Like many of us, Mike’s guest has had his fair share of entrepreneurial failures and lessons. Aaron Stahl, CEO of P3 Cost Analysts, certainly understands the highs and lows of the entrepreneurial journey. But when he navigated the 2007 financial crisis and narrowly avoided bankruptcy in real estate, he used this as motivation to find an industry that could endure a recession and help businesses in the process.
From a modest real estate company in college to a successful expense reduction business, Aaron’s journey is nothing short of inspirational. He and his team at P3 Cost Analysts have helped over 30,000 client locations in North America save money. Aaron takes us behind the scenes of this unique business model, blending technology and human expertise to make sure vendors are charging fair prices. He’s not shy about sharing his wisdom either, from the importance of prioritizing service levels to the practicalities of the equipment used.
Aaron’s journey doesn’t stop at the evolution of his business. He also shares the mindset shift needed when transitioning from a lifestyle business to a scaling business, and how this has driven the success of P3 Cost Analysts. Never one for convention, Aaron also discusses his approach to life, including the practice of taking sabbaticals every five years. So, sit back, relax and soak up the wisdom from this entrepreneurial journey.
- From Real Estate to Expense Reduction
- Cost Reduction in Business Operations
- Lessons in Business and Real Estate
- Transition to Scaling a Business
- The Evolution of a Business Model
Connect with Aaron Stahl:
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Episode transcript below:
0:00:00 – Mike Malatesta
Hi everyone, mike Malatesta here and welcome back to the how it Happened podcast. On this podcast, I dig in deep with every guest to explore the roots of their success, to discover not just how it happened but why it matters. My mission is to find and share stories that inspire, activate and maximize the greatness in you. On today’s episode, I’m talking with an entrepreneur, an incredible thinker, about his journey from being a nearly bankrupt home builder to becoming a fast growing franchise, or. His name is Aaron Stahl. We talk about the difference between a lifestyle business and a growth business, at least how Aaron sees it. How the book 4-Hour Workweek by Tim Ferriss opened his eyes to a new operating system for himself, why he’s never been a suit and tie kind of guy and why it doesn’t always make sense to focus your sales efforts on the biggest whales.
0:00:55 – Aaron Stahl
It’s simple in the model and the fact that if we can’t help you save money, we don’t make any money. So if we can go in there and help a client save 100 grand a year, we’re going to take a portion of those savings as our fee. The client gets the rest. There’s nothing out of pocket whatsoever. It’s an unlimited return on their investment.
0:01:11 – Mike Malatesta
This episode is sponsored by the Dream Exit. The Dream Exit is a private, bespoke program for successful entrepreneurs with annual revenue between 5 million and 100 million who realize that they have one chance to get their Dream Exit right and that the odds of realizing that dream by themselves, all alone or at the last minute are stacked against them. In less than 90 days, we teach you how to design, build and execute a customized Dream Exit playbook that gets your business ready for sale at its maximum value and gets you ready to maximize your meaning and purpose in your post exit life, even if today you are not ready to sell. You see, dream Exits just don’t happen. They are the result of early, professional and proven planning. So if you’re an entrepreneur with annual sales between 5 and 100 million and you want to learn how to 10X to 100X your chances of achieving the Dream Exit you deserve, go to dreamexitplaybookcom today. And now here is Aaron Stahl. Hey, aaron, welcome to. How Did it Happen?
0:02:27 – Aaron Stahl
Hey, appreciate you having me on Mike.
0:02:28 – Mike Malatesta
Yeah, my pleasure. And just so you know, I definitely did hit record this time because even pros.
right, aaron, even pros mess up sometimes. I turned on the recording at the end of our podcast recording the first time. We did it, so a little embarrassed and then had to get this busy guy to come back and do it all again and so thankful that you’re here. So you heard a little bit about Aaron in the introduction and here is a little bit more. So Aaron Stahl is an entrepreneur and the CEO of P3 Cost Analysts. P3 is an expense reduction consulting franchise that specializes in reducing waste, telecom, merchant processing and utility bills basically all the stuff you’re wasting money on in your business. He and his teams find it and eliminate it. His organization has worked with and saved money for more than 30,000 client locations across the United States. Is it just the United States, aaron? I should have asked that.
0:03:31 – Aaron Stahl
Yeah, we’ve done locations in Canada and some in Puerto Rico and a couple in Mexico over the years, but 99% is the United States.
0:03:38 – Mike Malatesta
Okay, so North America, I’ll say, including well-known brands like Sonic, kfc, coca-cola and more. So, aaron, I start every podcast with a very simple question, and that is how did it happen for you?
0:03:52 – Aaron Stahl
Sure thing, very, very simple question, also loaded one. So this might be the unabridged version, but kind of have to start at the beginning. So back when I was in college, I really caught the entrepreneurial bug. I noticed everybody my junior year getting ready to do internships and preparing for the real world, so to speak, and the thought of working in nine to five and wearing a suit and tie every day just absolutely terrified me. So it really led a fire under me to start thinking of ways to make money for myself. And so I actually launched a real estate company in college and convinced my dad to co-sign on some loans and found a guy who knew how to build houses, and we jumped into the real estate boom at the time and had some early success.
2007 came along and almost wiped us out. That was a good lesson to learn at a young age. But during all this time I knew home building wasn’t something I wanted to do forever. So I was looking for another business to start. So I looked at hundreds of businesses and really settled on the cost reduction space. I just liked the idea of being able to save people money. I thought people would like having me around if I could help them reduce cost and then also work with all sorts of different industries. I really kind of have business ADD. Everything kind of interest me. The idea of being able to work with a lot of different varieties of companies was interesting. So there was a company out of Florida that was training people how to become a waste and recycling consultant in the cost reduction space and it was really just a training thing and I went down there and learned how to do it. I learned enough to be dangerous certainly not an expert Open up shop in Arkansas and just really started going around and talking to people about how I could help them and it’s a contingency based business, so there was nothing to risk and early on started calling on Fortune 100 companies.
This was 2004 as a one man shop, highly over ambitious, 22 year old and had zero success doing that. So I did that for a couple of years, making zero money and simultaneously was losing my shirt in the tail end of that real estate boom. So it was a tough period. But before through the towel and I told myself I was going to land 10 small local companies and I quit trying to go after the big fish stuck with it and actually did that and started to make some money, started to help people save money, started to learn more, started to become an actual true expert in waste and recycling and cost reduction, and so the company really grew from there. I was able to make it a money to hire my first employee, who’s now a partner in the company and still with us today, hire a bookkeeper, and for a while the company was really just a lifestyle company.
And then in 2014, a friend of mine from college was interested in buying the company. I was kind of burnt out, just wanted to do something different. And he was interested in buying the company and I told him hey, I don’t want to sell you the whole thing. I don’t think you know enough about the waste and recycling industry. I don’t want to do that to you.
So just sold them a chunk and we all kind of committed to forming a partnership, took on a couple of partners at that time and really trying to take the business to the next level, and so from there went from a lifestyle business to really a growth company and we put a lot of time and energy since then trying to grow the company and so we’ve added more and more categories expense reduction categories. We acquired a company in 2018 that we’ve been working with for a while that also had an affiliate program where they would train people how to market this business and we would be doing the back end expertise. We liked that model, but we wanted to convert it to a franchise, so we bought it and converted it to a franchise, so we’ve been a franchise since 2019. Now I have 40 franchises around the country and we’re up to like eight expense reduction categories, and I guess that’s kind of how it happened and how we’re how we’re at today.
0:08:04 – Mike Malatesta
Okay, so I appreciate you taking us through that. I think that people are listening and one thing that they may be missing is what exactly an expense reduction company does. And more than that, how do you? You said I was looking at a bunch of stuff and I sort of you know came, you know came down to the expense reduction space, and I think I’m thinking to myself because I know how I ended up in the waste business, ironically enough. But how do you, how do you look for stuff and end up in the expense reduction space?
0:08:39 – Aaron Stahl
That’s a great question. Yeah, I’ll start with that one, Just rolling fine by it and minding if it is expected For me. I mean, I’d looked at all sorts of businesses in college. Like you got to go through some of these like get rich quick schemes and you realize you know there’s no secret sauce, Just hard work, and I was looking through hundreds of different businesses and my I’m a pretty positive guy but I’m pretty like conservative and bearish as far as like I don’t want to, I don’t want to go out of business, I want to go bankrupt and I’ll lose money.
0:09:05 – Mike Malatesta
0:09:06 – Aaron Stahl
And having that experience in real estate where I almost went bankrupt certainly was it left a mark, and so I was looking for a business that was going to be those going to do well in a recessionary environment.
0:09:19 – Mike Malatesta
that had a lot of low overhead.
0:09:20 – Aaron Stahl
So I didn’t want to open up a retail store that if the economy, you know, crept the bed, it was going to go belly up. I wanted something that was going to do well in a down economy but I didn’t have to invest a ton of capital in that. I could be kind of light on my feet and still generate an income and provide values. That’s really why I settled on that space.
0:09:42 – Mike Malatesta
And what was the other question how does it work? What do you actually do?
0:09:46 – Aaron Stahl
Yeah, so the cost reduction space is it’s simple in the model and the fact that if we can’t help you save money, we don’t make any money. So if we can go in there and help a client save 100 grand a year, we’re going to take a portion of those savings as our fee. The client gets the rest. There’s nothing out of pocket whatsoever. It’s an unlimited return on their investment. They don’t have to pay us any money in advance and if we’re not able to help them, there is no fee. So, honestly, some of the biggest objections we face when we’re out there trying to onboard new clients is they think it’s too good to be true and we’re like look, it’s not too good to be true, this is what we do for a living. We focus on this. Therefore, we’re able to find savings and if we do, we’re going to get paid.
And the way that we find savings is simply by being experts in these fields, and we’ve got experts in each of these categories and in some of these categories the people even ran some of the vendor companies that we’re, that our clients have, that we’re working with.
So they know all the deep, dark secrets, the tricks of the trade and on top of that. We’ve been doing it long enough that we’ve got data points from all our portfolio of clients all over the country. So we know exactly what the cost of a service should be for your type of industry with X many locations and X state, and we can. We can go to those vendors and be like, look, you’re charging our client too much and we have the data to prove it. Like it’s time to time to come down to a fair price and that’s just like the negotiating side. Obviously there’s there’s humans involved in these bills, there’s archaic processes, there’s no desire on the fact on the part of vendors really to get it right, and so you find errors and overcharges all the time. That can result in some nice refunds.
0:11:29 – Mike Malatesta
And you have like software that you send these bills through, that does an analysis for you. Or is it like how much cooperation do you need on the part of the customer access to all their stuff, and then what kind of permissions do do they need to give you to sort of act on their behalf?
0:11:49 – Aaron Stahl
I don’t have you heard that, but if there’s a thunderstorm going on the background, so OK, I didn’t hear it, but OK yeah.
Yeah, so when we engage our clients, they sign a letter of authorization that allows us to communicate with the vendors. So when we’re on board our clients, we’re going to need invoices from them. That’s really the main thing, probably the hardest part of the process to get that data from the client. So we need between three and 12 months generally of invoices per vendor to get to work and let our experts experts start digging in and seeing what they can find. And then the LOA, the letter of authorization, allows us to communicate with those vendors, to pull other things like vendor contracts or service levels or that sort of thing that we also need to kind of put the pieces of the puzzle together.
So it is a combination of technology and human expertise. So I mean, we have some, some artificial intelligence, some other technologies that help us dissect all the information, and then we obviously have all our data points from around the country as well that we’re looking at there and everything to, and then there’s, there’s. We take all that data and our experts are analyzing that based on their 30 years of expertise, reading between the lines and formulating a plan. So the the great thing about what we do is that there really are no operational changes. We’re not coming back to somebody and say, turn off your lights more or install these sensors and your costs are going to go down. Or burn your trash in the street and your trash costs are going to drop in half. It’s all. It’s all forensic accounting. Very little, if any operational changes at all.
0:13:29 – Mike Malatesta
And the stat that I was blown away with was like you find, in 90% of the cases, I think it is you find savings and must be enough savings to justify the percentage that you take, because you you’re not going to take I mean you need to get paid, right. So 90% of 90% of the time you find savings that are I don’t know what is significant, the right word, what’s the right word?
0:13:59 – Aaron Stahl
Yeah, I mean, I think significance relevant probably are relative to each company, but we have. We have certain category minimums. Obviously we don’t want to go, we don’t focus on them, on the mom and pop, the single locations unless they’re spending a high amount of money, like a single location hospital or manufacturer, sure, but single location restaurant probably not. So we try to focus on businesses that are going to be big enough and, as a result, that’s why we’re able to find those savings 90% of the time. So we went out there and worked with 10 mom and pops. I mean I don’t think we’re going to hit that 90% number. We work out there are 10 companies that have a decent footprint. Yeah, we’re going to hit that 90% number and we’ve been doing that for a long time.
0:14:44 – Mike Malatesta
OK, and again, it’s an astonishing number and it makes me think and I think people are listening, probably thinking too Like, are companies that? I mean, are the companies ripping these, these, your customers, other companies off? And or is it just the company that you’re working for is just not been diligent about asking for Cost reductions or just absorbing increases that come Like computer generated increases and it’s just people being a little laissez faire? What? And I know it’s probably different everywhere, but just in a macro level, because it’s just such a big number, what, what’s happening?
0:15:32 – Aaron Stahl
Yeah, I mean there’s. There’s several things happening. One is there’s the vendors. I mean like they’re in business to make a profit and a lot of their systems that are in place are to sell the service, the exact same service, to somebody else for the highest price possible.
OK so that airline seating pricing you know two days before the flight and and everybody is going to be paying different amounts for the exact same seat and you’re not going to know what is a good deal or not unless you have the data and the ability to compare it. Ok, so most of the vendors out there, in the least in the outside of, like the utility and gas, and some of these highly regulated markets, operate that way. So we can function as a free market solution to be able to help these companies have the data to arm themselves to, to know if, if they’re being treated I don’t know. I don’t want to say fairly, because I don’t think these companies, these vendors, they’re providing a service right. So we don’t. We don’t think these vendors are out there trying to harm their clients. They’re just trying to make money, like all of us.
So this is just the push, the give and take of the business world, and then it’s certainly not the fact that the clients or clients don’t have the business processes or the intelligence to handle this, and in fact that’s the opposite. It’s just that we save money, a lot of money, for some of the most well run companies I’ve ever seen, and it’s really just because they’re focused on their core competencies right, and they’re focused on getting the hamburgers out the door, getting the medical, you know, the patients taking care of. They can’t, they can’t be worried about every one of these things. And even if they have people in those specific fields or in those specific departments that are purchasing this service or managing X service, they still have a hundred other things on their plates and they’re in a silo of their organization. Whether that organization has one location or a hundred, they’re still siloed here. Ok so, and they’re not focused on it. You know doing this 10, 10, 12 hours a day for 30 years.
And so it’s just really that focus that allows us to drive value. And I tell you know, if I’m in front of a client that owns some restaurants, I’ll simply say, hey look, I think I’m a pretty smart guy. But if you gave me 10 restaurants that were losing money and I started working on them, tomorrow, I’m not going to be able to turn those around. I’m going to. They’re probably going to continue losing money and it’s going to take me five or 10 years before I probably get good enough in the restaurant business to be able to quickly walk in, manage a bunch of employees and processes and food and turn that around. It’s the same thing in these industries. You get a bunch of waste and recycling bills. I can find you savings, but you give me the keys to a restaurant. You know sorry.
0:18:18 – Mike Malatesta
Right and OK. So company comes to you, they engage with you, they give you their bills. You start looking at, doing the analysis, you reach out to the suppliers, the vendors, and what kind of conversation do you have with these people? And is it like, what’s the? I’m thinking, you know, is it a carrot or is it a stick? What is the? What’s the conversation like?
0:18:49 – Aaron Stahl
That range is pretty wildly amongst industries, cost reduction categories etc. So it can be, as I want to say, simple, as we identified an error and overcharge and we’re trying to get that refunded back.
0:19:06 – Mike Malatesta
0:19:07 – Aaron Stahl
And so it’s like a black and white situation. But you’d be surprised how complicated that can get. I mean, we had one example where we found a school system was being overcharged on a phone line on one like line item charge on this phone bill by a factor of like 20. And it was a big bill. To begin with it was 20, 30 grand a month, so this one line item ended up being four or five grand, but it should have been like 800. And we had to escalate that all the way to the CFO of that particular telecom vendor over the course of a year before they agreed that they’d actually made an error, so and that ended up being a several hundred thousand dollar refund.
So there’s all these behind the scenes battles that go on as we advocate for what we think is right and what we can prove is right. And then on the flip side, if we’re going through a negotiation, if we’re saying, hey, we’ve got these 30 locations with this service, with this vendor, and we think this price is the correct price, we’re going to show that vendor data, we’re going to overcome all the objections that they throw up. I think that’s just a big thing. Is that a lot of the people in the front lines of some of these vendors, in the sales roles or the customer service roles, are trained to throw up, you know, between five and a hundred roadblocks and if you don’t know the answers to all those questions, it’s difficult to get past that because you don’t know what is right or what is wrong.
0:20:35 – Mike Malatesta
Okay, and I’m imagining in most cases the customer is your customer. Your client wants to maintain a relationship with the people that they’re working with, so it’s kind of that’s why I was wondering, like the carrot stick thing, because nobody wants to pay more than they need to, but they also rely on the company. So how does that? How does that work?
0:21:00 – Aaron Stahl
Of course and I mean at the end of the day, that’s what I said like we don’t think we don’t treat the vendors like they’re they’re villains or anything. They’re not. They’re providing a service, but there is a market for these services. So in most cases, a lot of these services are commodity commodities and if they’re performed well, then our clients have options and the vendors know that. And so ultimately again, the reason our company exists is because there’s errors and there’s there’s pricing tactics that exist. If those things didn’t exist, we would have no value that we provide our clients with our expertise and it’s just the nature of the business. It’s certainly we keep it as professional as possible and rarely have any issues. We’re advocating on the client’s behalf. We would never put words in their mouth or come in kind of guns blazing. It’s always just professional data and it’s the nature of the business. So it’s not completely unexpected by the vendors either.
0:22:06 – Mike Malatesta
Okay, well, I mentioned that and some people are listening know that I I’ve been had a couple of waste management companies that I’ve founded and owned, and I haven’t. I didn’t, I’ve never had any experience with your particular company, but I have had, or we have had, people come to us that did something similar, or companies that hired a third party to manage all of the waste. Let’s say and and, and I think it’s not once you, you know, I think it takes a pro to do it, because once you get the call, you know that there’s an agenda to that call. Right, it’s like I’m not calling you just to say, hey, we love you, you know we’re calling you to say, hey, we’re calling you to save money, we’re calling you to get you to reduce your price. Really, so, immediately, you know you kind of well, like you said, sales reps are taught to. You know, put up 100 roadblocks, and I’m not saying we put up 100 roadblocks, but we want to preserve our margin too. Right, it’s not just so it having been on the other side of, again, not your company, but but but some, some that did similar things. It.
It took a while to get used to it at first because you weren’t, you know, getting that it was. It was sort of like having a union in between you and your customer. You know it’s like who do I deal with, who’s the soap? But? But I love the way you explained it, because you, you, you really made it like if I reversed it and I was working with your company on my, in my waste businesses. I would want you doing the same thing, right? We’re spending too much on phones. We’re spending too much on power. We’re spending too much on, you know whatever merchant processing, all the things that you do. So I would want that, but still it’s kind of a little hard when you’re on the other side. You got to get used to it, right?
0:23:58 – Aaron Stahl
Well, I will say a couple of things to that Just. I mean I don’t have this number officially hammered out, but I’d say, at least anecdotally, 90% of the money that we find is what the publicly traded Fortune 500 companies.
0:24:13 – Mike Malatesta
0:24:14 – Aaron Stahl
So it’s not generally the mom and pop providers out there and I don’t, I don’t I mean there’s a huge caveat to that, because we we do find errors and overcharges, but as far as, like the aggressive pricing tactics, you don’t see that as often as you do with the publicly traded and the bigger companies out there. So that that is something that we’ve noticed for sure, as we’ve been, as we’ve been working. But yeah, it’s definitely not, it’s definitely not adversarial at all, Simply advocating on the client’s behalf. And another thing I’d like to point out too is quite often we’re able to reduce the vendors expenses right. So it’s not, it’s definitely not always about just price at all. I mean, a lot of times we’re able to help the vendor find ways to save money with the client as well, whether that’s service levels, whether that’s equipment they’re using. I mean, we’ve, we’ve, it runs the gamut. So it’s not just margin really, it’s it’s revenue more than margin as far as where we’re helping our clients.
0:25:19 – Mike Malatesta
Okay, okay. So, and if you’re listening to this and you’re like, wow, you know, I have no idea whether we’re spending too much, but Aaron’s making me think that we probably are, at least in some areas of our business, reach out to him at costanalystcom and learn more. And the two things that you mentioned early on. One was your experience in the real state and home building, and I want to put that aside for just a second, but I want to get back to it. The other was this lack of success that you were having initially with Fortune 500, fortune 100 companies. You’re kind of going after what I call the whales. Right, you went, I’m going out of the whales and the whales weren’t biting. What was wrong with your, your pitch, what was wrong with your approach? That wasn’t working.
0:26:15 – Aaron Stahl
Honestly, I think it was just. It was less less my approach as far as like reaching out and emailing and calling people, and more just my entire approach to growing my business and starting the business and getting off the ground. I think the idea of starting off with a whale in hindsight is just is just crazy. Now some people can do it, I mean, you can certainly have success that way. I don’t want to discourage anybody from aiming for the stars. That was just the mindset that I had as a wildly ambitious 22 year old and I was super naive and so I just, and a lot of times.
You know it’s interesting when you’re, when you have that mindset, you never know what you’re going to catch. You might get out there and get lucky, and 41 year old me would have talked me out of it and like and like, so you got to. Yeah, I don’t want to like, discourage people from thinking that way, but in hindsight I would just say that the approach to business was the problem, like, and I think from a story perspective, starting out small and growing is a better story than just getting lucky and landing a whale in a lot of ways. So, yeah, so I finally just said you know what? This isn’t working and I get. I have two things I can do. I can either give up and say all this time and money was torched and just try to start another business, or I can commit to seeing if this works on a smaller scale and growing from there. And I chose the latter and stuck with it and was able to have some success.
0:27:42 – Mike Malatesta
Okay, and yeah it’s so. I think it’s a good lesson for everybody that’s starting in business one. I wouldn’t ignore the whales, because you might get lucky.
The winds are really important. Right, getting winds are really important. And it’s hard, maybe if you’re 22 or young and you’re trying to get you know a CFO’s attention or CEO’s attention at a big company or even the general manager at a big plant or whatever. It’s just tough. But you know someone with a smaller business, you get. You can probably get to the person, have a sit down with the decision maker much more easily and maybe the reward isn’t as potentially high. But it’s a win and wins and wins on top of wins make you know they get big, they snowball Exactly, they snowball.
0:28:31 – Aaron Stahl
And again, I don’t want to talk to anybody out of that because, like when I focused on starting small, I mean some of these smaller companies were still pretty good sized companies and by the time those first few years had gone by, I was 25 and I got an intro into the door of the owner of a big restaurant group and I mean they’re a couple hundred million dollar company. And I think sometimes when you’re, when you’re young and you and you just have the courage to walk in the door and have some conversations with some of these people on the C suite that are in their sixties or older, yeah, if they like what you have to say, they’re going to take it. They might want to take a chance on you because they probably see a lot of themselves in you. So I definitely wouldn’t let age or experience be a deterrent to aiming high. It’s just the holistic business approach that I had starting out was clearly a little too aggressive.
0:29:27 – Mike Malatesta
Yeah, I think that’s a great point that you made too. Like, if you can, the hard part is getting to them.
0:29:33 – Aaron Stahl
Once you get to them.
0:29:35 – Mike Malatesta
Like you said they may. They may very well see themselves in you and not only be willing to give you a chance, but be like impressed that you kept at it, because they know how hard they can be to get to as well.
0:29:48 – Aaron Stahl
So I’m glad you made that point.
0:29:50 – Mike Malatesta
The home building. So you said your dad co signed a, co signed a loan. You were what? Was it just a momentum thing where you thought, oh, you know, housing is going great, I can you know, get in, make some money. I’m just wondering how someone that your age at that time gets into something like that.
0:30:13 – Aaron Stahl
Yeah, a series of crazy decisions, I guess. But I mean, I really started out looking at it just a little more mathematically. I was just like, okay, why, in solving a problem One, I needed to make money and I didn’t want to have a real job or quote real job in a year and a half when I was going to graduate. So I was thinking, okay, well, maybe I can do the whole rental house thing and kind of build income up slowly that way and get traditional mortgages and cash flow above the mortgage and taxes and all that. But the prices of the real estate were so high it made it impossible to really cash flow anything in that situation. And so from there I was like, okay, well, if the prices are too high to buy and rent, maybe we just build and sell, we create the inventory and sell it. And clearly a lot of people had the same idea at the same time. But I was in early enough that we were able to do well, in kind of the first batch of houses we’d built.
But once I kind of made the decision that building was the way to go, I didn’t know anything about building houses, so I just found somebody my dad knew a builder and I wouldn’t talk to him. I was like, hey, if I do all the hard work, all the sweat equity, can we partner together? We’ll use your licenses, you’ll teach me the ropes. And he was gracious enough to take me on and then convinced my dad to use a signature if I was gonna give him a portion of the proceeds and we’re able to get a construction loan and have a little team together.
So I was really just the, I guess, kind of brought the team together and then did the labor and the hard work as far as like showing up for the contractors and making sure stuff like that got done, cutting checks, all that sort of stuff. So yeah, it was. I think it was a good idea. And then, as kind of I alluded to with the start of the business that I have now, I was overly ambitious and after making money on the first few houses just almost got in way too far from my head made offers on quite a few lots to try to scale the business up. Fortunately those offers didn’t go through and ended up just building a few more in the last three that I built pretty much lost everything that I’d made on the first three and pretty harrowing experience to have at that age, but it was a good lesson to learn how was your dad through all that?
I mean he made it Fortunately like the money that I had made from the first group of houses. We had a little bit of runway to finance the money we were losing in the last few. So I was the first line of defense before it started hitting his pocketbook. But I don’t. It was tough. I don’t think either of us took it very well for a while but eventually sold them and learned a valuable lesson and moved on.
0:33:05 – Mike Malatesta
Yeah, yeah and moved on in a big way. So congratulations, because sometimes that something like that really takes the wind out of a person and you just kind of it’s tough to get it back.
0:33:19 – Aaron Stahl
Now I appreciate that. I mean, I think that’s again probably the reason that I got into the cost reduction space, because I was in a heavy capital intensive business that you only made money when you sold it once after a year of work and you were subject to major economic headwinds, and so from there it was like low overhead and low investment, recession resistant or proof industry and saving people money. So it’s kind of a. I guess that’s how I got where I am.
0:33:49 – Mike Malatesta
Yeah, that’s like a 180. So that’s a good lesson to learn at 25 or whenever you, whatever you were. So when you answered the how it happened question you mentioned, you talked a little bit about the trajectory of P3. So it was you started it. You took us through those first couple of years and stuff, and then in 2014 or four, I can’t remember.
0:34:18 – Aaron Stahl
2014 is when the part of the partnership formed and my when I see if I’m partner bought in and yeah.
0:34:25 – Mike Malatesta
Yeah, your fraternity brother, right, so? And your? The way that you approach life is actually which we’ll get to now. Life and work is probably one of the most interesting stories that I’ve heard of. So you but you described it as a lifestyle business up till 2014, and then it became more of a scaling businesses. I’m maybe putting some words into your mouth there, but do I have that close?
0:34:52 – Aaron Stahl
Yeah, that’s spot on.
0:34:53 – Mike Malatesta
Okay, so I think everybody that’s listening has an idea of what a lifestyle business is. But what does it? What’s, what does that mean to you and what’s been the biggest change for you personally, as an entrepreneur and business owner of that transition?
0:35:09 – Aaron Stahl
I mean a lifestyle business for me was just one that that funded a lifestyle that I wanted to lead. I mean I was in my, I was probably 27, when some of those, those local deals that I started doing started actually generating a nice income and I could hire somebody. And so, you know, for a while, for seven, eight years, you know, I was making six figures. I could travel, I could sell deals and just add, incrementally, grow the business. I was never worried about, I was always conservative, so I was never worried about making payroll or anything like that. So I only had a couple of people quote, you know, mouths to feed and I hate putting it like that but, but, point being, I wasn’t worried about, I didn’t have a lot of stress, I wasn’t worried about making those payments every couple of weeks, and so, yeah, I was just able to go out and travel. I mean I lived in South America for six months and learned Spanish and went on hikes in Patagonia and just, really just tried to enjoy life while simultaneously working and growing the business slowly. And so I think when you’re a lifestyle business is that, and it’s also when you’re taking money out of the business to spend on yourself.
Okay, okay, you know, growth business is when you’re feeding the business the profits, the majority of the profits, to grow it and provide more opportunities for the people in the organization, the employees and you’re. You know, and more than one way you’re thinking way less about yourself and more about the business and the opportunities that can provide for the people that work for it. I mean the people that worked for me when it was a lifestyle business. Like I said, one of the one of those people still with me today in a partner in the company I just can’t imagine what it was like working for me from their perspective, because there probably wasn’t a ton of like opportunities. I mean, we were growing and their incomes were growing, but it was still probably not as exciting as it should have been and it was because their boss was, you know, enjoying a lifestyle company and so- Like a rainmaker sort of is you’re the rainmaker and they’re the?
is that Sure, yeah, yeah, I mean and obviously they ran the company in a lot of ways. I went out and got the deals and we you know it was a tight knit group. It was fun, but I wasn’t doing the business any justice, I guess, as far as like feeding the business what it needed to continue to grow. And so, in 2014, when I sold a chunk of the business to several partners, including the one I mentioned that originally wanted to buy the company, for me the mindset shifted 180 degrees because I went from, you know, not worrying about paying these people what I promised to pay them and the, you know decent raises they would get year over year, to having people that had just paid me a chunk of money for a chunk of this business and they needed to see a five or 10 X return on that, and so the responsibility from my perspective changed immensely.
I mean, I took great pride in the fact that they’re willing to take a chance on me and I wanted to see them succeed. And so I went from, you know, working I don’t know how many hours a week I was working 20 to 30 hours a week as a lifestyle business to, you know, 60 to 80, and so over those next. I mean, honestly, since 2014, it’s been kind of like that, yeah, except for when I’m on vacation or whatever. But so, yeah, it just changed completely by taking on that investment, by taking on those partners, and it’s been good. The business has grown, we provided a lot more opportunities for our employees and for franchisees and other people, but it’s a completely different mindset. So I’ve had a lot of people not a lot, but a few people that I’ve mentored, that I’ve asked about the differences, and it’s a big decision to make. I will say that.
0:39:09 – Mike Malatesta
And you mentioned during the lifestyle, the, when you answered the question at the very beginning of the podcast, I think you mentioned that you were burned out even though you had this lifestyle that you know 20, 30 hours a week and so there had to be something more weighing on you. And this is these are my words, not yours. But how do you? How did burnout manifest itself? Because the way you’ve made it sound, it sounded pretty good, like I was gonna raise my hand for that.
0:39:46 – Aaron Stahl
Well, I mean, I think like, like, when you’re a two and a half person company, I guess three with the person we had doing some outbound sales for us. I mean there’s not a lot of redundancy there, right? And so somebody takes off. You know, I’m in South American Spanish class. I’m gonna get a text from a client or something you know, just it was there’s benefits to being bigger, right For sure.
Then staying small, and so I think, and then obviously I just, like I mentioned before, I’ve got I don’t know business ADD is the right word, but I mean, the fact I’ve been doing this 20 years isn’t is incredible. I everything interests me. I have an idea a day, probably, as far as businesses are concerned, and so I think, between just those little issues and stuff and the thought of maybe doing something else with a different chapter of my life, I was exploring the options of selling at that time, and so when we ended up doing a deal together and, you know, selling some shares to some partners, that re-energized me and kind of gave us a new, new direction and a new team, really, too, to work with and grow it together. So that was kind of a natural, I guess, progression from there.
0:41:08 – Mike Malatesta
Okay, and the franchising? So that’s part of the growth, or a big part of it. It sounds like when did that? Was that something you had thought about before, or was that something your partner brought in? And how did you execute that?
0:41:25 – Aaron Stahl
I mean, it wasn’t really I wouldn’t know, it wasn’t something we’d like, thought about a long time ago and it just finally we did it. It was as a result of working with this company that they did utility and telecom consulting and then they had that affiliate program and that affiliate program had a handful of affiliates around the country that would go out and market the cost reduction services on board the client, deliver the bills back to headquarters and then the experts at headquarters would perform the work, deliver the savings and the affiliate and the headquarters would share the money. So we liked the model and after working with them for a couple of years we started thinking about buying them. But we liked the model. But we also didn’t like the fact that it was ABC consulting and then, like Mike, malatesta consulting all these affiliates are their own names. So it made the market. It made the market look like much bigger than what it was.
But it was really just a handful of experts behind the scenes doing all the work and a bunch of different companies out there marketing. So it was really kind of silly because it ended up to, everybody was kind of competing with each other, diluting the market, making these services seem like they’re easier or more abundant than they are when they’re not. This is very narrow expertise, and so I remember we were in North Carolina at the office and I just texting my CFO and he was across the table. I was like, yeah, we should. I just texted Mike, we should buy them, and then from there we started talking about converting it to a franchise with our existing executive team and started making sense and eventually put together a deal.
0:43:08 – Mike Malatesta
Okay, so that was for you. I think you said that earlier. That was 2018 or so. So that was four years after you’d had this new part and expanded partnership growth trajectory, and you come upon this thing and you’re like ah, that’s the model, that’s or with our spin on it or our little tweaks to it, that’s the model. And then did you say 40 franchises, 40 some.
0:43:33 – Aaron Stahl
I think we’re at 41 right now. Yeah.
0:43:36 – Mike Malatesta
From zero in.
0:43:39 – Aaron Stahl
The 2019 was the April of 2019, I think, is when we officially became a franchise. So we’ve been, yeah, we’ve been growing as a franchise since then.
0:43:50 – Mike Malatesta
That’s fantastic. So, as you’ve moved from a lifestyle to this growth or scaling business, you’ve continued see, this is what I love about you as an entrepreneur You’ve continued to sort of, I’d say, live an unconventional for most entrepreneurs and business owners life. And I’m like I know you take sabbaticals you travel a lot. You sort of were working anywhere before working anywhere was a thing, did you? You created that. I think Aaron saw I work anywhere.
0:44:30 – Aaron Stahl
I would love to claim that, but it actually from. I got the idea from Tim Ferriss and four hour work weekbook for sure.
0:44:39 – Mike Malatesta
And so you here’s the thing I’m trying to square up. You can help me square this up. You go from working 20, 30 hours a week, you and the small team, you’re sort of the rainmaker of the business partner up with these other people and you start working more. But you didn’t give up like. You still kept this. I got a I don’t know what you call it recharge myself. I have to continue to experience life. I did not do that. I’m telling you right now. I think I was nose to the grindstone in the office. I was not. That was not me, and I’m vicariously sort of experiencing your thing here and I’m like how did you do that? How did how? Did you feel like you had to? How’d you do it?
I mean it was had to be more than Tim Ferriss said something about it in a book.
0:45:35 – Aaron Stahl
Well, I mean, I think so the idea came from. I’m grinding it out, I’ve been making these calls, all these Fortune 100 companies, not making any money, and then I’m in Barnes and Noble and I see this book on the shelf that it’s got a guy on a beach and a hammock and this is the four hour work week and I’m like, okay, this has got my attention and I read it and he just kind of advocated for one taking many retirements throughout life and not waiting until you’re 65 or whatever to retire and take advantage of that. And so that really resonated with me. I definitely did not have enough time to do that, but I was like this is that? That hit home. That’s what I wanted.
And then it was just talking about as well as like when you’re, when you’re building a business, you take one week off from work and you come back you’ve got a pile of work to do. You take two weeks off from work. You got a pile to do and things that have broken. You take three weeks off from work. Your employees have fixed a lot of those problems before you come back, and it was just so revolutionary to think about that. That and it made just made so much sense to me and I just started kind of testing that a little bit with the company at the time and so I would just and I would just bite my tongue and say you know what, if this doesn’t work and something blows up to the extent that the business goes under.
It is what it is. I live pretty frugally. I was willing to take that risk. It’s a very that’s just not going to happen. I don’t think there’s really any business out there, for if a business owner really truly gets over their fears and thinks about it, that could. That could happen. And so I started testing it and, sure enough, like employees would step up. I think they enjoyed it because they felt empowered. They felt that their boss trusted them and things would start to fix it themselves. So seeing that actually happen allowed me to kind of step away and enjoy my time off when I would take it.
And then the sabbatical thing. I said you know what I’m going to do this? I’m going to take a sabbatical every five years for the rest of my life, and at the time it was 2007 and I finally got the business making enough money that I went down to South America in 2011 and took a sabbatical and spent six months down there learning Spanish. I mean, the business was small and over the time, that sabbatical still meant I had to, like, make sure the checks went out every two weeks with the bank and make payroll, but I mean we were talking work in one or two hours a week, so I can’t claim it.
I can’t claim it was a full on perfect sabbatical, but I very much let my brain relax and learn Spanish and volunteered and made friends and just went on adventures. And then five years later six years later, so I’m not quite stuck to it Six years later I was in Alaska for six months doing flight instruction, going on outdoor adventures there. And then this last year I just got back from, or this year I just got back from, south Africa and.
Indonesia doing some surfing and golfing and hanging out, and so I think the thing that I would say that I’ve been lucky to have it’s also a blessing and a curse is when I get an idea and I mentally kind of commit to it.
It’s done and like it’s going to happen, and my friends probably attested that I mean, if I get it, it’s dangerous, right Cause you get like some hair brain idea and like it’s. I’m pretty good at sticking with it, but so yeah, I think that’s really how that happened. I think something that I’m most proud of and I know the partners and I’m the executive team are as well as that we recently rolled that program out to our employees. So any employee that’s been with us five years gets a month’s paid sabbatical, 10 years gets a two month paid sabbatical and 15 years gets a three month paid sabbatical. And we’ve got several employees that have already qualified and started taking those, and so we just I’m really very passionate about travel, adventure, enjoying your life, stopping and smelling the roses along the way, and I wanted to share that with our, with our team.
0:49:47 – Mike Malatesta
That’s amazing. That’s amazing. Yeah, I’m sure you’ve got some happy team members now. It was fun. It was fun.
0:49:57 – Aaron Stahl
Yeah, it was fun rolling that one out.
We did that on a quarterly kind of state of the union call and we had quite a few people that were either reaction was better than I thought it would be.
I thought people would be excited, but there was a lot of people very, very excited. So and I think, um, oh, just quickly one of the one of the things about that I know that price sounds intimidating to a lot of people out there that I own a business as far as giving your employees that much time off, or but I think it kind of works the same way as when you’re a small business and you take a few weeks off and can see what breaks and see what fixes itself. When somebody’s gone for a few months, your business becomes stronger. You build redundancies in place, the team picks up the slack. There’s a sense of camaraderie and team building there, knowing that, hey, if I’m around this long, these people are going to fill in for me when I’m, when I’m gone, and you also learn, hey, maybe it’s, maybe certain parts of this can be automated, you know so good point.
0:50:58 – Mike Malatesta
Good point because you’re right, that could be scary to lose somebody, but you know you’re going to. Here’s the thing you’re going to lose somebody to an illness or something for a month. Right, it’s going to happen. And if you’re not, if you have no preparation for it, you’re really going to be scrambling. So that’s a. That’s a really good idea. The other thing that came into my mind when you were talking about getting away from the business for a few weeks, and you know, you find out what can get fixed by itself. I think you also find out what’s the things that could that are really broken, that you’ve been bandating yourself, you’ve been heroine through, so you don’t really think that they’re super broken, but then that could be a person, a process, whatever. If you spend enough time away and you come back and you’re like, ah, this didn’t fix itself because I wasn’t here, and that’s a, and I think you would. You agree that that’s like very valuable too, because you wouldn’t see it otherwise because you’re there fixing it.
0:51:59 – Aaron Stahl
No, that’s a great point and in fact I would. Since you brought that up, I would say that’s actually the biggest point, because I mean if something were to happen to a lot of business owners out there, I mean their employees would be screwed, their customers would be screwed, right, and so it’s easy to get in a situation where you only trust yourself to do the job, you don’t trust anybody else. But I mean that’s really not fair to your customers, not fair to your employees. If something were to happen to you and ultimately it’s not fair to you either, right, I mean like you deserve to relax a little bit more than that, and building those redundancies and taking those risks can allow you to do that.
0:52:40 – Mike Malatesta
Yeah, I was like. Lightning always seems to strike the tallest building, you know. So if you’re the tallest building in your business and lightning strikes you, you and you didn’t build a foundation to support the other buildings, you’re, yeah, you didn’t really do your job. You didn’t do your job. So, aaron, before we go, is there anything that I should have asked you, that I didn’t ask you, or that you’d like to leave us with?
0:53:11 – Aaron Stahl
Well, I think. So I think we’ve covered quite a bit. You’ve done a good job with your open-ended questions and letting me ramble, so I appreciate it.
0:53:19 – Mike Malatesta
Okay, well, my pleasure. Thank you so much for being on today and, for those of you listening, thank you so much for joining us today. Do me a favor and maximize the greatness inside of you today. You all have greatness inside of you. Just harness it and maximize it today. Do something nice for yourself and for other people and while you’re doing that, think about your future and make it your property, something that you own, like your house. You own your future and you’re very proud to own that future, but until next time see ya.
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