Kevin O'Leary | Why the Busiest Home Service Owners Get the Least Done

The Home Service Expert Podcast

In this episode of The Home Service Expert Podcast, Kevin O'Leary, known as Mr. Wonderful from Shark Tank, discusses the home service industry's potential, the importance of recurring

Key takeaways

• Kevin O'Leary highlights the home service industry's resilience and growth potential, especially with recurring revenue models.
• He emphasizes the importance of signal-to-noise ratio, focusing on three key tasks daily while blocking out distractions.

Main topics

• Home service industry growth and investment potential
• Signal-to-noise ratio and focus in business

Notable quotes

"You need to get three things done every day, whatever they are. And that's the signal. You've got to block out 70% of the noise."

Conclusion

Kevin O'Leary provides valuable insights for entrepreneurs on focus, execu

Transcript preview

Speaker 1 (0:00) You mentioned you worked for Steve Jobs and he was an asshole. 100%. He also taught me about the concept of signal and noise ratio, which I've really adopted. You need to get three things done every day, whatever they are. And that's the signal. You've got to block out 70% of the noise. Now because you're blocking out noise, you're perceived as an asshole. We would have contentious meetings in the old headquarters. Brutal. Some of my staff would be crying when it was over. People don't have to like you. They have to respect you because you can achieve things. If you try and make everybody like you, you will fail. Today's a very special day. We got the Freedom Event out there. Today's guest, Harley is an introduction, known as millions as Mr. Wonderful from Shark Tank, world-class investor, entrepreneur, business leader, who built and sold the learning company and one of the largest tech deals of all time. He went on to launch O'Leary Funds and O'Leary Ventures, and today manages a diverse portfolio that spans everything from fintech to crypto to consumer brands, bestselling author. global speaker and a straight shooter on personal finance leadership and entrepreneurship. Kevin's not here just to talk about money, but also discipline, decision-making, and how to build wealth that lasts. Kevin, I'm really excited that you're here, brother. Appreciate it. Why did you decide to do this, is my first question. I love working with entrepreneurs, and, you know, what that room was full of was entrepreneurs, people that really understand that entrepreneurship is not a destination. It's a journey, and we're all in it together. and we were sharing our thoughts together. I really enjoyed that session because there's a lot of energy in that room. But that's what it's about. When you start a business in America, it's only a third of the population to pull it off. I mean, it's not for everybody, and I'm not telling people to do it, but if you are gonna do it, you wanna talk to other entrepreneurs, you wanna share ideas, you wanna help entrepreneurs not make the same mistakes that I made. So I kind of go through that journey saying, here's what worked, here's what didn't, here's what I've learned recently, here's what I've applied, here's how it's worked. I want to share, you want to give back. This is the way I look at it. What do you think about the home service industry? It's probably one of the best times ever to be in it. Not only technology advancing it, it's never going away. It's never going to be replaced by AI or any of this disruption stuff. It's the core of most people's net worth is where they live, and they care about it. It's a spectacular industry. I mean, it reminds me, there's two industries that I admire so much that you're going to be around forever. Climate Control Storage, which I came up in, it's directly linked to the stuff you buy for your home, because after a while you store it. I mean, it's kind of like everything that goes on in maintaining a home or a business is a perpetual business. Good times, bad times, with sessions, whatever. It's always a required service. You know, we run at my company 25,000 jobs a month. And you know what's crazy what happened through COVID is we were deemed essential. And I've been through 2008, as you know, and the multiples went from 10 to 12 to 14 to 18 to 20X. This isn't that crazy, 20X? And it's hard to do the math, really, of 20x multiples. on eBay. And then I learned about annual reoccurring revenue. And you can get a multiple of that. And it's fun stuff. What do you look for when you make an investment? I look exactly for that. How do I get my money back, first of all? Secondly, how stable is the reoccurring revenue? How risky is that recurring revenue? Like, what would make it stop? I mean, I'll pay way more for a safe investment that has recurring subscription or whatever it is to keep continuing every month. That's what you're describing, and that's why it's valuable. And it turns out the whole market feels that way. And so these multiples have increased for a reason. It's the safety of the investment, first to return the capital invested, and then to accrue the benefits of a renewed pace of free cash flow. That's very, very valuable. People covet those kind of investments. And so it takes executional skills, too. You have to have someone that can execute and do it. But if you understand the model on how to acquire a customer and how to maintain it and it generates cash, that's pure gold. And that's what this business is. That's why it went from a 7 to a 20. That's not you or I deciding. The market decided that because that's what the market wants. And so you're very lucky to be in that space right now. Very fortunate. And I think it's going to 6x in the next seven years. And I watch a lot of people. There's a lot of jobs going away. And it's scary. It's kind of scary in a one way. I mean, what do you predict? I just heard Bill Gates come out and say in 10 years, there's going to be a government subsidy. You're going to have to pay people to live because robots next year, Elon Musk, they could cook for you, it could walk the dogs? I mean, where are we going? What do you think about in the future? You know, I've listened to that narrative for multiple generations now. And I bet you if you were, you had a family business back 150 years ago making horse-drawn buggies and you went and saw the first car roll off the Ford production line with four tires on it and an engine and you say, oh, we're dead. I mean, we're all going to lose our jobs. That's not what happened to the economy. New technologies advanced productivity. There's a shift in who works on what and where. That happens. There's just dislocation. But because it's productivity enhancing, the economy actually expands. It's the same argument of saying, oh, well, television is going to destroy radio. That's complete BS. radio still exists. It comes from satellites now. I don't worry about that kind of stuff. I don't believe in predicting doom in the American economy. That's never worked. It never has happened. I've never bet against the American economy. It's provided an 8 to 10 percent return on average for almost 200 years. I mean, we're good at doing stuff that makes it easier to live and more productive. If I need a robot or a car that's going to drive me, great. And whoever was going to drive that car is going to do something else, probably a business that's. more valuable and make even more money. It's going to free human beings from tedious tasks, like flipping burgers. Right. I saw a robot flipping burgers the other day. I don't care. I'll eat the burgers as long as it tastes good. Yeah. It's it. I think a lot about where business is going. And just like you just showed the video of you, I can speak in Russian, Japanese, my AI, Hey Gen, some of the other tools we're using. I just watched a thing. If you're ever heard of n8n it's like zapier but for AI I could literally have it research the number one post for home service and build a whole integration that actually goes out does the research writes it I'm talking builds a thumbnail which mr. B spends 40,000 dollars on a thumbnail and it posts and build it perfect for X TikTok Instagram I mean now you're using the technology well that's what's crazy is uh I want to talk to you like I know every major P company in the space all of them. Blackstone, KKR, Apollo, all of them. And they show up with their loafers, their nice watches. I don't want to get in trouble here. I love you guys, by the way. And they think home service is just anybody could do it. And then I watch them fall apart because they lose the culture. They lose the, these blue-collar guys, they weren't raised the same way. Some of them have bad teeth. We've got to work on that. And they walk in, they treat them like a cog, a wheel. And they watch it fall apart because they say, number one, you can't cut your way to success. And I've seen very few people pull it off. That's why PE just learned never get rid of the founder. Never get rid of the founder. What is that? I don't know if you've ever seen that when they go in and they start looking at balance sheets and income statements and cash flow. And they try to figure out a way to absorb the, like make it more profitable very quickly. Have you ever seen that in business? Yeah, yeah. I see that all the time. The challenges the analysts that do that work have never actually run a business. It's a problem with P.E. and venture capital. And until you've actually made payroll on a Wednesday night, you don't know what it's like and how hard it is to run a business. And just use the metrics of, okay, I'll put debt on it or I'll change this, I'll change that, and it's going to be more profitable. Rarely works out. And the PE guys aren't that stupid anymore. They're starting to realize they've got to partner with the founder, figure out a way to keep them motivated. Hey, guys, I just want to let you know that the $250 out freedom ends tomorrow. Tomorrow night, it's gone. So the prices go back to full price. That's up to $250 off every tier for America's 250th birthday. If you've been waiting for a sign, this is the sign. October 26 through the 28th at Mandalay Bay, the best operators in business under one roof. Go claim your seat right now at freedom event.com or call our Texas at 602-581-7563 and we'll get you in. Do it tonight. I don't want you to miss this. Figure out a way to keep them motivated. So a founder in their 60s or 70s is looking for some of the last. liquidity for generational reasons, but they don't necessarily want to stop working. And so the better strategy is to partner with them. Maybe you buy, you know, a 80% control position and you cash out the family, but maybe some members want to stay working and they know all the customers. That's a much better model. And you give them incentives to actually work as hard as they did when they controlled it. It doesn't always work, but it works a lot better than just buying it out and thinking you can just parachute in some random CEO. that doesn't know anything about the history and the culture. And I would also say something that, you know, you touched on at the beginning of this question about technology. You know, you should use every tool that you can afford to advance productivity, both personally and in your business, because your competitor definitely is. And I'll give you an example. Damon got me into this. I'm going to pull it out of my ear. This is an IFB, a Bluetooth IFB, made by a company called Starkey. I don't own any of Starkey. Why am I wearing this thing? This thing is connected to my phone. It reads to me every communication I'm getting. Even if it comes in a foreign language, it translates it into English for me. I've chosen five different languages because I'm doing business in the Middle East. You can use it for all kinds of purposes. If you've got a bum ear, you can use it a hearing aid, but if I want to listen to the conversation over there, I can tune it to listen in over there. Now, these are not cheap, $6,000. But this thing has saved my hide, so many times when I travel or I'm doing something like on television. I've got the director in my ear. I'm on live TV and I'm getting my messages on all of my deals. And this year is reading it to me. And I'm able to absorb that and be more productive. So the minute I get off air, I can call. Thank you, Damon. Thank you, Sarky. I mean, I'm not the only guy. I mean, a lot of the sharks are using these things now. And Damon brought them to us. That's great. It's very cool, very cool. You know, I'm going to get one of those clips that that actually monitor everything I do in the day, and they listen to everything, and I just know. My assistant, my executive, she's right over there. She's the best. Ashley, she's hiring another assistant for her. And I said, they gotta be using ChatGPT B.T5. They gotta be taking aim. I use that. I use that every day myself. Our entire companies use it. We all have subscription services. We look at our social media, put it through all of the models to see if we can change one or two words. You know, a 15 second commercial has 75 words in it. Which 75? because we spent a lot of money on digital advertising. So we're testing. We'll do three versions. We'll put it through ChatTBTBT and other models and say it'll change two words. Then we test it in the Florida market. Boom, it worked better. And so, you know, it's kind of like... Maybe testing, yeah. Yeah, but testing works. I mean, you can do it by geolocking your Facebook buy or whatever you're using. And it's so easy to do it now. Like, it's not that complicated. You know, it's interesting. I just thought of this is I'm a big fan of attribution. I have 7,000 call tracking. numbers, every single landing page has a separate UTM parameters. Like, I know exactly. We spend right now, on average, 3.75 million a month in marketing. And it's important. What do you think you make back on that? I think you make $9 million? What do you think? No, I get my advertising budget is 12%. So I almost get a 9.4%. My ROAS, I'm getting almost a 10 times return. That is anything past seven, you've got it nailed. Anybody, listen, I see lots. Very rarely do I see a business at past seven raw. That's really hard. And if you're getting 10, you fine-tuned it. That's what, that's amazing. I spent a lot of money on branding. Even our trucks is a logo. It doesn't have a phone number, an email, doesn't have