High margins should NOT be your goal in your business. If your margins are too high you aren’t scaling enough.
Good morning, guys. I hope everybody’s doing great today. I am Lee Godbold with Junk Removal Authority. I’m just bringing you a few thoughts this morning of some stuff that I’ve seen on the Internet. Just recently, I’m a member of an internet forum, and there’s a few things people are talking about. Number one was the amount of money that they’re making, and their gross margins. Number two is the concept of having a business where you can leave, you can go out of town for a couple of days or a week or two or whatever, and your business is going to be just as good a shape, if not better, when you come back than when you’ve left. So, it’s just in good shape when you come back than when you left. That’s the ultimate goal in business, that’s something that we talk about a lot. However, I think this particular person is likely believing he has a business that is at that point before he really does.
Let’s roll right into the margin thing. Those of you out there that are making 50% plus margins, 55% margins, I see some people say they can they claim they make 70% or 90% margins. One, there’s no way possible you could make it a 90% margin. You’re not accounting for tires that go in your truck, you’re not accounting for any other automobile expense and repairs, you’re not accounting for insurance – you might not be paying insurance -, you’re not accounting for any advertising dollars at all whatever that might be, you’re certainly not accounting for paying yourself, you’re not accounting for any office supplies that you have to use in your office – the recording equipment, and the computer equipment that you do to put out your videos, your pictures. Even if you’re not paying taxes, you’re going to have to have some sort of office stuff going on, some sort of back in office stuff going on. You got a cell phone you’re on all the time, you’re not accounting for paying that bill. There’s no way possible you’re making 90% margins, there’s no way possible you’re making 75% margins. Those of you that are making 55% margins, guys, you’re not scale enough. You’re not growing enough, you’re not advertising enough, you’re on the truck all the time, you’re not having people out there doing the majority of the labor for you. You’re going to be underinsured, and you’re not going to have workers compensation one or the other to make 55%, and you’re not paying yourself fairly. You’re not accounting for your time on the truck, or doing anything else that you do. Whether it would be your office work, your administrative work. You’re not accounting for that if you’re making 55% margins. You’re not growing enough, you’re not scale enough is the biggest thing there.
Some of you guy expect to get those 55% margins every single job you do, plus. You expect to huge margins as you go and quote a hoarding job, and you look at the hoarding job, and you quoted that at $15,000, while you can make good money at $8,000. I’ve talked about this before, this is one of the disadvantages of you being on the truck for every job because you’re “Damn, I don’t want to do all that work. I don’t want to have to do all that.” So, you’re like “If I’m going to do it, I will have to make good money.” When you have other people work for you, you no longer have to do that. I was willing to jump in there and do it. I’ve done plenty of hoarding jobs, and all that kind of stuff, and they were pain, and we never over quoted them when I was on there. Now, if I went out there and did it now, and had to do all the work myself, would I quote it higher? Yeah, I probably would, but when I first started, man, we’d go out there and we’d quote the price what we needed to, get in there and do the work. We’d be happy on direct profit, not accounting for a lot of the back-end expenses, direct profit we’d be happy for 30% margins. Once you back everything else out, you back insurance out, you back all that office stuff out, the administrative stuff out, the telephone bill out – we do include automobile expense as a direct expense, because that is a direct expense. – you might not be able to quantify it just for that one job, but we pretty much know we’re going to spend somewhere around 3% overall on our vehicles, on repair expenses. Some of our vehicles have got some mileage on, we’re starting to replace that fleet here soon. In the meantime, our automobile expenses are a bit higher because we have so much mileage on our vehicles. Now, what happens is when you replace those vehicles, you’re likely to be making a truck payment, or you’re just putting on a huge outlay of cash which we’re not going to pay cash for a vehicle when we can go out there and for $65,000-dollar vehicle, we can go out there and get a loan in 3.5%. It’s just almost ridiculous, it’s just free money. You’re going to have that payment that you got to account for, that $900 something payment every single month on that vehicle. That’s got to be accounted for.
You’ve got to think about all of your expenses when you give your margin. Some of you all might inflate them when you’re telling other people how much money you’re making, which is fine, we try not to do that, but you know if you do, don’t tell yourself you’re actually making that much money, because that’s going to put you in a bad situation when the time comes, that you start spending to freely. You’re like “Man, I’m making $30,000 dollars a month, so I can go out here, I can buy this truck, I can buy this boat, I can buy this motorcycle, I can do whatever.” That’s going to get you in a lot of trouble. To grow your junk removal business, you must accept lower margins: 15% to 20% margins. For the established businesses, that’s a great business. That’s after paying yourself, 15% to 20% margins are an excellent return. Anything over that, you’re either not paying yourself enough, or you’re short yourself somewhere else, some of those other categories I just mentioned. Once you get your business to about $1,500,000 to $2,000,000 a year, that’s the point you can go out afford to spend $85,000, or so on a good general manager. Maybe your salary limit is at 40$ or 50$, and you have some sort of a profit share type deal where they earn more money based on the performance of the organization. You’re going to need to get a good manager, you’re going to pay them by $85,000 depending on the market you are in. If you’re in California, it might be $100,000. If you’re in some of the areas in the Midwest, it’s maybe at $60,000 or $70,000, but somewhere around $85,000 is what you can expect to pay a decent manager. So, you’re going to have a manager, you’re going to have a bookkeeper/secretary – somebody answering your phones. The manager is going to be back up the phone, secretaries will be number one. At that point, you’re completely removed.
That’s going to take you at a minimum four years with the Junk Removal Authority business package route. It took us, as we were learning, it took us six years to get to that point. I average about five hours a week on Junk Doctors. There will be some weeks I might work 15 hours, especially at the end of the month making sure the financial reports are together correctly. I’m popping in, and listening to call recordings and everything, and then there’s last week I don’t get to do a damn thing for Junk Doctors. Things are going great, he company is still growing, but I’m still involved. When you get to that point where it’s turned over, don’t just stop being involved, because you’re going to get in trouble. You still need to be listening to call recordings, you need to be around the office when people are answering those calls, listening to them, making sure they’re handling that call correctly. You need to be around your guys. If you’re no longer doing the hiring, and if you give the hiring over to the manager, you need to be around those guys. Are these guys that you would have hired yourself, are they doing a good job? Place the occasional customer follow, call yourself. Have other people do it normally, but every so often pick up the phone and run through a list of follow up calls to make sure those customers are happy. Certainly, keep monitoring financial statements. I would not turn over a check signing to anybody for as long a period as possible. Somebody else can cut the bills, somebody else can have checks prepared. You run through each one and sign him yourself. Don’t turn that over to somebody else. Whatever you do, do not remove yourself completely from the business at any point. You must be involved. If you want to get to the point where you get to remove yourself completely, then focus in on that business for a good six months. Focus in hard. Have a general manager in place, have them making 15%, 20% margins without you being actively involved. Get that baby listed for sale, and roll that baby out of there. At that point if you have a business like that, if you have pretty decent equipment, if you get good repeat customers, if you get a good local reputation, if you make it 15% to 20% margins after paying all expenses, manager, everything, if you’re doing that, you’ve got a business that is worth either four or five times gross profit. You got to get a very good business at that point. You have a valuable business. Sell it, get into something else if you’re going to completely remove yourself.
Those of you that have been in business for a few months, or a year, or two years, there is almost no way that you have a business that you can leave, and when you get back, everything went extremely smooth right in between. You either didn’t do any jobs, or something on there wasn’t done as good as when you were in town. Don’t be thinking. I’m not saying you can’t leave. I took very few vacations the first two, three years we had. I’d leave town for one or two days maybe once a year, and that was it. Everything else was actively involved in that business. Until you got a general manager in place, until you got multiple crews, multiple trucks, everything running smoothly, until you get somebody answering the phone for you, until you get somebody doing the books for you, until every part of that job is being taken care of, you don’t have a bonafide business where you can sit here and brag that you can leave town and everything’s going to continue running smoothly. You don’t have it. That’s just the truth of the matter that needs to be what you’re working towards. Part of being a business owner is when you’re not working, you should still be able to make an income. That’s the risk you take. That’s the stress you put up with. That’s the loans you take out from the bank if you take out loans out from the bank. That’s part of the payoff for you taking on all that risk. It is the ability to earn money when you’re not working. But don’t think you’re at that point before you really are.
As I wrap this video up, I want to welcome on Junk M.D. out in San Diego, Junk Junkies in Cleveland, Bull Run Junk Removal opened up in Virginia, and Dirty Dogs Junk Removal and Jay A Daniel Junk Removal down in West Palm Beach. I welcome you all to pay per job. Some of these sites are up and going already. We’re already bringing some of them jobs. Some of them will be coming up online within the next couple of days to the next few weeks. I’m so excited to have to be working with all these people on pay per jobs, bringing jobs. The neat thing about that program is that it just gets better over time. We’re on the first page in quite a few of those cities already. I’m a week or two in, organically, we’re already on the first page. We’ve got a top ad on AdWords, and just over time as that stuff gets more established, that page starts working the way up, that just gets better and better. For those of you starting right now, this is probably the worst the campaigns can perform. 20 to 60 jobs from the start is what we anticipate, depending on your market, anywhere from 20 to 60 jobs per month. $7,000 to $25,000 in additional revenue per month, and it just gets better over time.
I hope you enjoyed everything. I hope you found this video helpful. Subscribe below please, subscribe below. You can also visit junkra.com. There’s a lot of great articles on there. We’ve got a gentleman that has been in business for over 10 years that’s about to start writing articles for us as well in Pennsylvania, and we are now looking for guest writers. You can link your page from your article. We’ll send you a link from the article you write to your page. Same thing for videos. We can do some of the video editing. If you have job footage and all you provide will, we will edit those videos and we’ll put a link on YouTube and shoot that back out on your site to help out your search engine optimization. Guest writing, you can do it as much or little as you want, and guest videos if you’re interested. We’re not taking everybody. We do with multiple perspectives, though. We want the guy that’s been in business for 15 years and is still on the truck. We want the guy that’s been in business for 3 years and off the truck. We want guys offering dumpsters. We want to get every single perspective out there on junk removal, and we want people providing to that site so it’s the ultimate source for junk removal information. It’s junkra.com, that’s junkremovalauthority.com, or you can reach it at junkra.com. Email us: [email protected] or you can call us at 919-617-1975. Thanks, guys.