Austin Gray: Still have a W2 job, right?

Phil Burrows: I do, yeah. I still have a full-time job. I work for a fintech. A lot of the people I work with are on the West Coast. I work remotely. Everybody works remotely. A lot of people I work with are on the West Coast, so their day doesn't get started until, you know, like 9:00 a.m. Pacific time. I'm in the Central Time Zone in Tennessee, so I've, like, even when I didn't have a side thing, I normally had a couple of hours in the morning depending on how early I got up, two to three hours in the morning to focus on, like, deep work or uninterrupted work.

So what that has allowed me to do with the business is that’s when I get a chance to, like, really kick things off for the day or focus on any of the longer-term investments I'm trying to make. Um, yeah, it's been a bit of a juggle. I actually mentioned I had kids, and I mentioned that I have a seven-month-old. So the timing of the business acquisition coincided with the timing of the birth of my daughter, who is seven months old.

Back at the very end of May, my daughter was born on June 5th. Um, I closed on the business on May 31st, so basically, a week after that, my daughter was born. The company I work for in my day job gives paternity leave, so I had basically two months of paternity leave that I took at that point.

During that paternity leave, I was spending almost every day in the business, just like, you know, spending 50 to 60 hours a week trying to learn the ropes and understand what made it work, what didn't work, and try to wrap my head around things.

I didn't—so the company I own is a tree and landscaping business. I didn't have any specific tree experience before I bought it, and so those first couple of months were really about learning things and understanding not just the business side of things but just understanding the nitty-gritty details of the day-to-day—how we bring trees down, how we quote jobs, how we make money, and what kind of things do we lose money on. All that kind of stuff. So I was working on that basically seven days a week for that entire period of time that I was off from my day job.

So the timing of that worked out well, but it's also like super, super chaotic having a newborn around and also trying to do that. Um, yeah, and then from there, like, after I went back to work, a month before I returned to my day job, I hired a general manager to basically run the day-to-day things—just like do the quoting of jobs, send the crews off, get everybody set up for the day.

I had a month of training him on the job before I had to return to my 9 to 5, and that worked out well. I don't know that I would change anything. If I had a chance to do it again, it seemed like that was the best way to do it. But anyway, so that's where I'm at today.

So why did you decide to buy a tree and landscape business?

Phil Burrows: I mean, there was nothing specifically about tree and landscaping that I was really looking for, but I had had an itch for a really long time to start a business or to buy a business, for multiple years. It had gotten to the point where I was, like, thinking about it way too much, to the point where I told my wife at the beginning of last year, “I’m committing this year to either do it or stop thinking about it.” It's taking up too much mental bandwidth. I’m either going to start a business or I'm going to buy one, or we're never going to talk about this again at the end of this year.

So I spent a whole lot of time in the first four months of the year being really intentional about looking for businesses, about thinking through different business ideas. Um, I wasn’t specifically looking for a tree business to buy, but if I were to start a business, one of the options was a tree business. And there are a few reasons for that.

So I live in Memphis, which has a lot of really mature trees, especially out in the suburbs. I have just always thought, like, a good tree business could print money out here. Uh, and so if I was going to start a business, that's what I was going to do.

The other thing is, I live on a little bit of land, and we have, I don't know, hundreds of trees. Uh, and if I'm honest with you, probably like 50 of them need to come down. And so this is probably not a good reason to buy a business or to start a business, but I was like, “Well, you know, if I start the business, I could learn at my own place. I could go slowly. I could acquire the equipment as needed to figure things out here.”

Um, if I screw something up, I don't have anybody angry with me other than myself. It seemed like pretty low risk from that perspective. But the more I thought about it, man, tree businesses are very equipment-heavy. So, like, to do that, I have to buy a skid steer—almost certainly I have to buy a bucket truck, I have to buy a grapple truck. I like the list goes on, right? And before you know it, you know, you’ve got at least a couple hundred grand in equipment that I would have to buy just to start something.

Being that I am now in a different stage of life than I was, you know, a decade ago when I was willing to take more risks—with kids, with a wife—my wife doesn’t work. My family's entirely dependent upon my ability to earn income. If I'm honest, I'm a little bit more risk averse now than I was previously. You know, a decade ago I’d just be like, “Whatever, let’s do it.”

And I've done other things that, you know, risked a bunch of money. Some of them turned out, some of them didn't, and I was fine with that. But I was, like, risk averse to the point that the more I thought about starting from scratch, spending a couple hundred grand with no guarantee of any kind of—like, no guarantee that I could get clients, no guarantee that I could convince people to pay for our services—the less appealing that seemed to me.

And so it was at that point I started pivoting away from that and really started focusing specifically on searching for a business to buy. And when I was searching for a business, I wasn't looking specifically for a tree business; I was just looking for something that was profitable that I could, like, sink my teeth into and really have confidence that I could grow over time.

So it just so happened that the business that I found was a tree business, but that was more coincidence than, like, specifically looking for that.

Austin Gray: Is this business in your area? Did you have geographic constraints?

Phil Burrows: I did have geographic constraints. I was looking for something specifically in the Memphis area. We weren't going to move. I have flexibility with my day job; I work remotely. But my wife was born and raised in Memphis, spent her entire life in Memphis. We have family here. Here again, now that we have kids, grandparents are here. We're just not moving. We had just bought a new house less than a year prior, and my wife and I, when we bought it, had the idea, “This is the place where we will be for a really long time.”

So yeah, I was specifically looking in the Memphis area. I live in Germantown, which is a suburb on the east of Memphis. The business is based in Millington, which is kind of a suburb on the north side of Memphis. So when I go to—we have a lot in Millington where we keep all of our equipment, where we meet up for the day with the crew and everything—that drive for me in the morning is like 40 minutes, so I basically drive across town to make that happen.

Whenever you were looking for this business, how did you end up finding it?

Phil Burrows: So I found it in the place I did not think I was going to find a business, which is BizBuySell. Um, if you’ve spent any time on BizBuySell, there’s just a bunch of trash on there, honestly, and a bunch of franchises. I was specifically not wanting a franchise. Um, I don't know that I can articulate exactly why, but I just always had this aversion to a franchise, at least being the first business that I had.

I mentioned I'm more risk averse, but there’s—I don’t know—I'm still very prideful. So I wanted to fail or succeed on my own abilities and my own merits. Again, this is probably not super healthy pride, but, you know, a franchise, to me, there are two downsides of it.

At a very high level, the first is, whether this is true or not, I always had the idea that my upside would be capped with a franchise because I would always be paying fees to the parent company. The other side of it is that my downside would also be limited.

And I don't know, that might seem an interesting thought to people, but, like, I care very much about being good at what I do and succeeding on my own merits. So there’s some part of me that’s like, “No, no, no. If the business is going to fail, I want it to fail, and I want to learn the lessons of failure.”

And I don't know, this might be a little masochistic, but I want to learn that I wasn't good enough to do that thing. Um, so I just kind of, like, wrote off franchises pretty early on.

But, like, the vast majority of the other stuff that's listed on BizBuySell, at least in the Memphis area, is, like, pretty worthless. Um, so I had looked at a bunch of other places. I was cold calling businesses. I was doing all that kind of stuff. But where I found this business was on BizBuySell.

It had been listed for over a year. It turns out that the previous OWNR OPS had multiple offers, had actually gotten really close to selling a couple of times, and just like had things fall through.

So when I made an offer on the business, there was another offer that came in within days. So, uh, it was a business that was, like, desirable. Now we can talk about whether or not, knowing what I know today, it would still be desirable, but it was a desirable business from the numbers and what I was able to find out about it.

But yeah, it was just, like, publicly listed through a broker in Nashville.

Austin Gray: Can we start with what made it desirable, whether that’s numbers or just something specific that you identified early on?

Phil Burrows: Yeah, I mean, the numbers were the main thing—numbers and my perspective on the opportunity for growth. So, uh, I’ll just run you through the numbers really quick. I paid, um, I think I paid $875,000 for the business.

The SD number that was published was $400,000. After due diligence and a bunch of back and forth, the SD number was actually closer to $300,000.

And the previous OWNR OPS was, like, deeply involved in the business, right? Like he was in the day-to-day making it happen, not really paying himself a salary outside of the SD number. So, like, right off the top, if I was going to hire somebody, I knew that was coming down. Um, those are the base numbers.

The reason it was interesting to me is because I mentioned it’s based in Millington, so Millington is, you know, like 20 minutes outside of Memphis. Um, but they were not doing any real work in Memphis at all. Memphis is a large city with over a million people.

There are some pretty affluent suburbs on the east side, and this business was not attempting to take advantage of those at all. The rationale from the previous OWNR OPS was, “Well, I got enough. I have as much work as I can handle in Millington. I haven’t really looked to, like, expand in Memphis.”

So that seemed like a really obvious opportunity for growth going forward. I wanted to buy something that I could grow over time and not just, like, buy something that would remain stagnant and stable.

Um, the other thing that made it interesting to me was that the business's reputation was pretty good. It had a long-standing reputation and an existing customer list on the mowing side. So we do tree work, mowing, and then landscape work, which includes installs, drainage work, and stuff like that.

So the existing customer list on the mowing side was pretty decent, and a lot of the landscaping and tree work would come from those customers, right? So that was interesting to me. It was a fairly healthy business with some upside.

Austin Gray: Now, you mentioned something not being desirable about it. Do you want to dive into that?

Phil Burrows: Yeah, I mean, like, there’s only so much. I did a bunch of work in the context of the financial due diligence. Um, you know, I hired a guy to help with that. We had a 30-day due diligence period and really dug into the books.

I found that the books were a mess but I built a good amount of confidence about the financial situation of the business. Um, and so, like, I think I had good clarity about what the reality actually looked like, which was, you know, not quite as rosy as the picture that was painted on the listing, which I think is probably pretty standard.

And like I said, you know, the SD number was closer to $300,000 than $400,000 that they claimed.

But I was fine with that. I knew I was going to have a whole lot more expenses, right? Like, I was going to have to lease the lot back from the current OWNR OPS. I knew there was going to be a bunch of additional costs.

What I didn't know, and what I really didn't have the expertise to understand, was how much I was going to have to spend on, honestly, like, equipment maintenance and upkeep. I should have spent more time, like, really digging into the health of the existing equipment.

You know, I just kind of wrote it off as, like, “Oh, these are old diesel trucks that have been running great forever, and they’ll probably continue running great.” I just didn't, like, do much to dig into them.

But, like, all the pickups are at least 15 years old, and there are five of them. The bucket truck I had was like 20 years old; the grapple truck is 20 years old. These are all pieces of equipment that do last a long time, but I think if I had to do it all over again, I would have attempted to negotiate the price down quite a bit because of the age of the equipment.

The only stuff that isn't super old are the mini skid steers; we have a couple that are both like two years old, with a decent amount of hours on them but in good upkeep. But everything else, other than those two pieces of equipment, is like old and needs to be replaced, and I didn't really factor that in, so that's one thing.

Um, the other thing is, like, I haven't been able to get the right people hired. So I've got some people that have been really good, but, like, apart from that, hiring has been much, much more difficult than I expected it to be.

And it's just, like, an entirely different space than I have experience in when it comes to hiring, right? Like, I've hired and fired plenty of people. I lead a pretty large team at my day job, but it's in tech, right?

So, like, hiring is very different. Motivating those people is very different. Keeping them engaged is very different. The tools that I have at my disposal to, um, to keep them engaged, evaluate performance, and reward performance are just, like, very different.

I think I probably naively, in retrospect, assumed that it would be very easy to translate my experience with managing large teams to managing the employees of the business. Some of it has translated well, but there are things I've honestly just had to learn how to do differently because it's just a different persona that is employed at a tech company versus that is employed at a tree company.

And they need different approaches. And so again, if you're asking me about what hasn't been super desirable, honestly, the pain of that has been such a pain.

If I didn’t have to—this sounds terrible—if I didn’t have to deal with people, man, this business would be so easy to run. Like, people have been difficult. But the truth and the reality is, like, it’s the lifeblood of the business, right? Somebody’s got to cut those trees.

Austin Gray: Yeah, it really is. And I had always heard, you know, everything that I had read before and everything I’d heard, all the research I had done is that scaling a business and running your business goes through stages, right? There’s like the OWNR OPS stage where you’re, like, in the day-to-day, you’re making work happen, right? It’s like you and, like, maybe a couple of employees, and you can get really good at that.

But then there’s the other end of it, which is like you’ve scaled the business to like $10 million in revenue, and you have, like, hierarchies in place and processes in place and all these kinds of things.

Running that business is like—you can get that to a well-oiled machine, but there’s like this valley in the middle of scaling a business from, like, one to five million in revenue where it is just a slog.

Where you don’t have—you’re not big enough to benefit from some of the efficiencies of scale that you would at a larger company, but you’re also too big to keep running things as they had run before. So, like, that's been a lot of what I've had to deal with.

The previous OWNR OPS had run this business for 25 plus years, but it scaled from just like him mowing people’s lawns, you know, over the course of two and a half decades to what it is. The way he did things worked for him, but it’s just like nothing really changed as he grew things.

So, like, a lot of the business was run just like—not really as a business, but as a personal thing that a guy did. So everything breaks down really, really easily the minute one small thing goes wrong.

A lot of what I have been doing, especially over the last couple of months, is trying to get things to a point where we can become a well-run, you know, well-oiled machine, and there’s so much work to do to get there. The first six months of ownership, honestly, the business was held together by sheer will and duct tape—just like I’m not going to let this fail.

You know, my main goal was, like, don’t kill it. We've gotten through that, and now I think it becomes about, “Okay, how do we actually build the business that I want to have and that I will be proud of?”

And, um, there's investment that's going to be required to do that. There’s significantly more work that's going to be required. There’s a bunch of stuff that we have to change.

So, uh, you know, on January 2nd when we came back to work, I basically rolled out a bunch of new policies that we’re going to start implementing. And I told the guys, “By the end of this year, I want this business to be something that I’m super, super proud of that everybody here who works for this business can be proud of, that they have a vested interest in it, and that it is very clear that we are a professional organization.”

And we’re just, like, so far from that.

Austin Gray: So what are some specific things that you need to do right now? Like, what is burning in your mind right now every morning when you wake up?

Phil Burrows: I’ll say there are three things.

One, this is, like, so fundamental and simple, but getting the right people in place. Like, basically, so one of the policy changes was like unexcused absences will not be tolerated; tardiness will not be tolerated. I have guys that just don’t show up. They just don’t show up. I have guys that just roll in 45 minutes late, and everybody else is, like, sitting around at the lot waiting for them.

I’m paying people on the clock to wait for a guy because he just decided he didn’t want to get up in time to get in. Um, so it starts with that, but like the broader problem, the bigger problem, is just getting the right people in place that I can trust and that have some sense of pride and ownership around the work that they’re doing.

Um, and it starts with getting there, but then once they get there, it’s about honestly just learning how to do work efficiently and profitably. Everything takes longer than it should. Everything takes way longer than it should.

A perfect example of this: we’re doing a big retaining wall job—like a $30,000 retaining wall. Um, when I quoted this job a few months ago, I expected us to be able to get it done in three weeks. If we got it done in three weeks, it’d be a great job for us, we’d make money on it.

Uh, we've now been there—I think next week will be week number eight—um, and it’s not because we've run into a bunch of stuff that we didn’t expect; it’s just because guys are not working efficiently.

So the job started before Thanksgiving, and so we took the time off around Thanksgiving. But I think before Thanksgiving until Christmas was basically like five weeks that they worked on things.

And I’m embarrassed to say this, but it’s a retaining wall that we are building out of railroad ties. We’re just replacing an existing one. It’s not really structural; it’s more like visual. Uh, over that course of time, those five weeks, they averaged laying four ties a day, four ties a day for five straight weeks.

So the week of Christmas, I took off and I went and worked on the site with them for the four days—Christmas was on a Monday—so for the four days, Tuesday through Friday, I said, “I’m going to see how long this takes, and I’m going to run this job, and you and I, crew, are going to work side by side, and we’re going to see what we can get done.”

We got more done in those four days than they had in the five weeks up until that point. We laid 20 ties a day.

Like, it, you know, this is like digging down, setting footings; like, all that kind of stuff. So it’s not just like dropping in place, pinning it, and moving on. There’s work to do, but, like, we were working five times as fast as they were, and it’s not because, like, I have some superpower other than I’m just going to actually stay focused and make sure that everybody stays focused while they’re doing it.

So, um, that to me is just like a microcosm of a lot of the work that we do. Now listen, the quality is good, so I’m happy with the quality, but like on that $30,000 job, we’re probably going to—I’m probably going to lose $10,000, right? Which is just like a thing that shouldn’t happen.

Um, so that’s the main thing. So those are like the top two. It’s like honestly just getting reliable people and then, uh, you know, doing more efficient work.

The other is we’re in a slow season right now. This was always going to be a slow season. I looked back at the previous OWNR OPS' books during this time. He was similarly slow. There’s not a whole lot we can do about that, but lead generation continues to be a thing that I think we’ve got to just like continue investing in.

I mean, it’s the—it’s, you know, along with people, it’s the lifeblood of this business, right? It doesn’t matter how good the work is. It doesn’t matter how many people I have willing to do work. If we don’t have leads coming in, if we don’t have jobs being booked, we’ll just sit around and twiddle our thumbs, right?

So I’ve done a bunch of work to invest in that over the course of the last few months. It’s starting to pay off, but there’s just like—that’s a long-term investment to really make that happen.

So that involves, you know, after I bought the business, I rebuilt the website. We’re doing a bunch of work in the context of SEO right now. We've done advertising. I would love to get out of advertising, but right now it’s just been like a necessary cost.

And it’s not a cheap one, but it’s like, in the short term, a thing that we just, like, have to do. So that’s the other thing that’s like top of mind is at what point are the leads going to be flowing in organically at a rate that can sustain and grow the business without me having to spend as much money on basically Google Ads as I do right now?

Austin Gray: Excuse me, do you follow the Dumpster R guy, Bod?

Phil Burrows: Yeah, he and I talked about some SEO stuff. I also listened to your episode with him.

Austin Gray: Yeah, they are doing some good work right now. Anyway, I just—I didn't know if you’d come across some of his stuff.

I want to go back before we jump into kind of the lead generation because we’ve had several episodes where we talk specifically about that.

Um, I think you bring an interesting perspective here because, you know, you're coming from tech. You're used to managing the persona of the team member who works for a tech company. Now you're jumping into the service business, and I want to dive into how you're approaching hiring that person to be in the field.

So, like you mentioned, the crews lay four ties a day. You go in the field, just bringing energy and almost just like an effort and a focus to that, and you increase efficiency. So when you look at this business from a high level, how do you make sure that each crew—well, first off, how big is your crew or team size?

Phil Burrows: Uh, so we've got three different teams. Each team is between three and four people, depending on the season and stuff. So, we run, with office staff, around like 15 employees.

Austin Gray: Geez!

Phil Burrows: Yeah. Um, so the question being, how do you make sure somebody is in place to keep that focus and efficiency up moving forward, or how are you approaching that?

Phil Burrows: Yeah, it starts with a foreman. Uh, so to be clear, I think some of this is my fault. I don’t think this is all like, I think I have some blame in this, and that starts with getting the right person in place that I can hold accountable for how job sites are run and how efficient they can be.

So this is one of those places where I basically just ran with what the previous OWNR OPS had in place, and I have realized over time that’s not good enough.

To answer your question, how do you do that? Like, I have that figured out on the tree crew; the tree crew is good. The tree crew is efficient. I’m happy with that. Um, it’s the other two crews—the landscaping and the mowing crew—where we don’t have the right people in place.

Or the people that we have in place are not doing a good enough job is what I should say. I actually think that they have the skill sets to do it. Um, it’s about, I think it’s a lot about, like, making sure that they understand what I expect, which I have not done a good job of.

I've just kind of, like, sent them to jobs and allowed them to do their thing. So one of the things that I’m focusing on in the new year is, like, being much more explicit about my expectations around certain things.

And so on that wall job, for instance, like I have been on-site. I have communicated to them this is what I expect to happen going forward.

Uh, there’s absolutely no reason why we can’t maintain this pace going forward. That job will be done probably today, maybe tomorrow. So like that has worked.

But if I’m honest with you, I don’t know that I have entirely figured out how I translate that to the next job, right? Because not every job is a retaining wall job. If every job was a retaining wall job, it’d be very easy. We’d say, like, “Hey, the expectation is that we can move forward at this pace.”

And if you are not moving forward at that pace, there needs to be a good explanation, or there will be consequences, right? Um, I think, though, like, the way I’m approaching it is I think it's actually a symptom of the lack of structure and lack of intentionality around the fundamental things that exist within the business and the unprofessionalism with which the business has existed and been run for a really long time.

So the way that I’m approaching it is, like, I am rebuilding the foundations of how we exist as a business. Right?

I mentioned, you know, like, tardiness, unexcused absences aren’t going to be tolerated. The way I'm doing this—and maybe this will work; maybe it won't, but I'll just tell you how I'm approaching it—is I mentioned I haven’t been super clear or explicit, and so I’m, like, over-investigating.

So we have implemented a point system where, for certain infractions, you earn points. You don’t want points; you want zero points. Everybody starts with zero points, but certain infractions incur points.

So that's like being late, not showing up, or calling out same day; you get a certain number of points.

Um, it's little things like if your truck is a trash can at the end of the day, points. Trucks need to be cleaned out every single day. Don’t treat them like trash cans. If you smoke in the truck, points. We're not treating these trucks like your personal vehicles, you know?

Unprofessionalism, whether that's on the job or toward each other, points. You know, there’s like a long list of things, and it's like super penal, if I'm honest with you.

It’s not a system I want to have in place for the long term, but, like, right now, things are poor enough that we’ve just got to, like, attack it head on. There will be some people who won’t make it.

And, you know, there are, like, explicit consequences for points. You get 10 points, suspended for a week, no pay. You get 20 points, you’re gone, no questions fired. Like, you saw this coming, you earned those points; fired.

Um, it’s also, again, this is silly that I even have to implement this kind of thing because it should have just always been in place, but, like, also I’m not going to tolerate any kind of drug use at all. You should expect random drug tests, right?

Honestly, not a thing with previous—the, you know, employees that I had. I had to send a guy to rehab because I’m like, “Dude, your weekend warrior stuff is, like, starting to affect your day-to-day, and I’m not going to have you; you’ve got to go to rehab.”

Um, just like stuff like that. So I think time will tell whether or not I’m approaching this in the right way.

I'm not, like, prideful enough to believe that I can’t screw things up or that every idea that I have is perfect or right. But the way that I interpret our current situation is like a lot of the inefficiencies and a lot of the—I don’t know if it’s unprofessionalism, but just like a lot of the things that I don’t like about the business are actually symptoms of the fundamental things that I have not been successful at instituting and enforcing.

And that’s on me. So the very first thing I have to do is get that fixed. And so I think probably by the end of this month, it will be—we’ll be in a much better place on the foundations.

Then from there it becomes, “Okay, well, how do we take that foundation and build upon it?”

Um, I've seen some changes already from some of those policies. I’ve seen guys be much more intentional, much more communicative about what’s going on.

So my hope is that that, like, starts to permeate longer term.

Austin Gray: So how do you hire the right people?

Phil Burrows: I mean, I think what I’ve done in the past and what I’ll probably continue to do is, like, you know, you can’t look at a resume and see, “Yeah, this guy for sure is going to be good on site.” You can see they’ve worked at these other companies; you can call references, and I do that.

But normally what I’ve done for hiring is, like, you just have a week or a two-week probation period where we try you out, and if at the end of that week or two weeks, you're not cutting it or you're not a good fit, then we move on.

Austin Gray: How do you set that up tactically?

Phil Burrows: Like with your—just with the HR? If you bring them on W2 immediately?

Phil Burrows: Yeah, and then I just say, “Hey,” like explicitly in the offer letter that you have a two-week trial period and then we’ll make a decision on whether this is a full-time position or not.

Yeah, and I’ve even done it. I haven’t been super consistent about this, but I’ve even done it where we say, like, “You know, your pay during these first two weeks is actually slightly lower, and if we find that you work, we'll raise your pay.”

And that’s, you know, from the employee side, that kind of sucks if I'm honest with you. That’s more for, like, an attempt for me to protect myself from a little bit of the downside, right? You bring in a guy right off the bat and you pay him $23 an hour and he wastes two weeks' worth of work, and you’ve paid him for, you know, 80 hours; I would prefer to pay significantly less than that.

So, um, I haven’t been really consistent about that, if I’m honest with you—the pay thing. And I don’t know that that’s really the right way to go about it.

I think the probation period where we say we’re going to evaluate you in the field, and then at the end of that period, we’re going to say yes or no whether or not you make it, makes a whole lot of sense. But yeah, everybody’s W2. Um, and that’s important for a number of reasons, mostly my insurance liabilities, right? Like workers comp; I want everybody to be covered by workers comp, um, just like all that kind of stuff.

I just want to make sure that there are no loopholes or gaps that I fall into there by attempting to bring on a 1099.

Austin Gray: How did you find your general manager who you mentioned you hired?

Phil Burrows: Uh, online job posting. Uh, he was a guy who spent his career in banking and was looking to get out of it. Um, I just had a posting for a while. I had a few applicants; honestly, not a whole lot of quality applicants.

The guy I hired was one of the few that was, like, worth a conversation with. Um, he has been, uh, I think he has been really willing to learn. The main thing that I was concerned about bringing him in was I just needed somebody to make sure they understood how to price jobs, how to quote jobs.

Um, because like I said, we have to—like that is a constant thing. We have to continually be out quoting jobs, getting jobs. And so like even if he didn’t run the day-to-day of like crews and stuff like that, that was the main thing that I wanted to make sure he was doing well.

He’s done a really good job about that. He ramped up pretty quickly on pricing and understands, kind of, like, where our costs are, what we need to be pricing jobs at to make money.

Um, so he did that, like, well, ramped up over the course of the first month or two. And then the last few months have been about, um, you know, building expertise around actually running the day-to-day stuff, um, working in the business on a day-to-day.

There’s just a bunch of stuff that that involves, and he had to build trust with the crews so that he could actually, like, enforce some accountability.

Um, and I think again, in retrospect, I don’t think I set him up well for success from an accountability standpoint—like his ability to actually enforce and require things of the crews—because we had not explicitly articulated what it was that we expected.

So that was another big motivator behind me rolling out all of these new policies in the new year is, like, I wanted to be very clear what we expect.

I want my GM to be able to, like, very clearly enforce these things and hold guys accountable now that he's built trust. Um, now that guys think of him as their boss, he's got to have some framework and structure for actually consistently and equitably and fairly holding the bar on these things.

Austin Gray: How do you incentivize that role?

Phil Burrows: So he has, um, he has a salary portion of his comp, and then he has, uh, kind of a commission portion. For the first six months, uh, that commission has been all revenue-based, um, because my thought there was, like, during that period of time, really his role is going to be winning jobs.

It’s kind of not really a sales role, but like, um, you know, like quoting things properly such that we win these jobs at the rate that we expect to win them.

So like up through December, the commission portion of his comp was just revenue-based, so he got a percentage of all revenue that came through.

Um, from the beginning, I told him, though, longer term, I wanted to incentivize him like a more profit-based or margin-based incentive. So at the beginning of this year, we switched to a basically an income-based commission but also one that has that steps up his percentage if he can increase our margins.

So, you know, if at a million two revenue our margins are 10%, he gets this percentage of that net income. If he could, at the same level of revenue—1.2 million—increase margins to 11%, then his percentage of those profits that he gets to take increases as well.

So really, what I told him is I would love to make the same amount of profit with significantly less revenue. We’re not super efficient; I would love to get our margins. Margin growth is what I care about this year.

I don’t care about revenue growth. I’m actually fine with, like, revenue going down if at the same time we can grow margins on that revenue.

So that’s how he’s incentivized going forward. Um, there’s also like an overall performance bonus for him, and that’s basically just like my evaluation of his performance in the role.

So that’s, uh, you know, things like hiring and firing. Um, honestly, like his ability to enforce and hold people accountable to the policies that we have in place, there’s like I think five different points that I’m evaluating him on.

And so that's like a portion of his bonus that he’ll get at the end of the year if he’s successful in that.

Austin Gray: Okay, so part of our conversation leading up to this, I think this was, like, several weeks ago, was you buy this business, and you’ve got three different revenue streams.

Yeah, you’ve got tree services, you’ve got landscaping, and you've got lawn maintenance. How are you thinking about those different revenue streams right now?

Because essentially, you've got—like one could argue you have three, well maybe two different businesses, right? Like tree service and then lumping landscaping and lawn into one business. How are you thinking about that moving forward?

Are you going to grow all three of those revenue streams, or are you going to look to consolidate and double down on one or the other?

Phil Burrows: I mean, honestly, the way I'm thinking about it, I think landscaping is a distraction, and I want to cut back and maybe eliminate it over time.

I think longer term we need to probably like invest significantly in tree where the margins really are and in mowing where a combination of like good recurring revenue and brand awareness is built.

But the landscaping stuff is, like, for the most part, a distraction. I think it's one of those things that like the previous OWNR OPS, um, you know, he grew it over two decades, and it was a thing that he did, and then he just continued to do it.

So if I look at, um, if I look at our profitability across the three services that we offer, um, tree profitability is good.

I'm happy with the margins on that. I want to continue to grow it. The issue with growing the tree side is we don’t yet have like strong enough lead flow to actually like spin up another crew yet.

So that’s my goal for 2024 on the tree side is to get that to the point where we can have two tree crews and invest really heavily in that.

On the mowing side, margins are not great, but I think it’s like a necessary investment to keep our brand at the forefront of people’s mind so that when they have tree work, that's who they're calling.

We get a lot of that kind of stuff, right? Like storms roll through Memphis, uh, and so a lot of our mowing customers have a tree fall, have limbs fall; they call us first, right?

That’s super important. On the landscaping side, margins are like so all over the place.

So we’ll do, you know, one job where margins are like, you know, net margins are like 25%, which is awesome; you do the next job, and you lose money on it.

Right? Landscaping, I think, more than tree or mowing, is just very unpredictable when it comes to our specific ability to finish a job in the amount of time that we expect it to finish.

And we have attempted to change some of our quoting to basically like bake in the buffer. What we find is we just don’t win jobs if we do that.

And so as things are right now, I am not confident in our ability to complete landscaping jobs efficiently enough to make money.

And so what I would like to do over the course of this year is like start to dial that back and potentially get out of it entirely.

Um, the alternative there would be to just like get out of the big jobs and focus specifically on the landscaping services that are like bed maintenance, planting, like the stuff, you know, like mulching, the stuff that’s like very, very predictable.

We can price them in a way that both makes sense for the customer and for us and just like only do that kind of stuff and just like ignore any of these larger jobs that could blow up in our face.

So that's how I'm thinking about it. The thing that is like preventing me from just, like, pulling the trigger on that, if I'm honest with you, it’s twofold.

One, we don’t yet have enough free work for a second crew. There are two guys on my landscaping crew that I could like shift to a tree crew tomorrow. They have experience; they're great. I just need to get like hire another climber, but like those two other guys would be grounds guys, and they'd be awesome.

So there’s that. And so if I were to like just kill our landscaping stuff, I’d probably have to let those two guys go, and I don’t want to let them go.

And so this is the other thing that like in my mind I’m sure other business owners are struggling with this as well all the time.

Um, I want to make money, but like I don’t want to make a profit at all costs. Like, I don’t want to just, like, treat people horribly. I didn’t buy this business to just make money.

I also bought this business as an opportunity to hopefully, like, have a positive influence on some people's lives, and that starts with the employees that I have.

So there are some personnel decisions that probably a ruthless OWNR OPS would have made differently. Um, there are some personnel decisions that I could be making right now to increase our margins, to like lower our cost that I haven't made yet because, um, honestly, like, I care about the people too much right now—not too much, but like I care about them too much to make that type of decision.

I think that's how it’s always going to be.

And so, um, that's honestly what's preventing me from just moving forward really aggressively with cutting back the landscaping stuff is there would be consequences for people that I do not want to inflict right now.

Um, I'm okay being patient. I'm okay—I'm honest with you, and this is like a pretty privileged place to be—but, like, I'm okay losing a little bit of money while we figure this out if it means that longer term I can, like, do right by some of these people that I care about, that I know are dependent upon the job that they have right now.

Austin Gray: Well, it’s an interesting situation to work through. And, yeah, just from an outsider’s perspective, I love the tree business.

I love any sort of maintenance-style business. I talk to people in the landscaping business, and we get asked all the time, “Hey, can you guys do landscaping?” And I just don't say yes, because landscaping—it opens up like you’re opening up a can of worms to so much creativity and so much ambiguity on the quoting side and the estimating side.

Um, I've seen some of the landscaping companies who have had some really good success. It’s like they pick one thing and they focus really well. It’s like we do pavers, and that’s our expertise, um, or we do boulder walls, and that’s our expertise.

But I’ve always been curious how these landscaping companies with the design aspect and the creative aspect actually do.

And my gut instinct tells me it's a really hard business to crack unless you have—it’s almost like—I wonder how much of that had to do with just the owner's creativity and how much he actually just, like, enjoyed. It’s like, “Oh yeah, I like putting a landscape, a backyard together for someone.”

So it's like almost like leaning into more of a hobby.

Phil Burrows: Um, anyways, I think you’re right. I think it’s a difficult thing to do well.

And so I think the people who can do it well scalably are rewarded for it, as they should be.

I mean, you mentioned it—it just opens up a volcano of worms. There’s also the whole, like, long-term liability of it too, right? Like, you take on drainage work. If you don’t solve that drainage problem, you’ll have a liability there, right?

You build a retaining wall. If that retaining wall doesn’t hold up or doesn’t do the job, you have a liability there.

And so it’s just like that. That is the other piece of it where I’m like there’s a certain class of problem that I don’t want to take on long-term liability for because, you know, I want to do a job, move on, and not think about it again.

I don’t want to get a call back from a customer four months in and say, “Hey, y'all came and did—you put in a French drain, and now it’s settling; there’s all the water pooling above it. The problem is not solved,” and like get a call back and have to go back and fix it.

We try to solve that by having, you know, like only a short period of warranty on some of the stuff we do. But, like, again, from a customer perspective, like, you’re doing this thing that I’m paying you $15,000 for; I want confidence that it’s going to be holding up, you know, three to five years down the line. I don’t want you to tell me that you only warranty things for six months.

Like, that’s no value to me. So to your point, it’s just like—it’s a whole mess of things. And if you can do it well, awesome. Uh, there’s, I think there’s room for companies to do things well.

Uh, and there’s money to be made there. If I’m honest, I just don’t think that we are probably right now a company that should be investing in that stuff.

Austin Gray: Well, you mentioned that there’s opportunity in the tree side of things and so, from an outsider’s perspective, I think that’s a much easier problem to solve—just getting the lead flow for the tree side of business.

So I’m excited for you and what you have ahead of you, Phil. And thanks for joining. I need to wrap up this podcast; I’ve got to take my daughter to daycare here.

Um, and so I appreciate you joining the OWNR OPS podcast, sharing some insights.

It’s really interesting to have a little bit different perspective from someone who has purchased a business in this sub-one million revenue range and to see how you're thinking about solving some of these challenges because I believe that every business, whether you start it or whether you purchase it, once you get to that level, you know—call it over $500,000 and less than $1 million—you’re going to start dealing with these sorts of, uh, you know, if you call them problems or issues, whatever you call them, you’re going to have to start making decisions around these topics.

Phil Burrows: Yeah, for sure. Uh, to be clear, our revenue—not that this really matters—our revenue is like $1.2 million, but it's definitely that size where you start to, like, have to figure some of these things out. You have to get structures and processes in place, or you just get stuck there.

Um, and for us, I think the danger is we get stuck there as our margins continue to erode because those inefficiencies really start to permeate the entire business.

Um, I think my perspective, my hope, is that like addressing those allows us to, uh, basically break through the ceiling that we’ve kind of hit on the revenue side.

Austin Gray: Yes, apologies for misspeaking there. I took your purchase price number, had that in my head.

Phil Burrows: Totally fine.

Austin Gray: Um, thank you for joining on the OWNR OPS podcast. I really do appreciate it, Phil.

This is Phil Burrows with Hodges Tree and Landscape. Where can people find you online if they have questions?

Phil Burrows: Uh, well, I'm on Twitter. I guess my handle is Tree Service Dude. I try to share full transparency around financials and all the stuff that we’re struggling with there.

Uh, if you want the company, it’s HodgesLandscape.com.

Austin Gray: Perfect. All right. Well, thanks for joining. We appreciate it!