The Systems That Make Small Businesses Valuable with Phil Risher

Introduction

00:00Bill Gallagher: Have you ever had a week when you're completely slammed, but somehow nothing actually moved? Is this one of those weeks? That's not really a time problem. It's a busyness habit problem. My new book, Busy Is Broken: Do Less, Scale More, is all about growing by doing less, not more. Read or listen to a sample chapter over at busyisbroken.com. That's busyisbroken.com. It's also on Amazon and other booksellers.

00:31Bill Gallagher: Growing your business can feel a lot like start and stop. Like, oh, are we getting this right? You gotta recheck. That's what we're talking about today. How do you get your business right and ready to sell? Get things dialed in. Get systems working so that you know and you can count on it. And that ultimately makes it more valuable. That's our conversation today. We're talking with a guy who helped grow and sell a company and is now working with others with one of the pieces that makes a company valuable over time.

01:04Bill Gallagher: Hey, everybody. Bill Gallagher, Scaling Coach and host of the Scaling Up Business podcast. Come to you every week with a show about growing your business and all the things that go into that. The people, strategy, execution, cash, surviving the journey, maybe even enjoying it. That's our show. Find all those and more wherever you're getting this right now, or go to scalingcoach.com, and that's our own website where we have our own things, our coaching programs, that kind of thing. Check it out there. Scalingcoach.com.

01:36Bill Gallagher: All right, everybody. I want to welcome to the show Phil Risher. Phil is the founder of Flash Consulting. That's with a P-H, all nineties style. Flash Consulting. And he's got a story about helping a company grow and sell. Not huge though. Very relatable. Right? Some of you look, we can learn from companies of any size. We can learn from Southwest's rise and fall. We can learn from the growth of Costco. We can learn from how Disney's run. We can learn from companies of any size. But sometimes the most fascinating stories come actually from fairly small companies. And so Phil's got this company Flash Consulting that does marketing consultancy for service-based businesses. And he helped grow a company and then sell for, you know, a nice amount of money, a few million dollars that helped. And I think the stories and the ideas here are really solid no matter what size of business that you're running. So, Phil, welcome to the show.

02:29Phil Risher: Yeah, Bill. Thanks for having me. Something I'm very passionate about is growing businesses and specifically in the home service space. There's a lot of opportunity for businesses to grow.

02:46Bill Gallagher: Yeah. So home service, one of the things that's great about it, whatever kind is it's recurring. Right? Like, it's funny, today and last week, we've had some contractors here. HVAC, plumbing, pest, we had a whole thing. First, I noticed my air wasn't working, the heating wasn't working in the house. That found some other problems, then we brought some other things. There's been a steady stream of people by the house today fixing things that, you know, had gone unnoticed. My house is about 160 years old. So it's got issues on the regular. But you started with a company that just did air duct cleaning, and you helped grow that company and then sell inside of two years. And so I'd love to start at the back, at the end of it. Kind of what made private equity come and look at a $5 million company? This is not a massive company, and I know a lot of our listeners don't think even at five that they can attract a buyer. Talk to us about that. Tell us that story.

What made a $5 million company attractive to private equity

03:45Phil Risher: Yeah. I think you're absolutely right. I think the bigger thing is the EBITDA number that really attracted them. You know, it's $5 million at 30%. So it's like, you know, decent wheelhouse, like, solid, proven system, 25 years in business. This was a specific search fund that had a guy, you know, Columbia grad, was coming in looking for businesses. And he came across our business and we had a, we were dominating the market in our area. We went, the search fund guy, the owner, and me went to lunch for the first introduction. Went to a place called Lazy Dog in Northern Virginia. We sit down, and he asked me three questions. The owner at this point, he, I came into this business, and he didn't know, like, he was stuck at $2.7 million, kind of like the hustler, you know, kind of thing. When I came in, I brought in numbers, strategy, all the data, and that's how we grew so quickly. So when we sit down, the owner's like, okay, Phil, talk to this guy and answer whatever questions he has about our marketing and sales process. And he asked me three straight questions. And this doesn't matter what size that you are. And they're going to ask the same question. How do you get customers coming in the door? So that way when you move the owner, what's the process? How do you convert the leads into sales? And then how do you retarget your past prospects and customers? And I've gone, I've gone on three of these sales calls now in the first introduction. They all asked me the same thing because they want to make sure when they remove the guy or they remove the person that it doesn't fall apart. And what they, there's a couple things they love to hear, which is we don't retarget our past prospects and customers because they're going to come in and do that. But that's basically what it was. That's how the sale process started, but that was really what attracted them to us was solid EBITDA numbers, which take the conversation from lunch to, like, let's get into it, you know, get the LOI and all the stuff. That was kind of the starting point.

05:32Bill Gallagher: You know, a couple things I hear in that that are worth, like, in broadening the conversation. One of them is you were at $5 million at that point in top line revenue. 30% EBITDA is a nice number, nice percentage. I missed this once with a company that cost me dearly, and I didn't take in some money at below $10 million. And I was right within strike, but I delayed. And what I missed was that there was a moment of a story and momentum and an opportunity to sell that actually, in this case, didn't have anything to do. So one, you can sell a company well below $10 million. And at one point in my life, I believe that $10 million was the magic first threshold, and don't bother selling before $10 million top line. Bullshit. I helped a company that was doing only a little less than $4 million get a $21 million offer. Right? So you don't even need to be close. It depends entirely. The other thing is, in your case, the EBITDA number was really important, and it can be really important and often is. But depending on what you're doing, you don't have to have a big profit number. Right? I mean, you might want to have a great gross margin number, but I don't think you even need to worry about net profit in some cases, depending on what we're selling and who we're selling to.

You don't need $10 million to sell for a strong valuation

07:02Phil Risher: Yeah. I would say, like, tech, you know, SaaS products and stuff like that. It's not as much on the EBITDA number. In home service, this is just based on my experience. A lot of times, they want to see the recurring revenue, which is what you had mentioned. And that's like they want to see that number over, you know, a couple of years. Gold. Gold. Gold. Yeah. And then so, like, this company, he ended up going for 8x his EBITDA. Still pretty good. Right? It's not like a three-ish something. Like, it's pretty solid. The next company, it was, the third company that I consulted with. They were a $3 million business. Similar situation came in, went to $8 million.

07:38Phil Risher: Then they sold to a roll-up. So that was a little bit of a different experience because they're trying to keep him on with the earn-out and rolling their systems, and they actually went out of business after two years. So it's like a whole different process. But yeah, EBITDA is definitely—I would say in home service, probably one of the bigger things—and the recurring revenue for sure is really important.

07:57Bill Gallagher: So the focus in your case was like, where does this business come from and is that a repeatable machine? Right? Like, getting one contract with one big company can throw revenue, profit, even cash in your business, but that is not a recurring business machine. That is not like we know how to get business and customers, and that's what you had really done there. Before we unpack that, let's go back then a little more. You know, where did you get your start? Where did you start to get bigger picture in this world? Like, how did your career begin?

From Enterprise Rent-A-Car to home service consulting

08:36Phil Risher: Yeah, I started at Enterprise Rent-A-Car in their management training program right out of college. So yeah, I came out of college, management trainee. I ended up being one of the top branch managers at Enterprise, and we got paid off the bottom line. So a $3 million local service business, I got paid off the bottom line. I was 25. I had 20 team members. I read Rich Dad Poor Dad, and he said the number one skill you can learn is how to sell. So I went into their corporate office and I sold fleet management services to $10 million, $20 million, $100 million businesses that have fleets of vehicles. So they would have fleets. I would call on the CEOs, set up meetings with them, and have them use Enterprise to manage their fleet. At the same time, I started a blog about personal finance, and I ended up getting 30, 40,000 people to my website reading every day. I was featured on Forbes, Yahoo Finance, CNBC, all this cool stuff. That was kind of like my foundation from a business perspective. I didn't like what I was doing at Enterprise, so I actually quit my job and bought a school bus and I made a little tiny home and I traveled around the country making content. Then when I went to work at that home service business that was $3 million, he was one of my clients at Enterprise. All my worlds collided. I went to work there and I'm like, hey, where's the dashboard of how to look at leads year over year and jobs run year over year and average ticket? And he's like, what's that? And I'm like, dude, we've got to get the numbers in order so we can actually grow. And that's kind of how it all came to the point. And I didn't know this whole like, you know, EBITDA PE side of things. It was just like, I just knew how to grow businesses because that's what I did at Enterprise.

10:05Bill Gallagher: So let's actually peel that back. I don't know where this will go, but you—so I hear right off the bat a guy with hustle who's willing to try different things. You're at Enterprise. You're finding something. You're moving in on something else. You're building a tiny home. You're driving around. You're making content. You're not a shy guy. So what is this like character flaw, family problem that led to this? Where did this start as with a young Phil?

10:35Phil Risher: Yeah. So it's kind of ironic. My dad, he still works at a pest control company. He's a service manager at a pest control company. So he was a technician my whole life. My first ever ride-along was take your child to work day. I would ride around with him in his truck to run routes. Neither of my parents went to college. It was just like my mom is an immigrant family. So it's like there was never—like, just going to college and graduating was like you won the lottery, buddy. So like everything else is like gravy on top. So I kind of was just like, I'm just going to do as much as I can and just experience it. Like, what's the worst that's going to happen? So I would say that kind of helped. The other big thing for me, I'm a Dave Ramsey guy. So, you know, he's no debt, whatever, all the stuff. But like, I paid off my student loans. I bought a condo with cash. I had no debt. So I really was like all defense. Like, let me go play some offense and get after it and just try a bunch of stuff and figure it out. So I think both of those played a lot into it.

11:32Bill Gallagher: Mhmm. Mhmm. Now do you still subscribe to that no debt world?

11:36Phil Risher: It's hard, man, because there's good debt, there's bad debt, you know, the whole thing. And like, you can make money. Rich Dad Poor Dad's all about debt. Like, take some debt. Well, this is the thing—this is the thing that I kind of had this crossroads of like Robert Kiyosaki, Dave Ramsey, how does that all correlate? I would say for me from a personal perspective, I'm more conservative. But from a business perspective, I'm all for getting after it and going for the gusto.

11:59Bill Gallagher: It's good. And one of your parents is an immigrant?

12:01Phil Risher: Yeah. My mom, she's first generation Greek, and she went to kindergarten not knowing any English, only spoke Greek. And it's pretty cool just to like hear her story. My parents were divorced, so she was going to college at night and I was going with her to classes and stuff. Just like, you know, the hustle and grind. It's just—

12:22Bill Gallagher: Did you pick up Greek?

12:22Phil Risher: A little bit. Yeah. I took Greek classes growing up. I went to Greece a couple times to visit family, so a little bit of stuff there.

Growing up with a pest control technician father

12:30Bill Gallagher: I'm going to Greece this summer for five weeks.

12:35Phil Risher: Oh, where to?

12:35Bill Gallagher: I'll be on Rhodes.

12:35Phil Risher: Okay. Yes. That's where my family's from. So they're from a little town called Lindos, which is Lindos.

12:43Bill Gallagher: Yeah. Yeah. Yeah. It's amazing. I've never been to Rhodes. I can't remember being—I've been to Greece a number of times, but I don't think I've ever been to Rhodes. But I picked the place because it has wind, and I'm a wind sport guy. And so I'm going to go stay on the Ixia Beach side.

12:57Phil Risher: Yeah. Beautiful. Well, enjoy. Yeah. I went there a bunch when I was a kid, like probably from like 10 to around 15. Because my grandparents had a house there, so it's nice.

13:11Bill Gallagher: That's fantastic. Right? What are the chances of that? That's awesome. Right. So what do you think you learned from mom? Dad took you on the route.

13:20Phil Risher: Yeah. Mom was don't be scared to fail. She'd share a lot of her failures with me. She also is my number one cheerleader out of everyone I've ever met is like, you know, just like, wow, I'm so proud of you getting after it. So it's like having someone in your corner. It was literally my mom and I, you know, until I was 18 and went off to college. So that also, having structured finances. Like, mentioned with the Dave Ramsey thing was like, you know, talk about your budget. What does this look like? How are you going to plan for this? And one of the biggest things that she never said was like, I can't afford that. How are you going to afford that? One of the things that really stuck out to me about my mom, and I'll tell you this quick story. When I was about eight, our hot water heater went out and it flooded our whole basement. Like, we only had two floors, but our main floor. And we didn't have money to put a new hot water heater in or put floors down. And she was like, oh, no worries. Didn't you say you wanted to learn how to roller skate? I got you these roller skates. You can learn here on the cement for a couple months.

14:17Phil Risher: And it's like making lemonade out of lemons, right? And it just sticks with me. It's like, it can't get any worse than this, so let's just make it happen.

14:25Bill Gallagher: Yeah. Did you have any other businesses besides going around with your dad? Any other jobs or businesses before college?

14:32Phil Risher: Before college? Yeah, I invested in this VoIP thing. So I worked at Ruby Tuesdays when I was in high school as a waiter, and I did crypto type stuff, like penny stocks. And then I invested in VoIP things, spent like a thousand dollars to get a website and some VoIP stuff. This was in the early late 2000s. All those failed. I tried to start an app, random stuff.

14:59Bill Gallagher: Yeah, it's fascinating to me. My son did a couple different companies and three in a row failed. And then one was failing, but then he turned that work into a company that became known as Midjourney.

15:16Phil Risher: Oh, that's very cool. Yeah, huge effing deal.

15:20Bill Gallagher: And so I think that we can have lots of failures in life, and you could feel discouraged and you could feel down. And somehow, staying in action, staying focused, staying like—I wouldn't be afraid to be upset. I was away this summer feeling down about a project I was working on and talking to a bunch of my entrepreneur friends at a retreat. And they were like, come on, man, you gotta get up. And I'm like, no, I'm just gonna be down for a minute. But then I came back and I leaned into it, and then I turned—I'm like, okay, I'm gonna be down, but I'm gonna do some action anyway. And I used that to build some new business. So it gave me an insight to something that we'll keep playing with this year. So very good. The blog that I mentioned I started, I did that for four years and I probably made $4,000.

16:12Phil Risher: For four years. Because I'm like, oh, I could be this influencer affiliate marketing blah blah blah. And then now my business that we do, it generates probably $100,000 in passive affiliate style income, and I don't even really care that much. And it's like, learn all the skills and then it just—oh, now this opportunity came around the corner and everything comes together, which is basically how it happened for me. So you never know.

16:34Bill Gallagher: So let's talk about some of the stories and the people that you've worked with. You worked with one company and they were focused on—they didn't have a lot of reviews and they were building their reviews. Maybe talk about that one.

B2B partnerships crush paid advertising for lead generation

16:44Phil Risher: Yeah. Well, I'll give you kind of the biggest things that we see when we work with home service businesses. So out there listening and they're like, hey, I wanna buy a home service business, or are these good deals? These are kind of like recently with a collection of home service businesses. Yeah. Okay. There's those three pillars that I mentioned: how do we get customers, how do we convert them, how do we retarget? I'll give you specific ones for each that you probably never heard. So how do you get new customers? The number one thing that you could do is build B2B partnerships or referral partnerships. So like you mentioned, you had HVAC guy and a plumbing guy. They could team up and pass referrals back and forth between their technicians. And instead of paying $100 or $200 for a lead on Google, they could pay $100 or $200 to a technician locally that's gonna give them a warm lead. This game plan right here, I know that it will generate—yeah, Calvo, there you go—I know that it will generate an additional $1.5 million in your business because at the duct cleaning company, this was their core offer when I came in to work there: let's go find HVAC contractors and enroll them in our referral program and pay their technicians to be our sales force. So if you're listening to this, even if you're B2B or whatever, it's the number one way to get leads coming in and it's algorithm agnostic. You just set it up, you get leads coming in and they're warm leads at that. So that crushes in a lot of businesses. I'll give you another example. We have a wardrobe company that we work with. They do custom closets and wardrobes. They're about $2 million. We set this up for them. We found a bunch of interior designers in and around them. We sent out a cold email that says partnership in the subject line, came across your website looking for a good interior designer to partner with, reach out to us if you wanna talk about that. And they got one person right off the bat, $20,000 deal partnership, good to go. It's gonna keep paying. So that's a really big one for a lot of people. When we talk about the conversion funnel, and again, this is B2B, home service, whatever you are, the number one thing that we see is a lead nurture sequence is the biggest area of opportunity. You call an HVAC contractor or you fill out a form on their website, and then they call you and you don't answer. The lead's gone forever. This is why you need a text and an email and a conversation happening. So in this business, the duct cleaning company, they were converting their leads into jobs at 42%. We set up a text and an email that happened right away and they jumped up to 60. With no more marketing spend, they got 18% more jobs.

Why most service businesses lose leads after one missed call

19:12Bill Gallagher: Mhmm. There's—and this is the thing. That's a fundamental thing. So one, creating some automated immediate responses is really a great thing to do. But I feel like if you don't get a human being on really quickly with me, it's dead. I'm only willing to talk to a chatbot for a few minutes before I wanna hear somebody who's—unless you've got the super AI forward chatbot that is really helpful. But if it's just friendly but not actually helpful, like, boom. Get me a person who's like, Bill, we're gonna go out there tomorrow. I'll be there today, you know.

19:51Phil Risher: I agree. So one of the things that we recommend setting up, and I'll give you a little bit of a play on this coming into the future, is having online scheduling for your home service business or business in general. The reason is because, like, to your point, Bill, you just wanna get your problem solved and you wanna know when can you do it and maybe how much it costs, but when can you do it? I already trust you guys. There's this thing right now called agentic booking on Google. Are you familiar with it? Yep. Okay. I'll tell them. Basically, on Google, in their AI platform, you can ask it for a restaurant, and it's gonna go to OpenTable and Resy and find an Italian restaurant and the time that it's available and then come back to you and say, do you want me to schedule this for you? For home service businesses, for B2B, whatever, that conversation from the AI side of things, it's going to correlate to all of our businesses because people are not gonna go to your website and schedule and do all that stuff. It's gonna say, hey, how much does it cost to do this and when's the next availability? What's the best company to work with? And then it's gonna go and find the information and come back to them. Huge opportunity for a lot of businesses and they're just like, oh, let me write this blog post and have someone go to my website and turn into a lead. It's changing in the next year or two. It's gotta get faster.

20:58Phil Risher: Yeah, for sure. The third pillar from a retargeting perspective, I would say most businesses, and I mentioned this at the top, the PE guys, this is music to their ears. How do you retarget your past customers? We don't. Because they know that you paid for all these people that already know, like, and trust you, thousands of people, and you've never reached out to them once. And we have a saying: you can't get lifetime value without a lifetime relationship. So if you're never retargeting these people with an email or anything, how are you going to ever grow the business? You're just going to keep trying to get more leads coming in the top without getting the juice from the past customers. We had an HVAC contractor. They were $1,500,000. We sent out 12 emails, one every month, and they generated $263,000 in revenue just by sending out one email every single month. Imagine if they did two or three, or called these people or whatever. So it crushes.

21:47Bill Gallagher: You know, it's interesting. So I have a pest control company. I'll spare them, I won't name them. But after every visit, they're incessant about sending me multiple reminders to review them. Most of the time, I don't have anything to say. Was it good or bad? I don't know. I don't have any thought about it. If I have heard or noticed pests around my house, then I have a thought that the service was good or bad. But the quality of his service, I don't know. I wasn't home. He came by when I wasn't here. He did his thing. He went off. It's like a regular visit. They spray, they set traps, they do whatever they do. I don't even know actually what they do right now. And until then, I don't have an opinion. But if they sent me a thing saying, hey, you know, Tony was just by your place today, and here's what happened and here's how it went, and everything looks good, and let us know if we can be of any other help or if you have any other thing. And by the way, is there anyone else in your neighborhood that you think we should talk to? Oh, that'd be useful. But asking me for endless reviews after another? Like, you get a review from me every now and then, or get a review after you do something where there's some interaction.

23:05Bill Gallagher: So I sent him a message recently over the weekend and said, we have a problem. Like, there is a significant infestation under the house. It's some pests. I don't all know what's down there, but there's movement, nesting, and we've got to do something.

23:24Bill Gallagher: Now they, the speed that they answer and get me scheduled is the first data point. The technician showing up and diagnosing the problem and giving me a solution that I feel like is right-sized is the second thing. Then actually fixing it. Those are all actually good provable data points where I might have a positive experience. But I've got an issue now. Solve it. Now check my satisfaction. And then ask me if anyone, but I'm going to start telling people. Like, I'll tell my neighbor, oh yeah, we had a thing and so we had to do this and we did these things and, like, okay, good, that sounds good. Hey, I have that problem or I've been noticing something, you know. So I think that, like, leaning into, like over-indexing on reviews, right? A little bit of review, great. But then actually serve people and ask for a lead. Ask for a referral. I asked one of my clients recently, I asked a couple of them, hey, we're going to have an opening for one of this, like, tier of client. We have a couple different tiers. And I don't have a lot of opening. Only a few of those can I do a year. And do you know anybody I should talk to? And almost immediately referred me to someone, and it was great because I, like, trust who he talks to and who he thinks, like, he's a valued client. I want more people like him, you know.

The customer experience edge AI cannot replace

24:50Phil Risher: Yeah. I will say this. The customer experience is going to be a huge differentiator come AI. Once AI is fully ingrained, and you have been mentioning it with your experience of I want a human, the more that you can build real stuff into your customer experience. So I'll give you an example with the pest control guy. Imagine if he, after he got into his truck, took out his phone and recorded a quick video. Hey, Mr. Gallagher, just finished up at your home. I noticed this, this, and this. Here's what I did. By the way, like that experience that takes 30 seconds, if they put that on his technician checklist that he has to do that, and if he got performance pay off of getting more referrals from you, we can make more money, you can have a much better customer experience, and everyone can win. People are not thinking that. They're just thinking, I need more reviews so that I can rank higher on Google, and it's just very transactional in nature. Customer experience, the more that we can focus on that, the biggest differentiator every single business is going to have.

25:48Bill Gallagher: So in the case of my pest control guys, we'll see how they handle this flare up. But setting that aside for a minute, thinking just generically about the long-term thing, if after he left each time, he sent me a message saying, I just checked your traps, I just serviced the house, here's all the things I noticed, I had a little bit of an issue there, if he gave me a report, I'd have some positive review. Of course. And I think a lot of time, I had my car serviced recently, and the car dealership sent me video. And so they had the car all day. It was just a regular periodic maintenance. And they sent me video. I'm like, okay. Here's all the things they inspected. They're like, these look good. This looks good. This looks good. Hey, these two things need replacement. And then they gave me a box, like, I could just click off. I didn't have to talk to anyone, but I had the equivalent of, like, a human interaction because he's talking me through on the video, and then he just uploads it to whatever their app is. Their app sends it to me, and their app includes the estimate. And I could just click okay, and they added two, you know, additional cost service items on it that I was cool with. Brilliant. And I was like, wow. They, like, they use technology in a way that didn't feel cold or disconnected. And I love them, and this is the first time I had that.

27:09Phil Risher: Yes. Yeah. I think the more, and this is the hard part with AI and automation, is that it blurs the line between building trust and just checking a box in your customer experience. And I think the more that you can layer in video or just real organic stuff, like one of the things that we coach our clients on is having videos in your actual sales process. So for example, you send someone an estimate. You could record a one video that says, hey, Bill, just sent you this estimate. I put this in there and then this in there because you told me about this and this and this. Here's a common objection that we get, you know, that, and put that. It takes five minutes. You just put together an estimate. Just lump that in there. Close rate will go up because no one else is doing this and it builds trust.

27:48Bill Gallagher: I think if your AI assistant is useful, if it could actually do something, schedule something, resolve something, estimate something, great. If it's just answering when your hours are or, like, if it's just being polite, like, I don't need that. Like, that's yesterday's

28:05Bill Gallagher: AI, right? That's not today's kind of AI that's going to help me actually solve something. So, yep, I agree. All right, let's talk about cookie-cutter marketing playbooks. Tell me the worst story, the worst example of what you've seen and how you fix something. Right? I get multiple times a day, and I know our clients do, pitches from people with their cookie-cutter marketing BS that I'm sure those companies hope will work, but I have zero confidence in and never am willing to try.

Cookie-cutter marketing agencies without data or accountability

28:34Phil Risher: Yeah, well, good news, me too. Because I was at this home service business, I came in as director of business development, right? My job is to help the company grow. So we have these cookie-cutter agencies that I'm working with, that I'm trying to get them to grow their business, and I can't get them to cross the finish line. So I thought this exact same point, which is why I made this. I'm actually writing a book on this, and the title, I think, is going to be called Second Engine, which is what got you to a million dollars or $10 million is not going to get you over the hump. And there's a second engine of growth that you need from a marketing perspective, and it has three core parts. It's like a triangle. So you need good digital marketing, but more importantly, you need good data. Because the reason that most owners don't trust these marketing companies when they say, oh, we're going to rank you number one on Google, is because they don't have the data to prove it. Every time you talk to them, they say spend more on ads or yeah, our SEO is working, this black magic voodoo. But you don't know if this is actually working in your business or not. So, like, what I uncovered was I had to start pulling return on ad spend on every single channel, so that way I can make the decision if it's working or not. And my agency was, like, fractionalized cookie-cutter out here. And then the other pillar is automation. So you need your marketing to pull into your CRM to communicate back and forth to make sure that it's all working. And these cookie-cutter agencies, they just do SEO and run some ads and pray to the Google gods that they send you leads and bless you. But there's no data or anything, right? It's just like they're out here, then you have data in your CRM, hopefully it all makes sense, and then you have some automation tech stack over here, and there's nothing working together to actually grow in an engine format. Yeah, sound familiar? Yep. Yeah, this is exactly what I face, and that's why I literally built my company, because business owners need that.

30:22Bill Gallagher: Yeah. Well, tell us a good story then of somebody and something you built. Add some color to that.

30:28Phil Risher: Yeah. So I was at my home service business. We're spending $5,000 a month on ads, and I went to my agency because it was shoulder season. Shoulder season is January to February, and at that time there's usually not much demand. So I say, hey, I need jobs on the books. They said, well, your cost per lead and conversions is this amount of money, so you could just spend more money and get more leads coming in. And I'm like, okay, well, how do I know it's that profitable? How do I know it's actually turning into revenue? Well, you need to go in your CRM and figure this out. This is the plague that most people face. So I'll give you another example. We just started working with this $7 million home service business. He was spending $22,000 a month on Google Ads. $22,000 a month. We asked them in the sales process, how do you track your return on ad spend? I don't. So you're spending $22,000 a month and you don't know if it's making you $0 or $100,000? Like, what? Right? So we plug in return on ad spend reporting in the first month. He spent $22,000, he made $22,000. Yes. And usually this will say that there's two problems in your business. One, your lead quality is bad, or two, your lead intake process is bad. You don't have a good process for turning leads into appointments. So we need to figure out what it is. So we need to listen to the calls or we need to audit your intake process. That's another example. Another one, this is a perfect example for they don't know the data, so they're actually holding back their growth. We started working with this $10 million plumbing company. They were spending $2,500 a month on Google, like, not even that much. But they didn't know that it was producing a 10x return. $2,500. So the first month, we're like, 10x, double that thing. So they went from $2,500 to $5,000, 10x return. Yep. So the good data makes good decisions both ways. Should we do more of this or less of this? And we see this, this is the reason that cookie-cutter is cookie-cutter, is because it's just, hey Bill, let me fit you into this cookie-cutter system and just let it run, and you just tell me if it's working. We did this for another home service business. We did this for another consulting company. So let's run that with you. Like, who knows if that's going to work or not?

One company spent $22,000 monthly on ads with 1:1 return

32:30Bill Gallagher: Yeah. Yeah. I think thoughtfully looking at each point in your process, right? What problem are we solving? Who are we talking to? What do we say to them? What do they call looking for? What do they, like, that whole flow, I think is what I hear you. And then bringing actual data. What are the numbers here? Like, feeling good about a conversation is not the same as we had x conversations that produced y results. We went through that kind of that flow.

33:06Phil Risher: Yeah. With the private equity guy, we go to lunch and he says, how do you get new customers? And I say, well, we're spending $10,000 on Google Ads and it's performing at a 10x return. And, right, like, imagine how much more confidence he's going to have that we have the data and I can show him the information.

33:21Bill Gallagher: What else is important in getting ready to sell? What have you noticed? What stories have you seen with people who were or weren't ready to sell?

33:28Phil Risher: Yeah. So specifically, we work with companies that are, like, $1 to $10 million in revenue. And the biggest thing that I would say is this key man risk piece. Usually you can't be the number one salesperson or closer in your company. So you have to build a professional sales system. So we had a company, they were $2 million and went to $4 million in one year. They went on Inc. 5000 fastest growing companies, and then private equity went crazy. So, and they ended up selling. But what the business owner had to do was build a professional sales system in his company, aside from him just coming on and sounding smart or going to the meeting and sounding smart.

34:01Bill Gallagher: So, yeah, hang on, pause. So key man risk, that is both sales and operations. If you're central to the whole business, you can't sell. So you've got to take what you do and turn that into a playbook and build some team around it.

34:13Phil Risher: That's right. And the more that you can just own the business instead of actually running the business, that is the beauty of it. And even if you don't sell, it's just like building to sell, right? So, yeah, so that is a big thing that we see a lot of. And it was, to be honest, at the duct cleaning company, it was one of the hiccups that they kind of ran into because the owner was going out and doing the commercial sales, but they ended up overcoming that. That one, and then I would say in home service, like, profitability is so crucial because a lot of these guys—

Key person risk kills sales if the owner runs everything

34:42Phil Risher: A lot of the home service business owners are technicians that turned into business owners. So they know how to do the stuff through and through. But the problem is that these guys from private equity come in, and they don't necessarily have the chops to do the blue collar stuff. Right? They don't have the trades experience. So they need to know that when I pull this guy out, it's not gonna fall apart. He's not the number one firefighter over here, and that they, in spite of him not knowing how to run a business, they're still profitable.

35:12Bill Gallagher: Yeah. So it's a big part of it. You know, it's an interesting thing. Think about, so there are companies that aren't really home services. So you think about roofing, and you think about paving, and, let's just stick to those as examples. So roofing. Right? How often do you put a roof on your house? Well, I've lived in my house for thirty years this year, and I put on one roof, and I hope never to do it again. Right? So do I need service? Is that a home? Yeah. Well, it could be. So if I put gutters on and then I need gutters periodically, then I've upgraded that. Now maybe I put gutter covers, so I need it a lot less often. Same thing with paving. So if I, I did, I've put in, I redid my driveway. Right? And I changed out some of the pavements and stuff in the backyard and side yard. So, you know, that's not a regular, that's not a maintenance thing. But every year, I need power washing because we get significant algae growth, particularly on our bricks, on all of the brick walkways. That's an annual kind of a thing. And then that goes with, okay, well, maybe I need to also do my windows, and maybe I need to do the roofs and gutters. And so there's a world of that that needs to go on on the regular. And if you could figure out something, and we talked to the paving company that was filling in their off season with doing snow removal and other kinds of maintenance. And so if you could figure out how to turn your crews into regular, ongoing kinds of things, now we've added some upgrade.

36:59Phil Risher: Yeah. For sure. And what I will say is the duct cleaning business that I was at, duct cleaning is something that you might get done every five years. It's not like every single year you have to have your ducts cleaned. But he still sold for 8x. Right? The biggest selling point for him was that he had recurring business coming from his partners that I mentioned. So the roofing contractor, for example, it was a big engine that was a reselling opportunity that was, this has recurring revenue because of all these partnerships. So the roofing contractor, that person could partner with gutter cleaning companies, pressure washing companies, siding companies. And, basically, they're already doing this stuff, you know, all the time, like what you're saying, but then they have this engine and they could use them in their email newsletter and retargeting. Not just like residential customer. You don't need to, you don't need to email every single month about getting a new roof. But if you had partnerships with people, then you could stay top of mind and be developing that network. This was a huge part of the resale of the company that I was at with the duct cleaning was that they had these partnerships built out and they had a whole relationship, and it was really recurring because they were sending them, you could look at the whole lifespan of the last five years and see all the deals they were sending them.

38:04Bill Gallagher: I think, so that we're touching on the services and the recurring revenue side of things. My HVAC company. Right? My old one, you know, I found through a referral. They came in, they gave me a new furnace, and then they came in, they added an AC unit on. So two big projects. And then they added a splitter system and so on. Terrible company, like dishonest, like terrible quality work, that kind of thing. I went shopping around. I found somebody else to replace and service the thing ongoingly. What do they do now? The new company does twice a year. So they come twice a year and they, beginning of summer or the beginning of the fall, and they give it a safety inspection, tune up, things like that. And in fact, the thing that I had just right now, they probably would have found, but because of my travel, I avoided scheduling them in the fall. And I'm like, oh, yeah. And I got busy and I forgot about it. And so we didn't do the periodic maintenance that found the problem. We might have found it a little bit earlier, and it might have actually saved me significant in my heating, in my power bill. That's right. Because of the electric and gas. We were throwing all kinds of heating and cooling into the basement, which, I mean, into the sub, the crawl space. I didn't need to do that. Right? That probably was adding to the pest problem, creating a very cozy environment for the pests. Right? So that, but that thing that they do, they show up and they're like, they check the heating cooling levels, they check the airflow, that kind of thing. From time to time, they're like, oh, we see a problem here. But that also led them to saying, hey. We see a leak in a pipe under there. We've got a plumbing division, so it could have been a referral. But in this case, it was their own company. Our plumbing division could come out and fix that for you. I'm like, great. Have them come estimate it. And then while you're at it, hey. Oh, we have this thing. This valve and faucet up here needs some attention. So we're gonna end up doing a whole bunch of extra little work, right, that, you know, we might have lived with for a while.

40:14Phil Risher: Yeah. So memberships in home service is hand in hand with private equity money. They just basically wanna see memberships. So what we found is that for every million dollars of revenue, you should have 500 memberships. So $2,000,000 in revenue, a thousand memberships. And the reason that memberships are so good to your point is, like, one, it's good for the consumer because you have someone who's on top of you to be like, hey. You need to get these tune ups. But two, it's a cross sell opportunity for you to get your eyes on stuff, sell other things in the home. Hopefully, they have a checklist, which you probably had a checklist and said, hey. You need this and this and this. And it's basically diagnosing, it's you're the, the customer's paying to be diagnosed and cross sold. But it's also good for you because you don't have to try to remember to schedule things.

Turning one-time projects into recurring revenue streams

40:56Bill Gallagher: So, let's recap before we run out of time here. If you wanna create a great saleable business, right, you could sell it at any size. It doesn't have to be $10, $20, $100,000,000. It could be at a smaller number, and maybe that's enough for you. But don't get your thoughts set on it. We're looking for recurring revenue, a business growth model. Do we have a source of leads? Are you actually doing anything, converting leads? Do you know which ones are worth more? And are you central to either sales and marketing or the execution process? If you're critical to either of those, you're gonna have some real trouble.

41:31Phil Risher: That's exactly right.

41:34Bill Gallagher: Big callouts on it. Let's build a custom playbook that makes your business a repeatable business engine, and that's worth more.

41:44Bill Gallagher: If you want to find out more from Phil, check out Flash Consulting. Flash, because some of the music came out hot there. Flash Consulting is Phil's website. He does work if you're in the home service business. Our lessons and comments here apply to every kind of business, but in particular, his work is with the home services business. So you need marketing for your home service business? I know a couple that we'll share this with in our world that maybe could use some help with this kind of thing. But it's been a pleasure talking to you today, Phil.

42:14Phil Risher: Yeah, thanks Bill. I appreciate you having me on. And for those business owners out there, please try to remove yourself from the operation and build a business that can be sellable, whether you sell or not. It's going to save you a lot of headache and anxiety and give you a lot of fulfillment.

42:28Bill Gallagher: Go find more of our shows. We're getting this right now, 650 plus episodes there on everything to do with growing your business. I hope it's been helpful. You'll also find our website, scalingcoach.com, with information about our programs and different coaching levels. All the kinds of companies that Phil's talking about here, we've got a Growth Cohort program for them, that one to 20 million kind of range that's been much more affordable than our private coaching. You'll find all that at scalingcoach.com. Thanks again, everyone, for watching, for listening. Thanks to my friend and mentor, Verne Harnish, who created the whole Scaling Up framework that's the core of our business, to our producers Anna and Wanda for getting our show out the door. Until next time, keep scaling.

43:17Bill Gallagher: Thanks for listening today. One last thing. If anything in this episode hit home, my book digs into it further. Busy Is Broken: Do Less, Scale More. It's all about how to stop drowning in work and build a business and a team that scales without you. Available right now with content samples at busyisbroken.com. Go grab it. Be less busy.