Bad Investments, 19 Year Old GM, Marketing Secrets

Welcome back to the Mike Andes Podcast where we discuss the ins and outs of owning a small business. If you're new here, the Mike Andes podcast is all about taking your business to the next level. What do we have for you today? We're going to start out saying something kind of controversial. Trucks, equipment, they add nothing to your actual business value. And Mike is convinced on this one he'll break the theory down for us. Next, we're making a 19 year old the next general manager of the Augusta Bellingham location. Here's how to find the secret leaders that already exist within your company. And finally, Mike is going to compare every type of marketing to find what's the best marketing technique for your business. As always, you can find all this and more over at the Mikeandy's YouTube channel. But here it is. Why Trucks and Equipment Might actually be Bad Investments.

Today I'm going to be sharing with you the logic and the numbers behind why trucks and equipment is a bad investment for your business and how it has absolutely no impact on whether or not you're creating any value for the customer and the actual value of the business if you were to sell it. Let's jump into it. So some basic premises we got to go over first. First of all, what is a balance sheet? Okay, balance sheet. Over here we're going to have a profit and loss statement or a P and L. Alright? These are basic elements. You can learn more about this@mbaforantrepreneurs.com and in the links below. But on a balance sheet you have something called assets. Okay, These are going to be your trucks, your equipment, etc. And we're going to get back to that. You also have your liabilities. And ultimately on a balance sheet, these things must equ. And that's why you call it a balance sheet. The assets have to equal the liabilities. And some people are like, oh no, that's impossible. Well, if you get a loan, your liabilities go up. Guess what else goes up? Your assets. Because you get more cash from the loan. When you buy an asset in the form of a truck or equipment, here's what happens under our asset column. We had, let's say $10,000 worth of cash. Well, I'm going to go buy $5,000 worth of a truck. So what happens here? Well, I'm going to have a negative 5,000 dol worth of cash on the balance sheet, but I'm going to have a positive $5,000 in the form of a truck. Okay? So literally nothing happens. The assets column stays exactly the same. Now, if you get a loan again, your liabilities will go up, your cash will go up, and then the same exact thing will happen. But nothing really moves the needle at the end of the day. Your assets, the assets that you buy, your trucks, your equipment, your office supplies, your computers and all that is not a business. Those are tools to create value for your customers. And they do not need a light bar and flashy shiny rims and a six inch lift on the truck in order to produce value for the customer. I promise you, customers will not pay $1 more for the cost of their lawn getting cut or their house getting clean. They will not pay $1 more for a 6 inch lift on your truck or for a LED light bar on the top of your truck or to upgrade the type of film on your paint. That is not going to move the needle for the customer. And the reason I care about the customer is because the customer is what makes the business. And the profit and loss statement is what actually produces value. Because over here we do have value. The assets of the business equal the book value. This is literally, if you were to sell everything in your business, what would you be able to sell all your trucks, your equipment, your assets for is the book value. And this is literally what most small businesses end up selling their companies for. Because they don't have any other value outside of just the book value. They sell their trucks and their equipment and that's it. Because their brand doesn't have any value. They have no systems in place, nothing in addition to the book value. Now I promise you, instead of spending an extra $2,000 on a custom tint job on your windows of your truck, or on a flashy brand new whatever, on a piece of equipment that is gonna offer no value to the customer. I promise you, the customer would ra you spend that money on something that's gonna produce value to them. For example, I have seen many people upgrade their truck by 5, $10,000 by putting suspension and lift kits and roll bars and the flashy shiny thing in the front of the truck, a grill thing, I don't know what it's called. Whatever it is, they spend thousands of dollars on that. And yet that business owner will not want to spend 100, 200, $300 a week on a virtual assistant, someone to answer the phone. But guess what? Customers will pay more money if you answer your phone and they will not pay more money if you get an LED light bar on your truck. Alright, now the reason I'm talking about this is you've Got to ask yourself, what is a good investment? Is buying a brand new truck or upgrading the truck by $5,000 gonna be a good investment? No, I can confidently say it's not gonna be a good investment. Why? Because you're simply moving the cash into the value of the truck. There is no additional book value and there is nothing. The profit and loss statement, you created no additional revenue. So why in the world would you call this an investment in your business? It's not. It doesn't help the book value and it doesn't produce any profit or loss for the company. It's ridiculous. So let's jump into what a profit and loss statement and where you actually create real value for a customer.

Alright?

On a profit and loss statement, you have your revenue or income revenue at the top, minus your expenses. And that is going to equal something which is sometimes foreign to people in the small business world and that is profit. This number right here is what you create a business on. When you look at the stock exchange, what is everything based upon? Price to earnings ratio, price to earnings or profit? People care about profits because that's where value is created in addition to book value. So if I have $10,000 worth of book value, but I also create $5,000 worth of profit at an earnings multiple of just say, let's just say three. Now all of a sudden that $5,000 of profit times three in terms of valuation, now I've created $15,000 worth of value. And this is what business creation is. When you think about creation, it's taking nothing and turning it into something. This is turning something and turning it into something. Oh, and by the way, this truck, that roll bar, that, that LED light bar depreciates very, very, very quickly. So it's going down in value. It depreciates. But all of that to say that is not creating a business, that's not investing in your business, investing in your business is how do I improve the profits. And so if buying more truck, buying another piece of equipment, increasing the tint on your windows and upgrading the rims on your truck, if those things do not create value for the customer, that's gonna allow you to create more revenue and increase profits. That is not an investment, that is a sales pitch. And that is you buying into someone on social media that's bragging or showing off their equipment and their trucks and it does not produce more value for the customer. The reason that Amazon and these massive companies become massive is they obsess over what makes the customer happy. And what is the customer willing to pay for. Are they willing to pay for shiny new equipment and flashy new computers and new cell phones? Phones for everybody. And we're going to upgrade everything to be able to have a wireless key fob system for our truck. Your customers are not willing to pay for an air horn on your truck. It might help your ego, but it ain't going to produce any more revenue. It's not going to produce any more profit because your customers are not willing to pay for it. So when you talk about investing in your business, ask yourself, are we simply shuffling numbers on the asset column and on the balance sheet? Are we maybe getting some loans, that is some liabilities, taking that cash and turning it into assets, Just a transaction on the balance sheet, therefore moving book value, Are we actually producing real value for the business creation? The enterprise value of the business is based on this number. Can you produce profit? Can you maximize profit? How do you maximize profit? You reduce expenses or you increase revenue. So if buying more trucks and buying more equipment and upgrading all those things, it's an new and flashy and putting whatever on your trucks. If it's not going to increase your revenue, I.e. your customers are willing to pay for or b and going to decrease your expenses. Sorry, an LED light bar does not count. Flashy rims does not count. Now taking that $5,000 on that flashy new LED light bar and brand new rims and putting that towards getting a truck that's maybe five years newer and is going to last you longer, that's going to reduce your expenses, that is increase your profits, that is you've created more real value in your business. So stop thinking and convincing yourself and buying the lie in the notion of marketers that are telling you that you're investing in your business. When you buy trucks and equipment, you are not. You are simply getting the tools required so that you can build a real business. Producing revenue, buying customers with customer acquisition costs, spending money on marketing, advertising, much better investment than spending $5,000 on upgrading your trucks and equipment.

Why?

Because that $5,000 could turn into $50,000 worth of revenue. At 20% margin, that's $10,000. I just turned $5,000 into $10,000 worth of profit. Why? Because I took this $5,000 I otherwise would have spent on something that was depreciating and next year would be only worth $2,000 in my assets column. And I turned it into something that now that $10,000 of the profit could literally be worth 30, $40,000 worth of enterprise value and business creation, that is investing in your business, creating customers, making them happy and maximizing profit.

Here's something that does actually add direct value to your business customers. Yeah, that's kind of obvious, but especially if you're new to lawn care or trying to grow your business larger, adding to your customer base is essential to keep the revenue rolling in. Why not make it easy on yourself? We have Lawn Care Media, the one stop shop for all your print marketing needs. We've created countless original designs for any service your business might offer and we've made it easy for you to make the designs your own. Just download the package, then add your logo, number and email. You'll have everything you need to storm the Lawn Care Marketplace. Head over to lawncaremedia.com and get started today. All right, Augusta is all about hiring from within the company, which is why we're not afraid to say this 19 year old is the best candidate for our new general manager. Here's why.

My name is Dylan Garcia. I work at Augusta Lawn Care Services for the Bellingham location and I'm going to be the new general manager.

This is the very first Augusta truck ever in history. It's still with us today. I bought it for $6500. I still remember that Dodge 1500. We painted it yellow. It's had a little bit of cosmetic surgery done on it, but it's still in the fleet today. And now it has a ramp rack on on it. But today we are talking about general managers because this is the Bellingham location. It's our very first location. And at this location we kind of use it as the guinea pig for everything. Augusta Nation, we test out systems here. We see what works, what doesn't before we implement it across all of the locations across North America. And so it's really important for me that this location I have a general manager that is flexible to really constant improvement, constantly changing and evolving and testing new systems out. Recently we've had to look for a new general manager because Marcus, our current general manager, is moving down south about two hours and starting his own franchise location for Augusta Lawn Care, which is Fantastic. Using the 3F program, franchise fee forgiveness. That's fantastic. But the problem is I've got to find a new general manager. So we've been looking, we've been trying to find someone. Today you're going to be hearing from who's going to be coming the general manager next month. His name is Dylan. And what's crazy is the fact that Marcus, when he started as general manager here at Augusta lawncare He was 19 years old. Now Dylan is also 19 years old and both of them had less than one year of experience. Today I'm going to be talking about how when you look for leaders, when you look for management and you're hiring from inside the organization, it's not necessarily the most experienced, the highest paid, or the person that's the oldest that you need to be looking for. You're looking for someone who's going to be a great leader for you, the company and for the team.

A lot of people on YouTube, as you guys tend to do, you think we're crazy for putting a guy that's 19 years old, no landscape experience, only really six months experience with us doing landscaping in a general manager role. You guys will say you were crazy. Guys will say we're bound for failure. But our systems, our procedures, the past of Augusta and our profit and loss statement says otherwise.

I'm Marcus.

I moved from Montana when I was about 18 years old to this location in West Washington. I'd worked at a nursery before, but no landscape experience. I started with Augusta about a year later. I learned to become the estimator full time, pretty much estimator for a year. And then after that year I moved into the general manager role that Lee, Mike and Liz at the local shop appointed me. So there's a lot of things I've learned in this time. It was definitely once I got into the general manager role, I felt the weight of the entire team on my shoulders. And at first, I must say, it was painful, extremely painful. We did not have a team culture. Things were very sideways very often and I found myself trying to drown a basketball when it came to running a business.

When Marcus first got started, I still remember his first few team meetings were a complete disaster and the fact that he was like literally shaking, sweating, very nervous. And so when you're looking for a leader, it's not necessarily the person who is going to be the most polished from the beginning. I'm not looking at the beginning. I'm looking at where are they going to be headed over the next year, two years? Are they going to be willing to put in the constant work on themselves, listening to audible programs, listening to podcasts to make themselves better as leaders, working.

On themselves, starting with Augusta. For about the first couple months, I didn't read any books. I was not anyone to talk or anything. And now we have a whole audiobook program. We have a lot of systems inside the organization in which you can build up. So I've really used those to the full Extent. And I think it's really, really very lucky to have this opportunity and to work under these systems that are just now changing the lawn care, landscaping industry.

I'm also looking for somebody that is interested in the business, watching the content, interested in what the business is going, trying to figure out things outside of even just business. Like when Marcus first got started, he was actually really interested in real estate. And I just was really impressed with a young man that is diligently trying to work on himself, improve his skill set, get ahead in life and after work, go work on more things that he was interested and passionate about and just wanting more out of life.

Now I'm moving on to start my own franchise with Augusta Lawn Care Services in Redmond, Washington. I'll service sort of the Redmond Kirkland area and I'm not going to do that until later this year. But a lot of systems and procedures that we have here, not only in running a sustainable business, but also building one up from the ground, because that's what Mike believes in here, is upward mobility and starting things from scratch. So I believe that's sort of the final frontier for me. I've. I've done everything but this is a very successful, great culture business. Now. I gotta start from the bottom and be really scrappy with it. I look forward to the horrible days, the days I don't know if I'm gonna make payroll for the team. Things I don't experience here. I feel like I need to experience that pain for me to grow even more as an owner. And then possibly years later, I'll have multiple franchises looking to get into real estate and a couple other ventures in mind.

Just wanting more out of life alone is gonna be enough for someone to put the hard work and the hours required to work on themselves as leaders. Because just becoming a leader and putting it in the position of a leader does not make you a leader. You're gonna have to constantly be improving and listening to information, learning from other people and becoming a better leader yourself.

My name is Dylan Garcia. I work at Augusta Lawn Care Services and I'm going to be the new general manager. The only experience I had was just, you know, like doing my own lawn, string trimming stuff. There's never really much of a school type, didn't perform that well in school. But luckily I found something that interests me, put my efforts towards that.

I started at Augusta in the beginning of March this year, six months ago. After about a couple months, I started training people, doing estimates, taking on some leadership roles. It's a Lot of responsibility. So I guess what I would be afraid of is landing team down, making a lot of mistakes, not being able to learn fast enough. My goal is just work with the team. Hopefully they understand my mistakes. We have a really good culture here. Everyone gets along well. They're all really good guys. They all like to have a good time.

I hope to learn a lot of good leadership traits. I want to learn how to lead the team well and get them to perform well. And not only that, but for them to improve themselves.

Dylan again?

Yeah.

19 years old, comes into Augusta, no landscape experience. And really it's a testament to Mike's systems and how he thinks business should operate. We're very lucky that we're really the guinea pig for Mike. So he's always having us try new systems and procedures and things, finding out what doesn't work, finding out what does work. So it's a really special place to be here. And with Augusta in general, the whole franchise, very much a community. There's a lot of groups where we talk amongst each other and you know, what works on the east coast might not work necessarily on the west coast. But again, we're developing systems to make it more self sufficient. So you take a guy like Dylan again, he's the youngest person on our team. We have about 17 people on our team. He's the youngest one, no experience coming in. You think, you know, you need five, 10 years experience maybe to be a general manager of any sort for any business in landscaping. But we have the systems, we have the procedures, we have P4P, we have profit sharing, we have open book management, things of that nature. Keep the culture high. And that's what I'm telling Dylan is that's the biggest pain point for him to be in that role is to keep the team culture high. Because at times things go way wrong and you have to be the one that steps up in those times. So he's learning a lot. He learns very quickly. That's part of the reason he's in that role and he's very excited to learn and he's really good at managing others, being a leader in the field, learning about the estimates sales side of things, even just four months into working here. So that's part of what led him into that role. Basically it was an easy decision for us.

So first and foremost, if you're an employee looking to become promoted, become a manager, maybe become a crew lead, get promoted inside of your current company. Let me talk to you for a second, then I'm going to talk to the owner that's looking to hire a manager. Now, if you're an employee, here's a couple things that I'd recommend you do if you're trying to get promoted. Number one, make sure you get as close to the sun as possible. Whether the owner, the manager you're currently working for, get around them, ask them. If you can't steal five minutes and ask them how you can improve. Make it very clear to them that you are constantly working on yourself. You're not afraid of criticism and making sure that it's constructive. That is a type of thing that a manager is looking for to kind of foster someone's talent and skill and make them better. So number one, get close to the sun. Whoever your manager is, your owner, get close to them. How can you support them, how can you do extra work for them, how can you work a little bit longer in the day to make sure that you make their life a little bit easier? Getting close to the sun and then learning from them is probably going to be the thing that when they need a replacement, they're looking for, okay, who did I put? Pass that information and that education down to. That's the person they're going to want as their replacement. The second thing you can do is just constantly improve on yourself. Make it very clear to your managers that you are here for the long term, not just from out of like staying at the business for a long time, but you are willing to improve on yourself. Learn skills, watch YouTube videos to become more efficient. Watch YouTube videos in order to make your skill and hone your craft and educate yourself.

I've learned a lot of things. I think a lot of it just comes with experience in managing people. And so I think Dylan will get that over time that he just learns the certain scenarios and one off things that happen. Managing, you know, crew emotions with client emotions and trying to juggle it all at once. What I told him it was very straightforward, is there's a lot of pain that's going to come with it. Very, very painful to start out. But once you are in this role, he already knows the sales side of things. So once he's in this role, he'll know how to run the whole business and how the whole machine, how the whole wheel turns and operates. Him getting that experience I think is very crucial whether he wants to start his own franchise one day or stay here long term. And it's also a good sign for upward mobility. Other than Dylan, we have a lot of leaders in the field here that really bring each other up It's a self fulfilling cycle in which everybody helps each other out. And that's what I'm trying to train Dylan on is there's a book called Culture Wins. So if the culture's poor, that's still going to win out and you're never going to get anywhere. The culture is high like it is right now and we try to keep it high, then that's going to win and then that'll lift up the whole company. And I think that experience is invaluable. I would do this for free.

And then furthermore, if you're a manager and you're looking to hire someone, I beg of you, don't look at how long they've been with you, don't give them a management position because they're good at telling people what to do. Because when they're put in that position, they're going to fall flat in their face when the team no longer reacts to to them like they would a co worker. A great co worker, a great team player is fantastic. But just because they're a great team player, because they tell everyone what to do, they keep everyone else accountable in the field, does not necessarily mean they're going to translate to becoming a great manager. Because that same intrapreneur type spirit that tells people what to do, keeps everyone safe, tells them, don't do this, do this and make sure this is better. That's a great team player. But you put that person in a leadership position and now they're looked at as a dictator. No, no one likes to even listen to them. So you've got to be very aware as a leader and as an owner, as a manager. If you're looking to hire within your company, make sure that that position you're hiring because their leadership ability, not because they can just tell people what to do. They've been around for a long time, they're the ones asking you for the most money and they have the most experience. That in my mind is not what makes a great leader. So I look forward to seeing how Dylan is going to move in this new role. The transformation in Marcus's life over the past year year has been phenomenal. Just the change of his caliber of character, the way he deals with the team, his care for the business, his aptitude and education skills he's acquired this past year is incredible. I look forward to seeing what that's going to do with Dylan's life. And I encourage you, if you have a business, try to create that type of culture in your business where you hire from within you. Take raw talent and you work on perfecting it, making it better and improving the lives of your employees. I'm Mike.

Andy is. See you tomorrow. The smartest business decisions aren't always the most obvious ones. You can go out there and learn entrepreneurship by trial and error if you want to, or you could learn from Mike. Whether you're starting, growing or saving your business. The MBA for Entrepreneurs teaches the principles of small business ownership at every experience level. With over 350 plus in depth lectures and bonus livestreams, you'll have access from anywhere through the teachable app. Do the right thing for your business and sign up for the MBA for entrepreneurs by heading to mycandies.com education. Okay, last one for today. Marketing. We know that it works because we see it everywhere. But what type of marketing is going to work specifically for your business? Mike's going to do the math and find out.

Today I'm going to be showing you exactly how you can analyze what type of marketing is the best for your small business. Whether it be Google Ads, Facebook ads, print marketing, whatever it is. I'm going to show you how to analyze each type of marketing and determine the one that's going to give you the best results. Because there's a lot that goes into it and I think that this video will help you understand it. Now I've made some really in depth videos about what I'm about to show you and I need you to understand this before we jump in to different types of platforms like Facebook and Google and all the rest of it. Because everyone always asks me where's the best place to get, you know, spend your marketing dollars and get more customers. That's what we're gonna break down today and show you how to analyze that in your market. But the first thing I need you to realize is that marketing is like a funnel and that is at the top of the funnel you have clicks that come in the top and you can measure your cost per click or your cpc. Then as it goes through here, people go to your website, they call you whatever it might be, then you can figure out the cost per lead or the cpl. And then all I really care about is coming out the bottom. And if you form of customers and this is also known as customer acquisition cost or cac. So these are the important numbers that you need to know. I made much more detailed videos about this@mbaforantrepreneurs.com and landscapebusinesscourse.com breaking this whole funnel down and figuring out how to optimize each of these. But the reason I'm talking about this today is because there is no singular way to look at cost per click, cost per lead or customer acquisition cost and determine the best type of marketing. That's not the case. Because here's the deal as I'm going to show today.

If I have a $1 cost per click, a $50 cost per lead, and $100 customer acquisition cost to get a customer, and then I have a comparable marketing method that gets me a customer for $50 and my customer acquisition cost changes from 100 to 50, they say, well, that's great, I get twice many customers for the same price. In theory that's correct. But it's still not enough to know that that is the best marketing method. And here's why I'm making this video. I want to show you how you want to actually analyze different types of marketing. Because here's the thing, you're going to go to YouTube video, you're hearing me or someone else talk about Facebook ads or Google Ads or every door direct mail or whatever it is, and you're going to be like, oh, that's the next thing I got to do. I got to try that. Or I got to do HomeAdvisor or Angie's List. What am I supposed to do? Here's how you break it down. Now. I'm going to show three different types of marketing and we're just going to make these up on the fly. So forgive me if my math is wrong. I'm just going to use my calculator and hopefully this works out. Okay, we're going to compare Google Facebook and let's do every door direct mail.

Okay?

And so again, every door direct mail is going to be putting say postcards or flyers in the mailbox. Every single person through the USPS and their postal service. So I'm not going to make, I'm not trying to make a point here. When I am saying a certain customer acquisition cost or anything for these platforms, I'm not at all. I'm simply using it. You could interchange Google, Facebook and every door direct mail for a host of other ways to do marketing. I'm just using this as an example.

Alright?

So the first thing is, remember the only thing that really matters is, is our cost per click, our cost per lead, and our customer acquisition cost.

All right?

So I'm gonna put that first and foremost and you can literally do this over the course of time and figure out all of these things. So cost per click, cost per lead, and customer acquisition cost. Again, same thing over here. Cost per click, cost per lead, customer acquisition cost. All right, these are the numbers that you need to know first, but it's not the entire picture. Let's go ahead and just throw in some numbers here. For the sake of example, let's assume that in Google our cost per click is $2. Our cost per lead is, let's say $20. And we close 1 out of 5 of those or $100 customer acquisition cost. So cost per click is the amount of money you're going to spend on Google Ads. It's very easy to find this number. Just go going on your Google Ads Manager and finding out what your cost per click is. Very, very simple. Cost per lead is going to be how many of those clicks do I need in order to get get a lead? In other words, you got to look at your website and be like, okay, how many actually estimate request forms or phone calls or emails came from Google? Now in this case, I'm assuming 1 out of 10 converted into leads. Then out of the people who became leads, how many actually became paying customers? In this case, I'm assuming one out of five. That'd be my close ratio. I'd have a 20% close ratio in this case and that would assume my customer acquisition cost of $100. Now let's look at the cost of per click on Facebook. Alright, so maybe I am only paying 50 cents for my cost per click and so my cost per lead is gonna be $30. Because let's just assume that since they're on Facebook, they're not looking for my services and therefore I actually get only 1 out of 60 are gonna become a lead and then I have a really good close ratio. Let's just say, for example, and so now my customer acquisition cost is $90. All right, now let's look at every door direct mail. The thing about every door direct mail is I don't have necessarily a click. Now in theory you could drive them to your website, but typically cost per click is going to be much easier to track accurately on something like Facebook or Google because they're going to give you those metrics as part of your Ads manager. Whereas every direct mail, if you have a phone number and other ways of communicating with you, you might never know that they actually came from, from this every door, direct mail. And the click part is hard. So cost per click, in this case, it's not online, there's going to be less clicks. People might type in your website, but that's not a click. So I can't really get a cost per click, but I can definitely get a cost per lead by asking customers where they heard about us. And if they mention the postcard or the flyer that I put in their mail, in every direct mail, I can determine that cost per lead. Now let's assume that this one is $50 is the cost per lead per lead. In other words, it takes cost me $50 in postage and print paper and all the rest of it to manufacture one lead. And now let's assume that it takes three of those takes three leads in order to get a customer. That would impute a $150 customer acquisition cost. Because I need three of these leads, I have a 33% close ratio. Therefore my customer acquisition cost is $150. Again, don't get wrapped up in these numbers. I'm not trying to make a point with which platform is better. I'm simply showing you how to analyze the different methods of marketing in your business. You can use whatever you want. But this is the thing. This is not where you can just say, oh great, Facebook's the best because the customer acquisition cost is the best. That is not the case because not all customers are created equal. Here's what you really have to do. You have to ultimately, I've talked about this in my other videos. Your business is simply a number of custom records cost in money into the business and what is my return on that customer? So what that implies is if I know that not all customers are created equal, how do I determine how valuable a customer is? Well, you have to know the lifetime value of the customer. So the next thing I want you to track is the lifetime value of the customer. This is very important and this is going to be harder to track if you're brand new simply because you're not going to have years of data to know exactly how long on average customers stay with you. However, you can track on a monthly basis what your attrition number is. And from the attrition, the amount of customers leaving, you can determine how on average someone's gonna stay with you. For example, if your attrition is say 20% over the course of let's just say, let's say that Your attrition is 25% over the course of your first six months. That would mean that on average over the course of a year, it's 50%, which would mean that your lifetime, the lifespan of a customer is an average two years. So if I know that the lifetime value of a customer is simply going to be two years in span so then I need to determine what is the value per year of the customer. And let's just go ahead and assume that is an average in our business. Let's say $1,000. $1,000 per year is the average revenue per customer. All right, so the amount of revenue that's generated on an annual basis. Now if we determine based upon our monthly or six month or annual attrition rate that our customer typically stays with us for two years, then we know that the lifetime value of that customer is going to be $2,000. Now if we can also look at these customers that we got from Facebook and determine, hey, they actually stay with us for three years. Okay, great, well then 300, $3,000 would actually be the lifetime value. Then over here, for our every door direct mail campaign, we figured, you know what, they actually stay with us for five or six years. Let's say six years, they're staying with us on average, these customers, we track them over the course of say six months, we figure out our attrition rate, they stay with us on average for six years. Great. That means you, your lifetime value of that customer is gonna be $6,000. Alright, so now we know the lifetime value of each of these type of marketing platforms and what their customers bring. In terms of lifetime value, let's go ahead and assume though that we have a 20% profit margin on all revenue. Okay, so now what we can do is, okay, the lifetime value of the course of two years from a person that came from Google is going to mean that I have a profit of $400. Okay, so profit from the customers that came from Google is $400 lifetime value, $300,000 from these people who came from Facebook. Again, 20% of that is going to mean that I have $600 in profit from the customers that came from Facebook again over the course of their whole lifespan. Then I have over here, customer acquisition cost $150 for every door, direct mail. And I know that over the course of their six years, they're going to save me, I make $6,000 or which is again at the same 20% profit margin is gonna be $1,200. Okay, this is the part that you gotta get to because now we gotta determine what the best marketing method is. We've gotta look at the customer acquisition cost, input in and then output, which is the return on investment, how much do I have to spend to get the customer? And then that customer, how much are they worth to me? All right, so let's go ahead and look at Google, the Customers that came from Google, we know what their profit is over the course of their lifetime. So I know that the input into the business was $100. The output was profit. What was that meaning? I have a 4x return on my money for these customers. In other words, the box that I've created when I put a customer in from Google, when this lead that comes from Google comes into the business, it comes out two years later with a 4x return. That's awesome. I turned $100 into $400. This is the beautiful thing about small business is the ability to take customer acquisition costs and then put a massive multiple on it in terms of return on investment. That's a pretty fantastic ROI to get a 4x on a stock or even real estate over the course of just two years. Pretty phenomenal. Now let's go ahead and look at Facebook. We know they keep them on average for three years, $3,000 in lifetime value, 20% profit. Let's go ahead and run the math on this batch because now what we're going to do is we're taking this same $600 in profit that we made on this customer. $600. Divide that by our customer acquisition cost. Guess what? We have a 6.67x return on our investment. This is fantastic. Okay, 6.67. Alright, so let's go move on to every door direct mail. So now what we're going to do is we're going to take again the profit that they generate over the course of their entire life of the customer. Divide that out by our customer acquisition cost of 150. And guess what we got here? An 8x return. 8x return ROI on our money. We turned $150 into 1200. But get this, even though we had the highest customer acquisition cost from every door direct mail, we had the best return on our investment. This is why I say not all customers are created equal. Because guess what? But the customers that came from every door direct mail stayed with us so much longer that they actually had a much better return even though they cost much more. And this is why when people are like, should I use HomeAdvisor, should I use Angie's List? A lot of times those are much lower quality customers that aren't going to stay with you as long. And therefore, yeah, you might get a good customer out of them, but you literally are getting twice as much return on your marketing dollars if you were to spend it on every door direct mail in comparison to to Google. And again, I don't care about the platform Here, I'm just showing you. When you compare the different marketing platforms for your business, this is what you want to do. Look at customer acquisition cost, money in and then what is the lifetime value of that customer? Dividing that by my margin is going to give me what is my return on my investment. It's the only thing that matters in business. If you figure out this and if you crack this code, you will absolutely blow your business out of the water. I recently made a video about the defense, offense and special teams of your business. That is the attrition rate, that is the close ratio, and that is the re engagement of customers. And so watch that video. It's on mbaforantrepreneurs.com, it's also on landscapebusinesscourse.com but goes over this in even further detail. But this is how you break down marketing in your business. Everyone's like, where do I get the best customers? What's the best marketing platform? Should I do it on Facebook? This is what you do. You track over the course of time where the leads are coming from, how much you have to spend to get each customer and then how long do those customers stay with you. Very, very important. That's why you can't just say, oh well, just take Facebook. It's the lowest customer acquisition cost. No, no, no. It doesn't have the best roi. Not all customers are created equal. On average, every door, direct mail campaign. These people that came from that campaign stay with us on average six years versus three, which means that they had a much higher profitability and ROI over the course of their lifespan. I was literally able to 8x my return on the customer acquisition cost, the money I spent on marketing. This is why I'm so passionate about people spending money on marketing in their business. Because if you actually understood these numbers, you would realize that there is no truck or piece of equipment that is going to get you an 8x return over the course the next several years. Even if 4x return over the next two years, that doesn't happen. It doesn't go up in value. Those tools, those equipment are simply the mechanism required to provide a service to the customer so that you can make this arbitrage of a customer buying, getting it for $100 and you profiting 400 over the course of a couple years. That is what a business is about. That is how you build a great business has a great multiple, great enterprise value, high profit margins and you can can predictably grow and scale the company very quickly.

This has been the Mike Candies podcast. Now you have some ideas on how to take your business to the next level. And if you liked what you heard, we have tons of lectures, interviews, and more over at the Mikandys YouTube channel that'll be right up your alley. But that's all we have for you today. We'll see you next time.

Sam.