Full transcript10 chapters · 10,177 words
00:00From raking a neighbour’s driveway to mowing lawns at $1.50
Jim Penman: Well, you don’t need money when you’ve got a home service business. That’s the wonderful thing about it. It’s not like you’ve got to buy land or anything Yourself. You’re a contractor or a cleaner or whatever. It’s all the same principles, so you just do it better.
Jim Penman: So I started off I was doing it by myself. Then I got too much work so I started putting on subcontractors. I found that challenging. Getting the right people like controls and honestly, my controls weren’t that good. My customer service, my own was fantastic.
Narrator: Welcome to Profit and Grit with Tyler, where blue-collar owners and insiders spill the real story behind their hustle, building businesses that thrive through sweat and smarts. We’ll dig into their journeys, from scaling chaos to growing the bottom line, with lessons and grit that pay off big.
Narrator: Here’s your host, the blue collar CFO, tyler Martin.
Tyler Martin: Today’s guest started with $24 and a secondhand mower no investors, no fancy tech, no shortcuts, just grit, trial and error and a relentless obsession with service. Fast forward to today and he’s built one of the largest franchise networks in the world over 5,500 operators across Australia, new Zealand and Canada and he still reads every single customer complaint personally.
Tyler Martin: In this episode we talk about why home service startups fail, why great branding starts with brutal standards and why Jim has no patience for lazy operators, even if it’s his own family. If you’ve ever struggled to grow your business without losing control, or wondered what it takes to scale without selling your soul, this episode is for you.
Tyler Martin: Hey, jim, welcome to the Profit and Grit Show. How are you doing? Good, very good, good, great to have you. I’m really excited to talk with you. I’d love to start out with learning a little bit about you. Can you share with me what you do?
Tyler Martin: Professionally is the first part, and then part two. I’d love to know just a little personal tidbit about you.
Jim Penman: Well, I’ve run a business called Jim’s Group which has got approximately five and a half thousand franchisees across Australia, new Zealand and West Coast of Canada Wow. And we do lots of different services mowing, cleaning, 40-plus divisions doing different kinds of jobs Wow.
Tyler Martin: And then how about something just a little tidbit about you personally, maybe, even if potentially people don’t commonly know about you?
Jim Penman: I’ve got 10 children, six grandchildren, to date. I’m a regular churchgoer, go to a Baptist church. I have a research project that I dedicate the great majority of my income to.
Tyler Martin: Very cool. Wow, ten children, that’s a big group.
Jim Penman: Well, I couldn’t have more. That was why it stopped. They stopped coming. I’d have 20 if I could.
Tyler Martin: That’s awesome. That’s great. Okay, I want to start in terms of your journey. You have such, by the way, you have such a wonderful story. There’s just so many. I follow you religiously on LinkedIn. You’re one of the few people that I pretty much do.
Tyler Martin: I think you post up to two times a day and I don’t think I miss either article or video that you post every day, because you always have some good story or something that really relates, can resonate with many business owners. So thanks for always posting such great content.
Tyler Martin: That’s good. Pleased to be able to help. Yeah, awesome. So I want to hear about your story. So you started out as a history PhD student, yes, and then you go into starting out this lawn mowing business. Take me, how did that happen?
Tyler Martin: What’s the story there?
Jim Penman: Well, I’ve been gardening since I was eight years old. Oh wow, I went over the back fence. I used to rake his gravel driveway and it gave me in those days what was two shillings, which is 20 cents. It wasn’t very much, but you could buy a block of chocolate with it, so it was okay for an eight-year-old and I did it most of my childhood.
Jim Penman: When I left school I took a gap year and I did a number of things. I worked on a farm for four months but I also put a notice in the hardware store in the window offering to do work and in those days it was $1.50 an hour, which isn’t very much money.
Jim Penman: But I wasn’t very greedy in those days and I got a few jobs and I kept them going and I kept them going through my student days. It was my student job because I liked being outside. I like being outside, I like the outdoors, I like physically working, I love gardens.
Jim Penman: So it was kind of a nice break from study. About 1975, I wanted to buy a car. I thought it might help me with girls, which turned to be a complete failure. But to buy a car I needed to get more money, so I decided to get a lawnmower.
Jim Penman: So instead of charging by the hour I could charge by the lawn, which means I could do two lawns in an hour. So I can make about 10 bucks an hour, which was a lot of money as a student.
04:48Finishing a PhD with no job and starting over with $24
Jim Penman: So that’s all. Through my student days, my undergraduate, my PhD, I was running this lawn mowing business part time as a break from study and paid quite well. And then I ended up. I intended to be an academic. That was my whole aim.
Jim Penman: I was researching, I was developing ideas about the rise and fall kind of civilization which I thought were pretty groundbreaking and high potential. But I got to the end of my PhD and I realized I had absolutely no possibility of a job. I had these wild, wild ideas, which wasn’t even confined to history.
Jim Penman: They’re all to do with biology and epigenetics and all kinds of things. So I decided to turn my part-time lawnmowing business into a full-time business. That happened and I was just broke for various reasons at that time. So all I had was $24 and some crappy old, broken down equipment.
Jim Penman: That’s how I started. That’s in 1982.
Tyler Martin: That’s crazy. Was there a part, though, of you? Because, obviously, phd, it was probably mentally stimulating. You were thinking of a lot of topics in a deep way, and generally, when you think of a lawn mowing business, you don’t think that’s something that’s going to challenge you mentally.
Tyler Martin: It’s a great business, but not necessarily a challenge mentally. Was that hard for you, or was that even ever? Any facet that you considered is it wouldn’t be challenging enough. Well, it was challenging.
Jim Penman: My ignorance is quite challenging as a job, because, the way I look at it, I wasn’t just down there doing a job and in the same way I did, I was thinking how can I do it better. So every day, every hour of the day, I’m thinking how can I improve?
Jim Penman: How can I do a cut cleaner? How can I do it faster? How can I cut down during travel? How can I save myself one pace in emptying my grass into a grass bag? What form of grass bag? What material is best? How do I speak to clients?
Jim Penman: What can I charge? What extras can I do? Every day, all the time, asking myself these questions how can I do better? I had this relentless drive to work it out and because I have an unconventional mind, which is the one thing my PhD research shared, I came up with different kinds of solutions.
Jim Penman: So it was kind of natural, in a way. I started mowing lawns by myself, full time, very hard work, long hours a day, Started putting on subcontractors. I started experimenting with building up and selling lawn mowing rounds, trying to work out better ways to do that, better ways to employ people, better kinds of advertisements, better forms of advertising.
Jim Penman: Just kept on trialing, experiment, experiment, experiment and just driven. And so, seven years later, I launched the franchise. But that was a progress.
Tyler Martin: Yeah, yeah, steps. I love, though, how you bring that to life, because it’s like all the challenges of starting that business and making it the best that you can be. It wasn’t just mowing lawns, it was so much bigger than that. That’s really cool the way you explain it.
Jim Penman: People look at that as a job and it’s not a job, it’s a business. If you’re actually mowing lawns for yourself, you’re doing it properly. It is a business and there’s no upper level, there’s no topside potential, there’s no limit to how far you can go, which is my story.
Jim Penman: We’ve got many franchisees who are millionaires and multimillionaires. They started the same way with a basic business to say how can I improve?
Tyler Martin: Yeah, Okay, so I want to delve into this whole, starting with $24. And from my research, you really never have taken any outside money. What was that like when you start with $24, you have no investors? How did you keep scaling without burning out or running dry?
Jim Penman: Well, you don’t need money when you’ve got a home service business. That’s the wonderful thing about it. It’s not like you’ve got to buy land or anything Yourself. You’re a contractor or a cleaner. It’s the wonderful thing about it. It’s not like you’ve got to buy land or anything Yourself.
Jim Penman: You’re a lawnmower contractor or a cleaner or whatever. It’s all the same principle. So you just do it better. So I started off I was doing it by myself. Then I got too much work so I started putting on subcontractors. I found that challenging, getting the right people without controls, and obviously my controls weren’t that good.
Jim Penman: My customer service my own was fantastic, theirs wasn’t so good. And then I realized I could make more money by building up and selling lawn mowing rounds and that’s an immediate cash infusion because you sell. You know, in those days you could sell lawn mowing rounds for, say, $5,000.
Jim Penman: So I built up a bunch of customers which I was very good at, put them on the market, sell them. Somebody paid me $5,000, then another one and another one, another one and another one, another one. So I bought my first house actually doing that kind of stuff, building up and selling lawn mowing rounds.
Jim Penman: So it’s kind of you don’t need extra money for it. You don’t need any capital. You don’t need to plant. All you need is mowing equipment, which is relatively cheap. A mower is just a few hundred bucks.
Tyler Martin: No, I’m with you, but I mean when you were at the $24,. I mean truthfully, you know, one mower breaks or goes wrong or you’re trying you need two more mowers. You must have had some pretty frugal time periods there initially. That allowed you, oh yeah.
Jim Penman: I was very short of money, for sure. But you know you do it. But look at it in perspective. You know, back in those days I was turning over about $600 a week, which doesn’t sound much, but you could buy a house for not much more than that in those days, right?
Jim Penman: So you know, a lawnmower break stand is going to cost you a couple of hundred bucks. Well, that’s just part of my next week’s income, that’s all. So you just pay for it as you go. I always pay for it. In fact, the crappy equipment that I had broke down within about a week of me getting it.
10:00Building up lawn rounds and selling them for $5,000 each
Jim Penman: So I just got the money, which was just a few hundred bucks, and I bought new stuff. I just had to and I just worked really, really hard, very long hours, six days a week, and I paid for it and I just always kept.
Jim Penman: I had to use them. Loans I had to pay off my loans, my rent, my wife wasn’t working, we just newly married and I had to look after my business, but it always provided enough. It’s a brilliant business. Service business is a fantastic business because you don’t need capital.
Jim Penman: It’s so much up to the individual. It’s an individual character.
Tyler Martin: Yeah, could you explain? I’m not sure I quite followed. You talked about doing the rounds and selling them for $5,000. What was that model? I don’t know if I understand it.
Jim Penman: Well, if you want to get into business for yourself, it’s very difficult because you’ve got to build up a client base. You don’t know what you’re doing. Most people who do it fail. Probably about 90% of people who start small businesses like gardening and cleaning, fail.
Jim Penman: You can look it up on the internet. That’s about the normal thing. Now, if you can buy the goodwill of an existing business, so you’re going in and you’re already making good money from the first week say a couple of thousand dollars a week well then it’s not that difficult to get going, Because the hardest thing in business is getting the clients.
Jim Penman: I knew how to get them. People coming into business didn’t, so I would have a roster of regular clients and I would hand them over and they would pay me.
Tyler Martin: So you would go build the relationships, you service them really well and then you would basically sell that client list.
Jim Penman: Yeah, I just introduced them to the clients, I’d them around and I show them and this is Bill who’ll be doing it for you in the future. So he would take over and he would run the business.
Tyler Martin: How did you structure that You’d take $5,000 for that? Is that what you were saying? The $5,000 was.
Jim Penman: Yeah, yeah, that’s right. Whatever the amount of money there was, that was in those days.
Tyler Martin: The biggest we change now. Now, sure, sure, got it Okay, and then take me through. How do you get to from that? You got so large, like you said, in year yes, seven you started the whole franchise model and I believe you went with a flat free franchise fee instead of where you build it into like gross receipts.
11:58Why he charges a flat franchise fee instead of a percentage
Tyler Martin: What was the thinking there and what’s your reasoning on that?
Jim Penman: Well, because unlike retail where you can, as a franchisor you can check what a person is earning in a service business, you don’t know what your franchisees are earning. So it’s quite rare In Australia and New Zealand we basically do flat fee kind of systems, because then you know exactly what they’re going to pay.
Jim Penman: It’s the same, they know exactly, I know what I’ve got to receive. They know what I’ve got to receive, I know what I’ve got to pay. It’s better Trying to worry about what they’re making and all the cash money involved and sort of auditing and this kind of stuff.
Jim Penman: That’s really nasty stuff. So I set a fee fairly modest fee, you pay me that.
Tyler Martin: Yeah, because I’ve heard I think it might even have been in today’s posting or yesterday’s posting you had on LinkedIn. You were talking about how you just voluntarily decided to reduce your fees because you felt I don’t even really know the reason why.
Tyler Martin: You just felt like it was a little more fair.
Jim Penman: Yeah, well, it’s also partly commercial. You’ve got to look at see, in the fencing division where I was doing this, we had lots and lots of leads but not enough franchisees. So I was feeling that the reason people wanted to leave and go independent was because they were paying too much in the fees.
Jim Penman: So I thought, if I can bring the fees down a little bit it was just by a few hundred dollars then it makes them more like they’re going to stay. So in the end I’ll grow more and it’ll do better. Got it? That’s the reasoning behind it.
Jim Penman: The same thing, Actually, we did the same thing in dog wash division. In that case, what we did is we got rid of the advertising because with the, as it’s easy to find work, we don’t need the advertising so much. So what I did is I took off the advertising budget on most of it for the next few months, so they pay less fees for that reason.
Jim Penman: But I know I can’t use the advertising for anything else anyway. So it’s not really. I’m not. It’s not a loss to me yeah, you’re in so many things.
Tyler Martin: How do you manage that all? Like? Obviously, now you’re at the point where you probably have the systems and everything set up, but it seems like sometimes all those different markets could have been a distraction or got you off course. How did you keep it all together?
Jim Penman: They’re all very, very similar the basic work, whether it’s mowing or cleaning or dog wash or fencing, it doesn’t matter what it is. Somebody rings up or books, online books, a job. It gets allocated to the best available franchisee based on the computer system.
Jim Penman: They go and do it. We have a system, a follow-up, where you have a survey. Go out to the customer to ask how they’re doing it. We react to that in a certain way. It’s all very, very similar. The only difference is the actual jobs you do.
Jim Penman: That’s actually quite minor. Most of business success is not about the technicality of how you mow a lawn or how you do a vacay clean of a house or how you groom a dog. People succeed based on customer service. Are you responding properly, are you ringing people back, are you turning up on time, are you charging the correct rates, are you invoicing them properly, are you wearing the proper uniform?
Jim Penman: That’s 95% of success is the business side, and we’re quite good at that and they’re very, very similar. The software is very much the same, the actual details of how they do it. People are specialized. We have what we call divisional system, the divisional franchisors and the franchisors.
Jim Penman: They provide the specific training for cleaning using enzyme-based products which don’t damage services. That’s their business. But the great majority is what we have in common, got it?
Tyler Martin: When a franchisee joins you, do they ultimately end up offering all these services, or are they usually just a specialist and just one or a few?
Jim Penman: No, no, they stick to one Normally just stick to one, oh, just one.
Tyler Martin: So if someone joined, they would be a mowing franchisee, for example.
Jim Penman: And they could do gardening and rubbish removal and garden clearing, but they wouldn’t normally. Now we do have a system called cross-divisional.
15:30Refusing every buyout and giving franchisees a sale veto
Jim Penman: So for example, if you’re, let’s say, if you’re a mowing contract franchisee and there’s not quite enough work, we will actually show them would you be interested in doing cleaning or window cleaning or something else? They might have skills in other areas, handyman or something like that.
Jim Penman: So we quite frequently do that, but I would say that 95% at least of the work that a franchisee does in their own division.
Tyler Martin: Okay, got it, and I know you’ve been offered some pretty based on my research some pretty nice offers, and you’ve always turned them down. What was your reasoning for that?
Jim Penman: I’ve never even tempted to sell out. I love what I do and I believe in it. And the other thing, too, is that, look, I’ve got enough money that I can spend several million dollars a year on my research foundation. Honestly, I live pretty simply.
Jim Penman: I live on a tiny fraction of my income, so I don’t need more money. I just need a cash flow which is secure to fund my foundation and the fact of my business tends to do better year after year anyway, so it’s a steady rise.
Jim Penman: But the other thing, too, is that I am very feared of what happens when founders sell franchises. Typically, what they do is they get bought out by some greedy, vulture, blood-sucking, nasty financial people who go in and say, okay, let’s get some money out of this, and they squeeze the franchisees and they charge more fees and they do things so that they do horrible, disgusting things and in the end, they likely destroy the business, but in that they destroy so many lives.
Jim Penman: So our system is very. One of my missions in life is to make sure my franchisees get looked after, so I’ve got a system set up. So after I die, there’s a continuing, which is probably a long time to go. I’ve got about 20 years left.
Jim Penman: I reckon there’s a process that guards them and one of the things we’ve done is we’ve given our franchisees all kinds of powers, like the power to go to another franchise, to change to a different region or even division if they wish, to the franchise always no say.
Jim Penman: They can vote out their franchisor, they can veto changes to their own manual and they can also veto any sale of majority share of Jim’s group. That’s in the contract. Wow. So the majority share of Jim’s group cannot be sold to anybody without the written consent of a majority of franchisees.
Jim Penman: I don’t mean written objective, I mean written. I’ve got to agree and when my CFO I I called him I was going to do that, he said you’ve got to be nuts. That’s going to drastically reduce the value of business. And I said good, because I don’t want.
Jim Penman: I’m not particularly driven by money. I need this income stream for my research, but I don’t particularly want my children to have to be able to live on on. You know, trust funds and stuff it. It destroys character. Too much money is a bad thing.
Jim Penman: So I get a bit of housing, that’s it.
Tyler Martin: I wasn’t going to go there because I did read that about you.
18:11Why his ten kids get a house deposit and nothing more
Tyler Martin: That’s an interesting topic in itself. How do your 10 children view that? Like I put myself in that situation. Both ends of it, I’d go, man. That would be a little weird if my dad was super wealthy and he said, hey, I’m going to draw the line in terms of how much I’m going to share with you, and then you’re on your own.
Tyler Martin: I mean, what’s their perception on that?
Jim Penman: They’re used to it. They always know my values. They always know they were never going to be trustworthy. And my kids are not parasites, they’re great kids. They made their own way. They’ve done it. I just give them a bit of help, and that’s being very clear.
Jim Penman: If you want to, when you get married, start having children, I’m going to give you a million bucks that’s Australian, which is about 700,000 US. Okay, because it’s expensive to buy a house A little bit of help with each child. Okay, that’s it. That’s all they’re getting.
Jim Penman: That’s down there. I’ve made it clear from the beginning. But there’s nothing in your lifestyle that speaks rich. Where’s the mansion? Where’s the expensive holidays? Where’s the stuff that rich people are supposed to have? Where’s the fine clothes, the great cars and everything else?
Jim Penman: Just live an ordinary life and that’s. You know we’re not poor, for heaven’s sake. My children went to private schools, the younger ones Christian schools basically where they get good values, and you know we’re never short of a buck. But we definitely had like a well-off like one of my lawnmower franchisees fundamentally pretty much the same way.
Tyler Martin: Yeah, got it. One thing before I move on to the next topic. I’m just curious. So obviously, the $24 starting out there was one of the more challenging times. Was there ever another time in your course of scaling where you kind of hit a wall or kind of felt like, man, this is a hill I may not be able to get over?
Tyler Martin: Was there ever a bump on the way up?
Jim Penman: No, no, really, it’s one thing about me. My wife says I’m like a force of nature, it just doesn’t matter what’s happened. I pick myself up. I find myself with an unexpected $3 million tax bill and people have stole the money from me.
Jim Penman: It’s okay, all right, that’s a mistake. Now what are we going to do next? I just steady down and do it. I do never, ever, ever, even dream about giving up. It’s just not in my character. I can’t do it. I just can’t, anymore than I could retire.
Jim Penman: I just don’t have that in my mental attitude. I am very consistent. I just keep on going. I just don’t stop. I don’t give up, I just do. What’s the next step? All right, let’s do this, let’s do that. Look, I’ve made really shocking stupid mistakes, mistake after mistake.
Jim Penman: I’ve done more dumb things in my life than most people have done in 10 lifetimes. But I just say, okay, that was a mistake. How can I learn? What can I do to improve it? What’s my next step?
Tyler Martin: Yeah, okay, I love that mentality and that drive to just keep succeeding and excelling. It’s awesome. I want to talk about just moving forward a little bit. I want to talk about like hiring, firing. You’ve let franchisees walk. Where I’d love to start is just like, for example, I know you’ve had a family member that you had to terminate.
Tyler Martin: I know you’ve let some franchisees walk with clients and a lot of it you’ve characterized as, how I understand it is.
21:23Firing his sister Jill and the national TV backlash
Tyler Martin: You prioritize that character over everything else, over contracts, over making money. Can you talk about that a little bit?
Jim Penman: Well, talking about my sister which was painful because I was always close to Jill, we always had been she’s never been financially particularly successful and I wanted to get it back to Australia because my mother was dying. Mum and Jill are quite close and she couldn’t afford to.
Jim Penman: So I said, okay, what I’ll do is I’ll pay for your movement costs, which wasn’t a lot like 20 grand, and I’ll give you a job. If it doesn’t work out, I’ll wipe off the cost. So at least you’re back home, which you couldn’t afford to be otherwise.
Jim Penman: And she was actually holding my mother’s hand when she died. So that was successful. But but she just wasn’t any good at the job. Now, I don’t exactly know how or why, but every department she worked in they would just say she’s hopeless, she’s terrible.
Jim Penman: A manager would give her a job and she would delegate back to the manager, to the manager who gave it to her. She says that’s my job to delegate, but she delegated to the person who gave it to you, and then I’d move her to another department.
Jim Penman: She’d do the same thing again. So I tried her about three or four different places and then I said Jill, it’s just not working out. I can’t betray my franchisee because I didn’t put it to her that way, but we have a responsibility to look after them.
Jim Penman: This is our mission and you’re not helping. She got very angry at me. She actually outed me on national television this story which was broadcast, about this multim-millionaire who’s allowing his sister to starve. The fact of the matter is she didn’t ask me for anything.
Jim Penman: She refused to speak to me, but she said I should have known and given I don’t know whatever, the story itself wasn’t too bad, but it did sound pretty bad in the promos. I’m famous for hiring my sister. Because she made me think about it.
Jim Penman: I wouldn’t do it because I wouldn’t normally want to say my sister was no good in business.
Tyler Martin: Yeah, Did you guys ever? Were you able to ever bridge that gap?
Jim Penman: No, she refused to talk to me ever since. She will not talk to me ever since, and that was so many years ago. It’s pretty sad. I was always fun, you know, but she just.
Tyler Martin: Now it’s time for our marketing that scales tip. Great service doesn’t sell itself unless you help it. Jim Penman built a billion dollar franchise brand by obsessing over service. He reads every complaint, he holds his team to sky high standards and it works.
Tyler Martin: Because when your service is excellent, people talk. But here’s the mistake most home service businesses make they deliver a great experience, then bury it behind a generic brand, weak website and marketing that just doesn’t match the quality of their work. Your service gets you the reputation.
Tyler Martin: Your marketing turns that into revenue. This tip is brought to you by none other than Service Scalers. They’re my favorite marketing agency. Service Scalers, the team helping home service businesses turn great reputations into steady growth through better branding, clearer messaging and marketing that actually works.
Tyler Martin: Reach out to service scalers. Let them know Tyler sent you. Now let’s get back into the rest of this awesome show with Jim Penman and see what he has to say.
Jim Penman: No, she refused to talk to me ever since. She will not talk to me ever since, and that was so many years ago.
24:44Letting unhappy franchisees walk with their clients
Jim Penman: It’s pretty sad.
Tyler Martin: I was always fond of Jill but she just yeah, that’s hard, it’s a family dynamic, it can be challenging. What about because I thought this is amazing You’ve had franchisees where there just hasn’t been a right alignment and you actually let them take the clients and just move on.
Tyler Martin: What’s your feelings on that?
Jim Penman: Look, I don’t believe you charge franchise fees because somebody’s locked in by contract. You charge it because you give value. So we’ve got a system. In the beginning we just let people walk with their clients nothing. These days, you put a small charge on about $5,000 if they want to go and, to be honest, we don’t always enforce that very strictly.
Jim Penman: But the point of it is, if this person really wants to go, they’re not much good for you, because the way we sell franchises is very simple. We give people a list of our current franchisees and say ring them as many as you like.
Jim Penman: As many as you can ring them, do your research. Now, if they do that, they’ll get a good response. But if they caught somebody who’s only there because they have to by force of contract, it’s not a good advertisement, is it? Yeah, why are you with gyms?
Jim Penman: Oh, because I have to, because I can’t. I’m not going to buy a business with somebody who thinks like that. So why would I want somebody on the inside who’s unhappy? The fact is, most people don’t want to go independent. They like the system, even when they stop taking leaves.
Jim Penman: They like it because of the support, because the brand is strong, because they can charge more. In fact, it’s not uncommon for those who leave to actually come back again a few months later because they can’t make the same money. See, our fees aren’t very high.
Jim Penman: They’re only about 6% of turnover. So it’s really not hard to justify that, and we’re always trying to work out better ways to help them. But one of the ways I learned this was in the very early days of gyms, and I had this-away policy.
Jim Penman: I had a major rival at that time, a company called VIP that was much bigger than me. They had 250 franchisees by the time I found my first one, and they were interstate, so they were really big. Now what actually happened was that half six of their franchisees wanted to go independent.
Jim Penman: They took the case to court. They took VIP to court for the right to go independent. They lost, and then there was a national expose on national television about this case, about how these guys are so desperate to leave VIP. They went to court.
Jim Penman: Well, they never recovered from that. What sort of story is that? This is the company that the people are desperate to get out of. They’ll fight you to go independent. So I would never want to have that happen. If you can’t offer enough value, then let them go.
Tyler Martin: Yeah, that makes a lot of sense when you’re looking for high integrity operators. What are the things that you’re looking for? Are there red flags that you can spot pretty quickly?
Jim Penman: Well, when you’re talking about franchisees, you’re looking for somebody who’s got a really good attitude towards customer service, who listens. That’s the biggest thing. See, if you put a person out in the road, we do a trialing process. We don’t take just anybody.
Jim Penman: Everybody knows that they’ve got to be good enough to get in. So I put them out in the road with an experienced person and that just as an example. That experienced person will say okay, when you mow the lawns, you do a circle around the outside, then you mow straight lines.
Jim Penman: You don’t circle towards the center. People do on their own lawns. When you’re professionally, it’s straight lines. If there’s a hose in the corner of the lawn and it’s only typically a few blades of grass and leaves, you don’t just leave it, you don’t mow around it, you take it, you call it on the garden and you mow to the edge.
Jim Penman: There’s’s professional things. When you mow, when you cut the edges, you cut every blade of grass, every single one. You don’t leave one sticking out, because that’s like a pimple on a model’s face. It’s ugly. Now they get told that they may get reminded that if they don’t do it automatically they’re not fit to be a franchisee, because they’re not listening to you.
Jim Penman: That’s the secret. You look at that. You look for attitude, an attitude that cares about customer service and is prepared to listen to what you say.
Tyler Martin: That’s the person we want have you had to ask franchisees to leave that can’t deliver that level of quality. Does that happen?
Jim Penman: Oh, yes, yes, we have an entire process. We have a system.
28:41Reading every complaint and the Jimbo two-hour callback app
Jim Penman: They get a certain number of complaints goes to the franchisor first. Then we send them a warning letter, complaints continue, we send them a breach notice and there’s retraining they have to do and they don’t get any work until they’ve done the retraining.
Jim Penman: And then after that I personally get sent every single complaint that comes through and in the end, if they don’t pick it up, then they go. But there’s a whole process of warning, coaching, everything we can do, retraining, everything we can do, before we eventually say I’m sorry you’ve got to go, but look, we’ve got five and a half thousand franchisees we might terminate.
Jim Penman: You know, I don’t know, maybe a half dozen a year, not that many.
Tyler Martin: Yeah, that’s pretty small statistically. You know, on that note you do actually read all the customer complaints, even to this day, Is that correct?
Jim Penman: Yeah, all the ones that come through on the survey system. I do, it’s one of my daily jobs. I go through, I check them all. I look at them. It gives me an idea of what’s going on. Then also, I have a process where I can delete complaints If they, for example, can show like if a client says they’re never called, I say okay, I want the evidence Within two hours you called them.
Jim Penman: If you couldn’t get through, you texted them. I need to see both of those. If you can show that you did that, you did what was necessary. That’s just an example. Or no matter what you did wrong. If you go back and you satisfy the customer I don’t know how it’s done you do the job again.
Jim Penman: You wipe out their fee. Whatever you do, you’ve got to satisfy the customer. If you do that, I’ll delete it. So I’m in that process all the time. I’m working with franchisees and franchisors every day on these systems and then at the same time we’re developing software to try and get the benefit.
Jim Penman: See, there’s a new software just coming out we call it Jimbo whereby if the franchisee doesn’t actually contact the client within two hours, first of all we warn them in my voice, and my voice comes through the app saying answer the phone, make the phone call.
Jim Penman: And then again at an hour you’ve got to do it. And then at two hours it said pick up the phone and ring the client Like did I yell at them, okay. And then if they don’t do that, the message comes back to the franchisor to say they haven’t picked up the phone, so follow up.
Jim Penman: They haven’t done what they’re supposed to do. So we’re developing systems like that to try and drive better customer service and the great thing about that is what’s happened quite magically, as we’ve got our complaint rate down. It’s now a fraction of a percent of what it used to be in pre-franchise days.
Jim Penman: As we do, the leads just rise and rise, and rise. We had more than 200,000 unserviced leads last year. We just can’t cope with the volume in so many areas and despite the fact that in some ways we have to give back the advertising money, like in Dogwash, we’ve given them no advertising for the next 18 months because we’ve got so much money in the advertising account.
Jim Penman: So we’re spending less on advertising and getting more leads and our franchise more money. You actually rebate back the advertising account, so we’re spending less on advertising and getting more leads, and our franchise will make more money.
Tyler Martin: You actually rebate back the advertising money they put into the fund. That’s crazy.
Jim Penman: Under Australian law, you can’t spend it. You can’t take it for yourself. You’re not allowed to. Sure, sure, sure, no, I get it. We have to get their permission. Either give it back to them or don’t charge them advertising for a while, or they can get all their like pay for the conference they want to have.
Jim Penman: They get to vote on how to spend it, but we can’t take it.
Tyler Martin: But that’s highly unusual. I mean, I’ve been part of a lot of, at least in the States. I’ve been part of a lot of franchises and you really, I honestly can’t even remember if I’ve ever even seen a rebate or a lack of use.
Tyler Martin: Usually it’s the exact opposite. It’s usually like hey, we’re paying into the fund for advertising, what are we getting for this? And it’s usually more of the complaint in terms of any type of return for it.
Jim Penman: Well, we’re in a very different situation. Our service is, modestly speaking, it’s very, very, very good. We have a system called Bizzar actually, where we sell the surplus leads to independent contractors and we have a very rigorous process there. If I don’t respond properly and get bad, we cut them off.
Jim Penman: Just cut them off the needs. You’re not getting any more leads, so we’re pretty harsh. But even with that, they’re not as good as our guys. They’re not as good as our franchisees and even they complained about. They say, hey, we give great customer service, but you guys are too.
Jim Penman: You’re insane about this system. You know, look, give you a put, you’d look after 90% of clients well and 10% poorly. In the end you’re going to be terminated for poor service. It’s not a case of mostly bad. You have to look after all your customers properly, with very, very few exceptions, and then you coach them and you warn them and stuff.
Jim Penman: It’s an extremely tough system and, look, franchises get upset about it at times. They really do. I think that you’re affecting my mental health. I can’t sleep at night because these complaints you send through. What is wrong with you? Don’t you care about us?
Jim Penman: And I say, well, I do, but if I’m going to get you to be successful. You have to give great services. So does everybody else in Jim’s group, because that’s where we get the really good flowing leads. It’s not just about having enough work, it’s having work that pays well.
Jim Penman: We have an aim of making at least $70 an hour Every franchisee. If you come to me with a new idea for a division, the first question I ask can you make $70 an hour Average operator? So we want them not only to have plentiful work but do good paying work.
Jim Penman: That’s the key. And to do that you must have great customer service, not just you, but everybody else. And what we have found is the better customer service you give, the more likely you are to stay and the more likely you are to report good income.
Tyler Martin: Have there been any divisions? I know fencing, for example. You didn’t like the idea at first and then you ended up, I think, testing it or trialing it, and I think it’s one of your most profitable ones, if I’m getting my data right, but it turned out to be a very great segment.
Tyler Martin: Are there any segments that you still, to this date, turn away and just say it doesn’t make sense?
Jim Penman: Oh, yes, yeah, frequently people come up with ideas. Most people are always pitching me because I’m very easy to define. You just go to the website and you can email me. I get probably at least one a week. Somebody’s coming up with some sort of idea, mostly completely impractical.
Jim Penman: You know things like site-based. You know doing childcare or something like that. We just don’t do site-based. We don’t know how to do that kind of stuff. Or you have a business that requires too much training. You’ve got to do several years of training.
Jim Penman: It won’t work for us. Or you just can’t. There’s not enough market. I mean, one of the ways to check out a division is you look in, you Google it and you see how many sponsored ads there are. If I don’t see sponsored ads, it’s not a good business.
Jim Penman: I want people fighting for that job. So it’s got scale. Our system isn’t very lucrative per franchisee. If you have four franchisees, you’re going to go bust. You can’t make a living out of it. If you’ve got 20 or more, you’re starting to make a decent living.
Jim Penman: If you’ve got 50, you’re doing well, okay.
Tyler Martin: And how do you, when you do go into a new area, does Jim’s group itself get into that business first and then roll out the franchise?
Jim Penman: No, no, no. We find somebody who understands the business instead Ah okay, or has a background. I’m talking to several people right now about different things. I’ve been talking to a conveyancing business about taking over worldwide. We’re talking about Jim’s Legal. We’ve got last year one of our mowing franchises a very good franchise, excellent franchise.
Jim Penman: We decided to do Jim’s Driving School. That’s going well too. One of our cleaning people did something in laundry. We’ve got 120-odd laundry franchisees. Wow, somebody comes to us either with knowledge of the industry or they’re a successful franchisee or franchisor already. Those are the two ways we normally.
Jim Penman: But the biggest thing is actually you’ve got to have the right industry, but you’ve also got to have the right person. You’ve got to have the right individual, the right character, the right values. Any trace of lack of ethics is absolutely deadly. But we have a book actually that we pass out widely about and that creates the sort of philosophy of the business.
Jim Penman: And when I talk in, I do the first talk in training, in franchisee training. It’s an hour and a half talk called Jim’s Ethos. It’s about service to customers, service to franchisees and about selection and all those sort of things. So we drill very hard in the values of the company, which is one reason it’s hard to expand overseas, because it’s hard to get the Jim’s.
36:36The brush cutter that let him cut every blade of grass
Jim Penman: You can get the contracts and the systems of IT, but the culture is very hard to spread to a different country, right.
Tyler Martin: IT, but the culture is very hard to spread to a different country, right, jim? Where did this obsession with customer service come from? When did that start, where you were just focused on delivering high-value service?
Jim Penman: When I was eight years old and I was raking my neighbor’s driveway. I remember one time he didn’t have me to rake the driveway, he wanted me to take some rubbish to the incinerator. Okay, that was the job. So I did. And on the way, being an eight-year-old, I dropped some of the branches and he just looked at me very sadly, very kind gentle man.
Jim Penman: He just said to me if you’re going to do it that way, I might as well do it myself. And I felt so ashamed of letting him down. I said I will never, ever, ever, let somebody down like that. I just felt so bad about it.
Jim Penman: Look, it comes from the heart, it comes from the guts. I just have this attitude. When I was mowing lawns initially, I used to do edges with a wheel, you know, along the concrete, the mower strip, and what used to bug me was that I couldn’t do all the edges properly.
Jim Penman: I couldn’t do around the trees and the retaining walls and all those clotheslines, all those other things. I couldn’t do them. No client ever asked me, no client ever complained, no contractor ever did that in those days. They never did. But I remember looking at it and it bugged me and it bugged me and it bugged me.
Jim Penman: And one day I was in the mower shop and this was in 1970s and I was wandering around while the guy was repairing my mower and in the corner there was this weird looking thing, this long pole handle in the middle, little engine on one end and the other end this plasticky thing with a bit of white cord sticking out.
Jim Penman: And I said to the guy who ran the shop I said what is that thing? And he said it’s a brush cutter. I said what does it do? And he said well, you take this thing, you pick it up here, you start this engine and that bit of nylon cord comes around, cuts the grass on the edges without ring-barking the trees.
Jim Penman: And I said I’ve got to have it, I’ve got to have that machine. I said what’s the price? He said what? I said what? That’s so expensive, that’s more than a mower. And he said well, don’t blame me, charge. So I bought it on the spot, spent a bit of time to use it and then I could do all edges perfectly, and then I’d not only do the front and the back and the nature strip front and back, but as I’m coming down the driveway I keep it going on low revs and I zip the grass from the cracks in the driveway it’s not lawn mowing, but it looks good and then I blow it off afterwards and make it all clean and people would come out and they’d look at this thing and all cut back.
Jim Penman: And they cut back to the edges. They didn’t even know there was an edge under the nature strip. They’d look at it and they’d say things like I never knew my lawn could look this good. That remains with me, that kind of comment.
Jim Penman: I was just fanatical. It’s an emotional drive. And so we have a series of little things which you’ve probably seen on my email. Our first priority is the welfare of franchisees. First priority, always first. We are all so passionate about customer service and I say passionate because it’s an emotional thing, it’s not logical, it’s not saying I’m going to give great service because I want to make more money.
Jim Penman: I’m going to give great service because that is me, that is my core values and self and I care about it and I care about it and I hate letting customers down. And then it also says we’ve signed on new franchisees and franchisors we’re convinced will succeed.
Jim Penman: That has been there for 36 years and I never waver from that. Wow.
Tyler Martin: The fact that you remember, like at eight year old I think you said eight years old that someone said to you hey, I should have done it myself and that just sticks with you. I mean, I think that is so powerful. I wasn’t really expecting an answer like that, but it kind of it kind of hits home for me too, cause I’ve had some things people have said to me at a very young age and they just stick with you for life and you you kind of commit to yourself to always be above that level of whatever, whatever that topic happened to be.
Jim Penman: So I can relate to that Well above what people expect from you. It doesn’t matter what people think it’s not good enough. It doesn’t meet my standards and mine are higher than pretty well anybody.
Tyler Martin: Yeah, that’s awesome. That’s awesome. Hey, I want to wrap up with one last thing. You know there’s a lot of home service business owners, commercial service business owners out in our audience. Is there something you could learned on your journey in terms of a tip or something that we could lead better as business owners build trust better, anything that you want to kind of you could wrap up with and give us some feedback?
Jim Penman: I think I said before Tyler, but there’s one attitude above everything else you look at what you do every day and say how can I improve? It doesn’t matter how stupid you are, it doesn’t matter how much little money you’ve got, it doesn’t matter how stupid you are, it doesn’t matter how much little money you’ve got, it doesn’t matter what mistakes that you’ve made.
Jim Penman: Anything is excusable, as long as you’re always looking at yourself and saying how can I do better. You’ve got to be very aware. Most people are very blind to the values in business. They think they’re running a good business, but they’re not. They just don’t know.
Jim Penman: I am obsessively looking at what I do all the time and saying stupid, don’t do that, this is a mistake, this isn’t working, how can I improve? I listen all the time. I’ve got five and a half thousand franchisees who have my direct phone number and email address.
Jim Penman: They have very strict commands not to give it to anybody else, especially not the phone number. But they can contact me anytime daytimes, after hours, holidays, one day, me Christmas day, just to say happy Christmas. But they’re allowed to do that and I listen all the time and I meet them in training.
Jim Penman: I actually try and meet every new franchisee in training, bump fist with them, greet them, say hello, so that when they have a need they can respond to me. And I write to them after one month and say how are you going, what’s happening, how’s your income?
Jim Penman: And they write back and I respond really fast. So I’m always listening to my key constituents, which is basically my franchisees, but also my clients, and saying what’s going wrong, why is this happening? Why is this guy not succeeding? What do we do different? How can we change? Can we coach better? Can we train better?
Jim Penman: Can we have better software? What can we do? So people ask me what my goal is. They say how many franchises you want to have. One day I said I never have a financial goal, not ever. I have two goals. Okay, one principal goal that every single franchisee who comes into gyms will be hugely successful and happy.
Jim Penman: That’s one goal. And the second thing is that no customer will ever have a bad experience. Now, these are impossible goals that I’ll never reach, but I’ll never stop trying. I’ll never stop moving towards them. Well, I’ve got one happy franchisee, one happy client.
Jim Penman: That’s one too many.
Tyler Martin: Yeah, wow, good stuff, really good stuff. Jim, I can’t thank you enough. I mean, there’s so much wisdom here. I think one of my biggest takeaways in all of this is just how driven you are by delivering quality. It is just how driven you are by delivering quality.
Tyler Martin: It’s almost like in your fiber. Everything you bring up is around really delivering at a high level. I mean the fact that you still read complaints and I mean just that involvement I’m sure has a dramatic impact on keeping a high level of service.
Tyler Martin: I mean, I’m sure, as a franchisee, if I was a franchisee and I knew the owner was the main guy was reading the complaint last thing I wanted to do was one man in your office.
Jim Penman: Well, they don’t always like me. You know, tyler, I’m not that popular with everybody, I can be very hard on things like that, but I want them to succeed and to do that. You’ve just got to do better and I know that’s hard, it’s hard to hear and it’s hard to say.
Jim Penman: But that’s me and they understand it. They complain about it. I say during training, I told you this was going to happen. I told you the system was tough. I told you about complaints, I told you about other things about the system which you may not like.
Jim Penman: And if they complain about it, I actually send them a recording of the session. I say watch it again, remind yourself. I warned you about this. I told you it was going to be hard.
Tyler Martin: Sometimes about this. I told you it was going to be hard, but sometimes I think it’s going to change. The first time they ask but it doesn’t change. Yeah, plus, I mean you’ve built an amazing brand and I mean the truth is you have to protect the brand and not everybody probably coming in immediately, you know, just people are people.
Tyler Martin: Sometimes A lot do understand it, but there’s probably some that just really don’t get protecting the brand, how important that is.
Jim Penman: I actually think of protecting my franchisees more than the brand itself, really.
Tyler Martin: Okay, that’s good.
Jim Penman: The moral basis of gyms is looking after franchisees well more than anything, even more than customers. In the ultimate See, if we can’t look after a customer, we can’t service them. We just say no. As far as pricing is concerned, who’s our priority?
Jim Penman: Franchisees are we charge what the market will bear. We encourage our franchisees to charge more. Franchisees number one. But if you let down customer, it’s not so much that you’re hurting the brand, you’re hurting yourself and you’re hurting your fellow franchisees. This is our family, this is our extended family.
Jim Penman: We look after each other. That’s the core idea behind what we do.
Tyler Martin: Very cool, I love it. Hey, so your two websites jimsnet, jimsnet, very easy. And then your other one is jimpenmancomau, and Penman is one N as in Nancy and one M as in Mary. Yeah, penman very simple yeah, penman, yeah, yeah. And then you also have a book, don’t you?
Jim Penman: Yes, we do. We’re actually coming out with a new version called no Other Success, which will be released, hopefully shortly in the American market. Okay, cool.
Tyler Martin: When you say shortly and the only reason why I ask is I’d love to include that in the notes Do you think in the next month or so, Is it that shortly or later this year?
Jim Penman: Sometime in the next two or three months, I guess. I’m not sure exactly, okay, okay.
Tyler Martin: I’ll make a mental note, even if I don’t include them in the original show notes. I’ll update them when it does come live, just so people can find it if they desire to. Well, jim, thanks so much. Awesome conversation. I feel like I just scratched the surface of all your wisdom, but it was a lot, so I appreciate you sharing it.
Tyler Martin: Pleasure to be here, tom, good to talk to you. Take care, jim. There’s a lot I admire about Jim’s story, but what really sticks with me is his mindset. He didn’t just build a business, he built a system that runs on accountability, service and constant improvement, and he never let growth outpace quality or values.
Tyler Martin: That’s the kind of thinking I bring to businesses I work with as a fractional CFO. Scaling should never mean losing control of your cash, your team or your sanity. If your home service business is growing fast but the numbers feel murky, the strategy feels murky, your plan feels murky or you’re not sure what’s actually driving profit, let’s have a no-pressure conversation.
Tyler Martin: Head on over to cfomadeeasycom that’s cfomadeeasycom and grab a time that works. And, most of all, thanks for listening. I’ll catch you on the next one.
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Tyler Martin works with owners on the numbers behind these stories: home services accounting help from a fractional CFO for home service contractors.
