while you are talking about the Minimum wage real quick and don't worry vick. Well, we'll get to your question here too Okay, let me see if I can find the minimum wage info I mean not minimum wage. Sorry victory sprayer I'll post this. This is a PDF if you can download This is uh, I guess from the house of House.gov. So this is an official government document uh Bernie sanders who's kind of the budget chair in the senate is getting behind this where They're they want to raise minimum wage to $15 an hour, but it's not going to happen until 2025 it's going to go up gradually and this is still Not even close to being law yet, but if it's going to happen it looks like it's going to look A lot more like this as opposed to Just going from where it is up to 15 And I know there's a lot of people in the country that are already at 15 or something significantly higher than 20 Higher than than seven 25 Oh And I guess the part about that is even if you're in a part of the country that's currently at $15 an hour As soon as the federal goes up 15, you think They're going to be happy at 15 or you think they're going to want to raise it so I think uh That by 2025 26 There isn't there aren't going to be very many states that are still sitting that are at that $15 I know over here on the west coast Hours is slated to go up every single year We don't have an option and if the minimum wage gets raised to 15 I promise you they're going to put a big hefty wage increase on top of what we already have slated because the Our state definitely California's same way Oregon same way We do not want to be anywhere near minimum wage the federal minimum wage. So you know, so I'm just waiting for it to be 20 25 30 But if you think if you think about it, they cost a living in Some parts of the country is a whole lot less than it is You know and in other parts of the country and I don't know anybody anywhere that's paying 725 an hour I mean you got to be in the double digits to recruit in the markets we're in and Those are seven 25. I mean they're and they have them the federal minimum wage in place, but Nobody can pay it. So market forces are driving it somewhat So that that's my point you guys all of you that are paying You know just a couple bucks off of minimum wage, even if you're paying Whatever you're paying off of minimum wage, you're maybe not paying 15 right now But maybe you're paying 10 on a 7 25 minimum wage Then what as the minimum wage is bumping up You're gonna have to bump up off your 10 just as fast. So if minimum wage goes from 7 25 to What's the first? What's the first bump to 9 50 9 50 Two and a quarter you're gonna have to bump your minimum wage two bucks You're the people that are working aren't gonna they're not gonna handle that gap They're gonna be like what no way i'm not making that close to minimum wage minimum wage is 9 50 You're not paying me 10 bucks. Are you kidding me? I they're gonna need 12 50 So everybody the statement wage is going to and the state amount that we end up paying I guess is what I should be saying Is going to have to be adjusted based on the minimum wage Do you really think anybody that we work that works for us is gonna allow you to start paying minimum wage? It's not gonna happen. You can't pay 7 25. You're not gonna be able to pay 15 And look what's happening here at the restaurants the tip wage is going from two dollars and 13 cents eventually up to the same minimum wage that Uh You know, it's just going to be the same across the board Yeah, it's going to be indexed to the median wage at that point. So it's going to be going up every year thereafter so for like the restaurant industry I guess they're just going to have to raise their prices and the the paradigm is going to be that you really don't tip I understand Colorado, I believe this is kind of like that now, but Our minimum wage is the same here Like here our employees our restaurant employees Nobody makes 15 dollars. That's ridiculous. Everybody makes at least 17, but you still tip Okay Yeah, still tip So Yep Everybody should be ready. Everybody should be preparing to be You know, how are you going to? Move toward that because your wages are Are going up period but The good news is it doesn't look like it's your they're gonna You know minimum wage is going to double for Folks that are at the federal in a place where the federal is now It's going to go up slow enough that We should be able to adjust and raise our our rates and and manage that in a more more logical way and As long as they're haggling over You know relief packages and all that other stuff. I mean, this isn't even gonna become a topic of discussion anytime Real real soon. Anyway, I would think What the heck Exploding catching fire That's what they say. Yeah So, how do you know if you've got one of these? I've got some Supply works, right? Yeah Yeah So probably do you might as well is Um, so wait a minute. Hold on this was It sounded like So look here tom where it says the one these according to the commission about 405 these sprayers um were sold Between these things and sold between 100 and 150. So I don't think that's ours I think that is some I don't know I wish I paid 100 to 150, right? But uh, you can't buy electrostatic spray. Well, I guess maybe But maybe that's the day you could nowadays you can't Could back then maybe this was You know, I don't know But these are the ones we these you know, this is where we got them product details are the green and white model pv 20 A or the vp 20 b. So I guess you could basically look at the Sprayer itself. Yeah Got 800 number you can call and ask Yep Battery recall The battery that's being recalled. Yeah, that's supposedly what can blow up or catch fire Well, these batteries are kind of wonky because they're proprietary, you know, it's not like A standard design that goes with like a lot of different power tools and whatnot because I understand that You have to get these from From victory you can't go down to the local Leslie's She's saying She must have been on the list Okay Did you get notified Leslie or did you hear through through news channels? I'm curious I didn't get notified. I found through news channels So Dude Robert have a question here that we wanted to get to before That's it Vic his last Okay Yeah, I'll break here and I want to make good use of my victory sprayer. Where can I get more training? How can I keep my residential clients? I have one lady canceled today Not good Newfound one That's canada, right? Got me come It is Okay All right, newfoundland sounds like it's far away to me um Okay, um My ssa has some training. I would um What's the other organization remember? Um Sharon grammar was on How many months ago Just creations that that have certification You know what I would do Vic. I would I would go if you got victory sprayers I would go to victory themselves and say how can I get training on this? First off, they probably have their own training videos like on youtube But if you want something like a like a certification I'm sure they can point you in the right direction Right now what people are doing here Vic. We um, you know, we have friends over here in the states We've been dealing with this for quite a few months losing a lot of customers and then trying to get them back now What a lot of people here are doing is just Advertising it on their website that they do it how it works the benefits of it and then Sending it out to everybody they know getting getting that information out to everybody they know Oh, they were emailed Leslie I wasn't emailed, but I'm sure we registered. We're we're pretty good about registering all that stuff. So I'll still check but Maybe that means we weren't Not sure you might be in your spam Yeah, wouldn't be the first time It'd be the first time All right, so we're gonna hit price increases again, huh? well This is where we were Thursday talking about the merits of of You know rate increases and again all this ties into a loaded direct payroll to revenue um Okay, well What do you guys use les? So, um brew tabs or vital oxide. Those are the two main things I know of we we also use uh I can't remember some other Product, but I know those are the two most common here are the brew tabs and and there's a generic brew tab So you might check that out. They're quite a bit cheaper or the vital oxide We use hypochlorous acid and we brew it on site. Um, there's a couple of different companies that make the equipment but if You don't have a you know, if you're just getting into it, you'd be better off using That the the products that that liz is describing Perry has a good little um piece of equipment that makes The hydrochlorous doesn't he? who Was it peri peri tape? no, um He makes equipment that uses it. Uh, you're thinking of The annihilator is the name of the company. Yep. And marty marty paris. Yeah Good job. Marty makes it Yeah, and any of that information that you might want vic you can find in the resources that um Just uh linked to up above right tom? Yeah, it would be bringing business today and Somewhere in here is the link to marty paris's stuff It's not a download. No, you know For sale. There you go On that electrostatic fog blaster. This is this is uh paris. Yep. Um, I think he also has Something that makes the hydrochlorous in small quantities doesn't I think so I want to say yes I'm murdering A-N-N-I-H There you go. You see it Go a r e Oh l a r e. Sorry I'm just showing you how to spell annihilate there. There it is annihilator There's been a guest before and they make uh the equipment that uh, basically can take salt water and apply a electrical charge to it and You make hypochlorous acid which Arguably is the safest thing that you can use to put in a electrostatic sprayer for sanitizing disinfecting but It's a it's a big investment but if you're if you're into it and also makes a uh high pH sodium hydroxide product That you can use for like a degreaser as well You can stop buying a lot of a lot of chemicals when you go this road, but uh, You have to you have to material investment. Yeah, it's Ways machines is about 15 grand anyhow The sort of our rate increases all right Hey rate increases first You got to pop up your your graph tom that shows why rate increases are so important how over time The need for rate increases becomes more and more Let's talk in the context of loaded payroll to to to revenue there because we've been talking about this For a few weeks and if you want to make this number go down You can do that by making your your loaded direct payroll go down or by making your revenue go up And what a better way to make your revenue go up than to Do rate increases Free money, right? Yeah and We say rate increase We're we're not talking about a customer who you just underbid that You're you've got a lot more time tied up in the job than than what you estimated and you're you're losing money That's something that we call rate adjustments. We're gonna talk about that in a little bit What we're talking about here is your Often times an annual increase for for for cost to live in Yeah A more modest a more modest number. Yeah, because minimum wage went up Because supplies are more expensive because minimum wage went up and everybody had to raise their prices and so do you let me talk about Minimum wage is an awesome reason to do do rate increases, right? Yeah, it's a great reason If you're i'll tell you something that we did that worked really well here We had a big increase. Um, I think it was like two dollars and 40 cents That that the minimum wage was uh went up and it was voted in Here so we used that to our advantage Yay Washington really wants to pay people more money We're so excited that our state is one of the people one of the states that really wants to Support a living wage And we're glad that you want to support us in this as well. Here's your new price Yay And it actually did work. We had a few people that were like, I didn't vote for that price increase or that wage increase And they weren't they weren't as happy but still worked on them. They understood. We're like, oh, yeah Sorry, so You know, I guess the concern always is if I do like across the board rate increase Am I going to lose customers? and To some degree you might But the whole the whole calculation is You know, how many of them do I have to lose before it's actually hurting my gross profit? if I can Generate more revenue off of the ones that I keep I can afford to lose some and still Be more profitable All right, and I'm going to point out the other piece because a lot of you A lot of business owners don't want to lose customers for reasons other than the money They don't want to lose customers for a couple of reasons and here are the the ones that popped into my head fast First they want to keep their employees busy So they don't want to lose Any clients because they want their employees to be able to get the hours. That's the first one The second one is they like those clients the little old ladies That don't that are on fixed income and they want to help them So they don't want to lose them They don't want to raise their prices more than they can afford and they'd rather take a hit Then then cancel those customers. So We're also going to be talking about how to not lose and Your customers but We want to start with how why the money part of it and the number part of it because we are talking about remember we're talking about net profit And that if you have a large enough net profit Then you can afford to do all the things that you want to do like keep on the little old ladies And like keep customers that are maybe below The the price that you're charging other people because it's good for your company and some other way or good for your mental health But you have to have net profit to do that so I just want to point out for all of you that are like, yeah, but You know, I don't really care about that because of this other thing Listen first listen to what tom has to tell you here because this is the information That's going to get you to the place where you get to make that decision where you get to say no I want to keep mrs. Johnson at 12 bucks an hour because she was my first customer 25 years ago and okay You we're going to help you be able to do that and still do price increases So bear with us here while we Hit the hit the numbers first Otherwise people are like going to block you some people are going to be like No, he doesn't understand my my situation. Okay, so let's let's talk about Yeah, I love this crap okay, so What we're doing here and forgive the dates. We've been doing this for a while But the math is the math it works today just as well as it did back uh in 2013. Okay Oh gosh, we've been doing this a long time It's for a while Yeah Maybe we should have learned something by now right right? Maybe we have Let's pretend that uh, this says 2020 and this says 2010 or 2021 It doesn't really matter. This is a 10 year period looking backwards actually 11 years. Okay and let's pretend that we're starting right here in year one and We're charging 500, you know, we've got a gross revenue of $500,000 and this is per year. Okay, so when I say gross revenue, what does that mean? That's the top line. That's the income, right? All the money coming in All the money coming in you take every dollar that every customer gave you over the course of a year and it added up to Be $500 $500,000 Better number better number. That's a half a million. Okay So you've got a half a million dollar a year business and Over 10 years you never increase your rates for your incumbent customers Now you can have customers come you can have customers go and Arguably even if you're not comfortable raising rates for customers that you already have Most of us I believe occasionally raise The rates for for our quotes for new customers So these numbers would probably go up just naturally but for illustrative purposes Let's pretend for 10 years You never increase your rates on your incumbent customers and you never lose any of them So you'd be charging $500 Excuse me. You'd be getting $500,000 in revenue Off of those customers 10 years out It kind of looked like this red line here 500,000 every year for for for 10 years Let's say you decided to do a modest annual rate increase of only 3% So what that means is like if you're charging somebody Uh 150 dollars per cleaning that's only four dollars and 50 cents. That's not even a five dollar bill That's some yeah, that's not even a cup of coffee. Is it? Not not here in washington So what would that look like that would mean? You know the year that the first year you did increase your 500,000 annual income would go up to 515,000 In the next year be 530,450 you got this thing called what are they called the miracle of compounding You remember that it's not it's like it's it's compound interest But don't they call it the miracle of compounding? Yes. Yeah, if you listen to any of the financial advisors, right? So Each year the number gets bigger and it's 3% of a bigger number. It keeps getting bigger and bigger and bigger So by the time you're 10 years out your $500,000 is 600 and 71,000 Almost 672,671 958 Yeah So It's not that big deal at the moment because it's like only 3% is like $4 and 50 cents a job on the average You know, it's not even worth the hassle. I don't want anybody to get mad at me. I don't want to lose anybody But if you don't do it You're going to look up and you're going to have customers and you will have customers that he's been with you for 10 years That you've never increased their rate and then you're going to say Oh gee They should be paying You know this they should be paying 150. Let me let me do the math real quick Didn't we also have a Something that shows the total of that. So had you been charging I mean had you raised your prices what your total income would have been or that 10 years span? Yeah, um Which is a lot more a lot more They would have just been given away Yeah, it's like a 34 difference. So if you don't do it, you would have to go back here and say, okay Well, gee, I'm going to have to give you a 34 increase to get to your current rates if current And it seems like if you're growing your company and you're trying to grow at some point in time You're going to want all of your customers up at your At your current rate because it just gets too hard It gets hard on everybody. It gets hard on the employees. It gets hard on the clients It gets hard on the people doing the billing. Everything is just harder um When when they're not getting All the money. Oh good. Are you going to show the big one? I love this one Well, we're gonna have to recreate it, but let's see if we can Okay, so Tom's going to show you a number here in a more in a minute Well, what he what he's going to show you is How much you would have brought in total revenue if you never raised And how much you would have brought in total revenue if you just raised three percent Which is such a small amount y'all a lot times you're going to You might even want to or need to raise more than that minimum wage goes up You're going to have to raise more than three percent just to be able to stay even But let's say you did three percent It's going to show you the number here. How much money that you could have had in your pocket Extra that you could have just had extra to do stuff with where Just keeping it the same you didn't this number is huge. I can't wait He likes to build stuff on the on the fly y'all me. This would make me so stressed out if I had to do this right now on the fly so We're just going to drag all this down and I need to Would you hit the save to make it do that? Yeah, it was an acting flaky because this is like up in the cloud and it um Okay, so these are all the numbers that we had on the other side We'll put uh that in there and we'll make that go down So these are the exact same numbers that we have here in our Yeah, yeah So we just need total Olympics. So if I look at the the variance which is just the New number minus the old number per year By the time you get to year 10 Yeah, and that's 171 thousand dollars. You're leaving on the table But if I add it up for all 10 years it's Almost a million dollars Did you all see that almost a million dollars on a 500 thousand dollar company That wasn't collected over the course of 10 years so And just in three percent increases In three percent is really modest so modest You think maybe we could get Three and a half percent Maybe oh, you're gonna have to widen that little thing. Yeah, because we're over a million then Now we have over a million y'all a lot of people do five percent tom. What does five percent look like? five percent million and a half Over right. Yeah That's that's like three years worth of money Three years worth of money All right, so I hope that we are making the case For monetarily why you really need to be doing A price increase every year. Okay. This is the monetary reason. I'm going to give you a psychological reason as well It's going to help you if you set up your Cleanings with people with the understanding we talk a lot about expectations, right? That how important expectations are But if you set up your initial cleanings with the expectation that we this company does rate increases every year And on your anniversary, you can expect a rate increase Then you have lots of options when it's time to do a rate increase One of the options is raise them three percent another option is raise them five percent another option is Don't raise them at all. So Let's talk a little bit about that tom how we have options when we're actually doing rate increases Let me try 40 dollars an hour because I do this off and we're the highest price company in the county yeah, so There is a good argument for being the highest price company in the county I'm sure Leslie could tell you lots of benefits to being the highest price You might not have the most customers, but you are making more money Which is more money that's coming in more net profit more money to do things with If you do your rate increases You may or might have fewer customers, but you're making more money cleaning fewer customers Yeah, we talked about that friday and all things being equal You know as much money as you can you know if you can make more money and clean fewer homes Or make the same amount of money and clean fewer homes You're better off cleaning fewer homes and making the same amount of money because you've got less overhead. You've got less Billing you've got less credit cards to run. You've got less scheduling issues. You've just got less less headaches less labor So there's there's a lot of things that you have less of if you have fewer homes to clean and A lot of those things are things that are really A pain all of the things that we were trying to reduce earlier, right? They were trying to figure out how to reduce that ldpr well, you don't have to You don't have to struggle to take out every tiniest piece of everything when you're raising Your prices on uh, you're raising your rates on a regular basis couple things that people don't think about when they when they Are talking about how important it is to raise your rates and Clean fewer homes so that your expenses are less Some other things that happen is you don't have to have as much space to store things So you can you can pay less money for space like rent Like rent how big of a place that you need to house supplies equipment, etc. You don't have as much money spent in breakage Or repairs because you just don't have as much stuff that is breaking down or it needs to be repaired There are so many little things like that that you don't even Think about you don't have to have as many uniforms because you don't have as many people So because you don't have as many people out there cleaning The whole relationship management is easier because you've got fewer late relationships to manage so you can argue that you're In touch more with your clients because you've Claimed them more frequently and you know who they are and they know who you are And you can be if you're charging them a better price you can you can have somebody that Part of their job is to actually connect with the people But if you don't charge enough money, they can't That being said when charging the highest we need to deliver And I I would even argue that Leslie. I would even argue that in many many areas around the country the largest the the highest charging company in the area is Maybe a franchise Not not to not to bad not franchises because I'm loving me some franchises right and franchises are as good as the owners That run them but sometimes people without much experience will buy into a franchise And the prices are set by the franchise They have the highest prices because they know like we know that you're going to be making more money, right? You have a better opportunity But sometimes people that don't know anything about the cleaning business will buy into a franchise And they're charging the highest prices and they don't necessarily have the best service in town That that's a thing. There's also other companies maybe in your area I know of one in my area where the company's been around almost as long as I have And they're old and burnt out And the service is not is not not top notch So just because the price is the highest Doesn't necessarily mean they're the best place in town Somebody in Canada. This is his name. I can't remember his name right now. I'll remember it in a minute One time I was talking with him and he said My goal is to be Higher than and he he did name a franchise. It was a really good franchise in his area I want to say it was molly maids In his area molly maids with the top dog. They charge the most money And no and he said I I'm the highest priced Company in my area except for molly maids Except for molly maids, he's like, well, you know molly maids they have they're the highest price I was like, are they better than you and he was like, well, no Well Like why then why are you charging? Why are you not charging more than they are? Well, because they're molly maids. Everybody knows them Just branding Being able to Build your value proposition and help, you know establish that, you know We are more expensive, but we are worth it Let's let's look at the value that that that we bring and Then it's a matter of who your clients are and if they see value and what it is you're doing and I mean this whole thing kind of gets gets complicated The timing of your rate increases matters though I mean, we're having a A labor challenge in one of one of our branches at castlekeepers and we made A decision not to do Rate increases for the ones that were scheduled to go this month because we've been rolling homes and It's like well, we're not even cleaning some of these homes because we don't have the people to clean them Probably not an awesome idea to increase their bill rate If we're not cleaning their home anyway because it's not gonna help us any and it's just giving them one more reason Maybe to look for another cleaning service. So You know Leslie, you know, you got it. You got it. You got to bring bring the goods. Yeah, you're right At the very least you got to make sure that You didn't get a bad score card or you're not doing anything to you know Where they're looking to replace you anyway, and you're just giving them one more reason to So we do something called An audit we do an audit every year on The client's anniversary. So if they send up for service in january Then we do an audit on them in january to see how how we're doing with their job And we look for a few things first. We look at their score cards. What are their What's their average score card and what were the last three score cards because even if their average is really good But the last three were not good. Then we're not going to give them a price increase So we look at their score cards. We look at our And this is going to go back to some teaching that we have before we look at our productivity And in the home, how are we able to be productive in that home? Do we need to can we can we afford to not raise it as much or can we afford to raise it much? Do we need to raise it even more than we Had thought that we were going to raise it because We're going to have to add an adjustment and a price increase together. Maybe so Well, we do an audit on every client every month And some people will get rolled a certain amount of time based on one of those different criteria We might roll them three months. We might roll them just one month and now their new price increase Um time frame is this new time. So they still so let's say we audit somebody in january And we're like nope last three score cards. We're not not amazing. All right, we're working on it. They're staying with us We're good to go But let's audit again in march. I might kick them out until march or we probably would kick them out until April All right, let's audit again in april Hopefully things are straightened around in april and now they're just going to be on the april rotation every year They're going to get audited in april So that has worked really really well To to keep people from from leaving just a blanket Rate adjustment or price increase for people a lot of times is Is not the best idea or One another idea that I know a lot of people do Is And when they're going to be doing the rate increases they do give them to every single person the same amount Because they just want to make it easy everybody's getting a three percent rate increase across the board I don't care who they are what they anything about them But they'll send them out in batches So they'll like take their their stack of envelopes or they'll take their email list and they'll send out 25 percent or 30 percent of them and they'll see what they get back and see what they How they are going to manage those to decide what they're going to do moving forward So I know a lot of people do that too But when you look at like money over a 10 year period and just say it's five hundred thousand dollars for And consecutive years if you didn't do an increase that's not Real spending power I mean it's if it stacks of money yet still five hundred thousand dollars in 10 stacks over 10 years, but You have this thing called inflation going on that You know usually in you know for for most things They're going to cost more 10 years from now than they what they cost today There are some exceptions when it comes to technology you know Almost everybody can name at least one thing that they that you personally know of That was less 10 10 years ago. There was a lot a lot less 10 years ago What's our biggest expense as house cleaning companies? We talked about that No, this answer then we're just gonna take off our invisible hats right now Thank you That's awesome PPE That's awesome masks and shoe covers. We we actually needed that today Look at what you were paying for a labor hour 10 years ago and look at what you're paying For that same labor hour today Yeah And do the math There's a reason why we've been hitting ldp all this time, right? Because it's the number one most impacted number. Yes. Yes, Amelia. Good job so What we did here was we went back and over a 10 year period got the inflation numbers and this actually for some reason the department of labor Does this and they come up with a factor for They got like a basket of goods It's it's that they pretend that they're buying year over year and how much is the price and that basket going up Then I don't know how heavily that's influenced by wages For some reason I don't think food is in it It's got some quirks But if you use their inflation numbers over a 10 year period and this was like from 2004 to 13 What once was 500 thousand dollars The actual buying power that 10 years out would be 392 thousand dollars So it still might be a stack of you know Money that on the face says 500,000, but you're not buying power. You can only buy today 392 thousand dollars worth of stuff where 10 years ago you could have bought 500 thousand dollars of that same stuff Likewise, if you apply that same Inflation factor to the 3% increase that we did over here. You see how that line just goes straight up. Well Part of that increase is nothing more than keeping up with inflation Which kind of beats it down and in real spending power your I'm sorry a large portion of that Yeah, what we thought was 671 thousand is really only 527 thousand in change a real buying power compared to where you know the 500 thousand 10 years ago So if you don't do the increases and basically you want to raise to zero But your labor prices are going to continue to go up And if I go back over here to this model It gets into the loaded direct payroll to revenue or we call it cost of goods sold here This percentage is going to get bigger year after year after year after year where it's so big that there's nothing flowing down here To cover operating expenses in that profit because it's all going to be going To cover your loaded direct payroll because Your rates are too low, but you're going to still have to pay more in order to hire people because that's the way It works and we just began the discussion today With where minimum wage is going to be going We might not know by how much how quickly but You know our labor costs are going to be going up year after year for further foreseeable future They aren't going to be going down and they're not going to remain flat So leslie I like that you have leslie's Little comment up here less stress. It's your primary motivator So sometimes and i'm sure that some of you have seen this before It feels confusing you have more money coming in there's more money coming into your company But for some reason you still don't have any more money by the time you buy all your stuff And you pay everybody There's still no money at the end of the day. What is going on? I just talked to somebody that was having this Exact dilemma. She asked me if there are two valleys of despair because it feels like What the heck i'm still not making money and at least part of that answer is that you have to be adjusting your rates Along with everything else you are part of This whole ecosystem and when all the rates are going up Even if you're one of the people that is against this idea Menomum wage going up and it's just messing with everything You still got to get in line if it's going up You've got to you've got to raise your rates too because if your rates don't stay in line with All the other rates that are going up. You are going backwards. You're losing money. You're you're going Down. You're not building a business. You are eroding a business Maybe sometime this week we're going to talk about the valley of despair. I don't know if everybody understands how that works where You start off as like a solo cleaner you can make money cleaning homes Who's our friend who teaches how people have to do that? Ken Carfagno Yeah, cleaner. You know, you're not familiar with ken's work. You need to hook up with him ken carfagno And you know, he can basically teach him how to buy 60 70 grand maybe more years of solo cleaner just cleaning homes on your own and still having a life, you know Uh, some of us think that we want to turn this into a business and start hiring people And at some point you start hiring people and you figure out that i'm going to need help Answering the phones and doing sales and doing my bookkeeping and payroll And i need a supervisor and i might need to get an office and i need to get you know Start filling in the blank and you find that you're making less money than you were When you were smaller as a solo And if you go back to this model here What's happening is you've got relatively no operating expenses when you're really really small But you start growing these operating expenses go up and sometimes they go up faster Then what the gross profit is flowing down here to cover them So you're making less money even though you're you're actually making less profit Even though you're generating more revenue because you're having to add operating expenses So that's one way that you can find yourself in a valley and despair the way that liz Uh describe it the other way you can do is over time you aren't keeping your pricing correct And you find that your cost of good soul keeps going up your loaded direct payroll to revenue keeps going up And you aren't adjusting your rates accordingly to keep that down and if that number just keeps going up You're cleaning homes, but you don't have any money left over to show for it. We've seen that so many times time again And here here's the tricky part y'all It it can happen fast if you haven't raised prices in two years Your you're on that path and you just haven't recognized it yet If you're at three years, you're feeling it There are there are months where when it's time to make payroll you're feeling a little stressy So it's important that those price increases happen and they happen on a regular basis. Oh, I love this tom go ahead Because the question comes up when do you want to do your rate increases? And you know, I guess there's a couple schools of thought one is on the anniversary date of When that client became a client or the anniversary date of the last time that you you know did a rate increase It's uh Could be either or and if you do it on the anniversary day, you're spreading it out throughout the year Where maybe on a monthly basis, you're setting down and you're saying well, who has you know Go look back over, you know Who have we not raised or done a rate increase for in the last 12 months? And let's go ahead and let's do them now and then every month there after you're hitting them On their 12th month anniversary for a rate increase um Just spreading the workout It gets done sooner You're getting that rate increase right there as opposed to doing them all at once because if you're doing them all at once You have to ask the question You know, I've got some people that maybe have only been with me for six months Do I want to do a rate increase for them? um You say well no i'm going to wait and do it next year. So then it's like 18 months So if you do it on the anniversary Bang bang bang you're getting them all at the same time um You know some of the cons are some thoughts that customers are more inclined to Not want to lose their cleaning company and fire you than other times such as You know going into the holidays. They really want their home claimed we're in january Maybe they don't because they've got these credit card bills and they're trying to cut expenses anyway um But the kind of argument to that is if they signed up for your service in january to begin with maybe I don't care about that Or that's when they are feeling the pinch and needing cleaning the most Right. It's like ah, you just can't hold it together in january so you know My thinking has evolved over this for the longest time. We did our rate increases all in like october thinking that you know, we wanted to catch people for the holidays. They'd be uh Least inclined to push back. We've shifted that we do it on their anniversary day And we're spreading it out throughout the year Um part of that's because of technology. It's it's highly automated now So it's not a not a lot of work and it's just kind of easy to let it Turn out and flow over the air but you get those rate increases more quickly Well, especially now with the new I know we have a lot of main central users on here So they don't mind if I say but especially with the new Price increase thing in main central that they just go out automatically to everybody. I love that. That's amazing, Tom I don't have any idea that was either But they should get extra props if that was rebecca's idea. I want her to get something extra Awesome. It's a team effort. All right um So I guess the other question is how do you do your rate increases and This is You know, do you do flat across the board or do you do like a variable rate per client? There's cruising cons of that too if it's flat across the board It's easy. There's not a lot of hand wringing. You just kind of say I'm going to do three percent and just kind of do the math and increase everybody um The outside of it is you made overcharge some clients and You know make them want to want to shop around if they get that increase and say, you know What is their current rate? I guess is what you would want to look at in terms of revenue per per labor hour And if there are already at a point where if they call Your your your best competitor and they would get a lower rate Do you really want to increase them more that you might be putting them at risk of losing them? um And it's flip side of it You might be under charging clients who are below the target rate and we're going to be talking about rate Adjustments tomorrow and this kind of gets into that But if they're already priced way lower what they can afford to be then just giving them a you know three percent increase You know might not get them to where they need to be We're top of the hour Tom So we could probably just do an overview of this again tomorrow, but we're past actually Zero one Yeah, okay. Okay. Well, we're going to pick up on here tomorrow Then we're going to jump into rate adjustments and we'll have some other you know pointers all in this idea of You got your you know payroll you got your revenue and now we're trying to get that revenue number up So you guys have a great rest of your day. We'll see you here tomorrow at five o'clock eastern. Thanks guys. Bye