Jon Matzner: One of the things that I've learned through experience is, especially in the beginning, nobody cares about systemization and documentation more than the leadership. If you're not the frickin’ Energizer Bunny, because in a lot of cases they go, what are they trying to do, make us robots? Or what are they trying to do, fire me, or whatever. And it's people's sense of self worth is tied into the idea that the business doesn't- metal doesn't get poured without them. And they don't realize that that's what prevents them from being promoted. That's what prevents the company from growing. And so one of the things that Peter and I bonded over right away was he took five weeks off with no contact, every member of your team should be able to do that with no discernible difference in the business's output. So, I've just found that there's like interpersonal factors tied into systemization, that if you as the leader aren't like excited and stoked about, they're just going to go back to it. And then when somebody calls out sick, it's like, oh, I guess we're not making anything today. And you're like, what? They'll just go, oh, yeah, he's the only one who knows how to do that.
Josh Schultz: Welcome to the SMB Ops Show, an exploration into the mental models and decision processes of operators. I am Joshua Schultz, and with me today is Jon Matzner from Organized Garage. I really enjoyed digging into systems and processes with Jon today. He is going to show us how he took an unscalable garage upgrade business and not only created systems and processes that helped him scale and helped it run without him, but he also was able to take that, package it, and turn it into an affiliate model for other people to do the same thing.
Alright, I am here today with Jon Matzner. I'm excited. I've seen him more and more getting involved on Twitter. I've looked into him a little bit. I think he's got some businesses he talks about, some he doesn't. He's got systems he's alluded to. And I know we started DMing back and forth a little while ago, Jon, and yeah, thanks for hopping on here with me. Appreciate it.
Jon Matzner: My pleasure. Thanks for having me.
Josh Schultz: Yeah, so it looks like you're an ops guy. It looks like you're a systems guy. I know you sell a type of system, which we'll dive into a little bit, that I think you basically are building an affiliate/franchise business off of, and it looks like you've got other businesses too. So what exactly do you own, are invested in, and run day to day?
Jon Matzner: Sure. So pretty much right now, I own a company called Approachment, which does live texting, DMing, and like web chats for small businesses. I bought that with Codie Sanchez a little while ago, and we've been kind of chipping away at that. I own a couple automotive facilities in Florida, which I'm getting rid of as we speak. I own a large garage upgrade company in Southern California. I own a national kind of affiliate, which is a different company, very different kind of operating system that kind of spreads that business’s methodology. And then I'm in the process of launching this national business-in-a-box thing. So we'll talk about as well.
Josh Schultz: So your organized garage is not the business-in-a-box.
Jon Matzner: That is just in one sector. I'm in the process of launching it into other sectors as well. Just the power of the model.
Josh Schultz: So alright, so I was going to say, I'm going to make an assumption. You launched your upgraded garage, you then systematized it and launched that as Organized Garage. And now you're taking that, generalizing it, and launching it like, hey, you can actually do this in any niche with my systems.
Jon Matzner: Correct. And so probably by the time this is released, we will have made the official announcement. One of the first people we're doing this with is Peter Lohmann for property management. So yeah, we connected over geeking out on systems. And I was like, hey, man, don't franchise your PM concept. Don't expand corporately. Do this weird business-in-a-box thing. And so we've latched up to kind of launch and that should be coming pretty soon.
Josh Schultz: That's pretty neat. I'm excited. And he'll follow it to a tee. So you know that you'll actually see the results of the system rather than somebody, oh, it's better if I do this, or I know that I can change that, and you don't get the real flavor of how well it worked. What a great beta test I think.
Jon Matzner: He was out here a couple of weeks ago. So him and I spent some time together kind of sharpening our blades, so to speak.
Josh Schultz: Gotcha. He stayed here right on the other side of that wall for a few days. He's a really kind dude, was really good to my family. I came home, I was out doing stuff. I came home and he had gifts for the kids. My wife had gifts. And I was like I think I'm getting kicked out.
Jon Matzner: He said he's raising the bar too high. He and I immediately bonded just on the back of like we both, and I think you're probably the same, which is I really love learning from people who appreciate the same things I do, let's say. And so, we immediately hit it off and have just been talking about doing something ever since.
Josh Schultz: Awesome. Well, it was actually in the back of my mind too, to talk to you about that business-in-a box after this offline to see how I could use it. So it sounds like maybe we'll be having one of those same conversations. And I’ll come out to SoCal my wife is actually from there.
Jon Matzner: Okay, yeah, I'm in San Diego. I live right on the beach.
Josh Schultz: Cool. Yeah. She's from Rancho. So not as cool, but close. Yeah, we always do the Mission walk, Cafe Gratitude’s a regular. We hit Bird Rock, both locations. So let's start with your original, I can’t say original, but let's start with what I think is the most organic, your original garage business. How did that start? And when?
Jon Matzner: Yeah, so I did college, went and I was in kind of like the national security world for close to a decade, lived in the Middle East, lived in Africa for a while, got out, I was living in Dubai. And just I think I stumbled across Walker Deibel’s stuff and was just like this looks fun. And whether misplaced or not, I had a sense of self confidence with kind of like I love this idea of jumping in and bringing kind of a young person's energy to a sector or industry that doesn't historically have it. So just kind of starting when I was living in Dubai, I also wanted to go back to the States, just started looking around completely opportunistically for something that I could buy that I thought I could add value to. And completely sector agnostic, completely whatever. The only thing I knew was I just didn't want to do a big 7a, just because I knew that I was going to take some lumps in the beginning and just the overhang of that would be kind of scary.
Josh Schultz: I'm sorry. You said a big 7a?
Jon Matzner: SBA 7a. I’m cool. I'm using the slang.
Josh Schultz: I know, I'm not afraid to ask all the dumb questions.
Jon Matzner: I didn't want to take out a big personally guaranteed loan for my first big acquisition, I say big, but you know. So I was kind of intentionally just looking for value where other people couldn't find it, let's say, and found this company based in Southern California, which is kind of where I wanted to be anyway. And it was just kind of the classic company that usually doesn't even sell. Like owner did all the sales, didn't have even a list of his SKUs, like one crew, couple of trucks. His inventory system was like, hey, we're short on hooks. He was just like- he made a great living, made a couple 100Gs a year, the business had been on the market for a while, not really a sellable business. But I looked at all sorts of different stuff and landed on this company called Garage Excell primarily just because I really like the garage upgrade space for a whole bunch of reasons that we can talk about just the work from home stuff really just is fueling probably the next 20 years of just like primary market demand. And even though it looks like a contracting business, it's really like a sales and marketing business that does upgrades. And so from an execution and delivery of what you sell standpoint, it's not like concrete repair where you have to be some crazy specialist to know what the hell you're doing. This is pretty much like hanging cabinets. And so bought that, grew it like crazy, and then just kind of hit the limits of what corporate expansion for a business that’s this kind of operationally intensive, we could sustain. And so then have kind of evolved based on that.
Josh Schultz: So I'm picturing this guy's got the same 20 people he buys from, depending on whatever his clientele wants, he basically brings their catalogs to them, what do you want, they pick it. You come in and create a little more organized list, probably make it easier to reach out, I don't know, templates, POs, some kind of system. Am I correct there?
Jon Matzner: It was pretty much every piece of the business needed to be redone. So for example, from a marketing standpoint, professionalizing our customer acquisition through Google Pay Per Click, Facebook, Yelp, direct mail, referrals in a systematized way. Sales perspective, we moved everything into the cloud and on iPads so that we could do the kind of designs live in the home. From a crew standpoint, building out SOPs as to how we do stuff, here's the right way to do it, not just like what the guy feels like doing that day. QuickBooks Desktop to QuickBooks Online, just all the kind of low level kind of easy stuff but that prevents an owner operated organization from adding kind of the marginal million dollars in revenue a year.
Josh Schultz: Yeah. And you said you grew it like crazy. I'm assuming this guy did a lot of it himself. Did you start subbing it out and find people that could do all this and just basically pieced them together and schedule them out?
Jon Matzner: Yeah. So, the business does like three things. It identifies homeowners, it designs and sells garage upgrades, and then it installs what it sold. And so right away, I wasn't doing any of the sales. So I brought on board professionals, I say professional salespeople, but salespeople, he used that term loosely, who kind of like ran all the appointments, did all the designs, was able to bring on board some additional crews. And then, through my own knowledge as well as kind of some partners and vendors, we were able to just kind of spike our marketing. So that's like how you professionalize pay per click, well you work with a pay per click agency and treat customer acquisition as a revenue center and investment, not as a cost like he did. So, all that kind of stuff you do to upgrade a business, we spent the first, while I was directly operating that business, probably about the first year just building that capacity, building that professionalism.
Josh Schultz: Gotcha. Okay, so there's three things you said you did. You basically find the customers, you do the design, you said, and then you do the install?
Jon Matzner: Correct.
Josh Schultz: So, can we start at the beginning for a second? Finding the customers, you made a comment a while back, I think it was the first time I interacted with you, talked about a little bit about SEO. And I kind of said, hey, how are you thinking about this? And you made a joke about witches stew basically, that I didn't- that went over my head.
Jon Matzner: Oh, yeah, you have an SEO background. I forgot about that.
Josh Schultz: Yeah. So did you- When you did this, were you mostly just going outbound, hitting them with ads, you weren't doing too much inbound yet?
Jon Matzner: Our bread and butter is, and one of the reasons why we bought this company is because the pay per click for high converting keywords is way too low. It's just too low. And you can just see it right as rain. You look at what keywords score, and you're like that click should be $14, and it's $2. And that's just the kind of lack of digital marketing sophistication in this vertical. I mean, that's all that is. It's not like protein powder, national ranking or something. So, bread and butter is high intent paid search, which is, again, these are like 2004 era marketing tactics. I mean, that's why it's great doing this. You don't have to be the best in the world at that. So I would say that that's kind of bread and butter, which is inbound, which is lovely, converts great, turn it up, turn it down. We went from spending a G a month to between 20 and 50 a month on paid search. Because it's just like I know my customer acquisition costs. I know my gross margin for a job, how many salespeople do I have, how many crews do I have, work, So yeah, so that's bread and butter. Supplementing that with kind of, I think of SEO like R&D, which is a portion of your budget to build your organic footprint, just 10%, you don't want to go crazy with it because it takes a little while for it to pay off. But at this point, we're probably close to 30 to 40% of our traffic comes off of content that we've invested in, H1s and meta tags and all that crap. But you can't really live on that in the short term because it takes a while. You can't really game the Google algo too hard or you’ll get spanked. So yeah, and then definitely some Facebook stuff, Facebook stuff, you know this, is interruption marketing. So it's cheaper. But there's more people on Facebook then there are people searching for epoxy floors. So if you can convert out of that funnel, you have unlimited customers. So we balance. The answer in our business for lead gen is yes. Like, do you? Yes.
Josh Schultz: And so, it sounds like you're on Facebook looking to create awareness and convert somewhere else. For the search intent, you're just looking to convert on somebody that's already doing the research then the journey. So design, let's jump into the design piece. I'm assuming this is basically- again, so we built a home recently in the last few years. So I know a lot of it was they give you basically what's available, and then you put it together. And I'm assuming you've done enough garages now where you can help them make some educated decisions on what works and doesn't work and what's come out well.
Jon Matzner: Yep, so our sales folks who we call designers go out to the home. Josh calls and says, hey, I want to upgrade my garage. One of our designers comes out with an iPad. And essentially, it's like a game of The Sims. So it's not quite like hardcore CAD, but it's just like drag and drop fixtures, for lack of a better word. They measure the outline, they create it in the 3d software. And then they sit with Josh, and they go, so Josh, do you want these cabinets on this side or this side? And you kind of verbalize what you want. And then once they've kind of finalized what the design is, the customer can sign with their finger, put a deposit down, off we go.
Josh Schultz: Did you create this design software, or did you use something?
Jon Matzner: So we took an off the shelf software called magicplan and then put a ton of money on top of it for mostly custom objects but just for some functionality that we wanted. So yeah, we just layered on top of an off the shelf software.
Josh Schultz: I don't know the software, but I know Amman Bagua. He's on Twitter as well. He owns a closet company, and he has something like that. It's pretty neat. He's walked me through where the same thing, you add the measurements. And then he spent a lot of money doing all the stuff he can do, adding it to that software, that way he can drag drop, 3d walk into the closet, you pretend like you're looking around, and then same thing, you can sign right there. And it implements purchase order.
Jon Matzner: And the other thing that that allows, I mean, it allows us to do a lot of different things. I know, I've talked to Amman, by the way, because we were trying to increase our manufacturing capacity about a year ago. But the other thing that it really allows us to do is the old owner was like printing these orders out, and it was just like completely nonsense. So now, because we do it in this kind of modern software, it gets uploaded into the cloud, it gets quality controlled, it gets reviewed by folks overseas that go through a QC checklist. It's kind of like it's systematized now. It's not like- it's tight. Because doing residential home improvements at scale is a nightmare if you're not disciplined because everybody wants something different and all that kind of thing.
Josh Schultz: Yeah, the corollary to that in our industry is quality problems. And so, in my old company, Chess Group, we basically were a distributor for machine parts, and there's going to be parts that’ve got a dimension wrong from the GD and T or they've got a material cert that's off. Now, we actually make the parts ourselves at CaneKast. And so, when they did 2 million a year, you'd get one inquiry a month on quality issues. And so, the guy would just look at it and be like, oh, yeah, we'll change some stuff. So when I came on board, I was like, guys, we need to, like to use your use your word, we got to have this tight. When something comes in, it has to go somewhere, it has to get documented, we have to have somebody who knows what they're doing, why it happened, what we did to fix it. And they're like, why, it's only once a month? Well, now we're doing quite a bit more. We're more than 10x the size. And so, we're getting these weekly. And the guys in the shop are like, culture is going into hell, like we've never had this many quality problems. I'm like, guys, we're literally shipping 12 times the amount of parts. This is going to happen. And like you said, if you don't take care of that, it's chaos. Nobody knows who's supposed to respond. The plant manager is assuming the shipping guy will. The shipping guy used to once in a while. But like you said, its not tight. If you don't know who, what to do, the steps, you can monitor those steps, when is it completed? Who's talking to the customer? What are they allowed to say and not say? Who's sending that back to the production floor for the next run? When the next run pops up in six months, how do they know to make that change?
Jon Matzner: What's your feedback loop to make sure that you don’t- I think you do issue logs, I do problem logs, it's the same thing, which is- and then we have a problem log review meeting where we make sure- Well, I'm not running that company in Southern California anymore. But while I was, because we were learning so much so quickly, we had to have that feedback loop or else we'd run- things would sit. The best way to starve a dog is to have two people responsible to feed it. So who's on the hook to answer the customer? Who's on the hook to make sure the organization learns from this mistake? Those kinds of things, especially for us where our salespeople are compensated on the top line sale, not the net. And so their incentive is to just like, sure, we can do that and slap stuff against the wall. And if you don't have a checkpoint in there- I'm like a salesperson at heart, and so I can talk- it's like you can talk shit about your race or your gender or whatever. So I can talk shit about salespeople. Like not the kind of people that you want to be doing diagrams that are then going to be used for manufacturing. And so, we had to build a whole process as to let our salespeople be salespeople. So yeah, that was definitely a journey and a lot of pain, a lot of dollars, but we cracked the code eventually.
Josh Schultz: Yeah, I actually have quite a sales background. That's where I got a lot of my start. So I did field survey, where you just dial phones, and everybody hates you literally for eight hours straight for Verizon. They outsourced to this research company. I sold gym memberships, and I sold life insurance. So, I say I had the three worst sales jobs in the world, all in a three year stretch.
Jon Matzner: That's great. I like selling stuff that I'm excited about. And I don't like selling stuff I'm not excited. That's really easy.
Josh Schultz: I want to come back to that thing about learning quickly. Before we do, let's hit the third stage, which has actually got me the most interested. Because I can see in my head, I can rough out how to scale the first two steps using technology, overseas. But we're getting to the second step where now you've got to show up, you've got to install, you've got quality really matters now. How did you scale that? How do you hold people accountable? How did you blow the doors off this thing?
Jon Matzner: So the first and most important thing actually goes all the way, and this is, we're going to be playing in with themes, I think, but a lot of it was before we ever bought the company, it was assessing the nature of the work itself. And if this was HVAC where somebody needs like a four year apprenticeship to do one thing, I would’ve had no options. But specifically one of the reasons why we like the garage upgrade space is because, in essence, you can use a handyman to do an install, which takes all of the pressure off of the business model because I own a couple, or I used to, own a couple of auto mechanic shops, and I hated them because you couldn't grow them because the guy got $3,000 more from the neighbor, he's gone. You have no business. And so unless you build like a training academy, like Wilson did, you're always just going to be roughed up by your labor. And so one of the key functions was choosing our battles, which was we knew that we didn't require like finished carpenters to do a garage install. It's like are you sober, on time, and good with your hands, then you can be an installer. So that was kind of the first thing, which was not getting ourselves in the deep end and then saying we have a labor problem.
Josh Schultz: Sounds like you create almost a reverse moat, or you looked for a reverse moat where the quality on the front end, it's hard to compete with you because of all the systems you have. But on the back end, your supply of labor, there's no bar. Where HVACs the other way. Everybody can do HVAC and you got 18 people to choose from, it's low price. But on the back-end labor, you've got this massive issue. So you've got the reverse, which is very scalable.
Jon Matzner: Yeah, so for me, it was about not having concentration risk in any of the core functions of the business. So we're not beholden to Google because we can go to Facebook. We're not beholden to skilled estimators because sales are pretty straightforward with our technology. We're not beholden to skilled labor because it's a semi-skilled guy and an unskilled guy on our crews. So it was kind of industry selection as well, which also, same thing with manufacturing. We weren't beholden to one manufacturer because nobody says, I want those Josh cabinets. They just want high quality, well made cabinets. They don't care whether the Josh brand or the Husky brand. So that was a big part of the decision in picking this industry was no concentration risk. So yeah, so then in terms of the crew stuff, pretty straightforward stuff. We use Jotform a lot, which I've written about a bit, but it's a core function, which was just checklists, pictures, prescribed methods of doing things in certain order, not just find some guy who knows what he's doing and cut him loose. It was this is the Garage Excell way to hang a cabinet. You do it like this. And so kind of, I love those, I love the comfort of a well-designed system. It's like I always think of it like a mouse in a maze, where if it messes up, it hits a wall. And so, it's just like the only place they can go is forward. And so, using Jotform a lot and then just some other things as well. We're able to basically say, this is what good looks like, here's how you get to good, here's how long good should take, here's what you do if you can't do good, those kinds of things.
Josh Schultz: I mean, I love it. it's funny, you talk about that. And you'll have guys from large manufacturing companies talking about that. And then you go to their plants, and they don't use it. And then you got simple guys like us, where it's just like, yeah, put a picture of the finished product, the three main points to get there, and the two biggest mistakes, and you've got more than like basically these large companies that preach visual management and whatever.
Jon Matzner: And it's like and what do you do if you need help? Who do you call or who do you text if you need help, if you've hit a problem you can’t solve? So, I picked up a lot of that during my government time because working with a lot of dudes who are in the military and really in kind of cool parts of the military, those are some really hard problems with not enough resources, with dynamic environments. And when you take that kind of philosophy of simplicity and end state and those kinds of things, just brought to bear against a garage upgrade problem, they just are super effective.
Josh Schultz: So I'm good friends with Rich Jordan who is an ex-Marine. And the more we talk, the more I realize how well-suited military are for small business. And there's this thing, like we had a talk one time just privately about how they try to help you change your resume to be more, whatever, agreeable or to whatever the recruiter- that's BS, like this should be promoted, not hidden in a resume. You're coming out way ahead of where I was. And so yeah, the military stuff is great. So you made a comment, now going through all of that, you made a comment you were learning so fast, you were having these meetings. How did you go from here's 22 new things that we really should write down to having SOPs? Because that's the biggest question I always get. And I have my own answer. But I'm curious on yours. How did you get to writing the SOPs while you were growing, obviously trying to make money with this thing? How did you fit that in?
Jon Matzner: Yeah, so the first one would be that I pretty much immediately wasn't involved in the core operations of the business. That was probably the first one, which was I had enough money and flexibility that I didn't have to go run eight appointments and then go work on the business at night. I was able, the margins were good enough, I had access to enough capital, that from day one, my job was to work on the business, like even in a small company. So that was the first thing which was creating the space in your calendar, because it doesn't matter how good you are, if you're performing the functions of the company yourself, it's going to be a sideshow. So that was probably the first one. The second one was, again, using a military phrase that I love, which is prioritize and execute. And so, saying what is either the most painful or the most expensive problem that we're hitting? Like could I systematize how we order office supplies? Absolutely. Awesome. I could use overseas talent. I could have a barcode system. But is that expensive or painful? Fuck no. So it's like where is- the first one probably was having anybody besides the old owner do sales. That is a very expensive problem that needs full focus, and you die if you can't solve that problem. So that was probably like the first problem that I sunk my teeth into. And that was literally starting with as simply as tell me all the things you've sold over the last six months because literally there were no SKUs. Like literally being like, okay, is that the same product, or is that a different product? Literally sitting down and going, okay, what do you charge for this? You charge hourly or for-? Okay, we're not going to sell that anymore. Like that was kind of how it started. That basic.
Josh Schultz: That's really interesting. I know there's another business that I consult with where that is their issue. The guy wants to sell in three years. I told him this isn't even sellable because it's just you selling, installing. It could be systematized. And it's funny because I started with the same spot you did, which is we need to make it so that you're not the guy selling or that you don't have to be the guy selling. One thing you just said though that has me thinking, you said you asked the question, is this the most painful, is just the most expensive? I really like that. So I use questions a lot to help me prioritize. But ashamedly, I do not use them with documentation. I do not say should I be doing this when it comes to documenting. Right now, I'm just in a mass get it all written down and de-risk the business so that if somebody leaves, we don't go under. But we have, like a lot of our ops meetings, I basically have designed the sections of the meeting based on one question, what is the biggest bottleneck in equipment stopping you from producing more? Because questions are great. I feel like they're underused in business. I look at business documents, I look at all kinds of stuff. And it's always statements, list three things for this, or we're going to go over these five things. And I think questions are actually much better at getting useful tactical answers out of your team. So, I'm going to steal that one from you and work on that.
Jon Matzner: So you also said something that I skipped over that I shouldn't have, which is the first probably six months of process development were entirely fear based, which was we don't have a company if the owner gets hit by a bus tomorrow. So, let's run at full freaking speed to get what's in his brain out. And then the next one was, okay, our lead installer who's the only guy who knows how to install stuff, if he gets hit by a bus, we don't- I always use that like if he gets hit by a bus. And so the whole probably first six months were entirely like, okay, Carlos, how do you do this? Is it really just this? He goes, oh, no, I also have to check for this. I'm like, okay, anything else? And it was literally just like sitting down with him for a couple extended sessions. I wrote about this once where I had him walk through everything. And then I said, alright, go back to work. And then a week later, I came back and said, does this represent what you do? And he would say, no, no, no, no, I do this before this. But through a couple of cycles of that, by the end of that, I'm like this is how you hang a cabinet starting from zero. And so just really focused on trying to not be so exposed to talented people.
Josh Schultz: It's scary. I know. So the business I grew before was only six, seven people in the US and four in Mexico and two over in China. And everybody in the US was very well cross trained. Everybody could do AP, everybody could do quality, everybody could ship a part. We didn't always do that, but we all knew how, and we'd go on vacation, and people would fill in just fine. And so, we had everything documented, but it wasn't work instruction documented. It was just general here's the things, so you don't screw it up. Go to KaneCast, and it's what you said. It was what happens if Dale’s not here? Oh, the whole department can't run. What do you mean the whole department can’t run? Dale’s retiring in 12 months, what do you mean the whole department shuts down because he's the only one that knows how to get the metal going. He's the only one that knows the machines. And we went through and there were 12 people across four companies that, oh, if they leave, we have no idea what to do. Like none of us are foundry people. And they knew it. They just didn't know what to do about it. And so, okay, what do we need to know? What don't we know? And that's our to-do list for the next three months. And it's like you said, fear based. You're just- I mean, I was literally at the plants writing stuff down, taking photos. I didn't know what I was taking photos of, but I was like this will make sense at some point. Like get the photo. We'll use it later. And it's funny you say that fear based. I was there.
Jon Matzner: I think also what ties into that, one of the things that I've learned through experience is, especially in the beginning, nobody cares about systemization and documentation more than the leadership. If you're not the frickin’ Energizer Bunny, because in a lot of cases they go, what are they trying to do, make us robots, or what are they trying to do, fire me, or whatever. And it's people's sense of self worth is tied into the idea that the business doesn't- metal doesn't get poured without them. And they don't realize that that's what prevents them from being promoted. That's what prevents the company from growing. And so, one of the things that Peter and I bonded over right away was he took five weeks off with no contact. And it was just like, yeah, that's what- every member of your team should be able to do that with no discernible difference in the business's output. So, I've just found that there's like interpersonal factors tied into systemization, that if you as the leader aren't like excited and stoked about, they're just going to go back to it. And then when somebody calls out sick, it's like, oh, I guess we're not making anything today. And you're like, what? They'll just go, oh, yeah, he's the only one who knows how to do that.
Josh Schultz: I like what you just said. I put out something a little while ago and said different ways to think about your business. Can you run it async? Can you run it from an iPad? Can you run it whatever? I like this one, can anyone leave and there's no change, you basically just run through your entire organization? That's a great way to think about how anti fragile your operation is.
Jon Matzner: Yeah, have you done the task mapping thing? Peter got me on to that, and I loved it. It's every single task in your company, like could be 50 of them, 100 of them, whatever. So it's the name of the task, then it's what department it's in, so it's like marketing, sales, back office, or install for us, then it's the job title of the person responsible to do that. So that's like admin assistant or forger. I don't know what your people are called. For us, it's like installer, salesperson, marketing coordinator, whatever. And then it's the trigger, which is daily, weekly, monthly, or as needed. And then it's a link to the procedure. So it's like check the mail, admin assistant, daily, here's the link to how to unlock the mailbox, or whatever it is. But all the way through, and I just- it links to other parts of kind of our knowledge management system. But I've just found, when I get nervous at night, I just look at that. And I'm like, okay, every piece of this business has got accountability and backups and things like that.
Josh Schultz: I'm big on triggers because triggers are the only way you know where to go in the documentation. Documentation is pointless if you get an email, and you're like, what do I do? You got to have somewhere that says, when I get this email, I got to answer it, or whatever the details are.
Jon Matzner: I think of start trigger and end. How do I know when it started? What's my trigger? There could be more than one. And then when do I say, okay, this is the end of the check mailbox and the beginning of the upload mail process or whatever.
Josh Schultz: I stole something like that from Delegation 360. It's about how to properly delegate. And one of the things in there that I did not use in my procedures that now everyone has, and I tell everybody else to have, is this should say what it looks like when you're done. So for example, invoicing customers, I would just have go into here, you do this, you take the invoice for it, you match all the details, you push send. And then at the end of it, at the end of this, the customer should have in their inbox an invoice and know what to pay and when it's due. It's just this check of like- because there's always that gap between what you told them to do, and then like you didn't send it out. Nobody has an invoice. We didn't get- we're not billing. And you're like, that's the whole point of this.
Jon Matzner: So in the military, they call that end state. So it's task, purpose, end state. And so you always put an end state. You know your job will be done when the customer has the invoice with a correct amount that's linked to their PO or like- I love that idea.
Josh Schultz: We actually took our job duties, so we don't have job duties, we have job results. I don't want to tell you what to do. You're smart enough, you should know what to do. Most of these guys have been in the business for decades longer than me. So I tell you, I don't want to run out of metal, I don't want to be overstocked in metal, I want production running all day. You know that that means keep the machines going and make sure you order metal on time. Again, I don't want to list 50 of those, I want to give you 10 results that I want to talk about at the end of the week and say you failed on three of these or you knocked them out of the park, and you imply your duties.
Jon Matzner: So I've really wrestled with that concept because I see both and I've messed it up. So, one part of me wants to just hold people to results. Just like, hey, I managed to end state, you're an adult. Your job is to make $10,000 of sales a week. I don't care, whatever. So one part of me is just like we're all adults here. I'm not going to micro- effort doesn't matter. On the other hand, for me as the leader, I understand the habits that create the end state. So if you read like the former San Francisco coach, it was like Bill Walsh, it was like the score doesn't- the score takes care of itself. And his whole thing is like, look, I can't say the end- the result is we have more points than they do. But what I can say is less than 10 penalty yards a game, which are all like- they're all effort driven, not end state driven. Because if all you do is say we have to have more points than them, you're leaving them to kind of- you're not giving them the building blocks to create that end state. So I don't- probably a mix is the answer or something. But I've really wrestled with that because I've gone back and forth. I'm like only energy and out- only hustle goals matter, like how many outbound calls did you make, because I know that if you make 100 outbound calls, you're going to make a sale. Or conversely, I've also set goals like make $10,000 of sales, and I haven't-
Josh Schultz: I've seen it two ways. I'm sure you've seen this too. It's pretty common. You focus on the stuff you can control, like you said, how many outbound calls, the conversion rates will take care of themselves. We don't have too much like that. Our job is pretty much the same day in and day out. So, we haven't really built our sales funnel yet, to be honest with you. But like, what you're saying, and I don't know if this is right or wrong, this is something we did about nine months ago. But each individual person has their own results. And they're pretty granular to their position. So when you add them up, it should mean that the plan is doing well. But nobody actually has a macro end state goal of plants got to get out 4000 parts. Like nobody has that goal.
Jon Matzner: Yeah, it's like know your job. It's like the end state for your controlled job.
Josh Schultz: We call that a Papa team. And part of that, it is PAPA, and part of that is basically knowing the scope of your job. And within that, you have full autonomy, outside of that, you have none. And then we give you the bounds. And so the results are inside of that kind of scope.
Jon Matzner: Did you read Humanocracy?
Josh Schultz: No, I've never heard of it.
Jon Matzner: Yeah, it's a book about really big, successful companies that succeed by, I'm like a big small government guy, like anti Federalist, like push power down kind of guy. And this is all about these big multinational companies, that through a- it's essentially pushing incentives, outputs, control way, way down. So instead of having a thousand person division, like the biggest, even in a fortune 500 company, the biggest team they have is like 30. Because it's like it’s harder to macro bullshit than micro. Yeah, it's basically like fractal organization. And it's just all sorts of mechanisms and success factors about how they really drive profitability and success and innovation and all these different things by just like pushing stuff down. And I've always really liked that.
Josh Schultz: I'm going to have to get that because that sounds interesting. I'm all about using economics to drive behavior rather than declared law. It tends to be much more powerful. Alright, so let's, whatever you're comfortable with here, we don't have to get into all of them. But what are some of the ways that you measure your business? And we can call it metrics or ratios or KPIs. What matters in your business?
Jon Matzner: So we've got probably six that really matter. And I'll probably give like the simplified version, but in most cases, I like metrics that are fractions, so that there's some normalization for like volume, like paired metrics, I would probably call it. But for us, it's customer acquisition cost, gross margin per sale, installation capacity, like how many can we buy or have sent to us per week, that's manufacturing capacity, sorry. So we have a mix of inhouse manufacturing, US based manufacturing, Mexico based manufacturing, China based manufacturing. And so, it's just kind of like how big can we get that nozzle. Obviously, our cogs matters, especially because we are a product business. So every marginal improvement in cogs is a big deal. And then kind of I'll call it like crew efficacy, which is a combination of kind of like dollar value of installed work per day with some controls for overtime and things like that.
Josh Schultz: How do you measure, I'm going to call it install capacity, I think you were to kind of referring to it, do you look at the lead time for jobs or how many jobs at one time? How do you measure what you can handle at one time?
Jon Matzner: So roughly for us, the dollar value of the sale and of the job is almost precisely tied to its size and its profitability. It's almost exact. Bigger jobs, we make more money, smaller jobs, we make less money. So, it's essentially amount of installed work per day. Because if we installed $10,000 a day with the old guy, when we bring on a second crew, we're at $20,000 a day, and when it's a third crew, it's 30,000. That's if a crew can install 10,000 bucks a day. So, all of our marginal improvements, say hey, by loading the trucks the night before, we can actually install $12,000 a day, kind of marginal improvements in terms of the size of the hose.
Josh Schultz: So are you looking- so I'm just generalizing here, gross margin per crew or gross margin per employee installed per day?
Jon Matzner: We look at gross margin per job.
Josh Schultz: What about if you have a one person job versus a three, or they all have the same crew size?
Jon Matzner: There's some, there is a little bit of that. But the kind of center of the bell curve, 90% is one skilled guy and one unskilled guy. And it takes one day. There's definitely a little bit of that. But one of the things that's actually affective for this conversation, or that's relevant for this conversation, is just given the nature of the business model and the margins and those kinds of things, not all metrics are created equal. And so, for us, when we really look at driving it, it's basically customer acquisition cost, cogs, and some sort of reasonable controls on overtime. Everything else- we've tightened our business so much. We don't sell things that we lose control of. We don't- so those are really the big levers on our business is marginal improvement in cogs and marginal improvement in customer acquisition cost, just have these- I could break our crews silly with overtime to save 500 bucks. But if I get a 1% improvement in cogs, I make $5,000. So we've really been able to focus in on all not all metrics are created equal.
Josh Schultz: Yeah, absolutely. I talk a lot with Reg about, and I try to with other people, but I don't think it normally clicks, but I think you're already there, there's usually only two to three decisions that really matter in your business. And you can focus on optimizing all of these metrics. But as you said, they're not all equal. There's really, I mean, for us, it's molds out- it's mold count, molds produced per day and pricing of those molds, price per mold and mold per day. If you get those two right, you can triple your business.
Jon Matzner: And I actually made that mistake. I mean, I think it's a junior op, somebody who's bought in, they listen to your podcast, and they're like, alright, if it's not measured, it's not managed, alright. And then at the end of the day, you're like, if I pay my crew $24 or $22 or $26, that changes my business by this much. But if I stand up a new customer acquisition channel that's less expensive, I just dropped six points to the bottom line. So, I've learned- Did you read Essentialism? So that really had an effect on me, which is kind of like how slow can I move, and how little can I do and how few levers can I pull to have outsized impacts? Not how quickly are we restocking the fridge? Let's come up with a metric; I want it on my dashboard. So I found that I'm still learning, I'm still on my journey to essentialism in business operations. I'm in my journey, let's say. I’m still learning a lot about it.
Josh Schultz: I think we all are. I think if we have this conversation in a year, you and I are both saying completely different things. Which is crazy because I don't think people realize that, we talk about systems, they think we have like a static view of where we're at. Like I do differently what I did a year ago than what I did at Chess Group than what I did five years before that, like everything I did, I learned, I found four things I didn't like about it, I modified it, I tried that, and just iteration.
Jon Matzner: So my big revelation these days that I figured out was because I do a lot of stuff with overseas talent, like I'm going to do something bigger with it. I don't know what it is yet. And what I've- and it's the same with systems. But what I've realized is that those are features not benefits to businesses. And systems are the medicine you need to take to add the marginal million dollars in revenue, or offshore is how you break through your limited local labor pool. But that's a means to an end. It's not an end in and of itself. And so every time the company grows, you have to change your systems, change your overseas talent strategy because it's a means to an end. Business systemization isn't an end goal. It's a constant. It's like scaffolding that you constantly are building at new levels. And Wilson talks about an M&A system. Like, that's exactly right. And so I think people- I sometimes mess up my messaging on it because I talk about systems when that's like talking about penicillin. It's like, no, be healthy. Like, that's the- take a month off without your phone ringing. That's what systems enable. And so, I think I've been thinking a lot about my messaging because even something like overseas talent is a means to an end. It's not an end in and of itself. It's a means to an end. So talking about improving systems, that's really how I've been thinking about it a lot.
Josh Schultz: I'm a nerd. So my term that I use is meta systems, systems that will automatically run, build and heal the system so that when I'm gone, the idea and the mindset that I have kind of exists in the ether in the business.
Jon Matzner: I love that. I was listening to a podcast the other day talking about economics, and he was talking about the definition of a constitution is rules about how we make rules. And I thought that was- I was like that's such a cool way to say that. And so it's like what you're talking about, meta systems are systems that create systems or create and heal systems.
Josh Schultz: The problem issue log I see as a meta system. We have a problem, we identify it, we meet on it once a month, we talk about the two or three biggest ones, we try to find a way that will prevent that from happening again without bogging us down. You've now literally without me having to think through oh, that sucked, I don't want to do that again, you've created a way where it should, for the most part, do it on its own, and almost back to your constitution, it gives the flexibility so that you can create that bill of rights that comes on afterwards and keeps adding and amending based on what's happening.
Jon Matzner: And you mentioned something that I think is just a random aside, which we could talk about forever. But I also think about, I've learned through best practices, I treat systems as like one in one out, which is I've seen an overloaded system, overloaded company with systems. And so broadly speaking, because people don't eliminate systems unless you tell them to, so you go, okay, we're layering in a new PO system. But that old way that we used to do metrics, you guys can stop doing that, because we've changed it, and I'll fix it later. So that's another one too, so you don't like accidentally build bureaucracy or something like that.
Josh Schultz: That’s my definition of a corporation is just systems where only 10% of them matter and all the rest are legacy from before. But nobody's gotten rid of them. Nobody knows why they're there. Nobody has the guts to pull them away. They're too far up. There's too much risk. And they just leave them and everybody is overworked, really not much is getting done other than those 10% systems. And it's just a lot of shuffling. That's my definition.
Jon Matzner: I worked for the government. I lived that, which was like, why do we do this? It's like, well, because- so yeah, you and I- I think that that's something, your approach to that and mine as well, I think also it's a secret to good systems, which is it's not just additive. There's a lot of non additive as well.
Josh Schultz: So I have a way to that, I have two ways. But you said one in, one out. How do you in practice, how do you make sure that you're not getting overloaded? Do rebuild every time you implement a new system, whatever that's touching, you're kind of rebuilding at the same time and rethinking?
Jon Matzner: I think that it's like the old Google thing where it's always in beta. I think our systems are not static. I think they're living, breathing, evolving organisms. And organisms eat, and they go to the bathroom. And so, I'll literally come in and just delete stuff and write one Slack that says, hey, we don't have to do that anymore. And I found that that's- and that is a good use of my time because I don't really think, broadly speaking, until things are really stable, that anybody other than me kind of has the judgment to just like hack away at something. Whereas for me, it takes two seconds. I'm like, I really appreciate that you guys are still tagging it like this in CRM, but that was only when we were trying to create a dashboard, and we do that manually now. No need to tag it. So that's really in practice, that is something that I kind of keep myself is the scalpel-ing, the machete-ing.
Josh Schultz: We had two mechanisms that we’re implementing now at CaneKast and we did before. One of them was probably twice a year, we would look at the most burdensome systems and say what on this do we need or not need? And so an example of that for us at Chess Group would have been every time we on boarded a new part. Our parts were for government, they were for aerospace, they were for medical device. We had to look at industry regulations, national regulations, like DFAR, ITAR, all that, we had to look at the company, if they had regulations or requirements, plus the part, the GD and T on the print, the CAD, material specifications. So every time we get apart, we'd say, does the vendor meet everything? Does this meet everything? And so that process to for us to feel comfortable supplying a part got large. And it could very easily get overblown because you have a problem, and all of a sudden, you're like, well, we're going to add this to our onboarding part. And basically so once a year, we would take that, we’d take a few other ones, okay, what on here, this we could technically put in our ERP and automate. This we could put on our supplier request form and whatever they say we will then move over and that'll be all the parts. Just how can we reorganize this and what can we remove, automate? I think it's that thing, automate, delegate, eliminate, kind of like wrap it with data. What don't we even need, what have we been collecting for three years we've never used? Maybe that's something that's good game.
Jon Matzner: That's such a good habit. Like a slash and burn meeting.
Josh Schultz: Because it's we're the ones touching it every day. So we're like, yeah, we're all sick of this form. The second one is when we would touch something, we would rethink it. So oftentimes, for example, a contract review process, we get a new PO, we got to make sure we can make the part correctly and order it and all this. And that contract review, we would make a substantial change to it. We would all have a quick 20 minute meeting, really quick, hey, sidebar, let's run through this. Does this whole thing still make sense? Are you even reading these contract reviews? Are they getting scanned in? Are we storing them right? Should we totally change it? And a lot of times no, but you powwow on it every once in a while, it's like, actually, seven months ago, we started using Trello, that would actually be a much better tool than this literal physical bin system. Why don't we just create a Trello for- because like you said, you're always in beta. You're going to grab knowledge from other places that are, like for you Jotform. At some point, you use Jotform for one thing, and then you're like, wait a minute, we can also use it for- as you touch those systems, Jotform permeates through your organization. But if you're not careful, you could have the Jotform plus the paper version plus whatever.
Jon Matzner: Easiest version in the world of that is we use, for a while, like Google Drive and Dropbox. And we’d just never decide. And so it's like, where was that? And at some point, we're just like, okay, move everything from here over to here. I'm sick of- the other way that we've had fun with that, especially with software and stuff like that, and I read it on Twitter, and we did it and it was awesome, which was we changed all of our credit cards. And we just changed the numbers so that all the auto renews hit, and we had to look at every one. And we're like, we're still getting billed for-? Because it's so easy to lose track of $49 for Trello. And we're like, no, we just do it in Notion now. And so that was actually kind of a nice culling, forest fire burn away garbage exercise. That was a really nice one that we do probably about once a year now.
Josh Schultz: We're probably close to that. It's funny, I just put in a request to ask one of our overseas personnel to download all the expenses for the last 36 months, look for anything that's reoccurred that looks like it's either annual, quarterly, or monthly, put it in a list for me and send it back. So I'm kind of hitting it from a different angle. But some point- Just change it over to the ones I want. So let's shift now, talking about systems. I'm interested because I think you use overseas quite a bit. I think you've got systems for using overseas. I think I was poking at you online about one of them and then realized that you were kind of trying to start something rolling, and so I backed off. But I'm really interested in whatever you're willing to share publicly on kind of what you use them for, how you got there, and anything you want to share that could help us.
Jon Matzner: Yeah, so I'm not actually going to do anything with that thing that you were poking me about. No, no, not at all. I actually, and we could talk about this, I haven't quite figured it out yet. I was talking to somebody about this this morning. So I think because I lived abroad, maybe earlier than other folks, I was pretty comfortable like hiring people from Bangladesh and oh, South Africans and Croatians. And just like because I lived and worked and interacted abroad, it just wasn't that intimidating to me. And so, when I got back to the States, I just kept doing that and realized relatively rapidly I got really good at it. And I think it was driven, it goes into the conversation we just had, but I think that using overseas talent well is like 10% finding the person and 90% having a system for them to succeed in. And so, I respect all these like headhunters and hire somebody for you. But it's like in 30 seconds on Upwork, you can find somebody to pay $6 an hour, if that's really what you're after. But everything else after that doesn't have anything to do with the person. And so I think my systems orientation let me build that muscle and kind of like work it out. And then, if you go back to your E Myth, the goal of a business is to have tasks done by the lowest skilled people possible. And other than automation, which isn't a person, variations of overseas, and I don't just use low cost overseas people, I use everything, but it's just, to me, the target of most core business processes. And so yeah, I've just spent like a million bucks on Upwork, at an average rate of six or seven bucks an hour. I use a whole bunch of other platforms. So that's like a fraction of what I've spent. And I've just learned a ton. And none of it's going to be crazy or intimidating to you, but it is kind of, I would say, unique to the talent pool in a variety of ways.
Josh Schultz: So how do you help them succeed?
Jon Matzner: So you are talking about the overseas folks?
Josh Schultz: Because I'm going to show my hand on something I think that's a little negative, maybe, but I know that a lot of people think of overseas workers as desperate, willing to do anything, I don't even need to try. I'm just going to post this thing, shuffle over a to-do list, and if they don't do it, I'm going to go to the next one. I have not been as abroad as you, but I've lived in China, lived in Mexico, I built a business in one of those countries. These are real people with families that want to have meaning in their life and all that. They don't just want to be a tool there. They're not so desperate, living on dirt floors all the time that they're just like, whatever I can do for you. So I'm fully bought in. However, I don't have the muscle. I've got the teams that I know. I've hired a few others. I'm learning this and I'm hoping to maybe speed up my learning.
Jon Matzner: Yep, so a couple different things. So you hit on I think the first thing, and I'll tell you a funny story about a guy I'm doing some consulting with right now. The first thing is you'll never hear me say the word VA. You'll never hear me talk about like anything other than just a different talent pool. Like ever. Because that's the first thing, if you treat this talent pool as like, oh, just give it to the- and this dismissive, some sort of like paternalistic Rudyard Kipling bullshit, it's not going to work. You have to authentically care about your global workforce. Like, how dare you just care about the Americans. And it's so ridiculous to even say to me, but people have that attitude, and that's probably the first reason they fail. And so, I don't at all. And the people who work for me from overseas know that about me. Like, they can tell that I care, and I want to work with them for 10 years. And so that's the first thing that I think people fuck up, frankly, is they treat it as different than the person who's based in the States. So I'm like that's hilarious to me. It's hilariously wrong. That's the first thing. And I'll give you a funny example of that. I'm working with this painting company. His name's Michael, big painting company. I helped him hire his first overseas person in the system. And today, her name is Erna, she's giving a presentation to his whole company, he’s got like 60 people who work for him, about what life is like in the Philippines, how to- like what her role is going to be in the company, so that these folks who live in Ohio can see and it's like- and she's giving a presentation. And that's an example of doing it right. Not like, oh, just give the data entry to the- He's like integrating her in his company. And it's really, really smart. And he's doing it today, actually. He's going to send me some pictures. So that's the second one. The third one I think is it's going to be more work before it's less work. So the reason you're hiring from a global talent pool, I mean, there's a lot of reasons to do it, but a lot of it is you're too busy. You're going to get busier before you get less busy. Right there, if you just buy into that, like, no, but why do I have to talk- you have to talk to your person every day until they're set up to succeed, or you have to have such a locked in system that they can hit the ground running. But chances are that you're going to need to talk to them a lot, you're going to need to do one on ones with them, you're going to need to- I mean, there's a million tactical things that we could talk about. But the bedrocks of it are don't treat it as any different than anybody else who works for you, make sure that they're set up to succeed in the form of onboarding and support and point of contact, and recognize that it's going to be more work before it's less work. Now, once you've built the muscle, then it becomes incredibly easy. Like I now have, like Vinci who's my all star, I talk about her all the time, I've worked with her for six years, she started as like a very, very basic assistant. And now, she ran all of our crews. She's now coming into this other business-in-a-box thing with us. She's incredible. And she now hires other folks from overseas. And so once you've built the muscle and taught that and proliferated it within your company, you'll never go back.
Josh Schultz: So I'm going to share really quick what we've done. And maybe you can help me with some holes. We can do a quick live consult here. How's that sound? So I've got two from the Philippines, I’ve got one in Mexico. I know Mexico well, that talent pool. We talk all the time. We go out to dinner when I go down there and stuff. Philippines I haven't been to yet. And this is fairly new for me. So I wanted them to understand things, so I created this big page, which starts with a video from me, welcome to CaneKast, excited, whatever, here's part of the team, here's who to reach out to, here's a video on what we do, and I found a really short YouTube video on sand casting, here's some of the pictures of products we make, here's some of the customers websites. Just they're not here, so I want them to understand what they're involved in. Here's a list of what we expect from you, and here's some of the freedoms you get. You can work async after the first 90 days and etc. Here's the four tools we use, and here's how we use them. So they take a day or two and go through that. That's all, like you said, you get busier before you get whatever. I've been trying to create this as I've thought of it. I'm a systems guy. So when they say, what do you do, I'm not just going to tell them what we do, I'm going to be like, oh, I'm going to answer this question once and for all so that they all know what we do.
Jon Matzner: Yeah, same thing. Yeah, basic system stuff.
Josh Schultz: Yeah. And so now I'm on the point where they're learning. I'm having them help me write documentation, and they're actually amazing at it. Everything you learn, document. I'm seeing updates every day in documentation. They're on our Slack channel, so I chat with them probably daily. And I've been doing calls with them once a week more just to touch base, see a face, it’s a video call. I feel like that’s not scalable, though, because it's taking a lot of time. I know upfront, it's going to be useful. So my question is, that's our entire system for overseas, besides our recruiting. Our recruiting is a whole different thing. But we have that. I feel like it's not scalable. I feel like they're not bought in enough. What are the big things I'm missing that I could do better to help them be more part of CaneKast?
Jon Matzner: So I think, for me, it's stuff, I'm going to tell you stuff that- I'm just going to remind you of stuff that you already know. The first would be, in most organizations, six to ten direct reports is all you can do. Doesn't matter whether they're overseas or not, six to ten before we have to create another layer of a reporting relationship. So, when you're talking about scaling, it becomes pretty obvious you need a team lead. The team lead works for you, and the team lead does the weekly one on ones, the onboarding, the basic BS questions. You need to create a little bit of a hierarchy. And I do that all the time, which is, hey, four people, who's the best? Austin, you are the team lead, you get another couple bucks an hour. And I work directly with you. But here's my expectations for what you need to do with your direct reports. And in a lot of cases, they even end up hiring their direct reports. Like, hey, go find me four people, here's the budget for the position, here's what they need to do. Build your team. So that would probably be my biggest one, which is, your right, you directly supervising more than a certain number of people, because I imagine you have other responsibilities too, your number might not be seven, you might your number might be two, which is you need to look for a team lead right off the rip and then work with them to help you build the second cadre. That’d probably be my biggest thought.
Josh Schultz: Okay, yeah, that's actually huge. Because like you said, I'm already missing meetings because I'm getting pulled in all the different plants and other issues. And I do have team leads in probably four of the six areas, not overseas related. I do not have anything related to what we call-
Jon Matzner: That's what I'm saying. I'm just reminding you of stuff you already know. Like, you would never directly supervise 12 manufacturers.
Josh Schultz: Maybe I don't know because I'm trying to right now with the overseas thing. No, thank you. I think that alone will to be huge. And then obviously, creating that system and that thing, here's what you need to do, here's the things you're responsible to the overseas team to get them bought in. I love the presentation idea, too. I love the idea of having at least one live thing where the whole company sees them, they see the whole company, there’s interaction. Hi, my name, for us, it's Katrina and Dennis.
Jon Matzner: Definitely for me, the split is between like Upwork I won't do that with. Upwork is usually for like gigs, one, two week thing, coders. Those are essentially contractors. But if I'm directly hiring somebody, then after two weeks of, so that I know they're not going to quit on the third day, but after two weeks, now they need to kind of hop into your leadership team meeting, hey, everybody, just wanted to introduce you to Beth. Beth is our new junior accountant. She's going to be working directly with Bob, our senior accountant. She's on Slack. Here are her work hours. She crosses over with us for four hours a day. Some of you will be working with her directly, others not. But when you see that name, you now know Beth. Beth, say hi. Tell us about your kids. Just like normal business stuff.
Josh Schultz: I like that. I did that, not as smooth though. And I've had trouble getting people to trust them. And I'm being this go-between between director of ops between controller between Katrina, who is very capable. I've given her almost no direction, asked five things, she did it almost perfect. So she's obviously very talented, very equipped. I don't think I've done a great job connecting. I did kind of what you said, but just in like a message that invited her in. So I love that idea as well.
Jon Matzner: I'll just give you an example of that. I had an assistant who I hired who still works for me who’s great. The first job she did was write her job description. She found a job contract, she wrote the description. She was like, hey, do I have a job description? I was like, you write it. And just like that muscle of delegation and using this talent pool is wonderful. Like, hey, how do I do this? I'm like, do some Googling and then create a process and stick it in Notion. So, once you learn that kind of like muscle, it's hard to put it back in the barn, and I do it pretty aggressively.
Josh Schultz: You reminded me of, I was at the end of a long week. This is going back a few years, and I was pretty angry, I guess is a good way to put it, snippy or whatever. And somebody came up to me and asked me a question, how do you do this? And I said, I don't know. And they said, well, you're supposed to know, and this and that. And I said, you know what the difference between you and I is, I'm actually going to go back to my desk and Google and figure it out. You're just going to go around and keep asking people. And I regretted saying it, but you just made that thing about go Google it. I do that. I just did it for a huge thing that we’re supposed to be doing. And I told- they’re like, how did you put this together? I said, like Googled five examples, took what I liked from each one, put them together into one. And that's what I have here. I had no prior training, never done this before. Welcome to the amazing age of the internet.
Jon Matzner: There's a site, it's like the initials of the site are let me Google that for you. And I'll send that link to people like crazy. Like, Hey, what is this- it's like LMGTFY, or whatever it is. And it literally just sends them to Google. I'm like, no, no, oh, yeah. It's on LMGFTY, if and if they go to it, it just sends them to Google and they get the message, like don't be bugging me about stuff you can Google. It's a great trick. I keep it stickied on my desktop. So yeah, I think the- I'll just maybe for people who aren't as familiar, but I genuinely believe this. I haven't figured out what the hell I want to do with it yet. But the end of Moneyball, the owner of the Boston Red Sox talks to Billy Beane, who was Brad Pitt's character. He says, when they're talking about sabermetrics in Moneyball, he says any team that's not rebuilding their entire team in the image of your process is going to be a dinosaur soon. And I think that in the next 20 years, small businesses that aren't rebuilding the way they do it to take advantage of this talent pool are going to get out competed and beat because when you can have a full time accountant who makes six times their national median wage, has a Masters, who works for you full time for $1,500 a month, that is a weapon. And everybody's happy, the consumer’s happy, the employee’s happy, the company is happy, everybody's happy. And if you don't realize how much of a shift change that represents, that a florist shop can leverage a global talent pool now, I think you're a dinosaur. So, that's my wake up call to people, is I think you're going to be a dinosaur, you're going to get out competed.
Josh Schultz: Yeah, I think there's two things- what you just said, using global talent, and two, the no code just because you can build specific tools that are better than off the shelf without knowing code in less than a few days.
Jon Matzner: We've done that. We use a ton of no code. All of our procedures are in a installer app that we created in Jotform that's no code. So every single thing is in an app on their phone.
Josh Schultz: Yeah, we use Glide Apps. I think you and I went back and forth on this a while back, but we use Glide Apps. And now we have an app that's on everybody's phone in our plants. And the part is documented, the pattern, there's a picture of it, you can update the pour temp you do, if it's slow. And now we have a guy who we have as our first management trainee. And that's one of his jobs – every Friday, he documents all the parts being made. I just saw his recent work yesterday, which is great, because he's like, if you had these extra fields and this and if I could check this box, and if I had these choices, it'd be faster. And I literally wrote him back 10 minutes later, I go, done. He goes, what do you mean it's done? I go, check your phone. It's no code. I literally just went in-
Jon Matzner: You drag and drop it, link a database, and off you go.
Josh Schultz: The iteration cycle is crazy fast, which means you're just going. And he had gone back and updated all the parts by the end of the day. And 10 years ago, that is two weeks for testing to get it written into the software, got to get a launch period and literally with-
Jon Matzner: 20 grand to somebody who's going to give you benchmark and now you're just like, literally while you're talking, like you want to change it now, man, hang tight. I love that. Yeah, I'm a big no code guy too.
Josh Schultz: Yeah. So that overseas, I say global talent. And another thing is, I have not visited the Philippines but I have visited Mexico, and I know that my, I call her my friend now because we're pretty tight, me and her husband as well, she’s worked with me since 2015 or 2016. So we've got a lot of years together, three different businesses together. And she's got a brand new house or was at one point. She upgraded, moved to a better neighborhood, got a much larger house in a gated community. I mean, this isn't- you're not paying people- I mean, we pay above market for where they are, but it's below market here. So they win, we win. Like you said, customer wins. She's happier, safer, better off than ever.
Jon Matzner: She's middle to upper middle class with this position. So, I'm done, like I wrote about this the other week, like I'm done being defensive. Like come at me and just tell me that you think this person's life is worth more than this one because that's what you're saying. Because this person is crushing it, is happy, is supporting their uncle, aunt, and grandma. And you're saying that that's not relevant. So, full time, I was talking to somebody who works with me in the Philippines, a full time live in nanny who cooks and cleans who lives with you in the Philippines is $100 a month. So purchasing power parity, man, economics 101. Understand how money can be used in different geographies. So if you want to understand what your $1000 or $1,500 a month on the low end of Philippines does, they have people who work for them full time with that comfortably.
Josh Schultz: Yeah, Miriam's got- my other guy, Jorge. Jorge had two nannies when we were- all he had to do is worry about sales all day. They understand leverage more than we do sometimes. Back to running the garage business here. I guess we've been on it the whole time. But circling back, what are the cadences you use? How often are you doing important meetings, reports? Who's sending to what? Are there emails and Slack? How are you keeping the information flowing and updating?
Jon Matzner: So I don't run the garage upgrade business in Southern California anymore. I have a CEO. So I can tell you, and I turned it over maybe six months ago. So I can tell you, well, I can give you a couple different answers, which is me who still owns it, how I get my information, or where I kept my cadences when I was running it.
Josh Schultz: When you were running it because at the end, we'll talk about turning this into the generalized affiliate and that into the generalized business.
Jon Matzner: So yeah, I have to think back a little bit. Yes, it’s a little while. But on the numbers that really matter, it was basically like live. So our lead gen spend, every single day, I wanted to know what that was. Because if you're off the ball for one second, you lose five grand because with the amount of money we spend.
Josh Schultz: Was that being auto emailed to you or somebody was gathering it and getting it to you?
Jon Matzner: I have or had a business analyst whose full time job was just grabbing messy data from places. I tried to automate it. I spent like 50 grand trying to freaking automate it. And I ended up writing the whole thing off because, oh, that lead doesn't come into CRM, and it's not tagged the right way. So it kills the visualization. I'm like, why don't I just get a full time business analyst from overseas, and they'll just have it be perfect, formatted. So, that's what I did. And it was a mistake. That's actually a good lesson learned, which is I was a little too clever with automation. So I was like, it's okay, we can sync it, and the graph will look right, and it never looked right. And I would just go audit the data. And I'd be like, guys, this is wrong. And so I just learned, I had a person to it. So yeah, that stuff was just getting pushed to me in a very standardized form with kind of annexes attached to it. So, I would look at like what the real stuff was. But then if I wanted to refer to kind of like per channel data or those kinds of things, those were kind of available to me, but not hitting me in the face. Cog stuff, probably like weekly cadences with the team leads.
Josh Schultz: So you had weekly meetings with your team leads?
Jon Matzner: Yeah. And they were expected to come armed with the numbers that I wanted. And then they were also input into the kind of like broad based company health dashboard stuff.
Josh Schultz: How did they get their numbers, they had access to the ERP, the accounting? Like what did they have access to or not have access to?
Jon Matzner: They have access to everything. I mean, we're pretty, almost top to bottom, entirely transparent, so people can see how much we're making, what we're selling. And so, yeah, like our sales person saw every dollar that came in, he was in QuickBooks. The team lead for sales folks up to the second knew who'd swipe their credit card and who hadn’t, and then he would just compile that into a format that I wanted. So yeah, I guess I've alternated historically between automations and humans. And I've learned, at least until we're at a size and predictability where everything's stable. We were growing so fast that by the time we built something, it broke. We switched our CRM like twice in the first 12 months. I just learned until it's like super, super stable, I'm not going to try to automate analytics. It's too hard.
Josh Schultz: What do you use? You mentioned Jotform. You mentioned magicroom, or magicplan. What do you use for accounting? You said QuickBooks Online.
Jon Matzner: Quickbooks online.
Josh Schultz: What about CRM?
Jon Matzner: We use Zoho. I've used a million CRMs. I like Active Campaign a lot. We couldn't use it for this business because we didn't do attach stuff. And they don't have, at least historically, they didn't have that functionality.
Josh Schultz: You do a lot of outbound stuff and Zoho does that too, the email?
Jon Matzner: I mean, we do a little bit of email marketing. I mean, I haven't really found a CRM, they're all- I plug my nose and just pick one. I haven't found one that I'm like obsessed with. They're all too expensive. I've really let my pendulum swing the other way because I've just been so disappointed with so many different SaaS products, whether it's automated texting or whatever, I've really like- I've come to realize that the VC backed boom, every dweeb with an idea gets a seed startup to service SMBs. And I buy it, and I'm like this is terrible. No, I don't want to use your text message software as my CRM. And now I need to manually move it over because they don't have open API. And now I'm just like so pissed in general with anything that doesn't have like wide open API. Because you're just going to try to keep me in your world, and I don't want to be in your world.
Josh Schultz: It's funny, so we have CRM. I've used Insightly. I've used Salesforce. I've used Pipedrive in the past. Pipedrive is probably my favorite actual CRM product. But what I found was with even Pipedrive, really all you- like, nobody records their calls, so you don't get any of the metrics. People just write who the contact is and what the last update is. And that's basically Airtable compound view with comments. Like done, go, next. Like no reason to make this more complicated than it needs to be.
Jon Matzner: Yeah, I've just become, I don't know, I've just gotten burned so many times with small business subscriptions. Like I've just gotten burned. And so now I'm like super cautious before I do anything.
Josh Schultz: You use Notion now with, I think, the affiliate business, but did you use it for the garage business standalone?
Jon Matzner: Yeah. So that was the start of it, which was, I think, fundamentally, I'm super lazy, and I hate repeating myself. And so-
Josh Schultz: You're the laziest ambitious person says your mom.
Jon Matzner: That is my motto. Which is people can't figure out if I'm really motivated and energetic. Or if I'm just like a complete lump on a log, which is I kind of like that. And so the laziest, highly motivated person I've ever met. So Notion, it started as Trainual to try to capture our company's business. And I didn't like Trainual’s user interface and it was just kind of clunky and we weren't using it and stuff. And then I tripped across Notion and just like fell head over heels in love. Because I found that the people on the team were actually like keeping it open during their workday and using it. And I was like that is so much better than something that they do because the boss makes them. They were actually finding it usable and intuitive enough that they were keeping it open. It would be like CRM, Notion, and Slack. And I'm like, okay, we've hit something here. And so, all the stuff that I built at Garage Excell, which is the local Southern California business, I was building because I thought we were going to corporately expand. And it was to keep me sane when we moved to San Francisco, Austin, Las Vegas, Denver. And so, all of that stuff, we're probably talking about the affiliate stuff, was all built for my own usage. It was like, well, if we're going to do 10 million by the end of next year, if we don't have customer service scripts, I'm going to lose my mind. So, I wrote them and stuck them in Notion. And it was, if we don't have x, I'm going to lose my mind. So I built all that stuff for internal usage because I'm so lazy and then ended up just modifying it for what was next. So yeah, all that Notion stuff was originally built for kind of to just be a well run couple million dollar a year company.
Josh Schultz: And you decided to go this different route, this kind of anti franchise model. Do you want to walk through that and then why you decided to do that?
Jon Matzner: Sure, yeah. So found the business, loved the sector, loved the industry, grew, whatever. But these kinds of local service businesses have a very natural radius. And I've talked about this with Peter. Problems when they're 90 minutes away from your central location, and I was talking about this with John Wilson, are really easy to solve, no big deal. But when they're a plane flight away, it just gets harder. Your execution just has to get harder. So, your revenues grow linearly. And your problems grow exponentially and your margins and you need to insert middle management, you're signing more leases, and it's just, especially for certain types of businesses in certain industries. It's different with die casting or whatever, because you have economies of scale. But for this business, there's a very natural radius. So I didn't want to lose my mind expanding corporately because it was just going to be more risk, more butt pain, more whatever. So didn't love that. But I had all these killer systems. I was like- when you buy a small service business, you're not buying assets, you're buying SOPs, experience, methodologies, etc. So, looked really closely at franchising. And when we looked at franchising, we were- I just got like a bad feeling in my stomach. There are some people, some industries, some people in franchising who are awesome and great, but there are a lot of people who aren't. And a lot of different parts of that industry I just didn't love. The top down control, the restrictions, the idea of territories, oh, they're on the wrong side of some imaginary line. You owe me a quarter of a million or else you can’t- like I just didn't like much of that stuff. And then last but not least, cobranding in home improvement is it best neutral and at worst, it's negative. So, Dunkin Donuts, a national brand matters, H&R Block, a national brand matters. Laundromats, there’s no national brand in laundromats. Garage improvement, you want to work with Cleveland Garage Improvement, not Garage National Co headquartered in Austin. And there's a ton of sectors like this. But a lot of the franchises promise a national brand. And so, by stripping out the national brand, we are able to completely comply with federal regulations about franchising, because step one of the test is co branding. And by stripping that out, but still using the awesome part of franchising, which is the SOPs, the playbooks, the shared services, the community of people on the same journey as you, we were able to kind of absorb the good parts of franchising without the weird top down stuff, the territory stuff, etc. So that was where we landed on this kind of affiliate model, this business-in-a-box model, which was give me all the playbooks, the SOPs, the warranty documents, the customer service templates, give me all that stuff. But you don't have to call yourself Garage Excel. Call yourself, our first one was called the Garage Experience. So we gave him hundreds of pages, every high scoring google keyword, all of our contracts, all of our thousands of stock images we use, our sales materials, our training materials, our software build, our installer app, all that stuff that's like the easy button for launching one of these, we just gave him. And so, he's like, look, I got to de-risk the launch and did it for one tenth of the price of a franchise. And it's called the Garage Experience. You would never know it was an affiliate of ours. And I love that. I think that's so cool.
Josh Schultz: What creates the stickiness? He's got the systems, he doesn't care about losing a brand. Like with Dunkin Donuts, you can't leave because you need the Dunkin Donuts name. What creates the stickiness?
Jon Matzner: So we provide in this business-in-a-box, so we've got I think like seven or eight now, which is awesome, it’s so freakin’ cool, all around the country. So we're in Florida, Connecticut. So we provide value in three ways. And we make money in three ways. So, we give this big download of kind of like the encyclopedia of garages, which is essentially Notion. It's everything you could possibly need. And it's all that stuff, learned from blood, sweat, and tears. So that's the first part. And we charge I think like 19Gs for it. Then we have a bunch of optional contract based shared services. So they're completely voluntary, but it's things like if you want us to answer your phone for you, we have economies of scale, I can hire one person to answer three different affiliates phones. You each pay me 1500 bucks a month. I make some money, and you don't have to worry about your phone being answered, but specifically to our sector, so they know how to deal with garage questions and crap. It's on a call center. You want our software build, we just basically double what magicplan charges us and sell it. So all these- but they're all voluntary. So, it's not like franchises in like Quiznos where they make you buy their bread, and then private equity buys them and the product goes to crap. If we ever do a bad job, cancel it. And then the last one is the most important but the hardest to quantify, which is this kind of ongoing community of support. So, in six months, they're going to hit some problem when they hit 500Gs in revenue. And they're going to drop into the Slack channel and go, hey, I had an installer who refuses to go- and we're like, yeah, we dealt with that. Here's your two choices. So those are the kind of three ways – it's a community shared, optional shared services, and this upfront kind of encyclopedia, for lack of a better word. So we charge 20 grand up front, the shared services are contract based, and the ongoing for life, we take five points of top line, and that's contractual.
Josh Schultz: Another really cool benefit to both sides, you and them, is as this expands and maybe they suggest a change to the software or a problem comes up with a call center that then gets documented into a new script, that then flows out to every other brand. So it's basically the feedback system is building this bigger and bigger beast that's harder and harder to compete with, which is amazing. Almost worth paying five points just for that.
Jon Matzner: I'll give you something else too. On a voluntary basis, once these guys get rocking and rolling, we're going to negotiate in mass. So we're going to go to our key suppliers and lean on them and say we're going to shop $10 million worth of annual to Amman, the guy in Minnesota, and we're going to say, look, we're not just a $1 million garage. We're part of a voluntary buyer group. We can send you $10 million in garage cabinet business, but you’ve got to give me 10 points off what you're going to charge me. So we can negotiate in mass. So there's all these really synergistic benefits to being in a community of people in the same industry. And for us, it's great because it lets us grow, we don't have to control these guys. And we've got exposure to their success in a meaningful way. And because it's only 19Gs up front, they understand that I have aligned incentives. I'm not in this to sell 19G. Like our biggest franchise competitor is a quarter of a million dollars up front. And I think our stuff is better. I've seen their stuff, and I'm like our stuff’s better. They're like, wrap your truck. It’s like, thanks, dude. Like, people are taking out second mortgages on their homes to buy a territory. And so, it's a really useful model because everything that we've written down, we learned in pain, in blood, in pain. There's a reason why we make them initial next to that. It's because if they don't initial that, the credit card company on a chargeback will side with them. But if they initial it, they'll side with you. It's like what is that lesson worth? That lessons worth- And so it just was a model to kind of expand kind of like a franchise, but without a lot of the baggage and garbage of saying no, Josh, you're not allowed to do that. You have the Cleveland territory.
Josh Schultz: I'm going to call you out here then. You talked about earlier with Garage Excell specifically SEO, and it sounds like you've gotten into that a lot. I look at the current garage business, and it looks like you haven't done that yet. My guess is you're trying to get a couple on board, get the process down before you scale too much. If I'm right on that, my real question is how long until you're ready to really put the juice behind that, create a different kind of landing page, and start to really spread that business?
Jon Matzner: So because the timing of this I think lines up, I'll talk about it. So Codie Sanchez and I just co founded worldclassbusiness.com. And she's got the biggest mouthpiece in the space.
Josh Schultz: I've come across her.
Jon Matzner: So I'm friends with her and her husband, Chris, and we've done a bunch of stuff together. And so, her mouthpiece is going to be driving to this really cool model. And what we're doing is we're partnering with people like Peter in certain verticals to say, look, Jon doesn't know about the property management business, but Peter does. And we're going to partner with Mark Vlaskamp from The Folde for laundromats because he's been in the trenches of laundromats. And so, when people come to this overarching entity, they're going to be able to say, hey, so what are you into? Oh, well, I'm really into PM, I'm really into garage upgrades, I'm really into laundromats, I'm really into, insert, home tutoring, whatever we think, whatever industries we like. And so that's going to end up being the entity that we're like driving traffic to, etc. is that kind of overarching entity.
Josh Schultz: Gotcha. I love it. We are running out of time here. But I know, one, I'm super glad we just talked. I think we both hit, or I should say you hit on a lot of notes that resonated with me. Two, based on this, I'm coming to San Diego much sooner than I originally thought, so we can hang out, have fun, talk business, but also just hang out a little bit. And three, I think we're going to have to do an official one of these again. So I do two versions of this – one, a deep dive on your ops, which is what we just did, and then, two, Ops Talk where we just talk about our operations together as a convo. I think you and I should definitely do an Ops Talk in a few months or a month or so. And just whenever the current problems hitting. I'm always hitting problems.
Jon Matzner: I have so many I can't count.
Josh Schultz: Well, thank you so much for coming on, Jon. I really appreciate you diving into it all and opening up kind of the inside of what's been going on. I love the way you think. I wrote down a bunch of stuff to look into. Humanocracy I'm going to go check out. And anything else you want to mention before jumping off?
Jon Matzner: No, man. It's awesome to talk shop, Josh.
Josh Schultz: Yeah, thanks. Have a nice day, man.
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