How to Scale a Service Based Business Without Losing Quality
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A Topic Right Up My Power Alley
If you really want to scale a service based business and are tired of all the unknowns...
Or maybe you've brought in multiple consultants, read all 27 of Michael E Gerber's eMyth series...
But there still seems to be very little idea as to how to actually APPLY all of this information.
You, my friend, have come to the right place!
And that's a bold statement I don't usually make.
If you've read any of my blogs, I usually do make definitive statements but often times I recognize everything is largely individualized.
Right?
Like, your business might not be able to take the same approach as an example I'm referencing.
So, in theory, you could take the concepts we discuss and craft it to your own needs.
But a direct translation just isn't always possible.
Truth be told, that's why buy my courses or hire me to help them personally.
Now, I'll be candid, the hiring me part comes with a lofty price tag and for reasons I think you're soon about to discover.
Because my knives were sharpened on the edges of a service based business.
That's right!
I wasn't always the digital nomad or staunch supporter of technological innovation that I am today.
In fact, I went about as conventional as possible with my first business.
Simultaneously, I went with about as much risk as sending someone to the moon...
Okay, not THAT risky.
But my insurance providers sure treated me that way for Work Comp, I assure you.
Try on 33% of your payroll going directly towards JUST your Worker's Compensation Premiums.
Yea, ouch, like being Jared Leto and getting axed by Christian Bale's Patrick Batemen
Sick and twisted movie, by the way...if you're into that sort of thing.
I am not...just a die hard Batman fan that wanted to get a glimpse at the new Batman at that time before Batman Begins hit the theaters.
Still can't erase that one from my memory.
But I digress...
My first business, a residential moving service, spawned from the bedroom of my college apartment in Athens, GA.
If you've followed my story, you've already heard about this to a point you probably know the story better than I do.
But, for the sake of our new friends, here's a quick rundown of what went down.
The College Moving Company Was Officially Born in February of 2012
My brother and I had this noble idea that we could somehow make decent money and not have to flip hamburgers.
As college students, we really wanted to focus our efforts on school and not spending the majority of our free time making minimum wage.
I already had a long history of entrepreneurial side hustles under my belt.
In fact, one summer while I was in high school, a friend of mine and I launched a handyman type side gig.
In a matter of 3 months we were able to generate somewhere in the ballpark of $12,000.
Well, $6,000 of that came from one job request.
An elderly couple had a really bad experience with a moving company some 20 years prior pledged to never go that route again.
They wanted a different alternative to your typical blue-collar approach.
Growing up in an affluent area, most of my friends had an understanding of how important people's belongings are to them.
We also had one of the best school systems in the entire state.
Now, I'm not saying we were ALL a bunch of spoiled and smart rich kids.
In fact, most of my friends and I were on the lower end of that totem pole.
Somewhere in the upper-middle range.
So, our parents wanted us to "learn the value of a dollar."
And if I actually had a dollar for every time I heard my father say that I wouldn't need another dollar, I assure you (HA!).
So, this elderly couple saw one of our business cards pinned to the bulletin board at our local grocery store and decided to give us a call.
We visited the couple's home, realized what a daunting task it was and decided there was no way we could say no.
They respected the fact a couple of kids were spending their time in such enterprising fashion and enjoyed us as young men.
That experience, while then fast forwarded to my college apartment some 5 years later, really stuck with me.
You see, where we lacked in shear, brute force, we made up for with intelligence and basic laws of physics.
That elderly couple loved every minute of the experience with us so why couldn't we replicate that same concept again!?
Well, one day we see two petite college girls at our complex trying to move one of those massive sleeper sofas down the hall.
And, mind you, this hallway was like the tunnel of doom.
If it stretched an entire 8th of mile I wouldn't be surprised.
Struggling mightily, my brother and I decided to lend them a helping hand.
Not five minutes later and the sofa was secured and ready for transit.
The mother threw us a handsome tip and we went about our day.
Again, wheels are now churning even faster.
I told my brother we should go talk to the Lease Office Manager, whom we had a good relationship with.
And why she liked us I have no idea...
Evidently our unit, 320, had become notorious for our loud and obnoxious parties.
But either way, she wanted to support our efforts.
She began referring business our way, allowed us to post flyers around the building and soon enough the phones began ringing.
Not a month later and we found ourselves with a $10,000 moving business.
Okay, big deal, right?
Yea, it was a big deal for a couple college kids.
Fast forward one year and I'm now in the "real world" with a "real" job.
My brother is fielding interview requests, hiring people left and right while desperately trying to keep up with demands.
Something like $26,000 later and I decided it was time to leave my job and take this thing on full-time.
Ironically, my boss had just told me I would never be respected at my job until my hair looked like his.
FYI: His hair was as white as the background on this web page.
So yea, I left faster than most people leave an empty bar with no alcohol (no idea why I chose that metaphor, must be thinking about college again).
Three weeks later we had an incorporated business and I was now fully entrenched in entrepreneurship...
From Starvation to Half a Million in Revenue and Beyond...
I guess I kinda just ruined the big reveal.
We'll focus on the starvation part for another day because it was indeed a trying time and a message worth sharing, I assure you.
For our discussion today, let's focus on scale (ie. the reason you're here right now).
Within 12 months of taking on this venture, full-time, we had hit the $500,000 mark.
Within 18-24 months we were quickly surpassing seven figures and beyond.
We had employees in 32 states, working with five of the seven players in our industry.
And when I say the industry, I mean in the entire country.
Like companies with nearly 1,000,000 sqft faciltiies and easily doing nine figures (I'll wait while you count those zeroes).
You see, we had also started doing furniture installation work for student housing apartments.
So that, in line with the growing residential business, led to our substantial growth.
These contracts could range from $30,000 to $210,000, depending on scope and duration.
Crazy, right?
You haven't the slightest idea.
Now, we hear about crazy growth like this all the time.
Truth be told, that's baby growth.
Sorry to let you down, but it really is.
Under $5MM and you're still considered a small business.
AirBnB went from $3.2B to $20B in valuation is something like three years.
Now THAT'S disruption.
Key difference: our company wasn't a tech company.
And I didn't fully appreciate that until recently.
Being the type that always sets the bar higher and higher, I didn't ever really enjoy the ride, so to speak.
I literally didn't even conceptualize what we were doing and how rare it was...
And I've now told that story to people far more successful and experienced than me.
Most of the time their comments go something like, "you have no idea what that multiplier would be in tech."
Another one said something like "that's the kind of growth background we look for to see someone involved with the next unicorn."
Both flattered and humbled, I just saw myself as a normal, hard working dude with a silly moving business.
And I don't say all that to humble brag, at least I promise that's not my intent.
I'm no different from the next guy...
So, How Did We Actually Do It?
If you haven't arrived at this question yet, you probably aren't the owner of a service based business.
You see, because those people have tried to grow and it usually doesn't go well.
Even 5-10% growth is really tough to navigate when you're talking about limited resources, bandwidth and an increase in demand for your services.
And the answer to that question is we got our butt's kicked to tomorrow and back.
I've never been closer to an all out nervous breakdown in my life.
My wife (fiance at the time) literally thought she was going to get a call about me one day.
And neither of us are the dramatic type so please don't think I'm exaggerating here.
This was very real and for the sake of your own future I'm being extremely transparent with you.
We had revenue lags that presented cash flow problems that would make your toes curl.
I'm talking having upward range of $400,000 in A/R (Accounts Receivable).
Meaning, people owed me money...A LOT of money.
We were doing business with the big boys and you have to play by their rules, unfortunately.
Now, in hindsight, I could have done a much better job on all fronts.
But as a mid-20-something and just trying to see my business make it in the world you'll do whatever it takes.
There were very few nights I didn't get a call from somewhere about some mini-emergency.
In fact, most of my employees on the administrative side of the business were starting to develop some real PTSD.
We all literally had little panic attacks when the phone rang because we knew it usually wasn't a good thing.
Someone needed something, somewhere, and we were going to have to deal with it.
That, or something bad happened.
Things like:
One of our employees did something...less than intelligent.
Someone was stranded somewhere on the road due to something.
Maybe they ran out of gas, got the truck stuck in a ditch or even got themselves arrested while out drinking.
Literally, true story...One of our guys got arrested in Illinois for being so drunk he swiped at a cop.
And this was a good kid...just a college kid and way in over his head.
I've had employees quit in the middle of the night.
Someone came by one of our offices, cut the gas lines and stole thousands of dollars worth of fuel.
I've had employees hit a construction worker with their car because she wouldn't let them in the back gate for work...oh, and she was pregnant at the time.
I've gotten phone calls from the big companies that contracted us saying they received a report some of our employees were caught smoking marijuana in the stairwell.
Someone fled the scene of an accident after backing into the gate of an apartment community.
Give you enough of a picture?
Because I can go all day long here...
We're just scratching the tip of the iceberg.
So, to say we lost the quality of our service while scaling is hopefully very obvious.
We were putting out fires and putting them out much slower than they popped up.
Why?
Were we just bad people out trying to make money and not caring about people, our employees or the service we provided?
I can assure you that was never the case.
I just had no bloody clue what I was doing.
Like, at all.
And so here we are...a multi-million dollar startup with more holes than a spaghetti strainer.
We couldn't put money in faster than it was bleeding out.
We had no idea what was going on and it was now my job to go back and try to fix this mess.
Where to start...where indeed to start?
Becoming a CEO
I think it's important to start this segment in that fashion.
Sure, my business cards said CEO but I assure you I was not acting like one.
But not for lack of trying.
I began to think to myself, ruminating over potential solutions.
I had become truly cynical.
I was not a pleasant person to be around.
In the morning, I went into my corner office, the one I had always wanted, and closed my door.
"Don't bother me with your trivial problems," I would say.
And then it hit me...
We have to give these people a platform to be successful.
That's your number one job as a CEO.
Creating a culture and an environment where everyone that steps foot into your company as an employee has a shot at being a success.
If you aren't doing that, all of these problems, all of these incidents, are on YOU!
And that was a tough pill to swallow.
That took a heavy dose of reality to lower myself to recognize that truth.
And it hit me like a 20 ton bag of bricks.
But it was true.
It was ALL my fault.
And I owed it to both my employees and my customers to fix this and fix it now, not tomorrow.
I became obsessed with building a machine.
Right?
A machine just does what it's intended to do.
But if you need people to conduct the individual components of the machine it's not really that great of a machine.
It was like we were still churning butter with a large stick and a barrel but expecting flawless, mass production.
I built system after system after system until the word system was my favorite concept in the world.
Still buried and locked in my office but now with a purpose.
I rolled out new initiatives on a weekly basis.
The machine started to work.
So I implemented more...
The fires started to die down.
People started showing up with more positive attitudes.
And all that money that was flowing out of the business, started to stay put in the bank account.
Customers started raving about our service again.
The online reviews were amazing...something like 10x's more than our next competitor in that town.
And, for once, I was proud of what I had built.
I could go home and actually detach for just a few hours.
What was the norm became the exception.
I became the CEO, and it wasn't just because it said it on my business cards.
So, What Did This Magic System Look Like?
Ohhhh, man...
How much time do you have?
Because this post could go on for days.
But here goes, I'm literally going to give you the blueprint...the secret, to scaling any service based business.
And remember, I don't normally do bold statements like that due to individualized needs.
But I believe in this wholeheartedly.
At least, in principle.
So, in other words, you can take this basic theories and apply it to your own business.
It may not look and feel or even function in the exact same manner but your light bulbs with be flashing at you with the high beams on blast.
And, for the sake of some kind of continuity, I'll try to keep this is some form of concise order.
Hiring:
We've all been there, right?
Interviews and applications can largely be faked with easy questions that literally don't give you any valid information in making a good hire.
We knew this and opted to automate the entire process, removing nearly all touch points for one of our administrators.
The system graded their responses, passed them along to a pre-recorded video interview tool and if their score was high enough, we would then meet with the candidate.
The information they filled out was also automatically passed up to our Payroll/HR service provider in the event we triggered a response that shows we wanted to hire that candidate.
The system removed 50 minutes from the hiring process for our admins, per hire!
Training:
All of our training materials were included in a video series where we could track their progress.
This training also graded them on a quiz to ensure they not only passed with a 90% or higher but also gave them explanations for why their wrong answers were indeed wrong.
Once training was completed, a notification was sent to both our admins and HR provider to complete the onboarding process and begin scheduling.
Levels and Rankings:
You can't just throw people into the fire, you have to build a system to gradually introduce them to the work they'll be doing.
By quantifying these job functions based on level of difficulty and experience, we found a drastic reduction in our customer complaints and damages.
In fact, what we found was 40% of our issues were coming from our new employees that just didn't have the experience to do the job at a high level.
By giving them a path to succeed, we not only reduced many headaches but also maintained higher employee morale as our employees no longer felt overwhelmed when first hired.
Resources:
Don't you hate when employees interupt your major work with basic questions?
It feels like you can never move the business forward because you spend the majority of your day telling people how to do their jobs.
Proper training material will certainly help but we also created a resources page on the back end of our website that was password protected.
This page was an encyclopedia of potential issues that may arise and video material on how to solve them.
We also recorded examples of other employees handling those situations so they got a real world perspective and not just theoretical.
Our field employees had a similar platform with an entirely different login portal.
Furniture Database:
This was my Mona Lisa, for what it's worth.
We were able to get hyper-specific on the nature of what all furniture consists of.
By approaching an item based on it's attributes instead of the item itself, we could give instructions on how to approach items with those conditions.
For example, fine finished wood involves certain protocols, regardless of the item in nature.
So, a coffee table with fine finished wood is approached the exact same way a night stand with fine finished wood is approached.
Our field employees could select attributes from a database and corresponding instructions, plus video, were populated to give them guidance.
This could be pulled up on their company tablets in the field.
Field Paperwork:
I hate paper.
I used to say that all the time at the office.
How can we eliminate more paper?
Boxes upon boxes of paperwork and nobody truly knows where anything is.
We eliminated 13 pages of field paperwork, per job, by digitizing the entire process.
This also gave us the ability to take and attach pictures, record customer signatures and prevent field employees from moving beyond where they were in the process.
If they left a required field blank, they would not be able to submit and move forward.
All of these submissions went into a database for our admins to reference.
We also built in an amazing review system as well as an automated responder for people customers that indicated problems on the job.
If they filled in scores with an average less than 80%, alerts were sent out to admins as well as the customer to get ahead of a potential bad situation.
Scheduling:
You literally can't lose employees fast enough if you don't have good scheduling protocols in place.
For businesses where customers request the times they want to be serviced, we based our system solely on employee availability.
That way, there was no way we would ever be left short-handed.
This was a far removal from our competitors but the results were overwhelming and customer satisfaction went through the roof.
Our employees were happy and felt like they had much more predictability in their schedule.
We also used time slots to accommodate longer requests versus shorter requests.
This prevented work going beyond business hours and controlled overtime expenditures.
Pricing
One of our other proud moments was when we developed an automated pricing system for both our installation and residential moving requests.
On residential requests, we found many "window shoppers."
These people took up an exhorbitant amount of time and really weren't ready to hop on the phone just yet.
We crafted a tool with weighted figures to give them a ballpark idea on price and found it was within 15% of accuracy from a phone quote.
On the commercial/installation side of the business, we could measure down to nine decimal points of accuracy and provide multiple six figure quotes in 20 minutes of less. We later discovered our nearest competitor took about 2-3 days.
As you can imagine, this gave us a major competitive advantage.
Field Service Supervision
We began working on a system where our employees would attach webcams to their hats.
This system was no unlike what you would see police officers wearing.
Now, we never actually launched this initiative because of customer push back in having their personal items recorded and reviewed.
We believe the more technology becomes mainstream in our lives, the more likely it is we can deploy this initiative.
Either way, this would have allowed for us to have constant supervision of field employees, anywhere in the country.
Taking the Next Steps
Look, if you've now gone through all of this, I'd love to invite you to a free training workshop we've launched as a result of the overwhelmingly positive response we received on this topic.
This training will give you a further look as to what we built and how you yourself can start building basic systems and processes into your own organization.
It's my belief that what stands between you and the ability to exponentially scale your company is removing you as the glue that holds it all together.
People make mistakes, it's just part of who we are as humans.
But if we can build a machine that handles most, if not all, of these processes, we can free up significant time for work that moves the business forward and cut an astronomical amount of expenses in the process.
The moving and installation business is a nightmare, and yet we were able to find a solution.
That said, I know you are just ONE system away from revolutionizing your business forever...
Make sure to listen and subscribe to the podcast for more on this!
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In the latest episode of Entrepreneur Hour, we talk about how to scale a service based business without losing quality. We also jump into what systems and automations you should be building to limit human error and unnecessary costs.
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