One of the more challenging areas of running a software company is anticipating the legal and tax laws, which can change rapidly. My partners and I have often put ourselves at a disadvantage in this area. We ensure we adhere to these rules and prioritize them over our personal benefit. Many of our competitors play by different rules; They take legally risky bets and pay up when they have to. ServiceMonster can’t do that - I don’t have a $2M ‘in-case-we-get-caught’ legal fund.
One good example is the state-by-state tax law known as Sales Tax Nexus. It defines the level of connection between a business and a taxing jurisdiction. When a nexus determination is made between a state and ServiceMonster, we are responsible for collecting and paying sales tax on our services. Some states don’t have nexus. Others might want to charge us only for ServiceMonster CRM or our direct mail services (FillMySchedule), while other states may require sales tax on both.
States see their population as a commodity. If we gain access to that market in any meaningful way as defined by the state, and the state has nexus determination events, we could be required to collect sales tax from our clients in that state.
Until recently, we have steered clear of nexus determination, which has limited our growth in many ways. A common nexus determination can happen if we pay a non-employee (commonly referred to as an affiliate) for leads or sales to the state in which the affiliate lives. Keep in mind that it has nothing to do with sales of ServiceMonster related to the affiliate. When a state makes a nexus determination, we must collect taxes for all the revenue in that state.
For the last 20 years, ServiceMonster has had nexus in only one state: Washington, where our business is legally registered. For the last 20 years, we have paid sales tax for our Washington state customers on their behalf. Rolling state-by-state sales tax into our operating expenses is not a sustainable model.
ServiceMonster is pushing several growth initiatives in 2023, including adding an affiliate network (if you want to get paid for bringing us ServiceMonster clients, let’s talk). Last year I asked our development team to make all the necessary changes to identify nexus state-by-state, locate the correct sales tax for a client’s jurisdiction, and apply that sales tax to monthly or yearly charges for ServiceMonster services.
What does all this mean for you? As I’ve said, currently, we only have nexus in one state, Washington. Washington state clients will soon see a change to their bill reflecting the sales tax we collect for the state. Most of our clients will see a new line item on their bill for sales tax, which will default to $0 and 0%. If a state declares nexus with ServiceMonster, your invoice will reflect your sales tax responsibility at your local rate.
Should we have done this a long time ago? Probably. Unfortunately, the tools required to make this a simple administration task, like knowing the tax rate in every jurisdiction we have a client, are relatively new. Should we have gone with a riskier ‘growth-at-all-costs’ attitude? I guess this is just one of those areas where I’m not a very good CEO. For me, the regulations under which we operate are non-negotiable. The laws, employees, and clients have always come before growth or profits. I know I’ve left money on the table for this idea, but unearned profit is often poison. That’s not how ServiceMonster does business. Our 20-year history with zero lawsuits, zero judgments, and zero audits allows me to sleep well at night, nexus or not. These changes ensure that we will continue to operate with the utmost integrity in every state.
The world is changing fast, and your business must adapt to meet your goals. Expectations from vendors have changed as costs continue to rise, expectations of employees have changed as their ambitions have shifted, and expectations of clients continue to change as older service businesses shut down and new ones replace them.
From 2021 until the 2nd quarter of 2022, the amount of cleaning businesses closing their doors increased by a factor of 4 and those numbers haven’t shown any signs of slowing.
In 1990, if you had the right equipment, a yellow-page ad, and an employee manual, you could operate a successful service business with little else.
In 2010, you needed the right equipment, a good number of referrals, a decent website, pay-per-click ads on google, and a good relationship with your employees.
In 2018, you needed the right equipment, a good number of referrals, a decent website, pay-per-click ads on google, a good relationship with your employees, software experience, content creation, digital ads, and social media presence.
The number of skills required to run a successful service business have radically changed since 1990. It’s not enough that you do good work and have deep knowledge and dedication to the craft. Now in 2022, you need all that and more hoping to break even. If your business is thriving, congratulations. You’ve either adapted or you have benefited from other service providers closing shop.
New businesses are always better equipped to leverage the current environment. In a very real sense of the word, at some point you must be prepared to build the business that will replace you. You need to put yourself out of business before the market does. But how do you do that? How do you hack differences in your current business that will allow for these changes?
Every business generates the data needed for Key Performance Indicators (KPIs). You must know what changes will affect you bottom line. Tracking Cost of Goods Sold (COGs), margins, repeat rate (for residential), average invoice, services income breakdown, sales pipeline, lead source acquisition, schedule capacity, recurring revenue, and ad attributions.
Once you have visibility, you can attack low hanging fruit and watch how changes in your business influence your KPIs.
Set yourself apart from the sea of options on the market. There are two ways you can do this. You should do both. First is to identify yourself as an All-Star service provider. This is super easy because the bar is so low.
answer my phone
show up on time
be smart like a guru
educate my client
be fresh and clean
develop an intentional retention strategy
smile more and be sure
clean my equipment.
And if there is a problem, do my best to fix it
The second way to differentiate yourself is to BE DIFFERENT! Shocking, I know. Opportunities here should be tracked. Consider using index cards for your ideas. Leave nothing out, no matter how crazy or expensive. Take each card and rank them on two values. 1- Difficulty (time, cost, knowledge, etc.), and target impact on your business. Rank each of these as either LITTLE or BIG.
The number of ideas you can come up with is nearly unlimited but here are a few creative options we have seen. Automated recurring services, community outreach, trucks and vans with bubbles, a caricature of the owner or animal as a mascot, hi-tech posturing, costumes, online services for clients, using local lore/teams/attractions as inspiration, a list of services presented like a restaurant menu, and on and on it goes.
Never make your client work harder than they have to. I’m ashamed to admit it, but I once went 3 months before paying a service provider. It wasn’t intentional but I was shocked that in 2019 they didn’t take credit cards! He sent one invoice via snail mail, and I had to make a special trip to the bank to get a check printed. When I remembered on my own, I had yet to pay it. I don’t know if they take cards now because I never used them again. If they would have sent me a text or email with a link to a payment portal he would have been paid before he left the driveway and I would have used his services again.
Similarly, when we moved ServiceMonster to Bellingham in 2007, I wanted to get my carpet cleaned before I moved into our new home. I called three service providers and left three messages (read: answer your phone). I didn’t receive a single return call. I remembered that when I opened the truck roll-up door in front of my new house. If any of them would have followed-up, it would have been an easy job.
You should streamline your internal processes (like follow-ups, call-backs, and reminders) to make it easy and traceable for your team. This also includes access to their schedule and reports on their own individual KPIs. Streamlining your business can help reduce employee turnover and costs while giving you every opportunity to win new business and keep existing clients.
In order to thrive in our current business environment, we must learn to adapt. By putting the right systems in place, like ServiceMonster, you can make measuring, differentiation, and streamlining much easier.
I am happy to announce the addition of ServiceMonster Pay to the SM Marketplace.
Though this new payment option has additional benefits to both our clients and ServiceMonster directly, I first and foremost want to be clear that our existing payment providers like Stripe, and gateway providers like Authorize will continue to be available. We will always be committed to offering our clients choices, that’s just how we do business.
The relationship between software companies and payment processing is rarely discussed, but I have always pushed a culture of transparency at ServiceMonster. That is why I am using this post to share not only the details of our new payment option for ServiceMonster, but also why our competitors have been offering their own payment options for years.
All CRM companies that offer their own payment processors get a kickback from charges processed with their internal system; in our case this system is SM Pay. So, let’s talk about why this is so popular among CRMs, and why I think this is a good move for ServiceMonster. Our competitors get up to $12,000 for every $1,000,000 they process through their system. This adds up fast when you consider how many invoices get processed through CRMs every year. At ServiceMonster, our platform processes $500,000,000 in cleaning invoices each year, so if only a small number of ServiceMonster users choose SM Pay it could mean a big upside for our company.
You might be wondering, where does that upside come from? Let me explain; If you’re not using SM Pay and instead opt to use PayPal, Square, or Authorize, all fees you pay to process a transaction go directly to the merchant you’ve chosen. In short, the percentage you pay with every transaction goes straight to the bank.
With SM Pay, things are different. Because we are now direct partners with a merchant, we can control our rates by cutting out another bank or payment processor. Operating SM Pay has its own complexities and expenses- for example we are responsible for chargebacks, reconciliation, PCI compliance, and fraud. These are all expenses we need to factor into the rates offered through SM Pay, but ServiceMonster makes its money on subscriptions, not ancillary payment charges, so we can keep our payment fees as low as possible.
At launch, our fees will be set up to give you the best rate we can offer. The rates we charge are based on how many payments we process, and as the number of people using SM Pay increases so too will our power to get better rates.
As SM Pay grows, we have three options:
1. Use the extra cash from SM Pay to continue to improve ServiceMonster with more development resources, more hardware, and more benefits to you.
2. Reduce the credit card charge rates.
3. Pocket the cash.
I have no interest in pursuing option 3. ServiceMonster is doing well, and we don’t need to pocket the extra cash, so we will be implementing a combination of options 1 and 2. Our plan is to use any kickbacks we get to reinvest in our product, to improve the experience for you in your scheduling software, and to offer even lower rates in SM Pay.
From a fellow business owner, the most important character trait I look for around cash, is trust. We take great pride in the relationships we have established with you over these last 20 years. This is one reason it has taken us so long to offer a direct payment solution. Not only do we want to maintain the trust we have earned, but we needed to have some idea that the partner we worked with would help us maintain that level of confidence- and I’m proud to say I have full confidence in ServiceMonster Pay. It is safe to say the wait has paid off.
So yes, ServiceMonster is now offering a direct payment solution. While the kickbacks we may get are a win for us and our product, that isn’t the only reason I’m excited about ServiceMonster Pay. The team here has been working hard to meet one of my biggest objectives; with SM Pay you will be able process checks in ServiceMonster. This feature is one of the biggest reasons we developed SM Pay, and it is unique to our product. Check processing in SM Pay is another great example of how we are always working hard to make your business easy to operate, and hopefully more fun to operate too.
Get the most current rates and features here, and you can sign-up for ServiceMonster Pay in the SM Marketplace.
From the desk of ServiceMonster CEO Joe Kowalski:
Some general advice from the husband of a homeschool parent.
With the current shutdown orders in place for US citizens, most public and private schools have closed their doors to students for the rest of the school year. Many states have scrambled to get students some sort of direction, suggestions, and/or remote learning access, albeit with varying degrees of success. Parents who are in the middle of their own stressful changes are suddenly responsible for their children’s education. Parents may feel overwhelmed, inadequate, and a bit freaked out by the entire situation. I get it. It’s scary to think that, out of the blue, the daily education of your children currently rests in your hands.
Relax. It’s going to be okay. Your children will thrive even if you completely screw-up the next 5 months. I know this because I’ve experienced a more controlled version firsthand. About 12 years ago, my wife and I decided to start homeschooling our children. It was a major struggle for me to get used to that idea. We have 6 children now but at that time we were raising our first two. They were both super bright. I was terrified that we would fail to give them the direction and education they needed, that they would fall behind their peers or that they would not live up to their full potential. I was so very wrong.
I was raised in a public-school environment and indoctrinated into the system. I believed in our public schools and even accepted its many flaws. It was simply easier. Easier to leave the task of educating our children to the professionals. I have a lot of respect for educators, don’t get me wrong. It’s just that, in my opinion, it’s not the best learning environment for the kids. The best environment is one-on-one, much like the aristocracy did for thousands of years. The education is adapted to the child. Not the other way around.
Now I don’t think everyone should suddenly start homeschooling. What I would like to do is provide a bit of relief for parents who are worried. Your kids will be just fine heading into their next year, even if you do nothing until September. Have them follow the local schools plan as best they can but don’t beat yourself/them up over it. I’ll break the following article into two parts. The first will provide some basic suggestions to get you and your children through until the next school year. The second will attempt to provide a bit of guidance if homeschooling is something you are now considering.
Social media is plastered with frustrated parents trying to become the administrator for their child’s education. Managing the schedule for multiple siblings, controlling computer and screen time, ensuring they are paying attention and attempting to tutor them when they get stuck or need help can nearly be a full-time job by itself. Let’s see how we can ease the burden a bit.
All of that is well and good. As I stated, if you’re invested in your kid’s education, it’s unlikely you’ll screw them up before September. However, many families are seriously considering making the switch more permanent. Under those conditions, any friction one may have had with the schools, the curriculum, or the teachers, nearly vanishes. There is almost an infinite amount of ways you can go about educating your own children, resulting in what can be a confusing and stressful first year or so. If you are thinking of homeschooling, realize that the burden will be yours. You are going to have to do a fair bit of learning yourself to figure it all out.
In my opinion, as a homeschool father, my #1 goal is to install intellectual curiosity and rational thought. If I can do that, we both win.
Some parents are surprised that you can’t buy a “school in a box”. There is no one best solution that you can purchase, learn, and teach. Instead define the topics that you AND your child would like to tackle and find resources for the task. Yes. Both of you.
While you’ll find a lot of information about all the other methods of homeschooling, Institutionally Assisted Learning is my personal term. It’s the idea that you can homeschool your child using the resources available to you from your school district. Educational materials are not inexpensive. Some parents find that the financial assistance that is available from some school districts helps to ease the financial burden and fog of war by providing much of the curriculum that you may need. There are strings attached though, such as regular testing, documentation requirements, and regular counseling.
The classical method is one of the more popular teaching styles for homeschool parents. Mostly because it has been around since ancient Greece. This technique is centered around the Great Books. The subjects are interwoven into a chronological reading plan. This way the student gets the benefit of learning in historical context. The Classical Method also makes heavy use of dialog, fostering rich conversations and debate over the material while encouraging a deeper understanding beyond simple comprehension.
Montessori is much more modern than the Classical Method. It was created around the turn of the century by physician and educator, Marian Montessori for her work around kids with special needs. Physical learning tools called manipulatives provide a tactile experience while helping the child understand the concepts in physical form. Montessori is an independent learning system where the teacher provides guidance and instructs indirectly. Large time blocks (up to 3 hours) of unstructured learning encourages free movement and independent thought. Uneducated observers might look at a Montessori environment and simple see kids “playing”. Upon further observation, they will see the sneaky and well-structured teaching technique. This method is better suited for smaller children.
Another teaching technique popular with homeschool parents is called Student-Led Learning. In this style, the student (with guidance and direction from the parent) decides what he or she would like to learn or what topics they would like to learn about.
Here is an example. Let’s say Jonny is super into Greek Mythology. Go deep. Study the Odyssey and the Iliad. Read about Greek society. Look into the great western philosophers. Study the Art of the Argument handed to us by Aristotle. Study the Pythagorean theorem and Euclidean geometry. With one subject which the child is interested in, you can cover, math, science, history, philosophy, and sociology. And it works.
Most traditionally educated parents have a hard time understanding the unschooling concept. Let’s start with what it’s not. It is NOT an excuse to provide no schooling and be lazy with the effort. It’s not No-School. Unschooling takes the idea that everything is a learning and teaching opportunity. The student must first be well grounded in the basics of reading, math, and science before being allowed to learn from the world. It’s very much like Student-Led Learning but also promotes the idea of lifelong learning.
Homeschooling rules differ from state to state, so be sure to do your homework to find out what requirements your state may have for you, your child, and their education. Some states simply require you to file (so they know not to send the school money for your kid) while others require testing and a visit with a district educator.
I haven’t touched on some of the more common concerns of parents, such as support network, socialization, pace, and so on, but know that most of these concerns are non-issues as long as you are making the effort. Find a homeschool association in your county. Talk to other homeschool partners in your area.
Effort is the key. This is going to take real effort on your part, but the benefits, as I have seen over and over, can far outweigh the risks. You’ll get more family time, your child will get richer education, and you can choose your own methods from year to year. Fair warning though, if you simply pull them out of school to not teach them, or simply teach them what you think you know, there is a risk they will be underprepared for the adult world. Yes, it’s a big responsibility. But I think it’s completely worth it.
From the desk of Joe Kowalski:
I type this from the makeshift office I have set up in my home. Washington State issued a stay-at-home order last week. ServiceMonster is currently completely virtual. All of our employees are working from their homes. Fortunately, for both you and us, we have that luxury. Service providers such as yourself, however, don’t have that kind of flexibility. I’m sure everyone who is under a stay-at-home order is struggling to find the balance. Is your work considered essential? I can’t answer that for you. I don’t put food on your table. I don’t live in your community. What I can do is offer some guidance to those who have decided to (or been forced to) stay at home.
You’re an entrepreneur. This is not a vacation. If you need some time to get your head right after making some very hard decisions over the last few weeks, do that. Then get back to work.
If you’re able to keep your business after a few months in lock-down, then take this time to do all the things you “never had time to do" before. Get your books in order. Take that accounting class. Read. Study. Read some more. Master your CRM. Find out what a CRM is. Start getting to know your most important vendors. Get your business systems in place. Build a few spreadsheets. Create a few dashboards. The list is endless on how you can use this time to work #OnYourBusiness.
If you’re thinking of shutting down, lick your wounds and get back to work. Most entrepreneurs fail four times before they get it right. Not all of those failures are due to global pandemics though. I get it, but my point is that you have a clean slate. You can take everything you have learned, every experience you’ve had, and use that to create something new. A new idea. A new purpose.
Don’t be afraid to go outside of your comfort zone. Just know that your lack of understanding is simply a measure of how much you need to learn. Embrace the change and build a stronger version of yourself AND your business.
I hear comments like “I can’t learn that” and “that’s too complicated for me” from other business owners all the time. And they’re wrong. Self-limiting attitudes are a mind killer. The truth is, people who have that mentality are simply saying, “I don’t want to”. Fine. That’s a much different position. Either you’re managing your time and resources wisely, or you're lazy. Maybe even a little bit of both. Don’t claim that you "can’t." If you find it hard to make the transition, simply add “yet” to the end of your self-defeating mantra. “I can’t do that" becomes “I can’t do that, yet”. After a while, it changes the game.
The value your service provides is probably worth more than you’re charging. Try not to exchange hours for dollars. You and your business are worth more than that. This idea isn’t new and you’ll find plenty of references to this concept as you read and study.
Now, it’s likely that you’re thinking something like: “But I can’t raise my prices! How am I supposed to sell ‘value’? I don’t know how to do that!”
Then I will remind you: “You don’t know how to do that, YET.” You must build/re-build your business to be stronger. Self-reflection and study is number one. Proper revenue balance is number two.
You can’t sell value if there is no value to be sold. If you’re providing a community service, just like everyone else, you’ll never stand out as exceptional. Don’t be basic. MAKE yourself exceptional. Add something to your business, create new marketing or messaging ideas, or offer specialty services. Find a way to bring more value to your clients in the most creative ways you can think of. How can you help them, with what would work best FOR THEM? Take this time in the office to explore your creativity. You can be as crazy as you like on the white board. Push yourself and your ideas to a new point of view. You can always make them “less crazy” in the real world.
When is the last time you questioned a belief which helped determine your behavior? How do you protect yourself from you own bias? Business owners often fall into an insidious trap: We believe our actions have brought us the success we enjoy. That’s only a half-truth. The reality is, some of the positions and beliefs we have about our success will actually be the very beliefs which limit our growth. How can you tell the difference if your experience tells you the wrong story?
One such tool is the formal logic principle as defined by Aristotle and his band of merry men. There is lots of information available on logical fallacies, constructing proper syllogisms, and building the tools needed to recognize when you are irrational. Not irrational like, you cray cray. The proper definition of irrational.
Irrationality is cognition, thinking, talking, or acting without inclusion of rationality. It is more specifically described as an action or opinion given through inadequate use of reason, or through emotional distress or cognitive deficiency.
Find remote tools for your business that can help you communicate, create, plan, and execute. ServiceMonster has made many changes in our own office and here are some helpful tools we found when working from home:
Facebook Workplace – We have used Slack and Mattermost. Both are chat platforms. Neither of them gave us the communication options that Workplace has. Its familiar interface and wide range of options makes it perfect for chat, calls, video calls, and group posts.
Ring Central – A business phone system with virtual options, voice trees, multiple phone lines, and side loads on your phone via an app. This means that you can separate your personal and business lines on your smart phone.
Trello – Task management in a simple to use interface.
Basecamp – Project management in a simple to use interface
ServiceMonster – Take control of your schedule, keep your eye on important key performance indicators (KPI's), and stay in touch with your clients via automated marketing tools.
We must adapt if we are to survive. Take this time to reflect on your success and failures. Take what you need, ditch the rest, then get back to work #OnYourBusiness.