Building a Saleable Asset: How to Future-Proof Your Franchise from Day One

Free Agent Podcast, Business Insights, Franchise Ownership, General

Building a Saleable Asset: How to Future-Proof Your Franchise from Day One

So, you’d expect buying a business means you get a ready-made playbook, a happy team, and instant cash flow, right? Not so fast. In this episode, Josh Skolnick shares a story about an entrepreneur who bought into that exact dream—only to be left high and dry just three weeks after closing. Turns out, the real risks in acquisition aren’t what most people think. And when it comes to franchising, the biggest advantage might not be what you’ve been told, either. There’s a twist on building a saleable asset that could change the way you approach your next move as an entrepreneur. Curious? Let’s dig in…

My special guest is Josh Skolnick

Josh Skolnick is the founder of Horsepower Brands, a company specializing in the acquisition and development of home service franchise brands across North America. With over 15 years of experience in franchising and business ownership, Josh has built and scaled multiple successful ventures, including Monster Tree Service and Redbox Plus, both of which grew to hundreds of franchise units before being acquired by larger industry players. His approach centers on identifying high-potential service businesses with strong average unit volumes and developing robust systems and support for franchisees. Under his leadership, Horsepower Brands has expanded its portfolio to include nine home service brands and over 1,300 franchise units in just four years. Josh’s focus on early-stage brand acquisition and hands-on franchise development has positioned him as a knowledgeable leader in entrepreneurship through acquisition and franchise growth strategies.

Don’t be a jack of all trades and a master of none—focus on what you do best, and success will follow.

In this episode, you will be able to:

Discover how choosing entrepreneurship through acquisition or franchising can shape your path to business ownership and growth.
Learn how to build a saleable asset within franchising that attracts buyers and secures your long-term success.
Explore proven strategies that drive successful franchise development and help your business stand out in a crowded market.
Uncover practical ways to overcome common challenges in business acquisitions and turn potential roadblocks into opportunities.
Understand why maintaining sharp focus in your franchise’s service offerings can boost customer loyalty and accelerate growth.

Building Saleable Franchise Assets
Creating a business with resale value requires intentional strategies focused on profitability, strong systems, and brand reputation. Franchisees benefit from ongoing coaching and support that help optimize operations and enhance financial performance. Building a saleable asset not only secures future exit options but also encourages disciplined management and sustainable growth.

The resources mentioned in this episode are:

Listen to the previous interview with Josh about the foundation of Horsepower Brands for more background and insights.
Research Monster Tree Service, Redbox Plus, and Horsepower Brands to learn about franchise opportunities and their growth stories.
Explore the Varsity Zone HVAC brand for those interested in entering the mechanical and trade space through franchising.
Visit Victoria & Albert’s restaurant at Disney for a Michelin-star dining experience (reservation and dress code required).
Contact Hellman’s Clothiers in Cincinnati for custom tailoring, especially if you need formal wear on short notice.
Tune in to the Free Agent Podcast with Meg Schmitz for real stories of self-employment and business ownership. Contact Meg Schmitz to schedule a free, no-obligation call and get insider insights on franchise opportunities. Use the form at the FREE Agent Podcast if you’d like to be considered as a guest on the Show!

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Click to Take the Leap into the full interview transcript of the Free Agent Podcast, Episode 7.19, with Meg Schmitz and her guest, Josh Skolnick

Free Agent Podcast with Meg Schmitz – Guest: Josh Skolnick, Founder of Monster Tree Service & Co-Founder of Horsepower Brands

Meg:
Hello everyone, and welcome to or welcome back to my podcast, the Free Agent. I am Meg Schmitz, your host.

The discussion here is all about free agency and taking control over your financial future. The mission of my show is to share inspiring conversations with real people who took the leap into self employment, business ownership, franchising, and freedom from corporate refugees and executives tired of the desk job to entrepreneurs and investors looking to share camaraderie and inspiration through their own business journey.

My podcast aims the spotlight on real people who stepped into the unknown, took control over their destiny, and became their own boss. And today I’ve got a repeat guest, Josh Skolnick with Horsepower Brands. Welcome back, Josh.

Josh:
Thanks, Meg.

Meg:
We were at a conference together a few weeks ago and Franchoice conference in Cincinnati and we fell into conversation. It seems like every time we get together at a conference, there’s one subject that seems to rise to the top and become like the theme of the week. And this time it was entrepreneurship through acquisition.

People who are pretty relentless about their pursuit of buying an existing business. And I wanted Josh to come and thank you for volunteering and making it happen quickly. I wanted to have you come on because you have such a responsible history in franchising, some of it through mistakes and things that happened in your past businesses.

But it’s really transformed how then you handle franchise development, franchise acquisition, franchise development, all of it now in house and really making the franchisees experience that much more elevated than where things got started years and years ago.

So why from my audience, talk a bit about your entree into franchising. What brought you to franchising and then the importance of creating Horsepower and the premise that it’s built on.

Josh:
Yeah, I appreciate that, Meg. So my venture into franchising started close to 15 years ago. I’ve actually been a serial entrepreneur my entire life. Never been a W2 employee, so grew up in a blue collar household with parents that ran a very small hardwood flooring business. No more than two to three employees for about 42 years before in 2015, my father actually sold that business and came to work for me full time up until he just retired at the end of 2020.

So he spent about 10 years working for me, which was great to have my father working for me in recycling business that I’ve owned for many years. And you know, as I look at my journey over the years, I’ve always just ran local mom and pop businesses in eastern Pennsylvania where I lived and worked and grew up.

And in 2011 I had an opportunity as I was running a tree care business called Monster Tree Service, which was a business at that time, was three years old. And if you remember like Steve Jobs always talked about, if you didn’t drop into a certain class calligraphy class at Stanford, the type font of the Mac and the Apple products may have never existed.

And so I always talk about making sure that you show up and you do things that you need to do. Because in 2011 I got into franchising simply because I had a sales guy that worked for me, had a daughter that fell off a slide at daycare late in the afternoon and he had to leave to go get her because they thought she had a concussion. And as the owner of the business, I got the call and he said, hey boss, I have two more appointments left. Could you go do those two appointments for me?

So I jumped in and I did them. And the last one was actually somebody who had been a franchise consultant for many years. And so had I have not had that opportunity and jumped in, I may have never even made it into franchising almost years ago.

Josh:

At that point I was running a business doing about $5 million a year in residential and commercial tree work. Began franchising in October of 2011 and had the opportunity to build that business over a nine year period in franchising through September of 2020 to about 240 franchise units before actually selling that platform company to Authority Brands.

And so during that time I also built a dumpster business called Redbox Plus that I acquired in June of 2018. Over a three year period, grew that to about 305 franchise units before Belfor Franchise Group came and acquired that business from me, which allowed me to really focus all of my time and energy onto developing Horsepower Brands.

The premise of Horsepower Brands was after everything I learned with Monster Tree Service and Redbox Plus, which were two very different franchise opportunities—one in the waste industry and one in the tree care space. One was run in Pennsylvania, the other one was headquartered out of Minnesota. Two totally separate executive teams running those businesses with me, there was no overlap of either one of those businesses with each other, even though I was the controlling owner in those businesses.

With that being said, I saw opportunities and economies of scale to truly and purposefully build a platform company. And that’s where the birth of Horsepower Brands came from. Starting with Mighty Dog Roofing and enrolling through the nine brands that we have today within the portfolio that are all home service focused in different areas of the home—both interior, exterior, as well as in the mechanical room with our Varsity Zone HVAC brand doing the heating and air conditioning and all other mechanical systems on a home.

With that being said, I’ve had the opportunity now, along with a great team that we have at Horsepower Brands, to have over 1300 franchise units with the first location actually opening in April of 2021. So just over four years of franchisees in operation to get us to where we are today.

Meg:
It’s an amazing growth trajectory and it’s built on a foundation.

The first interview that you and I did, we were—and people can go back in the history and take a listen to it—built on a foundation of originally not paying as much attention to your franchisees and learning through their trials and tribulations how much more hands on you needed to be, or at least attentive to the pulse on the street and what your franchisees were experiencing.

So I remember so distinctly one of my placements was with Monster Tree Service and how much time and attention you gave to Mike in Milwaukee to help him grow that business. So it was very stark to me at that time how involved you wanted to be in their success.

And that’s the foundation then of Horsepower Brands. The importance to me of having you here today as well is that you are an entrepreneur. You are that. Entrepreneurship through acquisition, that’s what your franchise brands are.

Josh:
Yep.

Meg:
So talk about the discernment that you put in place because you’re acquiring these brands. You are Mr. ETA—Entrepreneurship Through Acquisition. The discernment that you put into what comes into your portfolio and what is automatically dismissed.

Josh:
So we have a unique acquisition strategy that we look for. Obviously we want businesses that are home service focused within the portfolio, but we’re looking for businesses that provide services that are needed or could be used by all across North America, primarily with a residential focus. And then there’s a commercial component to every one of the businesses that we’re in.

We look for high average unit volumes. And then lastly, when we’re making the acquisition, we only want one or two operating locations at that time. In most cases it’s a founding location, existing business that’s run by founder. That founder retains 100% owner in their local business. And they’re continuing to do what they do.

Then we’re working very closely with them as the franchisor to develop the national franchising platform that we’re growing across the country. And so that founder acts as just one of the industry experts that’s on our team.

What we do is we go and we develop an entire team within that brand that brings oftentimes decades and decades of experience to the teams. People that have chosen that industry as truly a career path of where they see themselves spending the majority of their working years.

However they got into it, whether it was starting on the front lines and then moving up through management to get into a management role, to ultimately land in a role with Horsepower Brands within that individual sector—whether it be like in the roofing space or the lighting space or insulation or mechanical, as I said, with our Varsity Zone HVAC brand.

What’s really unique about that—just you mentioned a few minutes ago about my early learnings going back to 14, 15 years ago when I started in franchising—I am an entrepreneur, so there’s a lot of things that come to me as just second nature. And I hate to even say “common sense,” because I’ve grown up around business and I’ve been through launching so many different businesses of my own over the years that there were things early on when I first started in franchising that I just assumed the average person would understand they need to do when they get into business.

And so that’s where I ran into some challenges early on in starting out in this industry. I just assumed people would figure it out. But then what I realized very quickly within 12 to 18 months of being in franchising is that no, you have to dot every I and cross every T and have robust systems and processes and training in place.

So, for us, the acquisition side of the brands we bring into the portfolio—it’s instrumental to us that we really hit on those marks that I talk about: the high average unit volumes, the services being required or needed by all across North America, and then that one or two operating locations that we can really control the culture into the future of what we’re going to build with that brand.

As far as getting a large net of existing franchisees in a brand to really buy into our vision and culture of what we’re building.

Meg:
I was going to go back to that point of why do you seek early stage? And that explains everything right there. It is definitely much easier to navigate with just a few locations or one location. But then of course a challenge.

Say on my end when I’m bringing a candidate to look at the brand certificate, one of their first comments is, “Well, this isn’t proven. This is not a proven concept. They only have one or two locations.”

So how do you overcome that obstacle?

Josh:
Well, for us at Horsepower Brands now, due to our size and scale, people really have little concerns over the newer brands that we launch. Because they recognize that our management team—for example, even though I’m the founder of Horsepower Brands—we’re a management led company.

From our CEO all the way through the rest of the management team, they truly run the day-to-day of the business. And just about everyone that’s in the management team has been with us from the start. We’ve had no turnover in our management team. When the individuals that are in the seats—from CEO, COO, president, CFO, CMO—once those roles were appointed at the early stage growth of Horsepower Brands, those initial individuals are still in those roles.

So it provides a high level of confidence to the candidates coming into our newest brands in a portfolio. They recognize that even if they join a system that has 10 or 25 or 35 units in the early stage, as we first get going on the development side of growing the brand, they recognize all the experience that comes from all of the learnings we’ve all incurred over the years—not just with Horsepower Brands, but with everything that we’ve all done prior to this organization being established.

It’s much different. I always tell people you really need to consider: put aside the size of the franchise opportunity at that time, who’s running it and who’s leading it. Because I’ve seen some even single brands that are just getting started in franchising but are led by some very decorated professionals that have a good track record and history within the industry. Those are the types of people that I would want to put my money behind if I was a franchise candidate.

So, people—we often hear in our discovery phase when people are evaluating our opportunities—that our process is leaps and bounds better than many of our competitors. It doesn’t mean that our opportunity is necessarily better. It just really showcases the overall knowledge and experience that we have in being able to deliver information and really that transfer of confidence to people in that process of discovery to make an educated decision of joining an organization that really fits their values and helps them to achieve their goals.

Meg:
What I appreciate too about your leadership team is when you bring in a new brand and there are a lot of learnings—like with Gatsby Glass, or I don’t even need to call out a brand in particular, roofing—there are transitions.

There are states that have different requirements. Say with locksmithing in Wisconsin, you have to have a master locksmith. Well, there aren’t that many of them left anymore. And so how do you tackle some of those unexpected, or maybe they’re, you know about them, quirks state by state with some of these brands where, ooh, you got a left hook there you didn’t anticipate? How do you overcome those obstacles?

Josh:
So we’ve done a lot of things over the years to really address that. Every state in different brands can have different types of licensing requirements, experience requirements and things of that nature.

It really starts from the recruiting aspect of who are the people that we’re finding and sourcing to work within our franchisees’ locations. Because in many of the home service businesses that we’re in, if there is a specific state licensing requirement that a franchisee does not hold that license or may not even qualify for a period of time to get that license, we can recruit somebody to work within the organization. Oftentimes they’re what’s called a “qualifier.” That person has that industry experience.

In some cases, Meg, we’ve even hired people on our staff because oftentimes our team at our home office will have enough experience to be able to secure those licenses even on a local level. Even though they don’t live and work within that particular state, they possess all of the experience and the requirements to achieve that license.

And then in some situations, we’ve actually been the qualifier for franchisees in a few of the brands that required it.

Meg:
Yep, perfect. All right, so let’s dive into the heart of the matter here. The entrepreneurship through acquisition versus franchising. You’re going to give us a masterclass on that. Now, I will let you dive into the topic wherever you want. And because you see both sides, the pros and the cons. So start navigating this conversation.

Josh:
Yeah, and Meg, I’m certainly no expert in either. Right. You know, it’s. I always remind everybody that, you know, entrepreneurship through acquisition or franchising really comes down to each individual candidate’s goals of what they’re trying to achieve. But I do find myself speaking on this topic multiple times a week.

Especially I’ve mentioned a few times on this call together, our Varsity Zone HAC brand, believe it or not, about 50% of the candidates that actually come to us looking at that brand began their journey of looking at the mechanical and the trade space, whether it be HAC, electrical, plumbing, by looking for existing businesses. That’s an industry that’s actively being sought out by private equity groups all over the country. And private equity groups are notoriously overpaying for these businesses in order to create these larger control groups across the country.

And so oftentimes those individuals are getting to us when they’ve reached burnout. They’ve been trying to source a business for six months. In one situation recently, I had a candidate tell me he’s been seeking out nhse business for four years and has even submitted bids on businesses upwards of $5.5 million and was being outbid by private equity groups overpaying beyond the asking price of what the advertised business was.

And so there was a breath of fresh air for some of these candidates within that brand, specifically to realize that there was a path for them with little to no knowledge of the space to actually get into it and then have better control over what they wanted to build as opposed to taking over someone else’s existing business.

And so I do find myself often speaking about the pros and cons of each. And so, like the pros on entrepreneurship through acquisition are very simple. It’s really only just two things to be very transparent. It’s you’re buying existing cash flow which you’re paying a premium for through that acquisition process, and then you have 100% control.

But 100% control in some ways is not truly 100% control, because you’re still going into a business that you know little to nothing about and you’re at the mercy of the existing employees. And are they going to stay? I’ve personally been through the sale of two businesses and I watched a lot of the common things that come up when I sold those businesses.

The buyers. When I look at Monster Tree Service and Redbox plus, when I sold both of those companies, there was no reason for any employee that worked at either one of those organizations to leave following a transaction. But what came up is some of the common things that I hear time and time again from people and people started leaving because of they worked for me. Well, I work for Josh. I don’t want to work for this other company. And it just began this snowball effect of what I think are really merely excuses because I don’t see what the difference is whether I own the business or someone else owns the business. And the cultures remain the same. The pay scale for the employees has remained the same, if not improved, because in many cases those groups came in and because they were private equity backed, they said, hey, we don’t want to lose anybody, so we want to make sure that we put incentives in place to provide more compensation to these people.

And in many cases, that wasn’t even enough to retain those, those people. And so, you know, when you think about some of the cons through entrepreneurship as well that I speak to, often, often is there is that high upfront cost because you are paying for that cash flow, which, which can be the pro that people are looking for. But then I just describe some of the legacy issues that you deal with, because, you know, you deal not only with the legacy issues of, you know, the employees, but then you’ve got the reputation, the reputational risk of like, what did the business do before?

Like, yes, it could be nice to inherit an existing business where, you know, there’s an existing online presence, but is that online presence a positive one, a neutral one, or is there a lot of bad publicity around there? And do you, through a due diligence phase, learn enough about that independent business to know everything that could be out there related to legacy issues?

You obviously get no playbook. I actually had to that point, I had a situation where we had a franchise candidate about two years ago, chose the path of entrepreneurship through acquisition because he really just wanted that existing cash flow. That’s what he was after more than anything. And the founder of the business that he was buying, he’s like, well, they’re going to give me all the training, they’re going to give me the whole playbook. They’re going to give me everything I need. They’ve already promised this to me. And three weeks following to close that transaction, the founder of that business walked out on him.

And it wasn’t related to home service what he bought. He actually went into the pet space and now two years later, he’s come back and he’s actually joined our standstrong fencing brand. And so he came back around two years after that, after he was able to sell that business and get his money back. And talk to me about just the horrible experience that he had by acquiring an existing business. And he said, the entire time I was going through it, I just kept saying to myself, I knew I should have joined horsepower. I knew I should have joined horsepower. But listen, it’s one of those should have, could have, would haves that you learn.

And then just a couple of the other minor things, Meg, on the entrepreneurship side from the cons are, you know, you do have a higher rate of failure because people through entrepreneurship, with acquisition, you know, they have little to no knowledge of the industry they’re going into besides the research they’ve done. And then it’s just really those integration challenges.

So, you know, that’s really the way I look at entrepreneurship. I mean, from franchising, there’s just so many pros and so many cons. But before I hit on those, you know, I’d want to just address any questions that maybe, you know, you were triggered by you. From some of the things that I talked about thus far.

Meg:
The points that you bring up are what I’m speaking to as well. I am an entrepreneur. I’m a franchise owner. I’m a franchise investor. Where have I made more money? I’ve made more money in franchising. I’ve been on both sides of the fence.

And so I completely agree with what you just said about the, the cons. You know, people, people who have never owned a business before think it looks easy. Nothing’s going to change. I’m going to get in there. I’m not going to change anything. I want the culture to stay the same, but just by virtue of being a different person, the culture is going to change.

No one is Josh. No one is Meg. I saw it happen too, with a business that I sold in 2003. Nothing’s going to change. And he wasn’t me and he didn’t maintain the culture and people quit and he was, he. He did not have a going concern that was worth anything close to what I had sold it for. He just wanted to exit, same as what you’re talking about. It’s. And I was there. I was kept on for a period of time and Paul didn’t really leverage my knowledge base or experience. And when he started to run into culture issues, he, he didn’t have the sensitivity to recognize that there was a shift and the tide was really rolling against him now.

And so he did end up. He bailed pennies on the dollar and sold it to another franchisee. So I’ve.

Josh:
You mentioned something, Meg, that’s interesting when you say people make the comment, I’m not going to change anything. Oftentimes when a business is sold there, that’s an opportunity to make the changes that the existing founder may not have been willing to make, because to maybe catch up to the current times or, you know, listen to what some of the employees or the customers have to say in order to better improve your offerings to your, to your customers as well as the experience of your employees.

And so, you know, coming in and just thinking that you’re going to make no changes may not be a beneficial way to approach things.

Meg:
Well, why people don’t acquire a business because it’s perfect. And so to clarify, I’ve talked to a bunch of people who have approached Pete and me about buying tall grass. And if I buy it, I totally respect the culture that you’ve built. Nothing’s going to change for the first six months, but, but by virtue of acquisition and then looking at the books, looking for operations, looking at the checklist at the garage door before taking that bobcat out or the, the cedar out, oh, you know, maintenance isn’t quite up to snuff. Well, things are going to change.

But the, what the employees hear or are told, what they are told and they embrace is, oh, nothing’s going to change. But of course things are going to change.

Josh:

Without that.

Meg:
Yep.

Josh:
Now when we flip to, like, franchising, you know, because again, people are looking at both of these opportunities, and your focus, you know, as a franchise consultant is you’re helping people better understand franchise opportunities.

You know, when, when I look at the con side quickly, you know, it’s really only three things that come to mind, you know, quickly for me is that your revenue starts from zero, but that’s the same level playing field that everybody starts from in franchising, when they acquire the territories that they’re going to launch their business unit in.

You know, the other con is you need to follow a system, but it’s really not a con at the end of the day, because one of the things that I believe a lot of people struggle with just naturally is accountability in a business. And franchising really brings back that accountability.

I always talk to a lot of character traits, you know, like execution, accountability and work ethic really help to drive success in just about anything that you do, you know, in life.

And then the last con that, you know, comes to mind for me is that, you know, when you want to sell or transfer your business, it does require approval of the franchisor. But people get that confused of what that means, because it’s not that we have to approve your ability to sell or transfer the business.

We, as a franchisor—especially at Horsepower Brands—we welcome a sale or a transfer at any time. We really just have to approve the buyer that’s going to acquire it. Do they meet the standards of who we want to have in our system? Are they genuinely financially qualified?

A lot of the same approval process that an existing franchisee went through to join our system is the exact same thing that a candidate or a buyer is going to have to go through to come in to acquire an existing franchisee’s business.

So it’s not that the franchisor ever wants to create a roadblock to the franchisee being able to exit, it’s strictly, we want to make sure that there is a seamless transition that protects the brand and more importantly, will also benefit the global opportunity of the system.

And so, in my experience, what I’ve witnessed in the last 14 years is that when I’ve seen transfers or sales happen within a franchise system, typically the new owner rapidly grows that existing location. They breathe a lot of new life and energy into that business and maybe add some of the things that were missing prior to them coming in.

So, based on that experience, myself, I welcome and look forward to those opportunities to be able to help people move on to whatever it is that they’re going to do next.

But then when you look at the pros of franchising the list, like, we don’t even have enough time to hit on everything on the list. But like, things that just quickly come to mind are like lower startup risks because again, you’re not paying for cash flow, so you have that lower startup risk. But with it, you’re getting systems, an established brand, that smaller upfront investment makes the financing easier because now you’re oftentimes off of your W2 income.

If you’re coming out of a W2 role or if you’re invested in other businesses and you don’t have a high income level, you’ll qualify for the loan that’s required to acquire that franchise, as opposed to that substantially larger loan to acquire an existing business.

You now get to establish also your local reputation. You get to establish the core values. You make all of the hiring decisions of people that fit your culture, that are really fit for the roles that you’re looking to put them in, as opposed to maybe a prior owner in a business that you would be acquiring might have tried to put, you know, a square peg in a round hole just to try to retain somebody that maybe wasn’t the right fit for the business.

And then most importantly, you get all of the training and support that the franchisor offers with that fast ramp up of onboarding and then that large community of peers that are willing to share open and transparent information.

I’ve been in industries where I’ve operated a small independently owned business doing under $10 million a year within a small geographic region. And I can tell you that even though I thought that I had others in the industry that were willing to be open and honest and share information with me, there was always this guard and where you quickly found out that you weren’t always getting the most accurate or up to date information from those people. There was some puffery involved. People wouldn’t tell you the whole truth.

It was just one of those things where your competitors would sort of want to keep you at arm’s length and make you think that they’re giving you information, but they’re really not. They’re just giving you very little.

And so opening up that community of being part of a franchise network is really the true definition of rising tides rises all boats.

Meg:
Yeah, I would love to go back to a point because it just came up yesterday again, if I buy a business, I’m buying existing revenue. If I start a franchise from scratch. This woman had told me that she was making 250, between 250 and 350 depending on the year.

So Meg, how quickly can I replace my income at that level? And I said, you know, it really all depends on but walk through Josh, because I did this for her yesterday. But you’re a different voice and a different point of view. It can be a benefit to start from zero. There are tax ramifications, etc, etc. How do you walk a candidate through that? That concern of starting with zero revenue and then building either a membership base pre sales. How does horsepower help franchisees quickly attain revenue?

Josh:
So a big misconception that people have when they’re going into business own sales from a W2 role is if I’m making $250,000 at my current job, I need to make $250,000 in a business and that’s, that’s in it. You’re not comparing apples to apples because in, in a W2 role, you’re paying for so many expenses on a personal level out of post tax dollars.

So your silent partner of Uncle Sam got his share of your paycheck and then you’re left with the net of that and then you’re stuck paying things like a vehicle payment, auto insurance, a cell phone bill, Internet, you name it. The list goes on and on. Now when you own a business. You know, you’re paying things like insurance, cell phone bills, Internet out of pre tax dollars. So those aren’t actually even hitting what you would be thinking as you need an income.

So you have to start backing those things out. You also can’t discount the tax benefits of starting a new business. Now it’s important to think about the structure because if you establish your business out of the gate as a C Corp, you’re not going to get the pass through onto your personal tax return like you would with an S Corp or an LLC.

But if I’m a W2 wage earner making $250,000 a year and I’m going to go invest into a business, I’m going to realize that first year of making that investment into the business. I’m going to realize a huge tax refund the following April when I file my taxes.

And so you need to take all of those things into, into account to really break down where you truly need to land. And when people start to do that type of an exercise, they realize that if they’re making $250,000 and they could get into a business and maybe make a hundred thousand or 125,000, I mean that’s 50% or less of what they the gross was before, right? That, that in itself in the early stage could be a replacement of income for that individual.

Everyone’s situation is different. But at the end of the day you also can’t forget, are you absolutely leaving that job or are you going to run a semi involved business to where you have availability of time and you want to build a team to go out and maybe in your first year maintain your W2 role while you’re managing a team that is helping to get your business off the ground to where you can have more of a stable base to say you can build this thing over the first year to 18 months, to say now I’m comfortable walking away from my W2 and stepping into it full time.

There’s that avenue and angle of it too. And you can’t forget about cash on cash returns because if you’re going to take more of the investment approach of where you’re going to maintain a W2 or maybe you’re going to back down your time allocated to that and start to work into a business. You know, you have to think about how much cash are you putting into it upfront, which is typically 20% of the project cost, borrow the other 80%, whether that be through a line of credit, home equity loan, or the SBA.

A lot of people overlook that. If they invest in a $300,000 investment, they put 60,000 down at 20% of the project cost. And if even in year one, if they made 60,000, they’d come back and go, this sucks. This is the worst thing I ever did. I make 250 grand a year. I can’t believe I bought a business to make 60 grand. But what they overlook is the 60,000 they injected. They made 100% cash on cash return.

But yet the alternative is people would give that 60,000 to an investment advisor who, at the end of the year, if they called you and said, we made you 10% in the stock market, somehow 10% hits better. But then if you pause and you go, but that’s only 6,000, who’s getting excited about that?

Meg:
Yeah, this is perfect. This is perfect. I talk about this stuff, and I think my candidates listen to me like I’m their mother. And so you’re. This all resonates perfectly with me and completely agree with all of it. And I mentioned that woman yesterday.

But I do literally have six people. I have a guy who completely walked away from a 350 job. I have another one in Illinois who’s making half a million dollars a year, and he hates it, and he’s looking for something else to do. And that was his first question is, how do I replace, I hate my job?

Josh:
Yeah.

Meg:
I said, why don’t you walk away from your job when the time is right and you’re building something that you see the future now is going to replace. Remember working with Mike, who I mentioned earlier? He called me out of the blue, and I never know what’s going to happen when they call me out of the blue, if it’s a good or bad thing.

And he. He thanked me. He had replaced his VP bank income in less than three years. He was making, I don’t know, 350 to 500 grand a year.

Josh:
Yep. So I think any franchise candidate has to do is, like, just pause and really think about what season of life are you in? Because none of us are getting younger. We’re all getting older. And that list of the should have, could have, would have opportunities just continues to grow naturally.

It doesn’t matter how strong of a level of execution you have. Even people with the best level of execution are still going to have a should have, could have, would have category. But like what I always try to do in a lot of situations is pause and think about what are life events that are happening around me as an individual and what have I observed of others as well.

And so for me, in the season of life that I’m in, I think about with having three kids that are 11, 12 and 13 as of today, you know, like, you hear people talk about 18 summers with your children. So like, I look at things of, like, certain decisions I make right now is like, how’s that going to impact the remaining summers I have with my children?

I also look at other things, like I’m now 42 years old. At 42 years old, what are some of the stories that I’m hearing around me? You know, just yesterday, you know, I heard tragic news of somebody who’s not much older than me that’s now terminally ill with cancer. You know, these are things that are like, those are things that are completely out of your control and my control, Meg. But like, but one thing that is 100% in our control is the decisions that we choose to make about how we’re spending our time into the future.

And so, like, if I’m not happy in my job, why am I going to continue on that journey when I have opportunities to do others? Because the thing that I learned years ago is that the people that we deal with and the people that are genuinely interested in looking at franchise opportunity, they are more often than not part of the top 1% of the wage earners in America. And they don’t realize that they’re in a very strong place to be able to do whatever it is that they want.

They can just stay in the job, but they have this burning desire to want to be in business themselves. Business ownership, as you said, is not the easiest thing in the world. But doing it with a franchisor that can provide you the playbook, that can give you the ongoing coaching and support and mentorship and everything that you need to build a business.

If you bring execution, accountability and work ethic to the table, you’re going to be able to go out and work towards achieving that replacement of income. It’s never a guarantee, but it’s one of those things that you are in control of. Can you get there?

And so if you think of all those external things that are happening around us all the time, like just put it into your own situation and determine, like, how are you making your decisions?

I’ll never forget a few years ago, my mother, who’s in her later 60s, she said something to me that just hit me like a knife through my heart. It was like she bought a brand new car. And she goes, Josh, this will probably be the last brand new car I ever buy. And it was like I stopped and I was like, oh, my God, like, you gotta be kidding me. Like, mom, no way.

Like, this isn’t going to be the last brand new car you buy. But it’s. But in her mind, in her late 60s, that’s the way she’s thinking that she just bought a new car two years ago and it may be the last new car she ever buys.

And so if you stop and you think about those things, I think it can really help you to determine where are you going versus just taking the easy road or the comfortable path. Because being an entrepreneur my entire life, like, I don’t know what it’s like to work for somebody else.

But I can tell you from the outside looking in, like the way people from the outside looking in at business owners go, that looks easy. I can tell you that for me, you know, I look at working for somebody else for 30, 35, 40 years, and I go, man, it’s got to be boring to know exactly what I’m going to make, what my increase is going to be every year, what my bonus is going to be. I mean, that’s just not the right fit for me. And I think that’s not the right fit for a lot of people that we work with.

Meg:
Yeah, becoming a business owner is a real paradigm shift. And I had a conversation with somebody else recently who became a franchisee. She had been exited from her C level job at a big corporation in Milwaukee, bought a franchise, and she called me and said, I, I gotta go back. I miss my posse. I miss people respecting me.

I said, well, Debbie, why aren’t you building that respect into the culture of your. Of your franchise? Promote yourself as the owner into the C level of your own business. But she really missed the collegial camaraderie of the C suite. And. And so she decided to exit and, and go back to getting a job.

Different strokes for different folks. We. But that’s a beauty, too, of. Of it not being a terminal diagnosis, but a decision to enter into business ownership, as you and I both know, that can be reversed. If it’s not the right fit, you can get out of it.

You brought something up that really resonates with me as well about competition in a fragmented, independent. We are an independent business, Tall Grass Restoration. We do prairie wetland woodland restoration. It’s not a franchise. And we get contacted by competitors. Do we want to acquire them or would we like to be acquired? And the lack of transparency is really stunning.

Josh:
Absolutely.

Meg:
Customer lists, quality of the equipment, maintenance records, a lot of it just isn’t there. And so for somebody who’s coming out of a corporate role, who’s never owned a business before, there are going to be some pretty sharp surprises that come up.

And I’m working with another guy who purposefully quit, but he’s been on that entrepreneurial side of acquisitions with his past company so he’s got some exposure. I have more confidence in him being successful. That said, a couple of my good friends who are business brokers have recently gotten out of brokerage because of the lack of decent entrepreneurial businesses that are saleable assets.

Josh:
That’s correct.

Meg:
Not designed for sale. So how do you help your franchisees design their exit and maintain the integrity of the business so that it truly is a saleable asset?

Josh:
Well, every franchisee has a different vision and goal for the business. I would, I would say, you know, we really have three, three buckets of people, you know, that we have people that are building to sell. So they’re strictly just building an asset and when it’s time to exit, they’ll exit that.

We have others that, you know, it’s more of a legacy type play. They just, this is what they want to do. They want it to be the last thing they ever do and potentially even have like family get involved and just, you know, make it a family business.

And then the third is, is just people that don’t know what they want to do with it. They’re just excited to get into business and they want to build it and they’ll see where it goes into the future. And so there’s no right or wrong way whether you go one of those three directions.

But we do, we do a lot of things to, you know, help coach and mentor our franchisees in order to make sure that they are building their business towards a path of creating the highest level of profitability that they can out of the business. But it is, it is hard for us. Like as the franchisor, we have no control over the profitability of a franchisees business because they’re the ones that are making the hiring decisions, they’re making the sales decisions, they’re setting the price points.

Because in our businesses being a home service, we’re selling a product and service to a consumer that we understand initially up front what our cost of goods are. But then as far as applying a margin to that, that’s the franchisees decision of what margin do they want to charge to that. So we do a lot of coaching on job costing because that’s where we can really identify a lot of issues within a franchisees business.

But oftentimes what you find out is that once a franchisee gets to a point where they are job costing and they’re selling very profitable work, then it becomes a volume game. And then you have to start to address like what are the, what are the franchisees doing in order to not just rely on things like paid leads, are they developing referral partnerships?

And that’s where you can start. Even though, you know, very few of our businesses have like reoccurring revenue aspects to it. Because once I sell a customer a new roof, they’re not calling me back for a new roof in five, five or 10 years, unless it was damaged by wind or hail or some other type of natural disaster.

So how do I create reoccurring revenue vehicles? Through referral channels so that the customers that I service continue to give me new work, even though it may not be on their properties. It’s people that they know, like and trust. And so we do a lot of local outreach as well at the franchisee level within the, you know, existing client base that we have, as well as the referral partners that we work with to continue to drive those referrals.

We find more often than not the most profitable work that our franchisees do are the, are the jobs that come through those referrals because it’s someone that’s really coming through and buying on service versus on price.

And then that’s how you can really establish yourself as a market leader. To be a market leader doesn’t mean you have to do the most revenue. Being well respected and delivering a high level of customer service, even though you might do a million or $2 million in revenue, while you’ve got competitors that might do 10 or 15, can still make you a market leader because people are coming to you as part of the trusted individual who has limited capacity as well.

I mean, think of boutique hotels and resorts and hotel industry like, you know, it’s, it’s a completely different price point than what you would pay to just go stay at a Marriott or Hilton. And that’s really, you know, what we’re trying to develop with our franchisees. We don’t need them to be the biggest within the markets. We just need them to be a market leader and deliver a high level of customer service at an acceptable margin that they can earn, they can earn a great return on that, on that business.

Meg:
To me, and this goes back to interview that I did with Terp Ricketts some time ago about the KPIs that are in place so that your internal teams can then help your franchisees focus on what is important. And that’s really the. When I interviewed my broker friend who has now taken another W2 job because there just aren’t good businesses, his real frustration was that entrepreneurs don’t have that same kind of leadership that a franchise has in place in order to see when the margins are slipping, the wheels are falling off, the culture is declining, whatever, fill in that blank.

But the franchisor can recognize, hey, we’ve got some KPIs that are off. I know that you have an exit strategy, let’s get this back on track again so that you can get the top top dollar for what your business is doing and have a real saleable asset when it’s time.

Josh:
And consultants are very expensive in most industries. And so being part of a franchise system eliminates the need to have to bring in consultants who are just really taking a high level look at your business, charging you thousands and thousands of dollars a month for a few hours of their time in order to make you feel good about thinking that some changes are occurring.

Whereas being part of the franchise system, you’ve got franchise business coaches that you’re interacting with regularly. You’ve got people that again are developing things, research and development occurring within the industry. Things are being brought to you as the franchisee to really keep you at the forefront of being innovative within the local market that you’re working.

And then it also adds a layer of just service that most small businesses would never have access to. I mean, you think of the attention to detail from a sales perspective. You know, when it comes to like sales coaching and mentorship, you know, if you’re starting a new business and you have one salesperson, you’re not gonna have a sales manager.

So to have somebody at the franchisor level that can provide that coaching and that mentorship and just so many other things that you know, we early stage for a franchise or there’s a substantial amount of savings that they would never have, they would never have the financial resources to be able to implement into their business if they had done it alone, where they’re getting that out of the gate when their revenue starting at zero and then build upon that and.

Meg:
That’s what the royalty dollars are for. You’re paying for access to intelligence, to market indicators. I love the example that you use about the boutique hotel, for example, to be a market leader. It does not mean that you’re the biggest or. But to be the best in your segment and to have that reputation, that’s what’s going to get you the highest return when you’re looking to, to exit from your business.

Josh:
You’re absolutely correct.

Meg:
Yeah. Well, there, gosh, there is so much to talk about this topic. What else do you want to talk about that we haven’t touched on yet?

Josh:
I think we’ve covered. We’ve covered a lot of stuff to really give listeners a lot of stuff to really consider. And, you know, at the end of the day, I mean, franchising still gives people the autonomy. You know, I always say, you know, you’re still in business for yourself, but just not by yourself.

And so, you know, when I go back to my earlier comment of, you know, entrepreneurship through acquisition gives you 100% control, it’s really not 100%, because being 100% in control can be totally out of control too, because what a franchise system helps to do is really keep you focused in, on, like, what are the core elements of your business as opposed to being a jack of all trades and a master of none.

You know, and, and you think about, you think about, you know, years ago when, when you saw some different businesses, like Dunkin Donuts as an example, like, they used to do Dunkin Donuts and Baskin Robbins together. And like, you know, you start trying to do too much, and it’s like, people know Dunkin Donuts for what Dunkin Donuts is, and people know Baskin Robbins for what Baskin Robbins is.

And, you know, like, if you, you look at some of our businesses, like, majority of our business in our portfolio, we have three to four unique services that we offer. Could we diversify into five or 10 or 15 others? Sure, we could. But then there’s no concentration, you know, and I go back.

The first business I ever ran with with, you know, complete focus was my tree care business. We did three things when I launched that business. We remove trees, we prune trees, and we ground stumps. People would call and say, do you plant trees? Nope. Call your local nursery. You know, people would call and ask other things. You know, do you fertilize lawns? Nope. Call your local lawn care company to do that for you.

Now, eventually we diversified and we got into things like plant health care, where we started doing fertilization and disease control of trees and shrubs. But that came much later. And I’ll never forget, when I launched that business in 2008, I had so many of my competitors going, you’ll never be successful if all you offer is removal, pruning and stump grinding.

And you know what? I later saw that following me, showing that you can focus on three things and do them very well, and that’s what you’re known for, that many of my competitors in eastern Pennsylvania started getting out of all these other services that were just like dragging them down. They were doing lawn mowing, they were installing sod, they were, you name it. The list goes on and on. You know, they were hanging Christmas lights, they were cleaning gutters.

It’s like, just because you have a bucket truck doesn’t mean you should be using that bucket truck to clean people’s gutters or hang Christmas lights. It’s not the highest and best use and return on that, that asset or that vehicle that you, that you own. And so, you know, really creating focus, and that’s what, you know, franchising really does, is that, you know, having that system to say, these are the approved services that you offer, go do these really well. Or these are the approved products that you can sell. Go sell them really well and don’t be a jack of all trades and a master of none.

Meg:
I’m so glad you brought this topic up. It is so important. People who’ve never owned a business before, and we get asked the same thing. At Tallgrass, we do prairie wetland woodland restoration work. It’s ecological work.

Well, came up over the weekend. We had a microburst on our street. Huge three fronts rolled in 3, 5 and 9 O’clock, eight trees are down. Pete and I grab a bunch of chainsaws, we go back to the neighborhood. We’re taking trees apart, basically. We were dissecting is all we could get to. Eight trees down.

And our neighbors were asking, well, you know, I just. He said, I need a new lawn. Can you do that? No, we’re really not into that. It’s so important when you are, when you’re a business owner to understand, just as you said, what are your core businesses, what are your core revenue streams and how do you maximize the profitability that equipment that you purchase?

If you’ve got a bobcat, if you’ve got a. We do. We’ve got John Deere tractors with huge batwing mowers that go down well. We don’t want to have the John Deere sitting on the sidelines because of a hydraulic issue for more than a week. You have to, you have to really run your business understanding the value of your best equipment and your best people and maximize those elements of your business without getting diluted and, and going off base.

Josh:
Yep. Well, you’re the true definition of don’t judge a book by the cover. Because the average person that would meet you, Meg, would never think that you wear chaps and run a chainsaw and drive tractors. But, you know, we’ve been joking about this for years. Ever since I was in the tree business.

Meg:
We have. And Josh, it was so fun over the weekend. I was the only female out there. I don’t know where everybody else was, but I’m dragging trees, tree limbs and oh my gosh, it was started at 6 in the morning and we didn’t get done until 5:30 and.

But I gotta say, yeah, I got, I got good guns. And it’s the benefit of being in shape. And I also try to put enough collateral out there so that people know I’m more than the franchise fashionista. And I do that. We do other things.

And it’s really because of that I think I’m successful. And you are too. When you, when you touch the earth and business, you don’t know. You don’t have to know how to do it, but you have to learn your business principles somewhere. And you touched on a little while ago surrounding yourself with mentors and the right people who are going to advise you and, and get you to the end game, whatever your game is, but surround yourself with people who are going to steer you in the right direction.

Josh:
Absolutely.

Meg:
Thank you so much for spending your time with me today. It’s been a pleasure. It’s always great to see you at the conference. And I always wonder, how do you run a business that’s in Omaha, Nebraska from New Hampshire? But we’ll save that topic for another time because that’s another good one. The role of the owner who’s absent and not hands on all the time.

This has been excellent. I love everything that we’ve talked about and I thank you so much, much for, for making the time for me today.

Josh:
Yeah. I appreciate it, Meg. Thank you.

Free Agent Podcast with Meg Schmitz – Guest: Josh Skolnick, Founder of Monster Tree Service & Co-Founder of Horsepower Brands

Meg:
Hello everyone, and welcome to or welcome back to my podcast, the Free Agent. I am Meg Schmitz, your host.

Josh:
Thanks, Meg.

So why from my audience, talk a bit about your entree into franchising. What brought you to franchising and then the importance of creating Horsepower and the premise that it’s built on.

Josh:

Meg:
It’s an amazing growth trajectory and it’s built on a foundation.

Josh:
Yep.

As far as getting a large net of existing franchisees in a brand to really buy into our vision and culture of what we’re building.

So how do you overcome that obstacle?

And then in some situations, we’ve actually been the qualifier for franchisees in a few of the brands that required it.

And so he did end up. He bailed pennies on the dollar and sold it to another franchisee. So I’ve.

And so, you know, coming in and just thinking that you’re going to make no changes may not be a beneficial way to approach things.

But the, what the employees hear or are told, what they are told and they embrace is, oh, nothing’s going to change. But of course things are going to change.

Josh:

Without that.

Meg:
Yep.

I always talk to a lot of character traits, you know, like execution, accountability and work ethic really help to drive success in just about anything that you do, you know, in life.

So, based on that experience, myself, I welcome and look forward to those opportunities to be able to help people move on to whatever it is that they’re going to do next.

And so opening up that community of being part of a franchise network is really the true definition of rising tides rises all boats.

Josh:
Yeah.

And he. He thanked me. He had replaced his VP bank income in less than three years. He was making, I don’t know, 350 to 500 grand a year.

And so if you think of all those external things that are happening around us all the time, like just put it into your own situation and determine, like, how are you making your decisions?

Josh:
Absolutely.

Josh:
That’s correct.

Meg:
Not designed for sale. So how do you help your franchisees design their exit and maintain the integrity of the business so that it truly is a saleable asset?

Josh:
You’re absolutely correct.

Meg:
Yeah. Well, there, gosh, there is so much to talk about this topic. What else do you want to talk about that we haven’t touched on yet?

Josh:
Absolutely.

This has been excellent. I love everything that we’ve talked about and I thank you so much, much for, for making the time for me today.

Josh:
Yeah. I appreciate it, Meg. Thank you.

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