Why Cheap Hiring Can Cost More Than a Recruiter — Transcript

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1. 0:00I sell guaranteed deadlines
2. 0:02and show-stopping trade show booths.
3. 0:05Uh it's very
4. 0:07>> deadline? What was it?
5. 0:07>> Like we have guaranteed deadlines on our
6. 0:10cuz it's all event event-based, right?
7. 0:11So
8. 0:12>> Uh-huh.
9. 0:12>> people are hosting events like this. I
10. 0:14have a guaranteed
11. 0:16deadline on when our properties have to
12. 0:18be there.
13. 0:19>> So you'll have a booth that you'll build
14. 0:21for them.
15. 0:21>> Yes, yes.
16. 0:22>> That'll be done by the time.
17. 0:23>> Exactly.
18. 0:24>> Okay. Yes.
19. 0:25>> Including the shipping and all that set
20. 0:27up and what not. So we do A A to Z on
21. 0:29that.
22. 0:30>> Um our revenue is about 10 million right
23. 0:32now. I'd like to be at 20 to 25 million
24. 0:34in 18 to 24 months.
25. 0:37The biggest problem we're having is key
26. 0:39man and manpower. And
27. 0:42I mean it's kind of kind of
28. 0:44same problem, right? I just need to hire
29. 0:46more people to take over the
30. 0:48responsibilities that we have now.
31. 0:50>> Okay.
32. 0:51So what stops you?
33. 0:53>> The biggest thing is
34. 0:56it's it's manpower in general, right?
35. 0:58>> Okay, do you have the money to afford
36. 0:59the manpower?
37. 1:00>> Yes.
38. 1:00>> Okay, what are the margins again?
39. 1:02>> About 30%.
40. 1:03>> Okay, so you're doing three-ish?
41. 1:05>> Three-ish, yeah.
42. 1:05>> Okay, that's not bad. Okay, so you have
43. 1:073 million and what roles are you missing
44. 1:09that you are struggling to fill?
45. 1:11>> A lot a lot of
46. 1:13trade industries like we need welders,
47. 1:14carpenters, stuff like that. And
48. 1:16obviously it's a big commodity right
49. 1:18now, so everyone's paying top dollar for
50. 1:20them.
51. 1:20>> Mhm.
52. 1:21>> And just to get incentive to come work
53. 1:24for us, especially in the in the trade
54. 1:25show industry, it's uh
55. 1:29>> How much do you
56. 1:30How much do you Oops. How much do you
57. 1:32make per
58. 1:34per tradesman roughly for the role that
59. 1:36you're struggling to fill?
60. 1:38Per year, gross profit.
61. 1:39>> Um
62. 1:41it's hard to say one part one part of
63. 1:43department that we just opened and that
64. 1:45it's the welding part, fabrication of
65. 1:48it, metal part.
66. 1:49We've brought in about
67. 1:51probably 750,000 dollars
68. 1:53>> That's what one guy can do in terms of
69. 1:54like what you can sell for his work.
70. 1:56>> Yeah, and that that guy was me. Cuz I'm
71. 1:57I'm the one laser welding and doing all
72. 1:59that kind of thing.
73. 1:59>> Right.
74. 2:00>> [laughter]
75. 2:01>> Okay. So, 750 fine. Let's just say that
76. 2:03they're not as fast as you or as good as
77. 2:04you and they can bring in 500. Does that
78. 2:06sound fair?
79. 2:06>> Yeah.
80. 2:07>> Okay, great. So, 500 But, what about
81. 2:09gross profit though? What would So,
82. 2:11that's revenue. And then is it just
83. 2:13Like, what other costs are there besides
84. 2:14labor?
85. 2:15>> Uh very minimal. I mean, the material I
86. 2:17mean, obviously the the materials to
87. 2:19build it.
88. 2:20>> Is that like a huge Like, what
89. 2:21percentage is that?
90. 2:225%?
91. 2:23>> Probably about 30% total is is the the
92. 2:26material cost of that.
93. 2:27>> Okay.
94. 2:28So, they bring in 500k. So, there's 350k
95. 2:31that'd be left over.
96. 2:33Does that sound right?
97. 2:34Then you Then you have to pay labor out
98. 2:35of this.
99. 2:36>> Yeah.
100. 2:36>> Right. Okay, cool. But, this would be
101. 2:38like whatever
102. 2:39after labor, the rest would be bottom
103. 2:41line.
104. 2:42>> Yeah, a little bit of buildings, rent,
105. 2:44and stuff, but yeah.
106. 2:45>> Yeah, just for just for incremental.
107. 2:47Okay. So, um
108. 2:49And that's per year. Okay, great. So,
109. 2:51what How much How much are you How much
110. 2:54does a welder normally get paid right
111. 2:55now?
112. 2:57>> It can go all the way up to $85 an hour,
113. 2:59depend There There's certificates, and
114. 3:01we're not
115. 3:01>> So, like 180-ish. You can go up to that.
116. 3:04Is that what you're offering?
117. 3:05>> Uh we're offering a non-certified
118. 3:08welder. So, those are
119. 3:09>> How much do those guys get paid?
120. 3:11>> 45 to 65.
121. 3:13>> Okay, 4 What's a big range? But, um
122. 3:15>> Yeah.
123. 3:16>> Okay. Uh so, let's just say 50 bucks an
124. 3:18hour for simple math.
125. 3:19>> Perfect.
126. 3:20>> So, 100 grand a year is what you're
127. 3:21offering, right?
128. 3:23Um What are you paying right now in
129. 3:25order to like in ads to get those
130. 3:28people?
131. 3:29>> We We have I I don't know the exact
132. 3:31number of ads we're paying for, but we
133. 3:33have I have my project managers on
134. 3:35LinkedIn paying for the ads to bring
135. 3:37people in.
136. 3:37>> Okay. So, let's just assume Let's just
137. 3:39get really aggressive here and say that
138. 3:40you pay
139. 3:41180,000 for the Like, if you paid 180,
140. 3:44do you think you'd be able to fill the
141. 3:45slot?
142. 3:46>> Yeah.
143. 3:46>> Okay, great.
144. 3:47Um Oh, let's do 150 so I don't have to
145. 3:49do this math. There we go.
146. 3:51>> [snorts]
147. 3:52>> So, $200,000 in gross profit is what's
148. 3:54on the line, right? And if you paid
149. 3:56this, you know you'd be able to fill the
150. 3:57role.
151. 3:59So, why don't we do that?
152. 4:02The real real question.
153. 4:05>> It's
154. 4:06If I could find someone qualified, I
155. 4:08would pay pay for that, but it's the
156. 4:09part the hardest part is bringing
157. 4:11someone in, training them training them
158. 4:12how to our processes, and then maybe
159. 4:15they're
160. 4:15>> If you advertise this rate, you'd
161. 4:16probably get more qualified guys.
162. 4:18>> Okay.
163. 4:20Okay.
164. 4:20>> So, if you did that and you got a
165. 4:21qualified guy, you'd happily pay him.
166. 4:24>> True, yeah.
167. 4:30It's not a problem solved.
168. 4:31>> [laughter]
169. 4:33>> And don't feel weird about it. I had a a
170. 4:35dentist here like 2 months ago. He was
171. 4:37doing 20 million top line,
172. 4:384.6 million in take home, and he was
173. 4:41like, I have
174. 4:43it's I he has a boutique dentistry, blah
175. 4:44blah blah blah blah, right?
176. 4:46I only have unicorns, etc. etc.
177. 4:49And so, I said, "How much do you make in
178. 4:50gross profit after you pay a dentist
179. 4:53per year?" And he said, "$700,000 in
180. 4:56gross profit is what he makes per
181. 4:57dentist per year in his in his
182. 4:58practice."
183. 5:00And I was like, "Okay." And his issue is
184. 5:02he that's after him paying them, right?
185. 5:04And so, his problem was that he I was
186. 5:07like, "Okay, well, what are you spending
187. 5:08in advertising to go acquire these these
188. 5:10dudes?" And he was like, "I'm spending
189. 5:11$2,500 a month in advertising to get
190. 5:14these dentists, and it's just not
191. 5:16working."
192. 5:17And wild. And so,
193. 5:20I said, "Why don't we just get a head
194. 5:21hunter and pay him a hundred grand to go
195. 5:23find the person? And would you be I
196. 5:26think I said 150 cuz I was being
197. 5:27aggressive.
198. 5:28150 grand per person.
199. 5:30And so, this year your profit's going to
200. 5:32go from 4.6 to 4,
201. 5:34and then next year you'll add 2.8
202. 5:36million in profit to the business. And
203. 5:38if I give you a trade that imagine I
204. 5:40have a stock stock investment where I
205. 5:42said, "Hey,
206. 5:43you give me 600 grand a day, and then
207. 5:45for the rest of your life, you're going
208. 5:47to make 2.8 million in profit per year
209. 5:49on this investment. You'd be like, [ __ ]
210. 5:51yeah.
211. 5:52I would do that. Right. And for whatever
212. 5:54reason, we don't do that with our
213. 5:55businesses. And so this is why I still
214. 5:57believe that to this day, the best way
215. 5:58to beat the market is to find A player
216. 6:00talent and pay them well. You'll also
217. 6:01retain them longer, all that stuff. And
218. 6:03I'll just say this is like just a
219. 6:04general thing for anybody who deals with
220. 6:05the trades, which is about a quarter of
221. 6:06you guys. Right now,
222. 6:09there is going to be I think there's
223. 6:10going to be like a compression and then
224. 6:12a huge drop off the floor, but for the
225. 6:15next few years,
226. 6:16you have to accept that the cost of
227. 6:18acquiring and and paying good tradesmen
228. 6:21is going to go up. It's a supply
229. 6:23constrained market. And so in a supply
230. 6:24constrained market,
231. 6:26the supply has the has the has the uh
232. 6:29the upper hand. And so that means that
233. 6:31you're going to have to pay them more.
234. 6:32Now, the good news is that the vast And
235. 6:33this is, you know, not a slight, but
236. 6:35there's a lot of people who are in the
237. 6:35trades world who are not very good at
238. 6:37business.
239. 6:38Um and so they will not think this way.
240. 6:40And so fundamentally, we just have to do
241. 6:42the math of is it is it worth the money?
242. 6:44And so what I was what I was outlining
243. 6:46here, I was about to do the other side
244. 6:47of this is LTGPE, lifetime gross profit
245. 6:50per employee, to CAT, which is cost of
246. 6:53acquiring talent. So just like we did
247. 6:55LTGP to CAC on the customer side, it's
248. 6:57the exact same equation on the other
249. 6:59side, which is how much am I willing to
250. 7:00pay to acquire talent and how much do I
251. 7:02make in talent per year? What's the
252. 7:03lifetime value of this talent? And so
253. 7:05when you look at, okay, if we were to
254. 7:07just keep spelling it out, it'd be like,
255. 7:08the average person stays with you for 6
256. 7:10years. They're like, great. So all in,
257. 7:12I'm going to pay a one-time recruiter 20
258. 7:14grand to go get this guy and I'm going
259. 7:15to pay $150,000 per year over the next 6
260. 7:18years. So I'm going to pay 900k plus the
261. 7:20100, I pay a million bucks, but I'm
262. 7:22going to get $200,000 per year for the 6
263. 7:24years and I make it back, right? Or I'm
264. 7:26going to make whatever in profit after
265. 7:28that cost. If you like this video and
266. 7:29you're a business owner who wants to
267. 7:30break through your current revenue
268. 7:31ceiling, I just took every lesson from
269. 7:33scaling 10 businesses past 10 million
270. 7:35and three businesses past 100 million
271. 7:37into a completely free scaling road map
272. 7:39that I've used to go from zero to one,
273. 7:40zero to 10, and zero to 100 plus. And so
274. 7:43you can click here, and you can check it
275. 7:44out. Again, absolutely free. And since
276. 7:46you're a business owner, appreciate you,
277. 7:47and enjoy.