64 | The Hidden Costs of Hiring Technicians with Guest Co-Host Kristen Deese the Virtual CFO of the Trades

Running a home service business is hard. So how is it that some people make it look so easy? Well, we'll tell you. This is the Freedom Blueprint Podcast. It's always good to hear the wins that successful contractors have. But have you ever thought that the best advice would be to hear about the speed bumps they encountered?

the mistakes they've made along the way. We're going to talk about the good, the bad and the ugly. We want you to be successful and avoid the mistakes others have made. Let's get this party started. to the Freedom Blueprint podcast. Now your host, Justin Dees. Welcome to Freedom Blueprint podcast. Today, I have a special guest who really is kind of becoming a co-host, whether she knows it or not. My amazing wife.

Kristen and we're actually hanging out in the farm on the farm, not in the farm, hanging out on the farm today. And I don't know, we just thought, hey, this would be a really cool topic to talk about. we'll fill you in on what that is in a minute, but good morning. Good morning. I think if we call it guest co-host, then it's not, I don't have to commit to it. I'm writing that down, guest co-host. Yeah, so.

At the farm, you have you told everybody about what the farm is yet? I don't think so. I don't don't think I've really talked too much about the farm. So the farm. So there's a movement across the country of folks moving from the suburban neighborhoods out into where you can have a little bit more space. What I was thinking about this morning, though, is a lot of the people who are doing this are about 15 or so years younger than we are right now.

So we might be a bit behind the curve, but that's okay. It doesn't matter. Which is odd. We're normally not behind the curve. So we are in the process of making a transition from, well, one, we're kind of downsizing the house a little bit because we're about to be empty nesters. Like only a few more months and then we're officially empty nesters. So we're downsizing the house just a bit, but we're going from a half an acre to 14 acres. So much more grass to cut. my gosh. So much more grass to cut. It's insane.

But we are not up here full time yet. We just come up on the weekends and stuff. And part of the reason that we're not here full time is because in order for to be here full time, you need a workspace that's not in the house. We do, because apparently I'm loud when I'm on the phone or recording. Yes. Apparently I dominate. You dominate. So you need to have your own space, which you have your own space at the house we're coming from too, which is fantastic.

So your new office is getting delivered today. So we are up here excitedly anticipating the delivery of your man shed. Yep. I can't wait. When we were talking to our kid, we were FaceTiming Zach a couple of weeks ago, who's in the Marine Corps in North Carolina. And we were telling him about how, you know, we got it ordered and we are excited and this is what color it is and everything. And we called it the man shed and he goes, mansion? Are you building a mansion? And we're like, no, man.

shed. And he's like, okay. And so since then, it's been dubbed the mansion. Which is interesting because the one we had built at the other house, they built it on site. They, they built it right there. And this one's actually a little bit bigger than the one we have there. And there's a certain design you wanted it, you wanted to match the house, you know, you had some criteria. like, I just need space. So that's my criteria. But so we found somebody to build it and turns out they build it.

off-site and bring it here. Now this is a... Is it 16? 12 by 32. Yeah. But anyways, I didn't know that you could deliver such The 32 thing, which I mean, if you think about it, our camper is around that length. I guess that's true. But so it's going to come on a tractor trailer bed, I guess, and then have some fancy little...

drivable machine that's going to place it. this is not only one guy does it by himself. Yeah. And this is not flat terrain. Like they've got to come downhill and around a corner and whatever. So I'm tempted to set up a time lapse on the porch and we're totally going to have the video watch because it's going to be pretty cool. but anyway, so yeah, I, I dictated what the outside needed to look like and then you can do whatever you want on the inside. Cause the outside's what I have to look at.

Yeah, so we'll have some pictures, I'm sure on social media. I'm sure we're, if you're listening, we're friends on social media and if not, we should be. So come find us on social media and all the social and all the show notes we'll have how to connect with us. And you can see the delivery of the man shed starting to happen. And that'll be the new podcast studio, which is pretty cool. The other one was a shop first and then it was converted into a studio.

So there's a little bit of challenges that happen there where this one is designed, the inside of it is designed to be a studio. So it's all, it's already gonna be spray foamed and all the electricals already where it's supposed to be. So I'm pretty pumped. I might be right before. Can you tell he's excited? Yeah, it's, it's a, yeah, it's like right before, actually it is right before Christmas. And I feel like Christmas morning as a kid, can't wait. So yeah, it's gonna be awesome. cool. So, so yeah, they didn't.

They didn't come to hear us talk about our mansion, but. But aren't they glad they did that. But let's talk about our topic. So our topic for today, we're going to talk about the cost of hiring a tech. Now, some episodes ago, we did talk in general about a cost of a hire and kind of a cost of a bad hire. We had an episode on that. But this one is going to be specifically about the cost of a hiring of a technician, because that does.

come up a lot. Before we get into that, little bit of scroll. I love your coffee cup. My coffee cup says in case of emergency, ask Justin. Hashtag source. What is this? A hashtag source of all sorts of all the wisdom. was a little too close. I couldn't see it. That is a really cool coffee cup. Yeah, it's metal or tin. A off track there, but it's okay. Cost of hiring a technician. I know in our

industry, industries, that's obviously a big thing. And a lot of times people go, I got to hire more techs. And they don't really put any thought into what the process looks like. So I think that you're very good at this topic and can kind of walk us through that process and what it looks like and all the good stuff. Yeah, I've had a few questions lately about how much capital somebody needs to have.

kind of ready or expect to spend in order to bring that new person on because especially from the technician standpoint, you have that period of time where they are not a revenue generator. They will be eventually, but they're not yet. And so it costs money to make money, right? That's the same thing that you would always tell me every time you wanted to spend money. And I was like,

No, I don't want to spend money. And you're like, costs money to make money. It's my go-to. If I want to buy something, then you shut me down. Cost money, make money, babe. You're how does the new side-by-side make money? Cause it does. Cause it does. Posi-track on a planet. That's right. So, so I worked this through with this for the couple of clients recently of how do we actually put a dollar amount on what it costs to

bring on a new technician in that time period between when you hire them and when they're actually out there generating revenue. So really it's literally a list. I did an Excel because I like Excel, but you could do it on a of scratch paper just to start laying stuff out. But there's all kinds of things to think about beyond just their hourly rate while they're working. So before we dive into that, at the end of the episode,

We'll give your email address and if somebody would like a copy of that spreadsheet, they can send you an email. Fair? Yes. Is there another way you would like to do that? No, that's fine. It'll be a minute till that form is ready because it's... To disseminate. Okay. But yes, that's totally fine. I like it. People like free stuff. I know they do. So do I. So some of the... Here's a couple of the things that we came up with when we were working through this on a client activity. One was the...

time put into the onboarding of the people who are already on your team. So if you have your HR person or your direct supervisor is spending three hours doing onboarding and paperwork and all that kind of stuff with your new hire, then you would count those hours or dollars towards the cost of hiring a technician.

The cost of uniforms, we have to uniform the guy or gal. So the cost of getting their first set of uniforms to them. If your company is one that provides hand tools, some companies, they want their technicians to come with their own hand tools. And I understand why, because a lot of times technicians will take more better care of the tools and where they are if they had to purchase them themselves.

I know that when we first started, when we first were getting started, we provided hand tools and very quickly we stopped. Yeah, because it's like they would leave, leave them on the job site man, I can't find my screwdrivers, I just bought. Well, cool, go buy more. But you also have business owners who want that uniformity. They want to make sure that, you know, they're using the proper tool. That was actually a big argument, not argument, but a big reason why the one company that I was talking to

provided the tools because he's like, I don't want them using the wrong tool to get something done because they didn't, you whatever. So putting a dollar amount on the hand tools that you provide if you provide them. Well, it's so I would say this as you're doing because I do think that you should have a tool list. So you should have a list of tools that are and there's a difference between hand tools and specialty tools. Like from a plumbing company's perspective, a hand tool is not

cell phones or tablets if you're providing them so that they can get into the software or even if they're not using it for software purposes if you're providing them any technology. the initial cost if there is one and then any whatever the monthly cost would be.

And then of course we have the big one which is their payroll, that new person's, that new tech's payroll. So we would be looking at the dollar amount that they make as a base and then we would also be calculating if we anticipate they would get any overtime during their training period. So in this particular example, we figured about four or five hours a week in overtime.

We figured about four or five weeks, four or five hours a week in overtime. And this particular example, we did $25 an hour. So $25 an hour with a couple of hours each week of overtime, it comes out to $9,500 a month in just those wages to that technician. How long, and you may have already said this and I may have totally missed it. How long are you factoring in your onboarding or have you said that yet? Their training period or?

Not yet. Okay. We'll get there. I'm taking good notes. So you have your wages and then the payroll taxes that go along with it. I want to say they're a little over 7 % for the employer side of it. So we figure that in that was about $750. And then the workers comp because workers comp for technicians is significantly higher than it is for admin people. So when we look at how much it's costing us to have that person, especially during the training period,

we can factor in that workers comp cost too. Each industry, it's going to be slightly different in the rates and stuff, but for sure, it's going to be higher than administrative people. So when we came down with that, actually, I gave you a wrong number. The technician wages is actually about $47.50 a month.

So this particular example, we were considering the training period being eight weeks or two months. Okay. Okay. This particular industry, they can get their technicians up and going in a pretty quick period of time. I also realized that there are certain states and licensing that requires apprentices to be apprentices for an extremely long amount of time. And we are not talking about those situations here. Like you're talking about the state of Alabama. I want to say

There's a lot of states There's a lot of states that are like this. So we're not talking about those situations. We're talking about the ones where you can get somebody up and going and, know, lots. And there's also a difference between hiring an apprentice tech and hiring an experienced tech. Yes. And I think a lot of times where companies get a little bit sideways on this is sometimes they'll do a really good job of onboarding apprentice style technicians. But then a experience, and I'm air quoting here because

you should always trust but verify. And I think a lot of times when we're hiring, it's almost out of desperation. like, my gosh, somebody quit, I need to hire another person. Somebody walks in the door like, yep, I know your software, I know what to do, I'm amazing. You're like, my gosh, I can't wait, you're amazing. Here's your truck, here's the keys, go with it. And that's so, bad for not only that business, but for our industry as a whole.

But so I think whatever you've got is an onboarding. And again, we can talk about onboarding is a whole different topic, but whatever you have from a cost perspective, even if you're listening and you're like two months is not how long I need, this is just an example. you come up with your own, it's your business, you can do it however you want. It's a beautiful, thing about it. But whatever timeframe you feel like is how long it takes to get someone in a truck generating revenue for you.

whatever that looks like, you do the same process, whether they've got 20 years experience or two days experience, but you trust but verify. So maybe two months is what you do for this type of technician, but somebody comes in and they know everything, make sure that you can verify that before you just put them in a vehicle and have them roll with it. Absolutely. So when we talk about these, like this training program, so in this example, they're figuring eight weeks. So they're figuring the cost.

of what it will cost to the company over that eight week period to be $12,700. So $12,700 is the cash that they have to have ready when they hire a new technician to get them up and going in those first two months. Now, and that doesn't include vehicle material. So that does that does not include that's that assumes that you already have a vehicle that's stocked and ready to go for them to jump into.

Now, if you need to add a vehicle and well, if you need to start from scratch and wrap and shelve it and then you need to fill it with material, that obviously is going to be a little bit of a different expense there. we're talking about just we're assuming in this situation that you already have the van ready to go. Maybe you're replacing somebody. So it's not necessarily a beer upgrade. Maybe you're upgrading. Maybe it's upgrade season. So then the then the the.

thought process comes up of, well, what happens if they're not ready to go on their own yet at the end of your eight week time period when you've done your cost estimation? So there's two train of thoughts there. One, if your technician isn't ready to go at the end of your training period, maybe they aren't a good technician, right? Or maybe they just need a little bit more help and they're not totally fully ready to go out on their own yet, that's okay. We have...

on our list of costs that we identified earlier, onboarding hours, uniform, hand tools, cell phone, wages, all that kind of stuff. Some of them are one-time initial expenses and some of them are ongoing. So of the things that we listed, the ones that are ongoing, cell phone, wages, payroll, taxes, workers comp, comes in at about $5,500 a month. So each month moving forward that that technician is in training, air quote,

It's $5,500 a month in cost to the company. And that's based on what hourly did you use? $25 an hour. Now, it would be reasonable to say, or this would be my goal if it was my business, right? My goal is I would want to teach the technician, especially a newbie, some of the easiest jobs that can be taught and some of the most common ones that you guys are running. And then...

They can start running those simple, easy jobs on like a part-time basis enough to at least cover their cost of $5,500 a month. And then you can use that additional time beyond that to continue the training process. But now at the end of your training period, they're at least covering generating enough revenue to cover their cost. Yeah. think, I think a lot of owners and leaders in our industry, they get jammed up on.

how long it takes to get a technician out there. Or that the technician has to know every single thing before they can go. Right, and the truth is, if you look at the calls that you run, and it doesn't matter what industry you're in, there's a good chance that 80 % of your calls are gonna be kind of very basic. And it's that 20%, which is the next level of the difficulty in whatever trade that you do. And I think...

when we're onboarding someone, especially someone that's newer, focus on that 80%. You know, the 80-20 rule is a real thing. If you haven't heard of it, Google it. There's all kinds of resources out there. I know when we were really starting to grow our first plumbing company, I was getting frustrated with, no offense to plumbers, but I was getting frustrated at the experienced technicians that were coming in.

And I remember going into the leadership team and going, all right, so we got a plan, never hiring another experienced plumber ever. the look on everybody's face was like, you have lost your mind. I'm like, but wait, there's more. But I had been building a training plan of what was our 80 % of our calls. And really when I did all that research and I started working, it was six things from the plumbing side. I mean, it was drain cleaning, it was garbage disposals, it was toilets. And I started thinking,

If I spend one solid day in a training room with a technician talking about toilets, at the end of that one day, if that person couldn't do everything needed for a toilet, they probably need to find another job. So now instead of running this course for six, eight, 10, 12 weeks, I mean, there's a lot of people that we would bring in and it was easy to trust but verify. I will tell you, we do higher experience.

It was up, you know, sometimes you have those moments of frustration. You're like, never are we doing this again? That was my moment. But the good that came out of that was I did build a really awesome training program for technicians and it was a six week program to bring to, and that was to bring apprentice techs in and have them being a revenue generator. And at that time, zero to six weeks, our goal was, I think it was like 32, five, $32,500 a month in, in revenue goals that we had for those.

the ones that made it past the six weeks, they were doing that. And we probably went through.

we'll call it more than a dozen, because I would bring in 10 people at a time and just train them. if, you know, every morning, if you're in a classroom and I know if you show up on time, I know what you look like, I know what your attitude is. I know if you smell like last night or Paul Maul's from the parking lot and all those good things. So, yeah, definitely be intentional with your training and your onboarding. Well, and when you can tie an actual dollar amount, like an actual specific

pretty accurate dollar amount to every week or month that that person is on the payroll. And you, it sounds almost like Grand Theft Auto, where there's like a dollar sign on top of their head when they're walking around. But when you look at that person and you're like, why am I paying for this? Like, look at what it's costing me, why am I paying for this? Sometimes it will allow you to look at the yellow flags that you're seeing and actually be like, okay.

this is not gonna be a good fit. This is costing the company $12,000. Is this $12,000 a good investment or do I need to invest this $12,000 somewhere else? So in the scenario you were given, what was the monthly burn rate for an in-training technician based on $25 an hour? Not including those initial costs. Yeah, just after all that's It was about $5,500. Okay, about $5,500.

So yeah, so and then we didn't like there's a lot of I'm sure that a lot of people that are listening use service Titan that did not count the service Titan or any software. And the reason that we didn't count in this experience or this example is because this particular client didn't turn them on to the mobile version, didn't make them a managed tech until they were out on their own. So the training period for them wasn't. But if if part of your training period is teaching them how to use service Titan, then you might have to turn it on earlier. Right. If they're going to be if they're going to be a right.

generating tech that does need. Right. So let's just, let's say 6,500. Let's say. Yeah. There's some other ancillary things that whatever, let's say 6,500 bucks. Now, when you have that technician, that new technician coming in each month that they're in training after that initial month, you have to ask yourself, am I willing to invest $6,500 in this technician for three months, three more additional months to get.

To get what I'm to get to get an ROI. Right. Yep. Yep. And that's and that's only if they make twenty five dollars an hour. And there's a lot of a lot of parts of the a lot of the country that is now even starting techs are higher than that. Right. The minimum wage across the country is is just continues to go up and up and up, which is that's part of and that's part of everything. So but yeah, if so, the list, the whole point of this is you fill it in with your

your cost like your line items of the different things that you incur and whatever it cost for you. The idea is that if it doesn't get measured, it doesn't get managed. So if we are able to put a dollar amount on this, then it will hopefully make you more efficient in your one, training period and two, hiring process and weeding out those that maybe shouldn't be on the team.

or sounded good during the interview and then aren't doing so great after they come in. They sounded really good. They answered all the questions the right way and they sounded great and I really just need somebody to run these calls. So truth is too, something you just said about the getting managed and measured and all that kind of good stuff. The truth is if you're not looking, if there is a part of your business that you're not looking at on a regular basis, I just was having this conversation with a group the other day.

and we happen to be talking about booking rate for customer service. And it's funny because the ones, there were some that were like, I feel like we do great. Dude, that is the worst. If you ever catch yourself in your business using terms like, think, I feel, you In terms of your numbers. terms of your numbers. terms of your numbers. Well.

Well, I guess it could be more. example of not? I feel like my employee doesn't do anything. I guess that would be KPI related. 100%. So you're not measuring it. If you're doing KPIs and scorecards and one-to-ones and checking in with your team member on a regular basis, you won't ever have to feel that. No mo. can say, look, here's your scoreboard.

You're either there you're not. And if you're not, got to, you got to step up or step out. Like it's one of the two. So anyways, circling back to the point you were trying to make of you should never have to say, or you shouldn't find yourself saying, I feel like because everything is something that you can measure. And then if you're measuring it, then it's not a feel like it is, or it is not. There's no feeling there. I mean, there might be some emotion arised from the numbers, but. There's emotion when you look at the numbers, you're like, what? But no.

And everybody's setting revenue goals and what they want to do and big, big, hairy, audacious goals. B-hags, b-hags. Which is fantastic. And then their question to me becomes, great, how do I do that now? How do we go from 8 million to 10 million? Or how do we go from 2 million to 5 million? Or whatever the goal is. And so.

My answer is always, I'm glad you asked. There is a formula, there is a way to figure out how many technicians that you need and all the things. There's a handful of variable numbers in there that we can identify, but to be able to calculate that and be able to say with pretty good confidence, you need this number of technicians to get to this revenue goal. So that is gonna be what we talk about next, which.

pretty excited about. I like all this kind of stuff. I love the number side of things. And I love being able to say, when you can make this one little tweak in this one little thing, this one little number, how does it affect 10 steps down the road? You know, when you make one little tweak in your booking rate, or you make one little tweak in your conversion rate, or you bring your average ticket up by 10 bucks, what does that do over a course of a year? That kind of stuff is super exciting. I know everybody's probably like, but I mean, I'm not, I'm not obviously I'm not a numbers.

person and spreadsheet person is not me, but it is pretty exciting to see those little tweaks and those little changes make these giant humongous impacts. And the truth is, is when you're running a business, when it's thriving and excelling and exceeding the expectations that you have, it's fun. And when it's not, it's not fun. So...

part of that as being intentional. And I think that's the challenge a lot of times is that we are in a very difficult business. There's trucks, there's tools, there's parts, there's people, there's all the things. Not to mention that all of our businesses, a technician leaves your building and goes to a customer's home or building or place of business or whatever, but they're leaving. It's not like customers are bringing you their...

HVAC system, their toilet or whatever. So it's just very difficult to kind of wrangle that part in. Talking about it being fun, right? Because it's more fun when the numbers are good, when we're seeing good numbers on it. I will say in like the last, really the last couple of financial reviews that I've done with clients over the last few weeks, it is fun.

It's fun for me when they do well too, because when we go through the numbers and we go through the fun, you know, that we do the financial review and we get all the way down to the bottom and they're pulling 25 % net profit. Heck yeah. That's freaking awesome. I just, it's, it's pretty, it's pretty exciting. And even when they're surprised when they're like, I mean, I thought we did good, but I didn't think we did that good. Like it's, it's pretty cool. So anyways, thank you so much for being a cohost guest cohost. I'll get her to commit at some point.

it worked for, for getting married. I wore you down. did wear me down. You wore me down. So here we are. The ultimate cell. So, anyways, appreciate you guys coming and hanging out with us and, yeah, stay tuned. We're going to, we're going to do some more recording now that we have this new studio, the mansion, the mansion, coming in, hopefully, she'll want to hang out in there more and we can do more of these, these podcasts. So appreciate you guys coming and hanging out and all this information will be in the show notes and.

I'm going to say this too, if you want a copy of that spreadsheet, Kristen's email is Kristen, K R I S T E N at Kristen Dease.com K R I S T E N D E E S E.com. Thanks guys. You've been listening to the Freedom Blueprint Podcast. Information is useless if not applied. So take what you've learned and go and implement it. We hope you enjoyed the show.

If you did, make sure to like, rate and review. We'll be back soon. But in the meantime, find us on social media at Freedom Blueprint for Home Services and hit the website at www.freedomblueprintpodcast.com. See you next time.