Transcription
What's up, all you Lee haters? Today I got a special episode. [music] This is our first ever exit or not. This is Jim [music] Klingbill.
Jim, how long you been here in Chicago?
I've lived here all my life, since third grade, 1964. And in today's episode, I'm going to decide: am I going to partner with Jim or not, buy his company or not? We're going to go through his strengths, weaknesses, opportunity, and threats.
This is a local company, A+ rated with the BBB, 4.9 star. We have 189 five-star reviews, a great brand for craftsmanship. But one thing's for sure when running a business: it's all about the bottom line, the profit and loss.
Does the business run without the owner? Does the company have a good marketing system that generates leads at a good cost per acquisition consistently? And what is the sales and marketing a system actually producing bottom line? Let's go inside and get a tour of what's going on here in Advantex.
So Jim, did you start off like doing the jobs or selling the jobs?
I got into the business selling jobs.
Retail?
Retail. Uh, doing home remodels, windows, what was it? Um, did sales for a remodeling company for a while, and then I started my own business, and market went crappy in 2009, so I went to work for somebody else for 4 years, and then I decided to leave them and came into the roofing restoration part of the business, started learning that. And a few years later I started my own company, and here I am, eight years later.
Eight years later, peak year was 3.5 million in sales.
Right.
Last year we had a dip: 1.1 million in sales.
Correct.
What do you think is your biggest problem that you need to solve?
Uh, finding some good sales people. I've got two great guys that work for me now. Don's been with me since the beginning, 7 years ago. He started right away. And then Joan came on last summer, and he's a fantastic sales guy.
Well, you got a great reputation with 4.9 star. We had a big hail storm here. Like, this is the best hail storm in Chicago in the last 10 years. That's why I'm here. There's 6-in hail. I've never seen hail go through metal roofs, EPDM roofs. We're automatic adjuster, put in today, 500 holes in the EPDM roof. And so there's a lot of longevity of opportunity in this market. And so let's go in [music] here and see what the actual numbers look like.
Here is the foundation of every good roofing business audit. Jim, [music] number one, I might just go ahead and point out the weakness, but you do give away all the jobs. I love that. Owner dependence. [music]
If I'm going to buy the company, or anyone, it's going to be valued on how many jobs the owner's selling, how important is the owner in production, how important is the owner in marketing. And if you walk away for a 6-month time period, would there still be jobs? Could this place still operate? And you have some things in place.
Um, talk to me about passing the owner dependency test. How, how do you pass? 'Cuz you do have some goods and you have some bads, but you, what are the goods? How are you not owner dependent?
We have systems in place that can—I don't have to necessarily be supervising each little bitty step. It'll, it'll produce itself with the guys and following through on the paperwork.
I mean, you get a handful of leads that come in through word-of-mouth referral and through SEO, and you're constantly giving Joan and Don, you know, maybe a couple appointments a week, five appointments a week.
How many?
Five to 10 a week.
That's a lot. For word-of-mouth referrals, that means that you have a little bit of a consistent brand. And the thing is, you got a couple salesmen that have been here that, you know, you can kind of depend on. Uh, you also have a crew partner that kind of makes, if you had to, if something happened, there could be a little interdependence there too, right? Uh, he could complete the jobs if need be, say I got injured or something.
Who would schedule the jobs, order the jobs, do the crew? Who would do all that?
Joan's kind of my right-hand man as far as detail like that, right?
Okay, so he's a production assistant.
>> He can help with that. He's, he likes, he's been building roofs for better than 25 years, so he knows the hands-on end of it.
Okay, so training Joan for operations as a backup is something that I can be keen to. As far as owner dependence, what do you think you're missing? What do you think the weaknesses are?
Um, that's a tough one. Sales manager?
Yeah. What happened there?
Uh, just wasn't the right fit. Had a bad story about happened, and we'll just go ahead and go through it real quick.
>> Um, well, everybody oversells themself as what their abilities are, and you want to hope these folks really perform what they're going to perform and do the follow-through, and they, they drop the ball quite a bit, so.
Once you start paying someone, they get complacent. A sales manager's job is to recruit, hire, train, retain, to drive sales, to lead the sales team, to hold the team accountable. And when the team isn't going, sometimes they have to lead the charge. And you're just saying that the guy you had was complacent, wasn't doing his job.
Yeah. And, like you were saying, his, his belly was full, pockets full of money, he could back off and not do some stuff. So he decided to go and be with family down in Tennessee. There were some health issues, so. When he left, that kind of took the, the sale out of stuff, but he was already on the downside.
>> And that's when you came to me to build the next level. Of course, you came to our coaching program. You got some people through the Indeed. We went through a recruiting cycle. But what were the lessons on what was the good, bad, and ugly for your—
>> Don't hire everybody.
Okay, don't hire everyone. What? Be choosy and fire, fire. Hire quick and sorry. Hire slow and fire quick. If they're not working, they're not working. You got to move on.
One thing I want to tell you is that because you're a natural closer, maybe you're not a natural door-to-door guy, and that's okay. But training the new guys door-to-door means you got to take them, or someone's got to take them, and teach them what it means to run in a war wagon, to run a setter-closer model, to execute the pitch. And even with Joan, I feel like when I get in the truck with him and I do that, that, that'll be one of the first times that he actually gets to see what field door-to-door generalship looks like.
Right?
>> Yeah.
So that's why you need a sales manager, and sometimes we got to become that guy before we can, uh, attract that guy, but you're doing all these other things. So, sales manager, um, then we got the marketing system, okay? Which, like you said, you do get five to 10 leads a week that comes from SEO, and they come from word-of-mouth. Uh, but, you know, uh, have you tried Facebook ads before? When we did the system, did, when you did our system, did you try Facebook ads?
Um, I don't think we did.
Okay.
>> Did some Google advertising and, uh, some other stuff from off of our Facebook page. Uh, not Facebook, off our website.
>> Okay, so you've done Google paper click in the past?
Yes.
And what's been your results?
Uh, marginal at best.
So Google local services is my favorite when it comes to Google paper click, and it's all about the 'be the lead,' so it's about the system of being able to call every lead within 5 minutes 'cuz it increases your odds 80% to close it. And if you don't get it, or you miss calls, then you're literally wasting dollars. And so, I mean, if you don't have that system, sometimes that's a problem.
More importantly, even with Joan coming to me, lead that I got, he needs a sales process of closing. He needs a little practice, and we're going to practice. But a role play culture, like it's hard, but these are our friends, these are our brothers. But I say this to my sales managers, like, 'Well, how hard are you role playing with them every day?' And I can tell, basically, it's: we might talk, we might train, we might do these things, we might watch videos, but actually busting them with the hard objections, hearing them pitch, making them speak it to you. Like, Joan, you're not getting away from the role play. We don't have to do it on camera, but we are going to role play. It's kind of silly, but it's how you get better. You know what I mean?
And so that's sales management, but besides that, if we got good marketing, but we don't have a good system to close, that could lead to money that gets wasted on leads. Fastest way to waste money, uh, is to spend money on marketing, not have a system to call them within 5 minutes, follow up six times, and not have a good sales process to [ __ ] close the leads.
Now, word-of-mouth referrals close different. Google SEO closes different, don't they?
Oh, yeah. They close at a higher percentage.
So it's good you got this. I like it, you got five to 10. But we need to add Google, we need to add Facebook, but the main thing that we need to add is we need to add the recruiting funnel of door-to-door. So we got some holes in the game, but the good thing about the marketing is your brand. What's the strong points about your brand?
Um, we've been around for eight years. We have the five-star Google reviews.
Okay. Uh, you have 189 and you're 4.9 rated.
Yeah. It's a good rating.
That's something to be proud of. When I told you that you should charge more for that, what'd you say?
Really? Really?
Do you know how [ __ ] hard it is to be 4.9 all the time? This should allow you to charge 20 to 30% more than the competition, and if you don't do that, you're selling yourself short. We're going to get that fixed, don't worry.
Um, the next part is going to be bottom line profits, okay? So let's go through our best year. 3.5 million dollars in sales. All right, couple things at this level. Um, the secretary executive assistant should be able to hybrid off and help you with scheduling the crews, making sure that payroll is correct. At this point, you might be doing production, but you should have someone doing a lot of the heavy lifting with you. You can't recruit.
Yeah. It's a blockage when [ __ ] roofers are blowing you up about materials and job issues.
Right. This was a good storm year, right?
Yes.
All right? And then we went down, we, we, we, people got complacent, we had no storms, you had to go retail. And last year, how much did we do? 1.1 million.
Okay, 1.1 million. And how much of that did you sell?
About half of it.
Okay, about half. So, the owner dependence is high. When you did 3.5 million, what was your net profit?
About 450,000.
Okay, do you remember, like, before all your overhead, what your average gross margin would be?
I don't remember the exact number, but—
>> Important number.
You said between 35 to 40.
Yeah. This is what you say, not me.
What we're going to do in the game plan for us, okay, me and you, is we are not going to land below 45, okay? And I would say that we really want to be between 40 and 50. We want to try to pump this up another 10%. We're going to do that with a better retail sales process. We're going to do that with the insurance to retail. We're going to do that with a lot of things. I'm actually excited—
>> About the gas crisis.
You know why? It's going to bump our prices.
>> [ __ ] yeah, and it makes sense.
Yeah. You're more expensive than the rest of the roofers. It's because, check the $5 a gallon gas. I don't even know if we're going to be able to get shingles for this price. I've locked in my shingles. You're lucky. It's going to double again next week.
>> [snorts]
>> So, same thing here.
>> 1.1 million, you sold 500k. Uh, Joan and Don sold 500k. You did production, okay? So, I mean, typically, brother, you'd have to pay yourself at least 50,000 in commissions if you sold that. So, all the profit doesn't count. But 1.1 million, you say your total gross revenue was somewhere between 35 and 40% on this 1.1 million? Do you know your office overhead and your total overhead expenses for, like, everything that you spend money on out of the company?
Yeah, I can look at our P&L statement. I don't know it off the top of my head.
Okay, it's a pretty important part of the audit, but what was your net profit on 1.1?
Less than 100,000.
Okay. So, that's okay, brother. Let's say we're at 90 grand. You paid all your bills, you kept your team, you kept your company, you were prepared for me, and now I'm here to help us grow.
All right? So, let's go through what we call strengths, weaknesses, opportunity, and threats. I have four square. Four square, okay?
Strengths: your brand. Strengths: your, um, ability to produce good jobs. Strengths: your SEO and word-of-mouth referrals. Strengths: loyalty, good culture, and team. What, what are some of your other strengths I'm missing, Jim?
My, my knowledge in construction.
>> Hell yeah, he's a craftsman. He's a legend. He's been doing it for 40 years. He can [ __ ] build anything. Is that right?
Oh, yeah. Guys usually don't believe that I've ever roofed or framed or done any of the other construction.
Let's [ __ ] turn that on its head. Is that a business strength or a Jim strength? And what happens if Jim's gone, where does that strength go?
You got to find that person to take over that, that spot if I'm not here.
Well, good news is that Joan has a lot of craftsman knowledge, too. He knows a lot about roofs. He's got a lot of practical experience.
>> that you were saying, 'I'm training Joan,' but you're in that, you're in that same deal.
Yeah.
Uh, weaknesses: no recruiting funnel. All right? I'm, I'm going to bust your balls here a little bit. Is that okay?
>> Yep.
All right, no door-to-door heartbeat. Okay, that's okay. Let me tell you, no guys that are 60 or 55 that are old school like to knock doors. No guys like my age like to knock doors. It's only the young guys.
>> It's only the young guys, right?
Right. So, just the thing is, is it's okay. You got to find that guy. Sometimes you got to slap yourself and become as much of that version as you can until you get that guy. Um, or sometimes you got to partner with that guy. All right? That's what we're doing.
Um, weaknesses is no paid advertising, even though we do have, um, the ability to get these word-of-mouth referrals, we don't have any paid ads. Also, weakness is going to be owner dependence. I mean, we've became really owner dependent now since you're selling 50% of the work and you're basically, you know, doing the production. Um, of course, net profit margin is actually a weakness. You're in a really good, you're in a really good area. And this right here, if we're, if you're telling me this and I'm not inspecting it, it's liable to be on the lower side. It could be below 35% because we always look at the numbers with a rose-colored glasses. And, and then total profits, of course, you know, I don't really want to buy companies unless they have 1 million in profit, but I mean, situationally, good brand, good reputation, owner runs without me, 500k, I'd still be willing to, to buy a company. So, we got to, we got to get this bottom line number up.
And let's say I would be willing to pay a 3x multiple on this, and, you know, a 5x multiple on 1 million means that you got a sales manager, you got a girl or an executive assistant or production person that can run the production, and then you have at least five sales guys, but hopefully five to 10. That's what, that's what a 5x multiple looks like, but most companies don't get a 5x.
Opportunity is going to be the storm. Opportunity is going to be, uh—
>> [sighs and gasps]
>> the, uh, recruits. I mean, the storms bring in people that want to work with you, and that makes it easier to recruit. The opportunity is partnering with me. I may not, we may not want to sell the company at the point that it's at now, but partnering with me might be the way that we get where we need to be.
Threats. Threats are going to be paperwork with the state. We've got some details to make sure that our RCA / Advantex partnership is 100% legit. We got cash flow as a threat, isn't it? Don't we have to cash flow this whole thing, huh?
Always a threat.
And I say, 'death by depreciation.' It's waiting for depreciation: 50% down. 25% when we start the job. The balance when we're due. If you have depreciation, you pay me, you get reimbursed. When I explain depreciation to someone who's had it explained to someone else, I say, 'Look, step one, you sign a statement of completion. Step two, we turn in a paid in full invoice. Step three, you get reimbursed.' Now, the hard part: you have to tell that without saying anything.
But, 'But, Lee, I don't, I don't have the money for that.'
Well, that's okay. I'm not a bank, but I've partnered with the bank. And that's how you get better cash flow. What are some of the other threats? Is there government agencies that come around and check jobs? Is OSHA about here?
OSHA comes around every once in a great while.
>> Never had a problem?
Never had a problem.
Uh, what are some of the other threats?
Um, that's a good one. Miss storm opportunity.
>> Yeah.
Continue to not recruit. And then miss window where Jim has energy to scale. Is that true?
Yep.
Huh? Is, is, is this, is the threat like you got to get the energy focus for this [ __ ] last hurrah? [ __ ] get rich or [ __ ], right?
>> Yep.
That's the threat, right?
Yep, that's the threat.
>> Is that this could be the last hurrah, and if we [ __ ] leave this one on the shelf, that you'll mentally it might [ __ ] you up to where next time I don't want to be doing this when I'm 90.
Okay. All right. So, look, I'm not at a point where this is a business that you want to sell or I want to buy. Your goal is to get the company to 5 million in sales, okay? In order to do that, we're going to hire 20 sales guys yourself. You're going to put your own Indeed ads out. You're going to push people to a weekly Zoom call, just like we did. There's going to be people that reach out to you. What I want you to do is start livening up your social media. Hopefully, we can create some content today. Hopefully, this gets you some content, but the whole point is: Guys, if you're watching this right now and you want a good local roofer, we're partners, but you can reach out to Jim direct. If you're really a kindred spirit, a Jim, a craftsman, you want to work directly with him, you're on my platform. I want him to win alongside of me, and so what we're doing is partnering up, and you can get direct craftsmanship, good installation right here at Advantex here for the, the storm. But the idea is like, uh, we got to get you 20 sales guys. We need leads. We need Juwan to get trained up. He needs to be a killer sales person. Unknown [music] caller. And then he needs to be trained up to help you with production to keep up with my system.
Getting 20 sales guys is all about one simple thing. Okay? It's not how to grow your business 'cuz you went through the coaching. You know how to do the recruiting funnel. You know that posting on social media matters. You know that it's, you need to go door-to-door, but you're not the door-to-door guy. It's about who, not how. I am that who. You did a great job recruiting me. Congratulations. You got me on your team, man. I'm going to partner with you because I will put my blood, sweat, and tears into you because you're coachable, because you showed up to the calls, because you kept coming back, because you listened, you tried, and the whole time you showed up. And the point is, is you got to show up first. If you're all watching this right now, you're a company at 1 million, it's who, not how. I'm that who. You need a recruiting funnel. You need more leads. You need less owner dependence and paid ads, good leads. It only works when you have a good sales system, good sales training. And so, getting Juwan to train with us on our four weekly calls, getting him in my Sky Diamond University. This is the solution. Having us role play. Like, Juwan, we're about to role play, dog. We're about to hit this door-to-door. You're about to get some objections. It's going to be great. But that's what making door knocking fun again is about. It's all about energy.
And if you're watching this right now, never miss a chance to sell your vision to your team. We're going to do 5 million together. You, Juwan, Don, separate from my organization, right? Y'all are going to produce it. You're going to build it. You're going to generate the leads. You're going to get better at sales. You're going to train Juwan as a secondary leader. You're going to get less owner dependent, better at marketing, get your bottom line profits up. 1 million in profits. We're going to goal a 5 million dollar exit. We're going to have this ready in the next 18 months. We're going to be partners.
If you want an audit in your business, find out your strength, weakness, opportunity, and threats, [music] click the link below. You can come to my office. We have a two-day training. To get more information, click the link below. For a limited number of people, you got to be open-minded, coachable like Jim. He's a learner through and through, even though he's 70 years old. So, look. Click the link. Hey, [music] 69. Don't be putting that on him, dude. Like, I'm 40 years old now, but people be saying I look like a 50, so don't have a lot of care there, but then I want you to know, click the link below, we'll help you out.