Paul Giannamore: Every single line on a P&L cost as well as a revenue number should have somebody accountable for that and their performance should be measured based on that number.
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Paul Giannamore: Hey, Fat Pat.
Seth Garber: Hello, the fat one.
Patrick Baldwin: Hello. Thanks, guys. Seth, speaking of fat, it looks like you keep eating and putting all these pitchers in your new Pest Daily foodie group. How are you keeping your figure?
Seth Garber: I'm making it to the gym. I had to up it one more day a week. Now, I'm up to four days a week. I’m trying to make it happen.
Patrick Baldwin: Are you still torturing people by taking them to your trainer?
Seth Garber: That is correct. It is an option though.
Patrick Baldwin: It's crazy. You told me what productive day you had this week and that's normal for you. There was also a category three hurricane going through Tampa as you got your job done for the day. I don't know how you do it.
Seth Garber: I focused on commitment, my friend.
Patrick Baldwin: Are you giving a standing invitation for anyone who comes to Tampa to come and work out with you though?
Seth Garber: That's correct. The reality is by the time we get to PestWorld, the only thing I have to do is be in better shape than Paul. Up to that point, anyone can come to Tampa. After that point, we're getting back to eating food and supporting your habit, Fat Pat.
Paul Giannamore: You're lucky I'm on the disabled list. I'm on the DL.
Patrick Baldwin: What are you talking about?
Paul Giannamore: I don't know. I was lifting too heavy, I hurt my shoulder, and, in Manila, I did something in my arm.
Patrick Baldwin: I'm calling BS, Paul. You're afraid to work out with Seth.
Paul Giannamore: I'm on the DL.
Seth Garber: Are you going to quit, Paul?
Paul Giannamore: I got to take a week off.
Seth Garber: It's getting close to PestWorld. I don't know if I'd be willing to take a week off or a couple of months off from PestWorld.
Paul Giannamore: The rest will do me good. We'll see. I'll be ready.
Patrick Baldwin: We did our Moneyball event and I've got a question and feedback that came in. I know it's not quite right for our FRAXN Moneyball event so here we have The Buzz, a great place to answer this question. How to best manage managers? If you aren't doing open-book accounting, how do you make sure they have the information they need to move the needle on your financial priorities? How specifically do you motivate them to be aligned with your goals and hold them accountable?
Seth Garber: The question is that without exposing your financials, how do you manage managers? You've probably heard me talk about it quite a bit. In order to manage a manager, it has to start from the bottom all the way up. Whoever that manager is managing has to have an absolutely clear understanding of their performance and their metrics. If the people below the manager don't, it's almost impossible to have that manager hit certain expectations.
One of the things that we see too frequently is a top-down management structure where a CEO or a head of a company is coming to a manager and they're saying, “Manager, you need to do this, and you need to do that.” The manager is trying to explain that to their people at the bottom but the people at the bottom don't have an understanding of what they're doing day in and day out affect the business so they don't know how to improve it.
Ultimately, what I've seen for years now is that we try to manage these managers by pointing at them and telling them what to do versus simply tying it to the data sets. The companies that we've seen be the most successful, and let's call it a $5 million-plus company, is that when the managers have a clear understanding of their expectations, they can utilize the data and we're only managing the data versus trying to manage the qualitative components. I've always seen that to be the most successful at the highest level.
Paul Giannamore: I agree wholeheartedly with Seth. At the end of the day, these managers have to be financially literate and they have to be looking at something. If you're a branch manager, you better understand your revenue numbers, you better understand your cost of services, and you better understand your fixed and variable costs. While a manager might not be able to see the financial statements for the full company, the manager needs to understand the financials and be financially literate. That's what we talk about when we say P&L ownership, they're owning a P&L. Whatever P&L that manager's responsible for, they have to understand it.
Seth Garber: Paul makes a good point here, Patrick, and it's something that a lot of people don't necessarily want to consider. Sometimes they can own a P&L without seeing the entire company's financials and that's something companies forget about. We'll speak to an operator and the first thing they say is, “I don't want to share all my financials.” Maybe they can share departmental financials with them or departmental P&L with them and that can make logical sense without having to expose everything.
Patrick Baldwin: A $5 million business, what types of managers do you have and if it's an efficient operation, not overly staffed, how many managers do you have and what managers are they?
Seth Garber: If I had to build a perfect little model, if I pulled a playbook out of the hat and said, “What does a $5 million company look like?” I tend to see on the service operations side a service manager being responsible for ten technicians. You've heard me talk about the playbook of time in the field versus time not in the field but I like to see a service manager equals ten technicians.
If you think about let's call it an averagely efficient business, a $5 million company could arguably have two service managers, somebody who's the head of service operations, and roughly call it twenty technicians on the office side. You probably could run that organization with 3 to 4 CSRs, maybe an inside salesperson, and then probably an office manager or head of the office. Realistically, you could run that business with probably 2 mid-level managers, 1 higher-level manager, and then the CEO or the head of operations. That'd be an efficient model to think about.
Paul Giannamore: At the end of the day, Fat Pat, a manager needs to be privy to and understand the financial implications for that which he or she is responsible for. If a manager is only responsible for revenue, then they need to understand that they're selling recurring revenue and they need to understand the pricing implications of those accounts. If the manager is charged with making capital expenditures, buying vehicles, making chemical purchases, and hiring, if the manager is responsible for hiring, they need to understand the implications of the cost of labor.
I don't want to make a blanket statement that a manager needs to see an entire P&L unless that manager has P&L responsibility. Oftentimes, managing by saying you're responsible for growing revenue and not having particular metrics that they're shooting for is somewhat of a fool's errand. If you're charging that manager with profitability and not allowing that manager to understand the implications of revenue and costs, it seems counterintuitive to me.
The cornerstone of managing managers is making sure that the incentive structures are appropriate, both long-term and short-term, trying to align those incentive structures with that of the owner, and then educating those managers on the things that move the needle in the business. At the end of the day, your aim here as an owner is to grow a business that is durable, meaning it has a lot of recurring revenue that's adequately priced and growing cashflow, which is mitigating expenses, and running a business with high operating efficiency.
When managing your managers, if you've selected the right capabilities and culture, the next thing that you need to do is make sure that that manager is armed with the appropriate financial data in order to make realistic and appropriate decisions. It's easy to talk about this. It's hard to do this in practice. This isn't something that happens overnight. As you scale a business, you're an owner, you have to think about how you do all this stuff in lockstep. One of the things that you guys should think about doing is putting together some courses for business owners as to how and what financial metrics they should educate their managers on. It would be my little note in the suggestion box for the two of you.
Patrick Baldwin: Accepted. Anonymous or not?
Paul Giannamore: No, I always put my name on things so I've signed it.
Seth Garber: It'll be part of the introduction. Paul said that we're building this course because it matters for clients.
Paul Giannamore: Correct.
Seth Garber: It's no problem. We can start the introduction right there.
Patrick Baldwin: Jump back into service managers. We talked about 20 technicians to do $5 million, and 2 service managers in that scenario, 1 per 10 technicians. A service manager could handle the gross profit margin. Whatever revenue they're given, they can affect fuel, vehicle maintenance, and labor costs, and then think about chemicals and supplies materials. That's the part of the P&L that they're over. Would you then give each of them their own P&L and almost divide them into two branches and say, “You're in the North branch,” or, “Your team A and you're team B. Go manage it.”
Seth Garber: If it was my business, I would do it. At Paul's point, financial literacy matters. The biggest challenge that you see out there is that, number one, no one is teaching it, and, number two, it's too difficult out of a lot of the reporting. It's just simply too difficult for people to clearly see it unless they've got good back-office support, bookkeeping, or whatever it may be. I was a big proponent years ago, I'm sure you guys have read the book, The Great Game of Business. It talked in detail about how to do this in an effective way and to have your managers learn the P&L and have everyone in the organization understand the different components of it and how they affected it.
Even today, my internal staff, regardless of their position know our P&L. People think it’s crazy that I would show an entry-level person what our P&L looks like but I do. You could ask my team, they know how much money we make, and they know exactly where we're spending money, and it makes a big difference, and that's in my own business. To your question, I would 100% run many little businesses.
Paul Giannamore: To Seth's point on The Great Game of Business, there are a lot of other books out there on open book management. You've got Ricardo Semler who wrote The Seven-Day Weekend and Maverick. Maverick was his first book, a Brazilian business that went open book. It’s been a decade or so since I read that but it's an interesting read called Maverick. If anyone wants to look into this or his follow-up book, The Seven-Day Weekend, are interesting read.
Patrick Baldwin: If you give them P&L responsibility, the second part of the question was how do you then incentivize your managers to get aligned with the business goals?
Paul Giannamore: If you use a public company as a model, you can extrapolate anything. A public company has shareholders. Fat Pat, you own Fat Pat's Pest, you're the shareholder, and you might also be on the board of directors. I know a lot of smaller service businesses aren't going to have a board but you figure you got shareholders and the board of directors answers to the shareholders.
The board of directors might have a compensation committee and they're going to have an executive committee that hires executives so then they hire professional managers, CEO, CFO, and so on and so forth. Their jobs, of course, are to report to the board, which is a fiduciary to the shareholders. Of course, when you think about incentives, in the executive management of a publicly traded company, you have a lot of alignment between the executives and the actual shareholders.
If you look at the proxy statements and the 10Ks of publicly traded companies, you can pull Rollins up, and you can look at Rentokil. You used to be able to look at Terminix. You can see that a lot of these executives make less than many owners of pest and lawn businesses. From a current comp or annual salary perspective, the majority of their compensation comes in the form of bonuses, stock options, stock grants, and perhaps restricted stock units, so equity. They get equity grants.
Of the publicly traded pest control companies, Rentokil is the most transparent when it comes to metrics and bonus structures for executives. You could, of course, read how they do it. Effectively, the higher up in an organization, the longer term the incentive structure should be, and the more aligned it should be with the shareholders. It's a multi-year incentive structure typically.
As you start to go down the P&L and you get closer to the customer, you want a shorter feedback loop so that’s the CSR that's talking to the customer. She has a great call, her incentives are tied to very short-term day-to-day type things, and you can, of course, play with that. You have long-term versus short-term and you have group versus individual. A lot of owners only think about individual incentives. When I think about incentives, I've tried to think about individual incentives as well as team incentives and tried to get some balance so that there's cooperation amongst the team and it's not only individualistic.
When you think about your managers, whether you've got a landscaping business, a lawn care business, or a pest control business, your GM, you want him or her to be financially literate, understand the P&L, and have a long-term incentive structure. That general manager might get an annual bonus based on a variety of different things. It could be based on profitability, it could be based on the level of recurring revenue, and so on and so forth.
In a perfect world, there's a long-term incentive plan that might be multi-year or might be open-ended and it might be like a profits interest type arrangement. It might be some sort of shadow stock. It might be an actual equity grant. They could be a Class B shareholder in the entity. An LLC can have some sort of a restricted stock unit. It becomes flexible and you can do a million different things that way. When you talk about managing managers, Patrick, it's one thing to hire a GM and say, “This is your job. This is what you're going to do. Here's your mandate.” It's another thing to say, “This is your job and this is your mandate. Here's how you'll be compensated.”
If you go out there and cook with gas, you'll make more money. I do think it's an important organizational design business architecture thing to spend some time thinking about, “How are we compensating our people? What do our incentive structures look like? How do we tie that to quantitative metrics that are readily available?”
One thing that you guys could do at FRAXN at some point is have a dashboard for managers. You could have almost a restricted or redacted version of the financial statements that are available to a GM. Maybe that's not the entire P&L, maybe that's a portion of it that would be very helpful. If an owner doesn't want every dollar incent on a P&L, maybe a redacted version of that would be helpful for a manager's dashboard.
I often believe that in a small service business, a business doing $40 million or $50 million or less, every line item on the P&L should have somebody accountable for it. Somebody should be responsible for purchasing vehicles. That might be the owner. The owner might have the majority of the lines tied to himself but every single line on a P&L cost as well as a revenue number should have somebody accountable for that and their performance should be measured based on that number.
A simple process is taking out a P&L and saying, “Who's going to own this line? How do we measure this when? What impact will this have on somebody's performance?” When you start to measure those things, it does quickly impact the organization. Right now, in most companies, financial statements are done on an annual basis. No one pays much mind until it's handed over to the accountant. Most employees and most team members within an organization have zero idea. If I buy a metric ton of toilet paper, what impact it's going to have on the P&L? If you start giving a little bit of transparency there and making somebody an owner of that, it's amazing the types of things that can happen.
Patrick Baldwin: A metric ton of TP?
Paul Gianamore: As an example.
Seth Garber: He had to have this discussion with the Mexican about the metric tons of TP that he was buying.
Paul Gianamore: That's true.
Seth Garber: That's why he was thinking about it, it was top of mind.
Patrick Baldwin: That felt, Paul, like a second suggestion going in the box from you.
Paul Gianamore: I have now put two suggestions in the box. There's ultimately something to that, having some redacted report for subordinates to the owner who might be able to impact the P&L I see the gears turning over there, Fat Pat. Put that on the old roadmap.
Patrick Baldwin: The manager dashboard. My gears were turning FRAXN, I was like, “That wouldn't be hard to do.” Once we put the tool in the manager's hands, make sure that the CEO can manage the manager going back to square one here.
Seth Garber: The most important part here is if you're going to have your managers in place and the managers have done a great job for the business and we've promoted them up and they don't understand the impact they have on the financials, the biggest piece here is that the owner has to understand how everything works as well. The owner has to commit to education to ensure that his people look at the numbers the same way that he wants to look at the numbers or she wants to look at the numbers. That makes a huge difference here.
Paul Gianamore: I agree.
Patrick Baldwin: Getting away from the annual review of financials, is this a monthly where we're sitting down and all the managers in the room go over every line of the P&L together?
Paul Gianamore: In my opinion, there's a variety of different ways that you can do it. In most resi service businesses, it makes a lot of sense. This is my opinion and my opinion only and this is one of the things that I've noticed over the years that has been effective. The companies that can get into some rhythm of meetings, you might have a daily meeting that's quick, fifteen minutes in the morning, and then you might have a weekly meeting that's a slight bit longer, and you might have a monthly and a quarterly.
Those daily meetings are almost the heartbeat rhythm of the organization. You're not focused on a million things, you're focused on one thing. As you get into the broader meetings that happen at less of a frequency, you can get more deep into certain things. On a daily meeting, you might be focused on a core initiative that you're working on and get an update on it. You might also be focused on, “How did we do yesterday? What are we going to do today?”
A weekly wrap-up can be, “What do our account levels look like? Where are we right now? Last Friday, we had 2,150 accounts. Now we have 2,700 accounts. We added X and we lost X. Why did we lose these? What do we need to do? How do we save these customers? Let's get ready for next week.” In a monthly meeting, now you start to look into some costs, “What do we spend this month? What are we budgeting for next month? How are we tying to our budget?”
The quarterly, of course, would be more in-depth. You might have one big annual meeting in the fall getting prepped for the next year where you're doing a lot of CapEx and so on and so forth. Everyone might be in the daily meeting, you might have your whole company there, or you might have your whole company in a weekly meeting, I don't know. Maybe just on a daily meeting and you're meeting with your managers. You can decide, paint by numbers there, and figure out what you want to do.
Typically, what I have seen is those daily meetings might have everyone. The weekly might have everyone or it might just have the management team. As you get into more high-level meetings, you'll have less people there but it'll be more detailed and then you're revealing more within the financial system of the company.
Patrick Baldwin: I didn't know what frequency and what's normal. I can only go off what we did. I’m thinking about my experience, which was weekly executive team meetings, and it was twice a month, and we did it, of course, the Fat Pat way. Twice a month, we had a meal together. Does that surprise you, guys?
Seth Garber: No.
Paul Giannamore: It only surprises me that you were only eating twice a month back then and you got that big. I don't know that there's a normal. I have seen a variety of different things work. What often doesn't work is the companies that have no meeting other than for technical training and some random safety presentation. That's not great. You want to get your team focused on goals.
The simple act of having a whiteboard and saying, “Yesterday we sold a net of five accounts. We lost 1 and we sold 6 so we have a net new five accounts.” Having that on the board saying, “Let's beat this today. What can we do to beat this? We did seven the next day. How do we beat this?” Getting numbers in front of people is helpful because now they're rudderless ships without it.
Seth Garber: We build these models all the time. What should meeting structures look like? What should you be talking about? At what point, how do you talk about it? Regardless of whatever model someone chooses to use, and I could walk through model after model after model, the reality where it matters is that when they come into these meetings, these are incredibly structured times.
I'll give an example. One of the playbooks that we like to use for our weekly leadership meeting is that we run through our service operations metrics. The only thing we touch from a financial standpoint is our accounts receivable and our revenue collected. Those are the only components that we talk about from a financial standpoint. Everything else is service, operations, and sales-related. When we go into our monthly meeting, we would dive into the P&L if it's an open book accounting and go top down to the P&L.
The one challenge we faced was that, unfortunately, in our industry, up until FRAXN, was that we couldn't get the numbers on time so it was a huge problem. We've been able to get the numbers on time now and that's been beneficial. That's not a shout-out to us. The truth is we would wait weeks and weeks and by the time we would get numbers to review, it was 6 to 8 weeks behind when we needed them, and the data was dead at that point. From an executive weekly meeting, that's how we like to run service operations, sales metrics, marketing metrics, and then the basics from an accounting standpoint, which would be accounts receivable and dollars collected, and that's what we look at.
Patrick Baldwin: With your consulting clients, are you telling them to have their business meetings, not management, and not P&L but the whole crew, everyone on staff? Do they have a regular meeting cadence like once a month or twice a month?
Seth Garber: We do. Everyone's a little bit different depending on the scope and scale. Let's use a $5 million company because these people begin to get very busy. We have a monthly kickoff and the monthly kickoff is led by the CEO. The CEO lays out clearly the goals for the month, the performance of the previous month, how they performed the goals, and certain shoutouts to certain people for certain performances.
Something that we decided, and this was a long time ago, is that we also allow the CEO to talk more about the direction of the business and the vision of the business. One of the companies that we work with has a big expansion. They're going to open six more offices before the end of the year. As part of that, one of the things that they do is that we utilize the monthly kickoff meeting to talk about the growth.
The narrative has been, “We're going to open eight more offices. Now we've got six more to go. Now we've got four more to go. It's going to create lots of opportunities for you guys and your team.” The CEO paints the vision. That company's a much larger company. That's the type of stuff that we like. Where are we? Where are we going? How are we performing to our goals, monthly, quarterly, or year-to-date? Who are the top performers? Maybe some awards and different things like that. For the companies that have like President's Club and these other things, how are people performing to the big goals? These are structured meetings.
Patrick Baldwin: If they have this roadmap opening, six more branches, between now and the end of the year, what are things that the CEO can do now to get those managers ready? The idea of new opportunities is exciting, upper mobility, and more possibilities, but now they can get ahead of this. How do they do that in a way that prepares the managers for those new opportunities?
Seth Garber: One of the most important things ties back into what would be more of a career pathing methodology for these larger companies. Who is the next in line to run these operations? Are they checking the boxes along their career pathing in order to be ready to open it? Are we training and coaching these people and educating them along the way so they're ready to go and open these branches?
The companies that I see that expand quickly without that tend to fall apart. I'll give you an example. Before I got on this call, I was on a call with a company. The company was an $8 million company, and they've expanded to five markets. One of their markets is financially supporting these two new branches that they've opened. This is not a client of ours. I'm talking to him and he's going on and on about all the things they need to do and the branches aren't doing as well as they can.
As we dove in, the reality is what they did is they took a technician, put him in charge of the branch who has no training whatsoever, but they were so excited about growth, so excited about the expansion that there's no training, no nothing. You have an $8 million company with one branch supporting two new branches with leaders of the new branch who have no understanding of how to manage a business.
That's a common thing we see because it's sexy to talk about how big you're getting and how many offices you're getting. It's unsexy to sit there and go, “We had to slow down a little bit to get our shit together so that we could expand fast.” That's not sexy. If you take a look at what we celebrate, we celebrate how much revenue you make, and how many offices you have. We don't celebrate the companies that are dialing way in and ultra profitable and preparing their teams for the next world or the next iteration of their company.
Patrick Baldwin: It's a lot more than just top-line revenue growth at the end of the day. Would you ever talk to a company like that and say, “You've got to look from the outside, recruit outside, and bring talent in that has those capabilities?”
Seth Garber: 100%. It's always around the same point. We've talked about this a lot as we got into revenue plateaus. It's pretty easy for somebody to fight without really over-educating themselves and get up into that $2.5 million number. They start to push to $5 million and now you've got a business. What I tend to see is the companies that have fast growth will get to $5 million and they continue to do exactly what they're doing, especially if they do it fast.
It's always the same discussion. It's always the head of the company going, “It's me and my buddy or me and my partner. We're operating this company and what I need to do is I need to replace myself. I need to put someone else in to lead the company because I can't take it to the next level.” As soon as you start to hear that discussion, I always know that it's probably not the case because someone who got them there can probably continue to run them at that size.
What it comes down to is that they have no idea what to do in middle management or middle to upper management. I like it when companies get to that size for them to go outside. I like them to bring in the guys from the Massey of the world, the Terminix of the world, and the Rentokil of the world who operate in these incredibly structured systems. We find that we can bring these guys over and they understand the P&L. They have a fairly good understanding of how to run an efficient branch or an efficient team. They know their information and a lot of them don't even know how good they are.
If we're in any of the Massey markets, Massey’s GMs and branch managers, for the most part, know their stuff because of the way that they manage those P&Ls and they teach these guys. We can plug these guys in anywhere and we can take an inefficient operation, plug these guys in, and these guys know the playbook without us having to do much in order to get them really effective.
That's a lot easier to do that than trying to take someone who has been a good service technician and who's a good person and who wants to be a service manager and drop that person into what we call $1 million or $2 million branch and they've never done it. It's a lot easier to grab one of these other guys. Sorry friends over at the big companies. Sorry about that, guys.
Patrick Baldwin: That's exactly what I heard.
Paul Giannamore: It's largely related to the fact that the big companies have legit management training programs. They're focused on training these guys. If you want to work for Orkin and be in their management training program, they'll send you to Orkin University or whatever and you get P&L and all sorts of stuff. Whereas, if you run a $5 million pest control business, you don't have that capability. I do agree with Seth, that's definitely a shortcut from point A to B.
Over time though, you ultimately want to develop and build out that capability yourself. I have seen people effectively promote from within but it's not just taking, like Seth said, the guy who happens to be a good person, he's a good technician, and say, “You're ready to be a manager with zero training whatsoever. You happen to know how to do your technician job.” All of a sudden, you're a manager. A lot of folks do that and that stunts growth, quite frankly.
Patrick Baldwin: Because they don't know better. They grew the top-line revenue because they have a good sales engine.
Paul Giannamore: I struggle with that in our business as well because we have attempted to not hire laterally from outside from the standpoint that I want to create a lot of upward mobility in career advancement potential within the organization. You can't do that unless you invest a ton of money in training, which is what we've done. You can't just be an analyst for five years and then, all of a sudden, you're going to get promoted because you know the job of being an analyst.
You've got to know the job of being the next rung up on the ladder and what that means and now you're supervising so you have to be trained. We struggle with that and we struggle with building out those internal capabilities. It's not easy to do and it doesn't happen overnight. Of course, when you're a tiny firm, it's almost impossible to do it. Once you get large enough and you get the resources, you can invest in that and that's what we've been focused on.
Patrick Baldwin: What size revenue do you start doing this training until I've got to figure out my managers?
Paul Giannamore: We didn't start really doing that until we got over $15 million in revenues, it’s when we really started to invest in those programs here at Potomac. If I ran a $5 million pest control business and if I had the personal capabilities to be able to put together those sorts of programs, it doesn't necessarily matter what size but the problem is you can't do everything at once, you're trying to run a business. I would say that in pest control or lawn care or any of these resi services businesses, once you get to about $10 million, you can afford to start to implement those programs. Below that, it's very difficult.
Seth Garber: I've seen it done all over the board. The question that immediately comes to my mind, Paul, is that a lot of times, what I'll see is companies who start to say, “We need all this in place now.
We need it all in place now.” They're a $200,000 company or $1 million company and it's almost like this massive distraction because they heard that they need to do it. I see that a lot. I would tell you that it's incredibly common.
One of the things that we saw when we built Pest Daily was that it was originally designed to serve the sub $5 million company that didn't have the capabilities of training. When I sold my business and got back in, this never existed so we wanted to build it. It's been successful and people can use it for training and it's fine. If I were going to build an internal program, I would start the process a little bit below $10 million.
The way I would go about doing it's simple is that when I knew when it was time to bring on the next position, when it was time for me to go from 2 technicians to 4 technicians or my vision for the next year is going to to 6 technicians, at that point, I would start to draft the outline. What is the service technician for my company? How are we going to measure the service technician for my company? How are we going to train the service technician to know their job better? How are we going to teach them to ask the right questions? How are we going to get them to run their day-to-day? Start to give yourself the layout for that role.
As we start to get a little larger, we add, “This person then becomes the service manager.” We then go through the same pattern. A company that started the process as they add a new role begins to build the training around what that new role is, they essentially develop their own career plan until they get a little larger. I've seen it to be successful that way. It's like the adage, how to eat an elephant? You take these tiny little bites. There are lots of companies that you can hire to build these things for you.
The reality is when they go build them for you, you can't tend to not implement them because it's not for your company and so on and so forth. I tend to like to see it a little bit sooner than $10 million. I tend to see them get good around $5 million. Companies can start to build the structure a lot younger. They're not the largest company we work with but probably the most profitable company. Two of the most profitable companies that we work with, this is the methodology they've used. One of them has a training playbook that's probably good enough for a $20 million or $30 million company and they're a $2.5 million company.
The other one, every single time they have a discussion related to an opportunity or some career advancement or some type of training, they document it all right then and there. They have remarkably good playbooks and these are their onboarding checklists. These are their promotions, the way they promote, and they do a good job of it. It's probably a little bit under $10 million because what would happen is you get to $10 million, like the guy I spoke to, and you're racing around trying to figure it out.
Patrick Baldwin: Forward thinking. Instead of this year, we're going to have 4 technicians, or we’re going to have 6 technicians. What's to stop someone who’s doing $500,000 right now thinking in the future? “When I'm doing 5 million, these are the managers, these are my technicians, and these are my CSRs, and building out an org chart.”
Seth, you've had talks with that in mind, do you not just circle around these roles? It’s like, “This is what we're going to build into. This is what the responsibilities are. These are who we’re going to incentivize them.” When you have that interview with a technician candidate, you're saying, “We've got upward mobility. When we get to this size, you have the opportunity to be the service manager or GM and so on.” Is that helpful?
Seth Garber: It's helpful and that's an incredibly simple way to career path to somebody. One of the easiest ways for someone to show upward mobility and career path to somebody, and this gets us a little off subject, during an interview process, you present an organizational chart and you show them where the company's going, you essentially career path to somebody. You have a commitment and obligation if you're going to tell somebody to do it if they fulfill whatever you're talking about. There are some successful companies in our industry who faked it till they made it.
Through career planning on their website, spent all the time in the world having designers build these beautiful career plans, showing out the entire future of the business, sub-million dollar companies. Frankly, they're probably some of the best recruiting companies in the country right now. We're 4 or 5 years down the road and these are multi-million dollar companies that got the buy-in to the story. They didn't have the playbooks together but they had beautiful websites that showed career pathing and how people were going to get to the next level. Honestly, it works like a dream.
Patrick Baldwin: I would imagine they all followed that path which they designed their strategy.
Seth Garber: It was their strategy.
Patrick Baldwin: Going back, a $5 million business, how many managers is that?
Seth Garber: A super efficient $5 million business, you probably have an office manager, a CSR manager, two service managers, and probably a head of operations, probably 4 or 5 max.
Patrick Baldwin: As CEO, how often would you meet with each of those managers or as a whole?
Seth Garber: If I pulled a playbook out, if I'm a CEO, I'm having a one-on-one with those managers, a structured one-on-one, 20 to 30 minutes once a week that's scheduled that I never miss. That's how often I'm meeting with them. From a leadership team standpoint, I'm meeting with them once a week for probably an hour, and then they have their one-on-ones for 20 to 30 minutes in a structured way. That's how I'm running my playbook.
Patrick Baldwin: How often are you instructing those managers to meet with their direct reports?
Seth Garber: This has been a big topic and we've been looking at this a lot. If I'm the office manager or a CSR manager, I want that person running one-on-one with their employees every single week if they're in the office, 20 to 30 minutes, and ultra structured. The one-on-one is a dedicated time for that employee to be with their leader and to be able to have a discussion that they want to have a discussion about and so on and so forth. That's a core belief that I have.
Depending on the role and responsibilities of CSRs, I also tend to run a short daily meeting to talk about the results from the day before and our goals for today or our goals on what we're shooting for. We run a role-play to get people warmed up in the mornings, that's how we like to operate CSRs. On the outside though, on the service operations, this has been a huge point that we've been going back and forth with. What do you do with the service technicians? How often does a service manager meet with the service technicians?
If you had asked me this question 2 or 3 years ago, I was pretty dead set on saying I wanted one-on-ones with these guys every week as well. Because the service technicians are such a core component of the business, I wanted them to be heard in a setting that made a difference where their leader could hear them and they felt like they had that dedicated time. It goes well. The challenge that we faced was that we were pulling quite a bit of production out of the field for certain companies.
We've shifted that now and so the majority of our clients in the consulting practice is that we have our service managers meeting with the technicians every other week for a fifteen-minute meeting. Honestly, that seems to have worked a lot better and we don't lose the production, which matters. That's the type of meeting structure that I would have. They'd have a weekly service meeting for half an hour to 40 minutes before they do some type of late training and how are they doing for the week or whatever the case may be.
Patrick Baldwin: That's helpful. Interesting to see how it evolves also, the production time, we need that extra time.
Seth Garber: We've looked at this and what we found, which makes logical sense, is that the companies that pay on production, this becomes a huge issue, the companies that don't pay on production, it's no problem at all. It's amazing how much pushback we get from technicians who decide they don't want to meet and they just want to go out there and do production even though it makes logical sense. I didn't expect it. We've had late mutinies with some of our clients when we were doing weekly one-on-ones with production guys.
Patrick Baldwin: I was thinking about what we've been talking about because our meeting is twice a month with the whole staff. We paid technicians and production, and we fed them. They weren't compensated for that hour and 15 minutes or so for the meeting. We put the drive time, like, “You're coming from out in the field and back out.” I don't have a solution there but I know that is an issue.
Seth Garber: It's a huge issue. We've tried Zoom and we've tried all kinds of different things. At the end of the day, if we want people's careers to progress, we have to be willing to commit the time to them, and they have to have a desire to have that time if they're gonna be part of our organization. Those are the discussions that we actually have to have.
Patrick Baldwin: Is it something as simple as adding a base pay? We pay draw against commission. I wonder if it's like, “We're going to pay you $50 a month just because we know we've got meetings or something.”
Seth Garber: It works. All the ideas work, it's just about good execution and good communication for the people who have a good idea about why we're doing this. The biggest irritant is that we go, “We're going to do a one-on-one.” The technician who's on production pay is like, “I don't want to do a one-on-one.” I’m like, “Why?” “It's like another meeting. What are we going to talk about? Why are we doing this?”
They look at it as a management function, a management tool. They think that they're getting a one-on-one to get talked to. The fact is that if the one-on-one is done well, that technician understands this is that dedicated time with their leader for them to have the discussions that they need to have and to be able to get put on the right path. Too often, we say, “We're going to do this meeting and we're going to manage you more.” That's what people hear, which is interesting.
Patrick Baldwin: A big shift in perception. That's good stuff. Seth, your phone is getting blown up. You went on the record and you said, “I'll give all the resources in the world to help you build your Sentricon business.” How's that going for you?
Paul Giannamore: The check and wood business.
Seth Garber: Yeah. I, first off, want to thank all the readers. Paul had a great idea to build a Sentricon-only company and I decided that I was going to give somebody the resources to do it. I wanted to let everyone know that out of all the messages that I've gotten, I'm working hard to call everyone back because I said I would. Paul, you're going to laugh, 21 people have messaged me about providing marketing resources and support to build a termite-only business. I want to let you know.
Paul Giannamore: I still think it's a good idea. I'm violently jet lagged now to help our differential but I do think it's a great idea. I’m glad you're supporting it.
Seth Garber: We're going to do it. I don't know which city. I know that the other commitment that you made, Paul, was that if we do it, you're going to come over here and you're going to help us go door to door and go sell it for a day. Is that right, Paul?
Paul Giannamore: I will, 100%, do. I will go door to door. I'll knock on doors for a day. I'm not above that. I'll do that. I'll potentially even finance some of it. It's a brilliant idea. There is a lot of potential there, getting a lot of density on termite, I like it. Don't call me though. Call Seth. He'll vet the financing proposals.
Patrick Baldwin: I love how Seth called me and he's like, “Why am I getting so many phone calls about this episode?” I had to go back and listen to it for myself. Do you want me to read this to you, Seth? Do you want to hear what you said? You said, “If anybody wants to do it, they can use my team's resources to build all the marketing around it. We'll do it for them.”
Paul Giannamore: I will say we did get probably the most well-written email about The Buzz I've ever received. Patrick, I forwarded it to you.
Patrick Baldwin: From our Australian friend.
Paul Giannamore: Our Australian friend. I look forward to having a drink with him at PestWorld in Hawaii. It was a very well-crafted email. Not only is he a great pest control operator, he has a wonderful command of grammar and syntax in the English language. He said, “First, I have to thank you for producing such a fantastic educational resource for the industry in The Buzz. I cannot speak highly enough of it. I truly believe that your podcast has been the single greatest influence on me in developing a long-term strategy for growing my business.” I love to receive those sorts of emails. I'm glad that people get value out of it. Our friend in Australia, I appreciate you sending that over. It was nice to receive it.
Seth Garber: It’s super nice.
Patrick Baldwin: That's awesome. Paul loves those Apple reviews also, don't you?
Paul Giannamore: I love Apple reviews, for sure, Patrick.
Patrick Baldwin: Alright, boys. Paul, enjoy your jet lag. Seth, I'm glad you survived your hurricane.
Seth Garber: Thank you.
Paul Giannamore: Have a great weekend, boys.
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Dylan Seals: Thank you so much as always for supporting us at The Boardroom Buzz. We know your time is valuable and the fact that you spend 45 minutes or an hour with us means the world. All the media that we put out from Potomac is meant to honor and celebrate you, the service industry owner. As Paul would say, “Yee who toil in the pest control vineyards.”
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