Jonathan:
Hey. What’s up? I hope you’re doing great. Hey, I’m gonna give you three takeaways from my time at GIE in October. If you don’t care about GIE, you weren’t there, don’t let me lose you here on this video because the three things I’m gonna say are what I believe to be really important and I don’t believe other people are talking about them. I’m gonna give you my unique perspective and my perspective comes from knowing hundreds and hundreds of companies in the industry that are doing anywhere from, let’s call it, 150,000 a year to way over 10 million a year. I know a lot of guys doing over 20 million a year. Let me give you that perspective because it serves higher up. I work with thousands and thousands of companies. I know a lot of people, so I have conversations for four days in a row at GIE with tons of people I know that are doing really interesting things, running good businesses as well as a whole bunch of people that I don’t know that are in the industry.
Let me tell you what my takeaway is from the conference. Three things. Number one, our economy is booming. You know that. I don’t need to tell you that. If it’s not booming for you, you might be in the wrong market. There’s something going on, but if you’re not figuring it out right now, if you’re not winning right now, then there’s a systemic issue with your business. It could be business model. It could be pricing. It could be your ability to recruit team members, which every single person in every single industry is absolutely getting killed on right now. It’s not unique to our industry. It’s very hard in our industry, but everybody thinks it’s unique. It is not even slightly unique. It is killing everybody.
The economy’s booming. If you’re losing right now, you gotta figure out why. You have to work on it because it isn’t gonna get easier. If you are winning, or you’re losing, doesn’t matter, and by losing I mean you’re just not feeling the growth, you’re not seeing the improvement and profit inside your organization, there are three things in my mind you’ve gotta be doing whether you’re winning or not, because there’s a downturn coming. We’ve been in one of the longest growth cycles ever. We’re in a … We’re at the … reaching probably again a peak on the debt cycle, which means that things are going to have to downturn here at some point so that we can clean up some of the debt that’s on the balance sheets of tons of companies around the country and around the world, all kinds of things. It’s a bigger conversation. It’s coming. We just have no idea when. Next year, year after, nobody knows. Can’t predict it. All you can do is prepare.
The way you prepare is you know your financials. You look at your PNL. You look at your balance sheet. You’re getting accurate data into your accounting system, whatever that is, on a weekly and monthly basis. You are on top of that so that you can produce good financials. If you’re not doing that, and most entrepreneurs don’t love it, I have historically not loved it ’cause you just wanna go, go, go, sell, sell, sell, market, market, market, but you don’t really love paying attention to the numbers, you could spin your wheels for years here building this business that doesn’t generate much profit, then the economy downturns.
Your business takes a bit of hit. What’d you do for those last many years? What’d you build? You bought some equipment, paid it off maybe. Now it’s old equipment. It’s gonna have to be replaced. You didn’t take any money off the table. You didn’t really invest in infrastructure. You didn’t really grow a leadership team. What really was accomplished in those years if, yes you were growing, but there was no profit really being generated? This is something to worry about, so you gotta be on top of your financials. That’s the only way you know if you’re selling the right work at the right price. The core of all of that is job costing.
You have to know, by property, how much you’re making per man hour if you’re profitable on that job. If you don’t know, then companies like mine, which I got this right in the beginning even though I got a lot of my other financial stuff wrong in the beginning … companies like mine and companies like a bazillion other, let’s call it, Service Autopilot members and a whole lot of other non Service Autopilot members that are super savvy, that are job costing their work are going to eat your lunch in the downturn. They are going to take work from you. They are going to win the new work ’cause they’re gonna know exactly what they can bid that at to win it.
You gotta learn this stuff. I didn’t know it. Took me years to figure it all out. It’s not my favorite thing. I actually don’t love this part of the business. I don’t love the financial stuff, but it’s where the money’s at. It’s where the growth’s at. It’s where the security’s at. You gotta get your financials cleaned up. You gotta be on top of your job costing. If you use the right technology platform, technology solution, it’ll give you those numbers and you’ll be good. It’s not hard if you’re using the right technology to get those numbers. You’ve gotta clean up your non-billable stuff.
Where is all the waste? You’re driving too much. Spend too much time loading, unloading. You’re spending too much time fueling. You’re spending too much time buying drinks and snacks in the mornings. You’re buying … You’re spending too much time on breakdowns. You’re spending too much time on missteps in that plants and materials and things and parts weren’t on the truck and didn’t show up to the job site. All of that is killing you. Every dollar you take from non-billable time and you re-bill it is all profit to the bottom line, that very last number at the bottom of your PNL. Unbelievably important.
Number two, big thing I’m seeing right now that others are not talking about, massive consolidation in the industry. I have a unique perspective. There’s so much money in the markets, so much private equity money, so much venture money, so much everything. There’s so much angel money. There’s so much everything money right now. People don’t know where to put the money. What that is resulting in is you’re starting to see more and more acquisitions inside our industry. You’re starting to see more roll-ups. There’s a resurgence, in my opinion, in interest in our marketplace for companies like ours. You need to be one of the top players in your market if you wanna sell someday.
Right now you may be so small. “I’m just trying to make payroll. I’m just trying to survive. I don’t care about any of that stuff.” I get it, but have a mindset that, “Hey. I’m gonna build this thing. I’m gonna know my numbers. I’m gonna learn how to market. I’m gonna learn how to sell so that, at one point, whatever my little market is, my little service offering in my market is, I could be a real player in my market. I could … Maybe I won’t be a huge company, but I’ll be a leader in my market.” That’ll position you someday to have the best chance of selling your company if you even care about that. I’m not saying you should. In fact, I kinda don’t care about it, but I’m more careful about building a big business and having it be very profitable.
If someday, a byproduct of that was it was a very sellable asset, fantastic. That’s a win. My bigger point here is there’s massive consolidation in the industry. That means others with money that have a thesis on where the market’s going and the economy’s going and the world’s going, are very attractive … attracted to our business right now. I think that’s a very big positive for us. I think that’s a very good signal to us saying, “Hey. We’re playing the right game in the right market. Yes, we have a labor problem. Yes, we’re gonna have to figure out how to solve this. Yes, we’ve got some really challenging things ahead of us in the industry,” but when the big money continues to flow into our markets and you should look at which service, which types of companies they’re buying, meaning what are the services that the companies are selling that are most likely to get bought, that’s a clue of where you might wanna guide your business. You can kinda follow the idea of where the smart money’s going.
Two takeaways there. One, where is that smart money going? Should give you some clues on how you build your business. What is your service offering? Number two, it should give you some confidence that, hey, those with the money that are … that spend a lot of due diligence thinking about the future and financials are making a bet on our industry that’s very positive. A different perspective is almost every interesting software company inside the space right now has been sold, especially now that Real Green has been sold. There are several others that have the newer offerings that have come on the market in the last four years. There are software companies that are … most of the new offerings are all catering to the really small companies.
The reason I’m telling you this story from a software perspective is almost everyone now has raised a tremendous amount of money in our market, let’s call it 10 million dollars. Or, they’ve sold. There are very few software companies left in the industry now that have not been sold to big private equity or venture companies. Service Autopilot’s one of the last. What this tells me, and I’ve talked to a ton of these guys, is the very smart money is also when they’re buying technology solutions, they’re making a big bet on you. They’re making a big bet on this industry. They think it’s a massive growth opportunity. They think it’s a space where it’s going to grow in the next 10 years. Again, good for all of us in the business. Very smart money saying, “Hey, these are good businesses to be in.” I’m giving you a lot of detail here. I hope this is of value.
Again, what’s that telling you? It’s telling you to keep going in this business. It’s gonna … It’s telling you to figure it out. It’s telling you to get on top of your financials. It’s telling you to figure out your recruiting. It’s telling you to figure out marketing because you’re in an industry that’s very attractive, that more money’s coming into. What these companies are doing is they’re either buying up our types of companies or now they’re buying tech companies trying to get to you. They’re … Because they believe there’s a huge growth opportunity. I’ll give you another little clue to think about in your business.
A couple years ago now, Verizon did a study. There’s only about 17% penetration in our market. What I’m … that means is only about 17% of companies in our industry had moved to sass or cloud-based software, which is what Service Autopilot is, which the big money’s coming in and saying 83% of the market is totally missing the boat here. 83% of the market is going to eventually make the move or they’re gonna get crushed by the competition. They’re making this massive bet that everybody using desktop software and just using QuickBooks and living in spreadsheets is going to move to a solution like Service Autopilot.
I like to look for clues. Where’s the money going? Whenever the money’s going in a certain direction, it gives you some ideas on what you should be thinking. That’s a clue that you should be thinking about getting your technology ducks in a row, being on the right solution that will grow with you from 100 grand to a million to two million to five, because moving technology is a pain in the butt. What’s the money telling you? What are the clues? The clues … The money is telling you that you’ve got to play a technology game even if you don’t like technology. You need somebody on your staff doing it. If you’re not, you’re going to get crushed, and especially in the next economic downturn. That’s my next … my second massive takeaway.
My third takeaway is … it’s the same takeaway I have every year. Everyone’s running around worrying about the wrong stuff at GIE. My … I know that my channel here would be vastly more popular I would talk more about equipment, and frankly, I need to do that. It would be vastly more popular if I talk about equipment. Why does GIE attract so many people? They wanna come to look at the equipment. I get it. It’s cool, but who really cares in the broad scheme of things? I … It just doesn’t matter at all. I love … I’m a car guy. I’m everything mechanical in terms of cars and things like that. I couldn’t care less about equipment because it’s a massive distraction. I’m not saying you don’t buy the right equipment. I’m not saying you don’t get the right terms on your equipment. I’m not saying you don’t utilize the equipment.
Absolutely, you need to know what the best equipment is. You wanna make the right buying decisions because for every … think of a piece of equipment as a robot. For every … A mower’s a robot, even though it’s maybe not a robot yet. A weed eater’s a robot. A spray tank is a robot. There’s this machine. They’re a robot. What’s happening is every minute that you use a better piece of equipment, it displaces a minute of labor a human being. It is critical that you get your equipment right because right now we can’t find enough team members. If you had a piece of equipment that cut labor by 20% and you have five people, you’d only … you’d need one less person to run your company. If … Hopefully, you followed me on that. Yes, equipment’s incredibly important. You think of taking a piece of equipment and displacing labor hours, so the better and more efficient your equipment becomes, the fewer people you need to grow. Unbelievable competitive advantage.
But what are most doing? They’re running around looking predominantly at equipment, really excited about equipment, and they’re thinking about equipment in their businesses. They’re overbuying equipment. What really matters at the end of the day? Technology, understanding your numbers, marketing, building your leadership team, recruiting 24/7. Never, never, never stop recruiting. That’s the stuff that matters way more than equipment. Where is your brain power going? Is your brain power going to equipment or is it going to recruiting?
Recruiting is the number one bottleneck in our industry. If you don’t solve recruiting, you don’t have a business. If you don’t solve recruiting, you don’t win. If you don’t solve recruiting, you don’t get bigger. You have to solve recruiting. Where is your brain power going? If it’s predominantly going to the next cool piece of equipment, the next cool truck, the next whatever, which I understand, then it’s going in the wrong direction. GIE is a massive representation of thousands upon thousands upon thousands of people predominantly interested in equipment. It’s great. Do that, but it should be a small piece of what you do and think about because of all the other stuff matters. Another piece of cool equipment, another piece of awesome equipment in your fleet is not going to grow the company. It might reduce some costs, but it will not get you to the next level. You’ve gotta be thinking about all those other things.
Those are the three big things that I see when I’m walking around talking to people at GIE. Economy’s booming. There’s a downturn coming. Are you ready? Get all your financial ducks in a row. There’s a massive consolidation in our industry. Big money’s coming into our industry. They’re buying up all the tech companies and they’re buying up all the providers. That’s a positive for you. Keep going in this industry. The money’s coming into it. There’s clearly a belief behind it. Get your business positioned so that someday, a decade from now or 15 years or someday, you could take your money off the table with a very nice sell if you wanted to sell the company. What are the clues of the big money? What are they investing in? That gives you an idea of what you should be building. Then the third one is getting your equipment stuff right. Pay attention to equipment. Build out a great portfolio of equipment so that you can displace as much labor as possible, meaning you need fewer labor hours. Do all that.
That’s great, but keep your mind focused on number one, recruiting, number two, marketing, number three, financials. They shouldn’t be in that order. Yeah. You really gotta know your financials right now, then recruiting, then marketing sales. That’s how I think about it. I hope that’s of value. If you think that way, you’ll be ahead of the vast majority of the industry. Good luck.
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