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DYLAN MORGAN OF PROPERTY DOC HELPS US SEE HOW NUMBERS CAN HELP OUR BUSINESS GROW

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PODCAST TRANSCRIPT:

Ian Robertson
Welcome back to Inspector Toolbelt Talk. Today we have on the show Dylan Morgan from Property Doc. Hey Dylan, how are you?

Dylan Morgan
I’m doing well, Ian, how are you?

Ian Robertson
Doing pretty good. Yeah, looking forward to having you on the show. You’ve actually been a website client of ours for, for years now. And we’ve had some great conversations. I’ve always found your questions, insightful and concise. And then at the same time, I’ve had to really think about them. And the great conversations that we’ve had has led me to asking you to be on the show, because I think you have some insightful information. So I appreciate you taking the time out of your day to be on.

Dylan Morgan
Yeah, thanks, Ian. I know some of my questions are, you’re probably like, here we go again. I never run out of questions.

Ian Robertson
No, no, I love it. Because sometimes people ask a question. Hey, how do I get a real estate agent to like me? It’s like, okay. But you ask questions like, what do you think the ROI on direct to consumer in this vertical is going to be? And I’ll be like, oh, okay. Let me sit down here for a minute. Yeah. So, a couple of reasons I wanted to have you on. But first, let’s get to know you, Dylan. So Property Doc. Tell us about you. Tell us about your company, your background, social security numbers, credit card numbers, things like that.

Dylan Morgan
Yeah, well, I started the company about three years ago, now. Um, just about to the day. Came out of a corporate white collar job that I kind of, yeah, I hated, I didn’t like it. And thought it was a good opportunity to start a business, I didn’t think I had any better opportunity than then. I had some, I had a little nest egg. I didn’t have any, you know, family to worry about or anything like that and decided to go for it. I chose home inspections. I mean, I was already working in a real estate setting. The last most recent job was more commercial, but had been working in real estate since I got out of college. And was considering becoming a real estate agent or an appraiser or home inspector, which is what I settled on. I think my main concerns with the real estate agent and appraisers was just technology. I was looking for something to invest in over the long term. And I do think those professions could be under serious threat from technological, technological advances, internet listing sources, things like that. So home inspections, though, I can’t figure out how you could possibly automate this job.

Ian Robertson
Yeah, we can’t be outsourced. We can’t be put into a computer program. And we’re here today.

Dylan Morgan
Yeah, that’s another thing like threat from foreign labor is non existent. Home inspectors pretty much have to be local, real people, robot can’t do it. Someone in Indonesia can’t do it. And technology can’t automate it away. So I thought it was a service product that would be around for a very long time.

Ian Robertson
Plus, you picked a better career, because hour per hour, the average home inspector makes more than anybody else in the transaction. You see an agent spend, you know, weeks and months and however many hours working with a client. And they make a commission of three, four or five grand, you know, in the average market. Home inspector, you know, we can make $500 to $2,000. And we’re gone by lunchtime. So exactly. Yeah, same thing.

Dylan Morgan
If you’re pricing right. And you know, with agents too, it’s, it’s commission based. So I’m sure they figure out, you know, how to find good leads, just like we do. But theoretically, they can have someone run them all over town, look at 99 houses and spend hundreds of dollars in gas, wear and tear on their car, their time, and not sell a house. So, law of averages that work out but it’s nice in this business. You know, once once you’ve showed up, when I show up to a home inspection, I’m usually already paid.

Ian Robertson
Yep. So that’s the way to do it. And that’s, that’s the beautiful part about our industry. But you know, our podcast today is called Real Numbers to Run Your Business By. And you have presented some, kind of interesting topics to talk about. We’re going to talk about numbers to when it comes to investing and diversifying, but also our pricing and market psychology and a whole bunch of things. But I found out just today that you have an MBA. So you have an MBA in real estate and business.

Dylan Morgan
It’s a Business Administration degree, and it does have a concentration in real estate. So all it means is that out of the 15 classes, three of my elective courses were all real estate focused. So it was, yeah, I took a real estate development class, took a real estate law class. The third one, I think may have just been an investment analysis class. So yeah, there’s a couple, a couple things picked up from there that I’d say are maybe useful but overall, more just, the NBA, and the, my bachelor’s degree, which was entrepreneurial focused, the classes I took in the, in that program, in those programs, and the case studies that we had have been surprisingly relevant to me, they’re things that I’ve thought about quite a bit trying to build this business. I would say I use, I’ve been a little critical about college degrees as someone that has one, but I would say I’ve used both of them more in the past three years than I ever did in my job before.

Ian Robertson
And I know you kind of downplay it a little bit. And, and that’s great, the humility of it. But in reality, I mean, we’re real.

Dylan Morgan
Yeah. The cost, the cost is enormous.

Ian Robertson
Yeah. Oh, yeah. I can’t imagine that. I didn’t get past the ninth grade. So I don’t have that cost.

Dylan Morgan
I don’t want to get too far down this tangent, but the opportunity cost, and the financial cost of a college degree is insane. Yeah, I mean, if you like, let’s say someone, so I chipped away at my MBA over several years part time, but like, it’s like a traditional student that spends five years getting a bachelor’s degree and master’s degree in business. It’s a six figure degree now. You’re probably spending $100,000 or more, and you have opportunity cost of not working a real job at 40 hours a week for five years. I mean, you’re several $100,000 behind before you even start. And so it’s just something to keep in mind. You know, if you’re gonna go down that road, just make sure it’s a payoff.

Ian Robertson
Yeah, and I think most of our listeners here are probably past that part of their life, and they’re probably working into a home inspection career. But we are going to tap on your brain for that, because your degree does have value to us. It is a real estate industry that we’re in, and it’s a real estate degree. And one thing I like about you is some quick math that you ran in your head. You are a math guy, math…How do you put it? But you love math? Right?

Dylan Morgan
Yeah, well, I like finance. I think that’s where it is. I like, I like putting numbers on a spreadsheet.

Ian Robertson
Yeah. Well, I remember because we did a podcast. And we used a calculation to calculate the cost, the actual cost of owning a home. And we were talking after, afterwards. And you just said, oh, yeah, I know that. And you did the equation in your head real quick. And I’m like, oh, wow, that’s cool. That’s a useful skill.

Dylan Morgan
Yeah, I, sometimes I get called a human calculator by my family. And just, I like to run numbers, I guess.

Ian Robertson
Yeah. Well, that’s why we have you on today, because both your real estate industry experience and your math skills apply very much to what we’re talking about. Because we as home inspectors sometimes are very good at inspecting homes, and not so great at business and finances. For me, I was really great at business. I feel like I was really, really great at business. And I feel like I was really great at inspecting the house. But I’ve said it before on this podcast, when it came to money. I’m really good at making it and then I have it and go, all right. And I’d like to preferably poke it with a stick and say do something, you know?

Dylan Morgan
We all have.

Ian Robertson
Yeah, I guess. But what, why do you think it’s important for us as home inspectors and business owners to understand our business numbers, as a lead into our subject today?

Dylan Morgan
Wow, I can answer that in a lot of different ways. Well, you need to, you need to know how you want to use your money first, because we’ve got layers that you don’t have as an employee, like for an employee, just starting with simply like, you know, investing for the future. If you’re on a salary, just basically throw as much money as you can afford into a, you know, a tax advantaged account, 401K or Roth. And that’s about the extent of it, unless you want to invest in things outside of those platforms. But as a business owner, you have to decide first, how much money am I going to invest right back into my own business before I pay myself anything? And then the other important part about knowing numbers is just, you need to know, how much money are you actually making on a home inspection. And so first, you, you have to take let’s say, you charge $450 for a home inspection, what are your variable costs for selling that inspection, and those are going to be your your costs associated to that individual job. So your, your transportation costs, any software cost that you pay on a per inspection basis, call center costs if you’re using that. And then you’re also going to have your fixed costs every month, which would be things like insurance, things that just don’t change based on how much work you do. So you need to know all those numbers, so first, you know how to set your price so you’re actually making money, and then also that helps you determine other things later. Like, you know, what do you want your cost of customer acquisition to be? How much money are you willing to spend to, to build a relationship with a real estate agent? Once you know those numbers, you know, you know what those people are worth to you monetarily.

Ian Robertson
Yep. So I like how you said that. Monetarily anyways, how much a person is worth to you, so acquisition cost. So, if you don’t mind me asking, that’d be great to know all those numbers. But how does somebody find that out? So let’s maybe take that in pieces. How would somebody determine the acquisition cost of let’s say, a real estate agent?

Dylan Morgan
You’re gonna figure that out. Because it’s different for every company. It’s your acquisition cost, how much is it costing you and so your goal, of course, is to minimize that number. But there’s trade offs. So for example, if you wanted to start figuring out what it might cost you to, to find real estate agents to work with. First, you should think about how much the agents are worth. So I’m going to use an example of something I’ve done in the past, a phone call marketing program. So I got a seasoned sales veteran to, to call, cold call real estate agents, and try to set up a coffee or lunch appointment with me, where I can go in and try to close them on, on working with me. So I knew that guy, and some people might think I overpaid for him, but I wanted a really good sales guy. And I believe I was paying him $45 an hour to do that. And I gave him a list of not every person with a real estate license, but a list of agents that were likely to reliably produce a significant number of home inspections every year. So I didn’t really want to pay the guy $45 an hour to call agents that did one deal last year. But he was calling top producers that were doing 12 or more deals a year. And, or, they’ve been established for several years, so they’re not likely to move on to something else. And so you start to put these pieces together, you gotta, you got to start out with guesses. You know, I think he should be able to close this number, this many number of agents. And then once you actually start doing it, you start to get the real numbers. And so you have to figure out where you need to make adjustments. Or in some cases, you might determine that the campaign is too expensive. You can’t improve the numbers, and you just have to cut it. I did that with my mailer marketing, for new construction. Actually just, I was sending out warranty mailers, I’ve been doing that for like a year. But I couldn’t find any opportunities to improve the campaign any further than it was. And I was producing I think, a two or three for one return. I just didn’t feel like that was worth doing anymore. So I cut it.

Ian Robertson
Interesting. Okay. So you seem to be doing a lot more marketing than the average home inspector probably does. We’d all like to think that we’re marketing hard. But hiring somebody to make those kinds of phone calls. That’s an awesome idea, first of all, I think. I think most of us would probably try to do it ourselves. And I think most of us as home inspectors have what we would consider low acquisition costs for an agent, what we don’t have, typically is low acquisition cost for a client. So a real estate agent, I can, I can drive to 10 offices in a day, spend maybe $100, and then gas, and then obviously, my time and all that. And I can pick up, you know, five, six, seven agents. But my average agent is going to be anywhere from $5,000 to $10,000 a year, and obviously would turn, I’m going to lose some and gain some. So the average lifespan of an agent is going to be five or six years. All that being said, that’s 10s of 1000s of dollars for one agent. So acquisition costs for an agent is cheap. It might be, it might be $100. And as those of you that are listening and thinking, I don’t pay anything, I just, I just drive to an office, and agents refer me, great. That’s still acquisition cost, you had to brand, you had to, you had to put your logo on your shirt or your vehicle, you have to have software, you have to have all this stuff to be able to walk into that office and win that agent.

Dylan Morgan
And also your time.

Ian Robertson
The cost of your time.

Dylan Morgan
If you’re not busy then I guess you could say it’s not costing you much but yeah, you know, if you’re, when you’re out, if you’re out doing, you know, the home inspector is doing this themselves, even if they’re just driving around town burning gas. That’s time that could have been spent doing an inspection.

Ian Robertson
And even if we don’t have inspections, it still costs us. Because, okay, we’re either doing that or we’re sitting at home, or we’re getting paid to do a job. So let’s say, close to minimum wage at $15 an hour, upstate New York is going to $15 an hour. So you have to add a very basic, if you want to get a job at a fast food joint $15 an hour, that’s what it’s costing you to be out there. Even if you don’t have any work. So it does have a cost, the cost and time. I would, I would say most companies probably hover right around the $50 to $100 mark for agents. But where it gets expensive is acquiring clients. Because clients can be a little bit more expensive to try, to try to acquire sometimes, because you think about things like lead generation, time on the phone with a client, you know, I can win, I can win an agent over in one interaction, but clients oftentimes take anywhere from five to 15 minutes on the phone, talking with them beforehand and afterward, acquisition of cost of a client can be expensive, especially when it comes to time.

Dylan Morgan
Yeah, yeah. And you know, that, I’ll add just, once you have an established relationship with a real estate agent, a lot of those agents go on their website and book an inspection, I just get an email and a text, there is no time spent convincing them. You know, they work with me all the time. They know the deal. They just go straight to the website, they do the work themselves. You know, that’s my favorite, that’s my favorite email.

Ian Robertson
Yeah.

Dylan Morgan
Ka-ching. Customers don’t do that as often, sometimes, but not as often.

Ian Robertson
Yep. And it’s also better to try to keep our existing agents too, I would imagine. So I’m always referencing The Office because I’m a huge nerd. But I remember that one episode with the fire, where Ryan burned the cheesy pizza. And Ryan started quizzing, Michael, he’s like, is it cheaper to keep an existing customer or to acquire a new one? Almost invariably, in almost every business model, it’s always cheaper to keep an existing agent than it is to go out and get a new one. We lose agents all the time. But I see, I see inspectors sometimes talk about “oh, well, I didn’t need them anyways”. I’m like, okay, would it cost you $100 and time to go out and acquire a new agent, when it would have cost you $20 to go and unclog that client’s drain of broccoli and make a good name for yourself and keep that agent.

Dylan Morgan
Yeah. Reputation management. That’s something that I think is important.

Ian Robertson
Yeah. And our reputation with our clients and with the agents in particular.

Dylan Morgan
I’ve got an agent, that I take, because I was just looking at this the other day, and he sent me 55 inspections over the past, I will say a year and a half or so. And I know that one of the first inspections I did with him, that client’s microwave didn’t work. After they moved in, I thought it worked. And I don’t know what went wrong. I guess I didn’t really, you know, test it properly, probably just hit the ON button. And it looked like it worked. And it didn’t. I have a tool for that now, one of those little InterNACHI things that glows red.

Ian Robertson
Yeah.

Dylan Morgan
But I didn’t at the time. And I did, even though I guess technically you could have said it, the microwave wasn’t part of the inspection, I did test the appliances and gave the client the impression that they worked. So I wrote.. but he told me about it. He wasn’t really asking me to do anything. He was just like, hey, did you do anything with the microwave? Because when the client moved in, they said, they did, it didn’t work. I was like, well, I turned it on. But I guess the magneto wasn’t working. And so I sent him a check for 300 bucks, which is what it cost them to get a new microwave installed. But I mean, that agent was just, he was all about me and my company. You know, from that point, he was already using me. But you know, who knows, maybe he would have went somewhere else. But it actually ended up being an opportunity, a pretty easy opportunity at the end of the day to reinforce that I stand by my product.

Ian Robertson
Yeah. And that’s a, that’s a good example. Sometimes we’re afraid to take care of people because we’re worried we’re going to be taken advantage of. And that does happen. But I had a similar experience early on in my career. Guy moved in, and there was a support for the main drain line in the basement. So when the people moved out, they took it, like, who takes, who takes, who takes that? What are you using it for? It was in a picture in my report. So, agent calls me, they’re freaking out. There’s sewage in their basement. I’m like, sewage in their basement? I ran hundreds of gallons of water because I have this weird OCD thing. I run all the tubs and showers for pretty much the whole inspection. Anyways. I get there. He had his entire first floor bathroom taken apart. Toilet was up, tub fixtures were out. It was a mess. And I just go into the basement and I say why do you have your Bathroom turned up, take it apart. It was newly remodeled. And he goes, I thought that’s where the problem was. And you know, he’s a good old boy, you know, like, he was kind of rough around the edges. He was chewing on tobacco and spitting in his own basement. I’m like, dude, man, I’m like, Stop spitting for two seconds. And let’s fix this. So we popped the pipe back in resupport it and I said, Now, Allah, you put your bathroom together, and I spent a half an hour with them. That agent and her office referred me for years, she sent me a thank you note, he left me a great review. And every inspector I knew at the time was just like, No, don’t go back. That’s stupid. That’s not your fault. I’m like, I don’t care if it’s not my fault. It’s on my way. And it’s 20 minutes.

Dylan Morgan
Yeah, well, I mean, the thing is, like, you have an opportunity to try to take control of that narrative. You know, when you showed up, first off, it just showed, most people wouldn’t do what you did, just coming back to the scene of the crime basically. And, and helping the guy with it. But rather than a guy just sitting there, bad mouthing you about what you missed, you know, when you come there, and you show and you help them fix it. And you also get an opportunity to explain like how that wasn’t really your fault. Anyways, in this case, it changes his perception of what happened. So you turn that client around. And of course, like you said, the real estate office continue to use you for years. Sometimes, it’s just important that I get involved in the situation rather than try to hide from him. And that’s what I’ve done. And, you know, unfortunately, I think I’ve gotten off kind of easy complaints. But when something does come up, even if it’s, even if it’s not a direct complaint, if it even sounds like it could be a complaint. I try to get on top of it, to turn that around, if possible. So

Ian Robertson
yeah. And to go back to your point, first of all, you do you do a good, thorough job. But when I went back to do it is because I was wanted to do the right thing. But also, to your point, I ran numbers in my mind. Like, how much is it going to cost me? If this 20 minute trip? I skip it, and it turns into a bad review. That’s that’s incalculable. So then I said, Okay, well, this agent refers me five or six inspections a year. Okay, again, 20 minutes, you know, at the time, were charging about $200 an hour. So what’s that? $40. And it really took me 20 minutes, that agent started refer all of her inspections, and then I didn’t have the cost of the bad review. Yep. So to your point, it’s a matter of how did you put it? How much is that person monetarily worth to you?

Dylan Morgan
Yeah, and you got to look at that for gain and loss. Yeah. And a lot of it’s, it’s not, it’s, you’ve got to, you’ve got to think about like, so like you just said, it’s not, the cost wasn’t the time that you spent helping him, the cost could have been him, costing you more business, you know, it’s opportunity cost that matters more. You know, even in my example, with the $300, check for the microwave, I didn’t want to just like send someone 300 hours. But if we make an assumption that maybe the reason the agent has continued to use me ever since then, well, that agents brought me just gonna throw out a ballpark $15,000 worth a business, take the $300 on the microwave, and divide that by 15,000. It’s a small percentage.

Ian Robertson
Well, and then on top of that, we had Jay when on the podcast one time, and he said, every inspection I missed is future money lost. Every inspection is hundreds of 1000s of dollars potentially lost because that agent brought you 55 inspections. So very likely, I would guess that 40 or 50 of those had another agent on it that you might not have known or met otherwise. And now you get to demonstrate your great report your great inspection. So all of those are cumulative in the numbers that you need to think about. How much am I going to lose over time? If I lose one inspection? I could lose hundreds of inspections?

Dylan Morgan
Yeah. So you mentioned I caught cellphone a few minutes ago, $200 an hour years ago, it was whichever charge or Home Inspection Services. Yep. Yeah, that’s, that’s a credible side. I don’t think a lot of guys are charging anywhere near that.

Ian Robertson
Well, so that’s also a problem with our industry. I’ve seen the numbers go up slightly with inflation. But we charge so little compared to what we did years ago. $200 was our was our base rate. I wouldn’t get out of bed and go look at anything if it was under $200. So that’s anything you know. So a home inspection, I would always figure I want at least $200 An hour Because are so going back to your cost point, it costs us $125 To get out of bed and show up to the inspection. People like all those are high numbers, but take into account all of those costs, acquisition cost of agents, gas, time, insurance, branding, everything, or that year that you were in the negative, you need to earn all of that back. And that’s all costs rolled into it. So it’s probably a little bit higher now. But $125 per inspection. So that means the first almost 45 minutes, I’m just burning off overhead. So I never wanted to work for less than for less than that. But it actually that’s actually a probably a good segue. You’re a numbers guy. What do you have to say about inspection fees in general? Besides, you just say that you don’t think people, people charge enough,

Dylan Morgan
I’ve got some ideas that sometimes don’t align with each other. But you’ve got a couple of things. One, there’s the in a commodity market, if the market price pretty much dictates the sale. But a commodity is like corn, or soybean. And I don’t think that farmers can really just decide they’re going to charge 10% More than the market rate and sell their corn. Unless there’s something different about it, maybe it’s organic, pesticide free, something like that. But that’s a good example. Now you have home inspections, this is a professional service, we’re not a commodity, although there does seem to be some pressure towards that model. I don’t think it’ll ever stick. It’s too nuanced. And the expectations of the home inspector I think are they’re too high. I don’t think we’re ever going to get a standardized product. In Home Inspections, there’s always going to be a big variance. I don’t wanna say always, but right now, there’s a big variance and the competency of the home inspector, the thoroughness of the home inspector, the personality of the home inspector, and all those things influence the price. And so you have the opportunity to compete in a lot of different ways. I think a lot of home inspectors think that the main way to compete is on pricing, there’s really not, there’s a range that you’ll probably need to be within. I mean, I don’t think that a brand new home inspector is going to come on the scene and charge $1,000 for a home inspection, just because they feel like it and people are gonna pay it. But when I came in three years ago, I decided I wanted to be on the higher end. This was something I thought about before I ever even sold my first home inspection was what is my position going to be in this market. And there’s pretty much in any business, there’s already going to be the guys that are that have already positioned themselves at the bottom there, their main game is volume and low price. And that’s what’s going to sell their service. I can’t, I’m not going to try to compete with a Walmart business model, it’s, I don’t think that I can offer the level of service or quality that I want to offer at those price points. And it’s not very, it’s just not very interesting or fun to me, either. I like building a brand that’s valuable. So I’ve decided to go the other direction, I’m not trying to be on the extreme high end, because I don’t want to kill my own demand to where I can’t scale the company. Because I don’t always want to be a solo home inspector. But I am trying to be in the higher the higher quadrant, you know, the upper 25% of prices. And with that, I believe that I deliver a better product. I do a ton of here’s another cost for each inspection that’s hard to quantify. I’ve done 500 Something hours of continuing education. Oh, wow. So like does that you know? How does that factor into your fees, the time you spend on paid just learning? It may be more than that. I don’t know, I haven’t looked in a minute. But I do a tremendous amount of continuing education to try to always know as much as I possibly can. I don’t cut corners on the inspection. If I have to be there for three hours even though I was only planning to be there for two hours. So be it a stay until the job’s done. I answered the questions the client has, I don’t rush them. I don’t stack my inspection so close to together that I have to take off to the next one. Before it’s time. All this is about trying to make sure that the customer experience is always perfect or as close to perfect as I can get it. I just don’t think you’re going to have a viable business model trying to do all that trying to compete with what I’m offering for 300 bucks. Yeah. And when tools and equipment even, you know, I’m using a thermal camera on every inspection. It’s not an upcharge I’m not scared of the tool. Anything that I think is in my client’s best interest they get it and part of the reason I can do that is because I charge accordingly. And I actually just started putting out some feelers wants to figure out what my competitors are charging this week. And I will I’m planning on adjusting my prices upwards and April. Nice. And I’ll probably go up 10% or so

Ian Robertson
nice. And that’s what I like to hear. And that’s why we’re talking about this subject, real numbers to run your business by, you didn’t just do a quick internet search to say, okay, 350 Sounds good. For my home inspections, you’re looking at acquisition cost of agents and clients, you’re looking at what your overhead is, what others in the market are charging. So what you can sustain, and what bracket you want to be in for what you’re charging.

Dylan Morgan
Yeah, you know, be careful with the internet sources, because a lot of that information is just garbage. Yeah, if you go to Google and type in average home inspection fee, it does not align with reality. If it does, I don’t know who these people are. Because it’ll say that the average home inspection price is like 300, something dollars? Who is charging that much? Because if you ask someone else, right, don’t ask Google or because Google will pull up like they’ll populate a result from like home advisor. At the very least you have to consider selection bias in the samples. So where does home advisor get their average inspection fee? Well, I don’t know for certain, but they’re probably getting it from the home inspectors that use home advisor. Well, then what who is home advisor trying to cater to well, if you Google search, home inspection, Richmond, Virginia, for example, home advisor, you’re probably one of the top paid ads, and it’ll say it used to say probably still does don’t overpay compare the pros. Okay, so HomeAdvisor wants a customer that’s already really price focused, they’re already going to compare, it’s going to be a dogfight, they’re going to, you know, make all these home inspection companies fight for their business on price. That’s what that’s what HomeAdvisor is already signaling from their Google ad. So a lot of the home inspectors that are on HomeAdvisor are already in a fierce competition with each other based on pricing, they might not even get their call answered if they’re not within a certain range. So that site creates price pressure, where you where you’re going to have lower price people already, is that where they’re getting their data from, because if you look at all the companies that maybe don’t use HomeAdvisor, for that reason, I’m one of them, they don’t charge fees that low, my fees start at 450, which I mean, this is going to depend on people’s areas. So that number is not really relevant to someone that might be in the Midwest. But in this Richmond area, my lowest fee just to come to your house, I don’t care how small it is, is 450. And I actually have already gotten a pricing list from one of my competitors. And he charges into lower brackets than I do for size. But just based on his fees, I’m wanting to raise mine, because I’m supposed to be more than expensive than him. He’s charging almost as much as I am now. I guess, because of inflation. You know, I haven’t raised my price since January of last year. But you don’t really need to worry so much about trying to be in this low price just to sell the service. Another thing to consider, people will say that in supply and demand that you know, the more you charge, the less demand you’ll have. Which I think in a general sense, it’s true. But what that doesn’t take into consideration is something like consumer psychology, I’m going to use myself, for example, I’m probably I’m kind of odd. So I don’t know if I’m the best example of your average consumer, but maybe you don’t want to sell to your average consumer. I’m the kind of person where if I see something that’s really cheap, price wise, I’m less likely to buy it because I’m suspicious of it. Why is it so cheap, there’s got to be a catch. And to me, the cost of something isn’t necessarily just its price, it’s what it’s going to do for me. And so for example, I will never buy a cheap set of tires, because I’m scared, I’m afraid they’re gonna blow out leave me stranded on the side of the road, which is way more expensive to me than the 200 hours I saved compared to like a reputable high quality, more expensive tire. Just the easy example. A lot of the stuff I buy is, is you know, there are there areas where I, I am more cost sensitive, because I don’t really care that much about what it is. That product to me is not of any great consequence in the long run. So let’s say like, I don’t know, something silly on Amazon, you know, a container, how about a storage container, maybe I just don’t feel like spending a lot of money on that and I’ll buy something cheap. If it breaks, who cares, I’ll buy another one. I’m not gonna go for a cheap home inspection, though. I don’t want to say $50 on my home inspection and risk having someone come in that doesn’t care that rushes or is incompetent and misses a $30,000 foundation issue. And so those are the consumers you want. You want the people that understand this game at least a little bit better, or at least they have a little more common sense than to think that their best value is the lowest price. You know,

Ian Robertson
I couldn’t have said it any better. You hit the nail right on the head. And it’s funny you mentioned a tire thing I started I laugh a little bit because I actually had a tire blow, just a week or two ago ran over a drill bit in the road. I don’t know why. Yeah, went in sideways long story. But anyways, there was a Walmart down the road. And my tires were a bit low, I needed four tires anyways, but now I needed at least two. So I, literally me and a buddy plugged a tire filled it up, I drove it home, instead of going to Walmart, and waited overnight and then brought to my mechanic to get some nice Hancock tires. Because they were better. So he didn’t work, he didn’t worry that I could get a cheaper at Walmart. That was just where I was going. I went for value. So it’s funny, you mentioned the Toyota thing. But it is a different type of person that you’re going to market to if you’re marketing with price. Now I’ll caveat this I shop at Walmart. You know, they have two good subs there, by the way, but you know, yeah, go to Walmart. And you see a lady arguing with the cashier because the peanut butter is 12 cents more expensive than she expected. And you won’t take her expired coupon? Yeah, you know, it’s it’s a it’s a different mentality than the person who goes and shops at the, you know, Whole Foods, which you know, you’re gonna pay, you know, $30 for this weird, Amazonian peanut butter. Yeah. So not saying one is better than the other. We’re all human beings. And you know, everybody has different situations. But when it comes to our business, do we want someone who’s going to fight with us? Because, you know, I could get that radon test $25 Cheaper from your competitor, than they call us three times? And you know, every every little nickel and dime that we charge, that’s what we’re going to be working with. Yeah. Whereas, you know, you go to you go to a nice restaurant, you know, sometimes they don’t even put the prices on the menu. So old expression, if you can’t, you have to ask you can’t afford it, you know, makes me nervous. But I personally

Dylan Morgan
hate that. I do too. But I would have got

Ian Robertson
the but it’s a different type of person that we’re going to be marketing to. Yeah, oftentimes I would have people ask my price, still do to this day, after the inspection is over? How much was it? They were told on the phone, but they it didn’t even register? They’re like, I don’t care? Are you the best? Do you do the best job?

Dylan Morgan
Or here’s a little plug for having goods, you know, investing in good software and systems. More than half of the time, by the time I show up to an inspection, I have a signed agreement, and it’s paid. We don’t even have to talk about it. Yeah, that’s one of my favorite things. Do I pay a transaction fee? Yeah, so what I lose, you know, 2.75%. But I don’t spend any time having to deposit checks, ask for money, forget to ask for money and have to figure it out later. It’s just I love automation. Just things just done for me. I’d just show up do my job.

Ian Robertson
Yeah. So like, even even our app inspector tool belt. So people won’t give us like us $69 A month and like, Yeah, but you just paid someone to send out your inspection agreements, send out reminder emails and text messages, get paid. And all you do now is enter some information and inspect. So it, that automation part is extremely important. Because there’s, there’s a cost there to doing it ourselves. I was talking to a guy today, he goes, Yeah, it’s a lot of work, I have to go in and manually enter the information manually send the contracts, talk with the clients extra. And I’m just like, that sounds like a lot of work, man, just get some automation.

Dylan Morgan
Also just, you know, knowing thyself, I’d be horrible at that. I, I know my strengths and weaknesses, I am forgetful. I like just taking the human error things off where we’ll never forget to send an email to a client asking them for a signed agreement of payment. You know, all those things are done every time without fail. I don’t have to worry about forgetting or there being a typo or send it to the wrong person. So I much prefer to systemize as much as I possibly can.

Ian Robertson
Now, going back to the theme here, those are real numbers. I think it’s important that we mentioned that a lot of times we have numbers in our head versus real numbers. I’ve often talked to guys that say, it doesn’t cost me anything to run my business. I hear a guy say that a lot. doesn’t cost me anything. What a little bit of gas. Yeah, like it cost you more than you might think. So the cost of software, the cost of doing business insurance, our time. All of those are real solid numbers. And that’s why I’ve always liked you. You’ve never come to me and said, Hey, and here’s this magical thing. I’m thinking of what’s your opinion, you say, Hey, I’ve crunched the numbers. And here’s what I can figure out based on market data. That’s why I say okay, here’s the deal in question. Let me put my mug down here and let’s wrap my brain around this. That’s a beautiful thing. Real numbers.

Dylan Morgan
Yeah, the numbers, the numbers that tell you a lot I Don’t think it’s everything necessarily. But they’re a very important part of the puzzle that you need to know. It’ll help you make decisions to about where you know where you want to where you want to go next. What’s the money behind it? You know, do you want to do right on is that popular in your area? If it is, you want to know what the general market rate is what you think you could charge? Is that worth it to you to invest in the equipment to deal with the calibrations to make a second trip to these houses, you got to know the numbers behind all this stuff. And you don’t just want to be flying by the seat of your pants, because you might not be making as much money as you think you are. And so you know, I mentioned like investing back in your company. So I chose to do that last year with radon. Towards the end of the year. In December, I went ahead and bought a bunch of monitors, I wanted to drop my taxable income for the year. And that was a easy way to do that. On top of I didn’t buy them just to just for a tax write off. I’ve heard that before. In fact, you had a you had a tax on your podcast recently that talked about that’s one of my pet peeves. I hate it when people do that. Don’t go buy a brand new car just so you make less money. You need a brand new car, or wanted one anyways, just don’t do it to save on taxes. But right on monitors, I bought the radon monitors because there was a business need for them. I decided that it was worth it to expand into that. And so I went and bought them in the summer to go and I think uh, you know, I dropped my income like $6,000. So yeah, I’ll take the tax write off if I get it. But I decided to get into radon. Actually, it was about more than just the numbers. So I did determine that I was going to set a price that it was worth it to me to offer it. But I was not actually that motivated by the price, I was actually doing it to try to create more of a one time one stop shop for the clients and the agents. Knowing that there was some demand for that, I will I thought it would strengthen my model or my brand for them to be able to get the home inspection and the radon with me and not have to go to two different places for it.

Ian Robertson
I think that’s a great example of why the numbers aren’t always everything. Yeah, so we’ve done radon for almost 20 years, and we view it as a loss leader. See charge $200 for a radon test. I mean, that’s a giant pain in the butt, setting it up takes 1015 minutes, then we’re driving back. So let’s say it’s a half hour drive, then, you know, we’re dismantling and dealing with the seller, sending the report, it’s a it’s a full hour or two of just messing around. And you know, in New York State, you have to be a lab to use the radon monitors and all this other junk. It’s a big pain in the butt. We we really don’t make much off of them once you do the calculations. But it’s a loss leader. We do it because if you if we didn’t do it, people wouldn’t hire us. They just go to the next inspector that does do it. Yeah. So it gets us in the door.

Dylan Morgan
Yeah, yeah, the numbers I ended up setting on that. So I would love to raise this right. And I probably will at some point, but like my target hourly rate, I suppose, is about $125 an hour, which I know you said 200. But in my market, my rate I think is already in line or higher than some of my competitors. I’ll be honest, I think that there’s still room for me to save time, which is another way to increase your hourly rate, you either charge more or like get more efficient. I’m very efficient in a lot of ways, I do think that there’s still I could still get more efficient on on site. Some of the older houses with more issues, really bogged me down. And so I think I could actually make more money just or more money per hour by continuing to get more efficient with our report things. But anyways, so Well,

Ian Robertson
I think I think you’re doing good, though. But if you’re charging 450 as your base rate, you’re well above average. So I mean, if you’re two, three hours on site, you’re about $175 an hour. Yeah, we’re we’re talking on site time, not necessarily overall.

Dylan Morgan
Yeah. Oh, well, here’s so here’s how I figured that they so we might calculate that different mine, let’s say for 50. I’ve got about 80. Actually that that gets a little higher. I’ve got about $70. I actually have my spreadsheet right here. What does it say? As not worth opening up right now. I got about $70 worth of selling costs. So that would put me at 380 and then take that and then I also factor in my drive time. So if I spend let’s say I spend my target is about two hours, 15 minutes on the inspection for my bass house. And then I estimated about 45 minutes for the driving. So you had about three hours, the 380 divided by three hours, which I think is just a little over 125 per hour. That’s how I come up with that. So, you know, some, some people may not be assigning drive time, and how they calculate that.

Ian Robertson
What they shouldn’t be, yeah, or the

Dylan Morgan
variable costs, the I take the variable costs out first because I never see that money, and I wouldn’t have had to pay it if I didn’t have the job. So anyways, I think where I was going with, so like, was right on, I set the fee 200. Because that’s what I determined I had to charge in order to hit my $125 an hour. And also take into consideration I got driving that house a second time. And that’s another mileage charge to have roughly $20. I, the mileage is an estimate based on a rolling 365 day. I take like the number of miles I drive on average for each house over the past year. And I’ll check that periodically. It actually went down recently, I guess I’m not driving it as far now. So but $20.45 or something, is my mileage. So I, I reimburse myself as an employee for mileage for my vehicle expense. So that works well for me, mileage rates, 60 to 50, or 62.5 cents per mile right now, too.

Ian Robertson
So if this is not an illustration for you listening in, of why knowing real numbers is important. Dylan’s got Dylan’s got everything down to the minute calculations

Dylan Morgan
as much as I can. Some things are still hard to, to nail down, but you just use predictions and reasonable guesses were necessary, and you’ll get close to them. The more data you have, the more precise you can get. So

Ian Robertson
exactly. But you know, I wish more of us did things like that. Because I see a lot more success for you in the future. I think you’re going to be one of those guys that are going to bust out of this relatively rough market that we’re going through and just own a lot of market share more than you already do. But I really appreciate you being on and sharing this information with us. It’s a great reminder of knowing some of the details of our business, and then using those to basically make our business function better and not wonder what happened later on. So thank you so much for being on Dale and we appreciate it a ton. Thanks.

Outro: On behalf of myself, Ian, and the entire ITB team, thank you for listening to this episode of inspector toolbelt talk. We also love hearing your feedback, so please drop us a line at [email protected].

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Q1 2023 Home Inspection Market Outlook
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