fbpx

Behind The Scenes With A Franchisee In Their First Six Months In Business (Who Has Plans To Scale)

by | Mar 4, 2024 | Podcast

Franchise Masters | Cole Simpson | First Six Months

 

Cole Simpson launched his Mighty Dog Roofing franchise and started cranking from day one. His company and team signed close to $1M in revenue during his first three months and planned to do $3M this year (his company’s first full calendar year in business). In the long term, Cole sees a path to build a $10M business. And he’s only five months into his business! We talked through how he’s scaled so fast, lessons learned (it hasn’t been easy), taking calculated risks, the power of building a strong network of peers, ETA vs opening a de novo franchise, and his favorite tweets (including an encounter with the FBI. He didn’t do anything wrong). So, join us in this episode, and you will grab some golden nuggets today!

Listen to the podcast here

 

Behind The Scenes With A Franchisee In Their First Six Months In Business (Who Has Plans To Scale)

Welcome to the show. I’m honored to have this celebrity on. If you don’t know who Cole Simpson is, you’re about to find out.

‐‐‐

Cole, thank you for coming on. I’ll give you a little backstory on Cole. Cole and I got randomly connected in early 2023 or something like that. I didn’t provide any guidance or any wisdom to him. I didn’t do anything other than, “You might want to check this one out.” That’s what I said. Fast forward, Cole is crushing it with Mighty Dog Roofing in Columbia, South Carolina. His success and what he’s creating down there, we’ll get into it. Congratulations on everything you’re doing.

I appreciate that.

You’re an amazing follow on Twitter. Anybody, go check him out. He’s amazing. There are probably some stories that we’re going to get into. I want to know the backstory behind some of the stuff you put out.

Anytime.

How did you get into this whole game? Why’d you decide to get in with Mighty Dog in 2023?

Mighty Dog Roofing Franchise

I probably have to go back a little bit. I bought my first business franchise in 2019. I was working at a church at the time. I was moving to Charlotte, North Carolina to help start a new church there. I was moving without a job, and so I was like, “I got to find something to do to make money. “ A friend of mine owned 4 or 5 of these like Snow cone stands and it was a franchise. I was like, “He seems smart, but he’s not that much smarter than me. There’s nothing uniquely amazing about him.”

He connected me with the brand and I ended up acquiring an existing one. The reason I did that is my whole life, everybody was like, “You’re so entrepreneurial.” I didn’t know what that meant. I always responded with this canned response of like, “When I think of Facebook, I’ll be sure to start it.” For me, that’s what an entrepreneur was. It was Steve Jobs and Mark Zuckerberg. Franchising for me was like, “Oh.” Even this snow cone business was like, “I don’t have to have a new idea. I can take what other people are doing, do it a little bit better, and then do really well.” That was this unlock for me.

It went terribly. I made every mistake I could make. I paid probably two times too much. It wasn’t scalable so it didn’t fit with what I wanted to do, but I learned a ton. I learned about business, entrepreneurship, and this world. In a weird way, it got me connected to real estate. I did well in real estate and started a real estate company. I started raising cap. I was an agent for about a year. I sold about $7 million to $10 million in real estate. It was in ’21 though, so maybe it was $3 million in the normal world. I worked a ton with investors, and then I levied those relationships to start raising capital, start doing flips, and all this stuff.

It was 2022. I was doing really well financially. Me and my wife were, but I was super depressed about things that I won’t go into on this episode because I don’t want to get into it. My wife and I were like, “We’re going to move home.” We were in Charlotte. We were going to move back to Columbia, South Carolina. I sold the shaved ice stand or the snow cone thing and moved back. I didn’t want to be a real estate agent here.

A friend of mine who ran a pretty large home services company was like, “You should look into entrepreneurship through acquisition.” I was like, “What is that?” I ended up looking into it. Basically, it’s the idea of buying an existing business. I  love the concept. I love the idea of acquiring. I was really dedicated to my geography. After looking for about six months, I went back to my friend and was like, “How long does this thing typically take?” He was like, “Probably about two years.” I was like, “I’m not going to do that. I’m not going to wait two years.” That’s around the time I connected with you. It was around March 2023.

He connected me with a guy who ran a pretty large TWO MEN AND A TRUCK franchise. They were doing about $40 million a year. That unlocked for me this idea that franchises could be big businesses and that specifically home services or territory-based franchises could be big businesses. I really liked home services because of my real estate background. For me, it was this adjacent experience of, “I’ve never been a plumber or done a roof, but I get the concept and I know it’s valuable. It’s always going to be there.” That was attractive to me.

While I was looking to buy a business, I liked plumbing, HVAC, electric, and roofing. The reason I liked those four was because they’re always going to be there. There’s a need. There’s some recession resistance. When I started looking into franchising, there was a roofing franchise that was doing well and was blown up. At this point, I was in year three of Mighty Dog. It was pretty established, so I was like, “It’s available in my market. I’m going to do that one.”

I got connected to you and we talked about it. You were super helpful. You undersold yourself. You showed me Mighty Dog but gave me some other ones to look at. I realized that Mighty Dog made sense to me because it was a sales model. You’re subbing out the majority of the labor. I was comfortable with sales already, so it was like, “It’s sales and then managing contractors.” I had done sales and managed contractors because I’d flipped houses before. It felt like a good step. Not that I had done it before, but it was like, “This is a good stretch, but it’s not a new concept. I know I have these skillsets.” That’s why I decided on Mighty Dog Roofing.

When I make these decisions in the business world, I try to limit my downside and put up my upside. For me, Mighty Dog was like, “I’ve talked to multiple franchisees. There are multiple that are doing a few million in revenue. Worst case scenario, if I can be good, I can have a $3 million to $4 million company. It can make me a few hundred thousand dollars a year.”

Franchise Masters | Cole Simpson | First Six Months

First Six Months: I can have a three to four-million-dollar company if I can be good.

 

When I go and try to acquire another company, I’m seen as somebody who knows what they’re doing. I kept talking to these companies and they were like, “We’re not going to sell to somebody with no experience.” When I talk to people, they don’t care that it’s a franchise. They’re like, “You’re running a seven-figure home service business. I’m sure you could figure this out.” I saw that as an advantage. I was like, “Worst case, I’ll be better at what I’m trying to do two years from now if I do this. Best case, if I get into a good franchise system, I could maybe be that TWO MEN AND A TRUCK guy with $40 million in revenue.” I thought it was a good bet either way. That’s why.

For home service, there’s risk. The downside is there, but it’s not like you’re signing a lease and personal guarantee for ten years on the brick-and-mortar deal. You validated the upside. Let me ask you this. How much have you improvised to have the success that you’ve had out of the gates? Were you trained on that? Did you leverage your connections to put together a plan to say, “Let’s try this stuff and see how it goes.”

I’m pretty good at making things work. I was talking to a friend of mine. People in entrepreneurship or in business like to talk about this unique skillset thing. I really struggle with that because I’m always like, “I don’t think I have a unique skillset.” It’s not in a self-deprecating way. I’m a confident guy, but there isn’t something that needs, “It’s your ability to make quick decisions and give up quickly. You’ll try something. You’ll get 10 or 15 days into it, and then you don’t care. There’s no sunk cost fallacy for you. You move on and try something else.” Most people won’t do that. They won’t keep trying things until they find something good and adjust and improvise.

We did a lot of things that nobody had done before. We started with a team of fifteen guys. The biggest franchisee at that point maybe had five guys. On day one, we had the most, and that went terribly. We did a lot of things wrong. Three of those people still work for me. Out of those fifteen, I got a GM and a sales manager. Those guys were really good.

My sales manager had eight years of experience selling windows. That allowed me to get into a product that not many other people were doing yet. I’m not sure about this, but we’re top three in Windows sales already. My GM had done solar. It allowed us to get into solar, which there had only been three markets that had done it. We were one of the first ones to do that.

We went really heavy door-to-door. We do way more door-to-door than most people. We’re able to get into these things faster than maybe other people were able to. Part of that was because I was willing to spend money at a rate that other people weren’t willing to because I felt like it was a good bet. On day one, my overhead was $17,000 a month. We hadn’t made any money. For me, that made sense. It was a good bet. I felt like we could move the needle, and we did. It worked out. For a lot of people, that’s a hard bet for them to make.

We can go deep on that one too. Let me color this up context-wise. You’re in your fifth month in business. We’re in February 2024. You started in October 2023.

That’s right.

You speak like a seasoned entrepreneur. You’re in the grind of it. Your bet’s paid off, right?

Yeah. We’re doing really well.

You guys are cranking. Starting with 15 guys and ending with 3 but ending with 3 really good guys,  that’s how any business goes. To get to your core team, you’re going to go through a certain number of people that you’re going to have to hire and fire before you end up with that one. You can rinse and repeat until you end up with a core team that you can perform.

Get To Your Core Team

We made bigger mistakes, but we learned faster because of them. W e have about eleven people working for us in total, not including me. I’ve hired 34 people in the past few months. That means I’ve fired 23 people, which is a bad turnover rate. We got to learn about, “What do we do? What do we not do?” We know what we want in a sales guy. We understand it because we’ve done it.

We made bigger mistakes, but we learned faster because of them. Share on X

I know for a fact I’ve already fired more sales guys than you’ve probably even interviewed. That allows me to be better at this faster because I did it so fast. People like to talk about experience, and experience is important. Sometimes, experience isn’t time. You can compress experience if you’re willing to do things at unsustainable rates. What we were okay with and what I was okay with was, “In the next year, we’re going to be going at an unsustainable rate. That’s okay because it doesn’t have to be sustainable. It’s for a year. If we can move the needle enough, it’s going to pay off.” That’s how we thought about it.

You were paying close attention to all this. You knew quickly who wasn’t going to work out and you moved on. Firing somebody sucks. No matter how you slice and dice it, it’s not fun to do. It sucks, but you learn how to do it. It’s two shots to the heart of, “This isn’t working out. Thanks for your time. We’re moving on,” and hopefully, nothing bad happens after that conversation.

We’re way better at setting expectations. We’re way better at firing. Probably most of those people we shouldn’t have kept around as long as we did. We did too much for them. This is a terrible decision, but we provided housing for these guys. The good thing is I had the foresight of having a 60-day termination on the lease. I wasn’t an idiot, but it’s like, “That’s money I ended up burning.” We ended up firing these guys and it’s like, “We shouldn’t have done that.” We made a lot of mistakes. We tried to bring a guy in-house on install. It didn’t work. I probably burned $12,000 on that. That sucks. We made a lot of mistakes but we slowly got better, and we’re still getting better. We’re learning a lot every day.

If we can move the needle enough, it will pay off. Share on X

You also have a North Star. You have very ambitious goals. You’re attacking them aggressively, but you’re going about it humbly. You have a vision for what you know this business can do and where you want to get that business. Do you mind sharing a little bit about what your goals are?

Yes. When I came into Mighty Dog, the system had done $130 million that year. In the year of ’23, the system made $130 million. The top franchisee had done about $8 million. The second one had done about $6 million. The $6 million guy, that was his 19th month. The $8 million guy, that was his 31st month. For me, it was like, “I already know that these businesses can reach this $10 million number.”

I’ve spent a lot of time with both of those guys. One a lot more than the other. It was like, “I don’t even think you’re doing everything that you could do to accelerate this growth. You could grow faster if you were willing to be more aggressive.” For me, the conversation I had and the bet that I made on Mighty Dog was, “If there’s ever going to be a franchise that is the guy in the roofing space, it’s going to be Mighty Dog.” I could be wrong, but that’s my guess based on what I know about the branding and the team.

I was like, “If Mighty Dog is going to be the guy in the roofing space, if they’re going to be a 1-800-GOT-JUNK?, or if they’re going to be a TWO MEN AND A TRUCK, how valuable is it to be the number one guy in that system?” It may not be correct, but the way that I think about it is if I’m the number one guy, in some ways, I have more say on the system than anybody else.

I’m not $200 million in revenue, but I have way more control over $200 million in revenue than any other $8 million to $10 million roofing company. To me, it was like, “I feel like if we can grow and compound this and be able to grow quickly, that’s going to put us in a position where we have a really good negotiating perspective.” I don’t mean that in a negative way. It’s a partnership.

I like our corporate office a lot. We talk a lot. They’re very in the know about what we’re doing. We’re always talking about what I can be doing and what they can be doing. They’ve been super helpful. No one has gobbled up territory like people do in brick-and-mortar franchises. The reason they haven’t done it is because I don’t know that people think territory franchises can be that yet. I don’t agree.

We’re at the early end of, “In twenty years, these territory franchises are going to be the same.” It’s like, “If I can then be the guy in the system and I can capture a large portion of territory and a large revenue percentage, then I’m going to have a  good position.” Whether I want to sell or not, that doesn’t matter. You always want to build to be able to sell, but we may not ever sell. It’s not about that. It’s to be in the position of, “I own this really valuable asset because I was willing to maybe do something unsustainable for two years.”

Franchise Masters | Cole Simpson | First Six Months

First Six Months: It’s about being in the position of allowing this valuable asset because I was willing to do something unsustainable for two years.

 

There’s so much wisdom in that. You’re executing, learning, and adjusting as you go. It’s not a linear path. There are probably fewer good days than bad days, and that’s how it goes at the beginning. $10 million is a scale. That’s a big number. Also, when you get there, I would imagine opportunities for acquisition become a lot easier too. If you ever wanted to expand via acquisition within Mighty Dog, other businesses, or whatever it is, you have a lot of options.

I always like to look at optionality. It’s been interesting talking to people about horsepower brands. Sometimes, I have these conversations with other franchisees and they’re upset about, “Why hasn’t this been figured out yet? Why are we still figuring this out?” I’m like, “Do you run a business? I’ve been doing my business for five months, and probably month to month, the amount of change that has occurred has been dramatic. I don’t mind change. If you don’t like change, it would probably be really hard for you.” These guys are four years in. They have eight brands. They haven’t figured it out yet.

They’re also doing some good things. An example is Mighty Dog has let out a tiered royalty system. When I signed on the dotted line, I had an 8.5% royalty. If I get over $5 million in revenue, which I will do this 2024, my royalty drops to 4.5% and I get a check for everything. My royalty isn’t 8.5%. It’s 4.5%. That’s a different calculation. Anything over $100,000 is automatically a 4% royalty. That’s a franchisor. They didn’t have to do that.

Let’s put this in real numbers. At $5 million in revenue, that’s $200,000. That’s not no money. That adds up. They fired their internal digital marketing team and went and hired a vendor. I run an internal call center which is not of anything of the same scale. I know how much I save based on it being internal versus going and paying someone. You were legally obligated to use this digital marketing team and had to pay them a certain amount. They fired them and went and paid someone else.

Think about the revenue that they decided to give up voluntarily because they care about our success. They care about our success more than their success. They do care about their success. They’re tied together. That’s the right way to think about it. To me, that’s a huge nod in their favor. They don’t have everything figured out. They’re doing the right things.

In ten years, they will have it figured out and we will get a lot of the benefits of being here this whole time. In ten years, you’re not going to be able to buy in. No one’s going to be able to get territory because we bought in and we rode this wave to be in a really good position. That’s how I think about it. I don’t know if I’m right, but that’s my guess.

There’s so much wisdom in that. There’s also a lesson in it. Even if you invest in a franchise, it’s still a load of work. The franchise company, none of them are going to ever build the business for you. No matter what your goals may be, if they’re at a much smaller scale than yours, you still have to figure out how to get there. There’s guidance and support. There are other franchisees in the system, which I can make an argument about. How do you quantify that value? I don’t know, but it’s significant.

It’s incredibly valuable.

You got to put the work in and grind it out. It’s going to probably be the hardest stuff you’ve ever done in your life. We talked about mitigating the downside and the upside. The upside should be worth it because you can’t get there otherwise.

In my mind, in franchises, there are two sets of people. There are complainers and there are people that do well. I’ve been in three. I’ve never been in a system where there weren’t complainers. It has never happened. I was talking to a guy. We were talking about his numbers. He did about $3 million in 2023. He has a full-time job. He is a GM and does this part-time. He was complaining about some things. I said, “You did $3 million. What did you net on that?” He’s like, “I made $350,000.” I was like, “How many hours a week did you work on this?” He’s like, “I worked twenty hours a week on it.”

I was like, “You are in your 2nd year of a business that you put twenty 20 hours in and your investment was $120,000.” He was like, “It was $90,000.” I’m like, “In your second year of a business, only 20 hours a week, you are making a 370% return. You’re upset because you had to work. What are we even talking about?” No matter what, there are always going to be people that have problems. I understand it’s a balance.

Adjacent Skill Sets

There are bad franchise systems. You have to do your due diligence. At the same time, there’s a reason high performers do well. It’s a mix. It’s not as easy as it sounds. I’m in a system where depending on who you talk to, I’m sure there would be people that would say, “Never do this.” I would be like, “I would tell you to do it. It depends on you. It depends on what you want and what your goals are. If you have the right background and the right adjacent skillset, you could do really well at this.”

The biggest variation in franchising is going from franchise owner to franchise owner. Everybody’s different. It sounds like you tapped into something. You broke out with this venture. Do you feel like it unlocked something that you had in before you and maybe you hadn’t found the right business to unleash the ambition you have?

Adjacent skillsets. I know I keep saying that, but I was good at sales and managing jobs. I was good at managing contractors. That’s what this business is like. You’re subbing out the labor. It’s sales and marketing. It’s a sales team, and then you have subcontractors who are fulfilling the work. We’re starting to bring some labor in-house, but let’s keep it at that. I was good at those things. I knew how to do it. I knew how to vet both of those things. That’s something I’m good at.

I’m good at delegating. If anything, I overdelegate. I’d go the other way. I brought guys in and gave them real opportunities where they could make really good money. My GM is on a vested equity schedule. It’s a huge opportunity for him. He’s been incredible. Part of our success is because of him. Instead of me for 45 hours a week caring about this business, I have 3 guys, my GM, my sales manager, and me. We’re not working 45 hours a week. We’re working 60 to 70 hours a week.

You take that experience. With us, you’re putting 210 hours a week towards this business. If you’re by yourself, even if you’re a really hard worker and you’re working 80 hours a week, it’s like, “I do three weeks of work every week basically.” When you compound that over five months, it’s like, “My experience level is the equivalent of 60 weeks. We did some of those things well. We got lucky. We got some good guys in maybe at the right time. That always happens. You find good people.

On paper, you had a lot of transferrable experience and transferable skills with sales, managing projects, subcontractors, and stuff like that. Also, your mindset is completely different than the bottom 1/3 performers probably in the system. That’s probably one big differentiator. You’ve learned. You’re a learner. You’re not afraid to be vulnerable, reach out to somebody, and ask for their opinion on something. Whether it’s an opinion you want to hear or implement, who knows until you hear it?

You’ve done a great job at also leveraging Twitter and other relationships you have to get into conversations with people that I have to think you take a nugget or two away from every conversation. You start having more conversations. You start compounding your experience from other people’s experience pretty quickly.

I’ve met 3 or 4 guys on Twitter who have all built 8-figure roofing companies in less than 3 years. That’s probably a pretty unique thing that I’ve got four guys that I can call and ask, “How do you do this? How did you think about this?” Everybody’s different. Every market is different. You’re not going to copy 100%, but you can go, “I don’t have to learn this because I learned it from you.” It’s going to be a slight adjustment.

I always try to do that. That’s why we’ve spent probably four weeks up in Knoxville, Tennessee. He was a very good performer in Might Dog Roofing. The reason we did that is because their market is similar to ours. They have a similar model. They’re sales first. It was like, “What can we take and copy?” We’ve brought them down here to help train our guys. We did that.

The other thing that I’m good at is I’m pretty good at not caring about limiting beliefs. That is probably a difference. I’ve noticed this with other franchises. Here’s an example. I’ll talk to a guy, “You can’t train more than one sales guy at once.” He’s like, “Why can’t you? You might be right, but explain to me why.” It’s like, “We have 8 sales guys and we’re 5 months in. Maybe only 4 or 5 of those stick, but if we had done 1 a month, we never would’ve gotten to that scale that quickly.” We did solar, which nobody else had figured out. We went to other solar guys. We have guys on our team with that experience. With multiple pay, you can’t figure that out.”  It’s like, “ Why can’t you figure it out? What am I missing?”

We learned a lot. There are things that we thought we could do in the beginning that we were wrong about, but we adjust and then we find, “This is what we can do.” We are always trying to learn fast. That’s how I think about it. It is like, “How can I shorten my learning curve? How can my team shorten my learning curve, be decisive, and need to win?” It’s some of that stuff.

Do you think around this idea that you’ve been able to keep an open mind and not get blocked by limiting beliefs?

Keep an open mind, and don't get blocked by limiting beliefs. Share on X

Sure.

How did you go about that? Getting there is a magical place. Everybody aspires to be there, but it’s really hard to truly get to a place of, is it your desire to learn? Is it your desire to achieve something that you’ve set out to achieve so every conversation is a building block to get there? What is it?

This is one of the cool things about franchising. You are coming in as an outsider without industry experience, but you’re being taught the basics. It allows you to challenge things that other people have done. I’ll give an example. I had a guy on Twitter DM me because I mentioned how much we charge a square. We charge about $500 a square on a roof. An average roof probably is 15 to 22 squares, sp $8,000 to $11,000.

He said, “Nobody in our market charges that. Everybody charges $300. You can’t sell for $500.” It’s like, “I sold eleven roofs this week.” Maybe we’ll hit a point where that will be true. What I’m not saying is that he’s completely wrong. What I am saying is I’m unwilling to take that as gospel. We might get two years down the road and that might be true. That’s okay. I’m open to being proven wrong, but why is that the case?

I was at a conference with another franchisee because we do windows. They were like, “You can’t sell windows. Window World sells them for $400 a window.” It’s like, “I sold 30 for $1,100 a window, but okay. You’re bad at this.” It’s easier to say you can’t do it than to figure out why you’re failing. We’ve been wrong about stuff. I’m not this guy who’s like, “We know we can do this. We’re going to do it.” It’s not that. We’ve had to curb stuff, “Why do you have to do it that way?”

Probably, I learned some of that in real estate. I was in real estate for a year. It was during COVID. I did 38 transactions. 70% of my owners, I never met in person. Real estate agents are like, “You can’t sell houses without meeting people in person. It’s impossible.” I do it every day. I typically work with people out of state. You have to build a system. Are there difficulties with it? There are difficulties with it. Are there disadvantages to it? There are disadvantages to it, but there are also advantages. Sometimes, those advantages outweigh the disadvantages. Sometimes, the pros outweigh the cons.

Franchise Masters | Cole Simpson | First Six Months

First Six Months: There are difficulties or disadvantages to franchising. But there are also advantages, and sometimes those advantages outweigh the disadvantages.

 

Do we lose out on some customers because of our pricing? Probably, but we also make dramatically more on each roof that we sell. The other thing is I don’t believe that because at least once a week, I talk to somebody that somebody charged them astronomically more than we did years ago and they did a terrible job. They’re having to get it redone and that company doesn’t exist anymore. I don’t think the problem is the pricing. I don’t think that’s why. The problem is the clientele that you’re going after, but that’s a whole other conversation.

You’re willing to try stuff. It’s a calculated risk. Some gambles were bigger than others, but you sized it up. You did it. You stopped doing what wasn’t working and doubled down on the stuff that was working. A lot of people will sit back and think about doing something or think about why they can’t do something but never try it. They’ll think about it and never do anything about it. They never learn. They believe that whatever they think is the case and still think about it until they never try it. You had an open mind, willing to try stuff that a lot of people probably wouldn’t.

I’ve heard about it as the activist versus the strategist. The activist is the, “Let’s try it. Let’s see where we get.” The strategist is like, “Measure twice, cut once.” There are valuable aspects to both. Most people who talk to me think I am an activist. I think I’m a strategist. I go into every decision or I try to with like, “If this goes wrong, this is what I will lose. Can I afford to lose that?” If the answer is yes, then it’s like, “Is the upside worth it? Yes, the upside’s worth it. Let’s try it.”

Let me be clear. We’ve spent money badly, but we’ve also done things where we may be willing to be a little bit like, “I don’t know that matters. Maybe we don’t have to do it that way. Maybe we can save money here.” We did and it worked out very well. That’s some of the give and take. That’s how it works. You throw out ten lines. 5 don’t hit but 5 do. If you’re taking asymmetrical bets, then it doesn’t matter that you lost on 5 because you hit on 5  or whatever it is.

What’s your opinion on this whole ETA crowd? You were in it. You were doing it.

I love Entrepreneurship Through Acquisition. If you have access to an incredible deal, do it. These are the things that I would say are hard. I had already had some business success and failure previous to this franchise. If you were buying a $3 million to $4 million business and you had never done any type of entrepreneurship whatsoever, what I’m not saying is that you cannot be successful because you can. People do it. That’s awesome. I’m saying you better be right or you better be okay with the downside.

I also feel differently if you’re 26 and you don’t have any assets. Sign the $5 million personal guarantee. Who cares? Worst case, you go bankrupt. by 31, you’ll be fine. You can probably get a better job than you were ever going to be able to get because of that. Know the bet you’re making. I am biased towards this because I did it. I really like franchising. It is a good model.

I say this about Dave Ramsey. Not to get into it, but I talk about how I do not adhere to Dave Ramsey. Something that I tell people is that I’m one of the biggest arguers for Dave Ramsey than I have ever been in my whole life. The reason why is because if you can’t follow the rules, you probably don’t have the discipline to break them. That is the way that I talk about it.

If you can't follow the rules, you probably don't have the discipline to break them. Share on X

Franchising to me, in some ways, is the same thing as, “I don’t want to get into this business where I have to follow these rules.” Probably, if you can’t follow the rules of a good franchise system, you won’t do well outside of a franchise system. If you can follow the rules in a franchise system, you probably will be able to do well outside of it. To me, it’s a really good training ground. It doesn’t have to be what you do forever. I failed in my first franchise. I learned a ton.

Get into a franchise with limited downside. You’re like, “This thing makes me $200,000 a year. I spent $400,000 and now, I make $200,000 a year.” Then, go do ETA. You don’t have the opportunity cost of, “I’m searching. I’m trying to find something.” It’s like, “I’m not. I have a business that’s making me money. It’s paying my bills.”

When you do get into those conversations, it’s a lot easier to be like, “I’ve done this before.” Even if it’s on a smaller scale, don’t act like you know more than you do. It allows you to be a strategic buyer. It allows you to act, “Now I can buy other home service companies. I’m seen as an expert because I run a successful home service company.” There’s a lot to be said about that. I love ETA. If you find a great deal, I won’t tell you not to do it. For me, I cared about some things that maybe other people didn’t.

Do you think of ETA on a good deal compared to getting in with a good franchise? Try to do a comp. Which one do you think is more risky?

It probably depends on your skillset.

Well said.

I’m pretty good at growing things. That’s something I’m good at. For me, the upside of only having to pay $500,000 in debt but having this huge business is incredibly valuable. If you can’t do sales, taking something from 0 to 1, you may not be able to do it. It’s not because you don’t care. It’s not because you don’t want to. I don’t know if I 100% agree with that. Probably, you could be better at sales than you think you can be.

Franchise Masters | Cole Simpson | First Six Months

First Six Months: If you have a middle market management background and are good at taking something and just fine-tuning it, you may struggle if you can’t do sales.

 

Let’s say for all intents and purposes that you may really thrive in a business that has already got some momentum. You know how to, “Instead of building the 80%, let’s cut the 5%.” Those are different skillsets. It depends on what your background is and what your skillset is. Generally, what people say is ETA is way less risky. That is probably overblown. I don’t think it’s a total wash, but I don’t think it’s, “It’s all the way here.” It’s like, “There are pros and cons.”

When you’re buying this existing business, you’re getting thrown into the deep end with the operations and the activity. The learning curve is still there, but you could screw some things up if you don’t catch on pretty quickly. Versus the idea of building something new, you can grow into it. You have a little bit more of a runway to learn the business.

The negative about ETA is not always, but typically, you’re buying in an industry that you don’t know. There are ways to mitigate this, but at the end of the day, you’re betting that the other person has integrity. Maybe they do. They might have integrity. If they don’t, then you may find yourself in a position where it’s like, “You could never have known this.” It’s not that you didn’t do the right thing. It’s that the guy knows how to present things in a way that is both honest but simultaneously not enough information. You don’t know the questions to ask.

The easiest way that I could talk about it is if I walk into a roofing company to buy and you walk into a roofing company to buy, we have different questions. It’s not because you’re not smart. It’s not because you don’t care. It’s because I know that this number is wrong. You’re like, “We’re running at a 38% net margin.” I’m like, “You’re not.”  If you are, what are you doing that’s so unique that you are able to get this number? What I’m not saying is you couldn’t get somebody on your team that could help you with that. You could, but you have to trust other people. There’s nothing wrong with that. A lot of business is trusting other people, but that is the risk.

You’re also paying a lot more. You’re paying a big premium. The price tag goes up significantly. Where I’ve always been on the build and grow side of things, I don’t know what it’s like to come into something and whatever. You also lose a lot of equity creation opportunities if you can’t grow that thing. Whereas starting a new business as you’re doing and getting into it for a lot cheaper than it would cost to buy an existing roofing business that’s doing some level of seven figures, you’re paying a premium for that versus the equity creation.

A way to say it conservatively is if I hit the numbers that I’m going to hit this 2024, I could sell my business for $3 million to $3.5 million. It’s like, “Okay,” and that would be a fair value.

That’s when you’re going to love the ETA crowd and call the ETA crowd.

That’s 5 to 6 what I’ve paid. It’s because you don’t care what I paid. That’s not how we’re valuing this. It’s like, “That took a year. What is your year worth?” The other side of it is could you have done what I did in a year? Maybe not. For me, ETA makes a lot more sense when you’ve already had some success. To me, then it’s like you’re playing a different game. You’re playing a game of maximization. You’re able to get into maybe conversations you otherwise couldn’t get into. I’m not wholesale against it.

Franchise Masters | Cole Simpson | First Six Months

First Six Months: ETA makes more sense when you’ve already had some success because it’s like you’re playing a different game. You’re playing a game of maximization.

 

Maybe I wasn’t a good searcher. It’s very possible. I talked to a lot of searchers, and a lot of them, I end it with like, “I would consider franchising. I think that you will learn a lot. In two years, if you still wanted to buy a business, you would be in a better spot to do it and you would be making more money. Instead of burning money, you would be making money.”

That’s the other thing that, for some reason, and I’ve not always felt this way, it’s like, “How are you going to be able to walk away from your $700,000 business that’s making you $700,000?” Go pay somebody $400,000. Go find the guy and pay them insanely well. It’s like, “They’re getting more than you.” Who cares? You have time. I make $200,000 and I don’t have to think about it. People talk about that. I know that it can be oversimplified and it’s more of a complex equation than that. People seem to be less willing to pay people than I am. Maybe that’s because I’m young.

I don’t think you need to pay somebody $400,000 to run your business, but maybe $200,000.

I’m saying even if, then that would work out.

Different strokes for different folks. You said it well. Everybody’s got to know what their strengths and weaknesses are as best they can. Until you get into the game, it’s hard. That is one of the bigger benefits of franchising. It’s not being able to get in cheaper, but also, during your due diligence, you can call people who, hopefully, have built a business to the size and scope that you want to build. You know it can be possible. You can talk to them about, “How’d you do it?” They’re typically very willing to share their experiences.

Everybody should know their strengths and weaknesses as best they can until they get into the game. Share on X

A network that comes with a franchise is very valuable. There’s a guy on Twitter. His name’s John Wilson. He has become at least an acquaintance of mine or maybe a friend. I don’t know if he would call me a friend or not, but I like him. He’s a good guy. He posted a tweet. It was a couple of months ago. He runs a $30 million home services company with HVAC, electric, and plumbing.

He posted a thing and said, “If I could do it again, I’d really think about doing franchises.” That went against the rhetoric that I had heard. I called him and was like, “Why is that true?” He said, “It’s because acquisitions are so difficult. People talk about this concept of like, “I’m going to acquire. That’s not not true. The problem is that I’m going to come into this plumbing company and we have different playbooks. I have to rebuild it. I’m buying some techs and some equipment, and then I’m rebuilding it. There’s nothing wrong with that, but that’s what I’m doing. Versus a franchise, even if you’re different, at some level, you have a similar foundation. It makes acquisitions easier.” That was his point.

He was like, “I’m not saying I would for sure. I’m saying I would consider it more than I had initially.” He took over his dad’s business, so there are a little bit more factors to that. That, for me, was an unlock of like, “If this guy is saying the royalty might be worth it at $30 million, then maybe I, at $0, should not be saying I can’t do a franchise because of the royalty.” Maybe I’m thinking about it incorrectly.

That’s interesting. On the topic of Twitter, if you’re not following Cole on Twitter, what’s your handle? We’ll give a little shout-out.

@JColeSimpson.

There we go. What has been your favorite tweet? You’ve had some tweets that have gotten some activity and have gone viral maybe. I don’t know what viral means. Thinking back through some of the stuff that you’ve put out there, what have been 1 or 2 of your favorite tweets that you’ve put out?

An Encounter With FBI

Probably, my favorite tweets are stories about either my business or my life. For probably my 2 favorite tweets, I tweeted 1 about the FBI raiding a corporate housing that I had bought. It was a Twilight Zone. It’s 7:00 AM and I got a call. It’s from one of my sales reps. He is like, “The FBI is here.” I’m like, “Is where? What are we talking about?” He’s like, “They’re at the apartments.” I was like, “Don’t say anything.” I then get in my car to drive there.

I’m talking to the FBI about search and seizure and warrants. It was a really weird experience. I walked up and he had one of my guys in handcuffs. I looked at him and was like, “Is he arrested?” He was like, “No.” I was like, “He’s not answering questions. Let’s get him out of those handcuffs. Do you have a warrant?” He was like, “No.”

I was like, “Get off my property then. What are you talking about? There are rules here.” That was a really weird experience. A lot of my employees are minorities. It was an interesting perspective to watch the way they talked to me versus not me. My GM is a guy from Jamaica. He is a big Black guy. It was interesting. You never think like, “I’m going to talk to the FBI during a house raid.”

Not talk. You stood up to the FBI.

It’s very odd. For context, my dad was a lawyer, so I have some understanding of legality, maybe more, than the average person.

This isn’t self-taught watching Law & Order stuff. I got it.

There are at least some basics. I have a few friends who are cops. After each of these things, I would call them and be like, “I did this. I’m pretty sure I was right. Tell me.” It’s like, “You’re good. You didn’t break any laws.” It was an interesting experience, for sure, and not one I expected. That tweet did pretty well. I had a few people reach out to me and be like, “I don’t know that I would post that.” I was like, “It’s crazy.”

We’re a free country.

That’s right. What are we going to do? It was so funny. A few weeks later, the FBI called me, one of the guys. He was like, “I want the addresses of all your employees.” I was like, “I’m not going to do that.” He was like, “I thought you would want to be compliant.” I was like, “I don’t not want to be compliant. Let me be clear. If this is required of me legally, me and my attorney will come. We will have a conversation and I’ll give you everything.

You’re fishing and I don’t respect that. I get that you’re doing your job. I’m not mad at you, but I’m also not going to answer your questions. I’m not going to be shamed into answering them because it would make your job easier. I’m not mad at you for asking, but the answer’s no. Don’t call me back.” That was a weird experience.

Probably my other favorite tweet was from early January 2024. It was that I got a check that my dad got when he was 32 years old. It was the first check he ever got as an attorney for about $1.1 million. He won this huge case. It was a class action lawsuit. My dad passed away when I was pretty young. I’m 28 and we hit $1 million in revenue in my company .

The story is that he sued this mobile home dealer class action suit because he realized that they were basically illegally doing these purchases. He got a large settlement for a lot of his clients. The way he got the case was these two people came to him. He was doing nothing. He had no idea what he was doing when this happened. They came to him. He was 30 years old at the time. They were like, “We want these guys to fix our floors.” He sued this company and they were like, “We’re not doing that.”

In discovery, he realized he found a pattern of criminality. He created a class, which means he got a lot of people that broke the law. They sued them and then they gave him money. He was able to make these people whole that they had taken advantage of. They were taking advantage of primarily elderly people and stuff like that. There was this full circle moment of I’m 28. He’s 32. I did my first million in revenue. When he met these guys, he was 30. He got this check from $1.1 million.

A lot of people ask me all the time, “Why are you on Twitter?  Why do you spend so much on Twitter?” There are a lot of reasons, but one of the reasons I spend time on Twitter is because I know that story because my dad’s law partner mentioned it at a party offhand. I found the check, called him, and then he mentioned it. I went to a party and he told me the story. That’s the reason I know. I learned the story at 26 years old. No one ever told me. I don’t have these stories from my dad when he was building his law firm.

There are a lot of reasons why I write these stories, but one of the reasons is, and I don’t expect to die or anything like that, as silly as it sounds, I want my kids to be able to look back and be like, “This is what dad was going through in this time.” I even think there’s some amount of in five years, when you ask me about what it was like, I’m not going to remember. I’m going to remember the big things, but the day-to-day of, “I didn’t want to get up today,” I’m not going to remember that. I hope that that is encouraging to them because they will probably go through something similar.

Some of the reasons why I tweet this stuff is because my hope is that other people, when they try and build businesses and grow businesses, can see a little bit of like, “This guy’s not that smart. He is not dumb, but he’s not that smart. I’m seeing the highs and lows. I’m seeing what entrepreneurship is really like.” There are definite highs, and I talk about that. I also try to be honest about lows because, at least for me, that’s valuable to get the behind-the-curtain view.

Tons of people should do entrepreneurship, but I want you to do it with eyes wide open. It’s not because “I know this guy. He makes $1 million and works 20 hours a week.” It’s like, “How did he get there?” I’m not saying it’s not worth it, but know what happened. Those are probably my two favorites. I also did one about a chef that had 4.5 million views.

People should do entrepreneurship, but with their eyes wide open. Share on X

I saw that.

That was crazy. I did not expect that.

I have no doubt that your father is with you in spirit watching your tweets, your success, and everything you’re doing. I’ve always been a big Moneyball guy. I read the book. It’s that idea that you can look at talent in different ways. You don’t need to look at it on paper or people’s track record. There’s talent out there. Every day, you meet somebody that has superpowers. They haven’t found the right opportunity to unleash. That tweet you put out about hiring the sales rep at the U-Haul dealership, was that what it was?

Yeah.

That was a cool story.

He’s killing it. His name’s Jeremiah. He’s doing awesome. He’s probably our best rep. We hired him from U-Haul. He was super inquisitive. He asked all these questions and cared. I’m pretty brash too, but my GM looked at him and was like, “How much do you make? What do you make?” He was like, “I make about $500 every 2 weeks.” He was like, “You should work for us. I promise you can do better than that.”

This is as you guys are renting the U-Haul.

This was while we were renting it out. It took a little while, but he ended up working for us. He made about $8,000 or $9,000 in January 2024. It’s a funny story. At least for me, it’s cool that this kid has never had money because nobody has ever explained to him how to do this stuff, but we’re able to sit down and talk about budgeting.

He’s married. Maybe tomorrow, he would never show up again. My hope is we can make a difference in this kid’s life and be able to have him provide for his family. I hope we’re able to put him in a situation that he never was able to be in because he put in the work. He’s working his butt off. I don’t want to act like it’s easy, but that’s really cool. That is one of the cool things about entrepreneurship. You’re able to offer these opportunities to people. It’s not always that clean. Sometimes, you have to fire people that are good people. It goes both ways. That’s been cool to see.

You’re doing it the right way. It’s fun to watch on Twitter. I’m glad we got to connect because it’s been a while since we connected. Do you have any last thoughts for anybody who could be reading?

Yeah. I’m a pretty open book. If you want to connect with me, I’m on Twitter. Shoot me a DM. I do my best to try and get back to anybody who does. I ’m happy to talk to anybody who’s thinking about franchising and try to be honest about at least my experience.

Franchising is the redheaded stepchild of small business, which I love because that means it’s undervalued. That means that I can make a lot of money because other people have egos. Good for them. Maybe that means you can as well. If you can not care about having an ego, maybe own the gutter business or whatever it is. Maybe that’s going to be able to help set up the life that you really want. Maybe it doesn’t matter that people think you’re a big deal.

Franchise Masters | Cole Simpson | First Six Months

First Six Months: Franchising is the redhead or the child of a small business.

 

@JColeSimpson.

That’s my Twitter.

Go give him a follow. If you’re in Columbia, give him a call if you need a new roof, windows, gutters, siding, or whatever it may be. I appreciate it. Thank you for coming on.

Thanks for your time. I really appreciate it.

 

Important Links

 

About Cole Simpson

Franchise Masters | Cole Simpson | First Six MonthsCole is a great follow on Twitter (or X or whatever it’s called). @jcolesimpson

 

 

 

The First Step is a Conversation.

If you have that burning desire to build your own successful business so you can live a life you can only have working for yourself, let’s talk.

The First Step is a Conversation

The first step is a pretty simple one: We have a conversation.

After we speak, we’ll be able to figure out if there is a good fit to work together.