Business Bootcamp: Aaron Final Zoom Call

Welcome back to the mikeandys podcast, where we discuss the ins and outs of owning a small business. If you're new here, the mikeandys podcast is all about taking your business to the next level. We're covering the final episode of season one for Business Bootcamp, Zoom calls this week. If you haven't heard, you've been watching four different home service business owners overcome their challenges and build their business into something great. Part of the whole thing is zoom call. Check ins with Mike. That I do. Along the way, Mike has tons of great advice for anyone who runs a small business. So here's what we're getting into. First off is Aaron from AZ Lawn Maintenance out of Scottsdale, Arizona. Their business is currently worth 900k, but he's looking at almost 300k in debt and only 2k left in the bank. What we have here is a major cash flow issue, plus some massive payments being made on equipment they just don't end up using. But, hey, Micah's gonna talk to him and see if they can find a way out. It all comes down to this episode. We're gonna see if Aaron can take Mike's advice to heart and turn things around for the future. As always, you can find all this and more over at the Micah and his YouTube channel. But without further ado, here is the final call with Aaron from Azlawn Maintenance.

Hey, everyone, it's Mike Andes. And today you're going to be in the full consulting call with Aaron from Business Bootcamp. If you've been watching the past few weeks on Business Bootcamp, you've seen Aaron and how that he literally had only a couple thousand dollars in his bank account with over $300,000 worth of debt over the course of the past month. On the Bootcamp, he's trying to get even more debt by getting more trucks and more equipment. And so this last call is very imperative. Just make sure that going forward he has a clear path and plan as to when he can buy more equipment and expand and grow versus when he needs to save money. I think it's a really good episode if you're trying to decide whether you should keep growing, expanding, taking on more equipment and more debt, or if you should focus on profitability and stacking cash. If you wanna watch the fourth episode from season one that wraps up this whole event, check out the link in the description. Let's roll it.

Can you hear me?

I can. How's it going, brother?

Good, man. How are you doing?

Good, good. You still out working?

No, I. No, I'm Just getting home.

Very cool.

I dropped off some equipment.

Yeah, Good stuff. Awesome. Well, I wanted to touch base, obviously, our last weigh in, so it's been a good 30 days. I've heard a couple good things. I haven't seen all your videos from this week at all, but tell me a little bit about working with Jobber. I know it's a big change, obviously, so maybe it's not fully integrated, but are you moving some of the things in a job right now?

Yeah, I am. I've integrated QuickBooks, I've added some of my accounts. Not all of them yet. I actually ran into some issues this week. One of the guys, one of my drivers, called out the night before he's supposed to work and said that he's not working all week. So I ended up having to drive on Monday and Tuesday, which I dedicated those days to implement everything. And then I ended up getting Covid tested. Yeah, I heard a lot of people from the expo actually got Covid.

Really?

Yeah. I talked to a lady from the expo. She had a booth there and she said that she was down with COVID her husband. And then she said a bunch of people at the expo got Covid, so Mercy. And I'm one of them, so.

Wow. So is it kind of you were out where you kind of just down for a day or two, so.

No, I still have it. I got some medicine. You know, it's helping. They have a new medicine, but I can't afford to get all my crew sick. So being down one driver, we can only fit seven guys in one truck.

So a few of the guys had to stay home, you know, since I like. I'm the kind of the backup driver, you know, if someone misses, so.

Okay, cool. I know that might have thrown a monkey wrench. I know. We were gonna go over some of the numbers in terms of revenues and things like that for next year. Were you able to put those together or. I know it's been obviously hectic week.

Yeah. So I actually reach out to the media team to ask them if they could send me the video of what you wanted me to go over during our last meeting. I never did get that, so. And it has been kind of a crazy week. So. What were the numbers that you wanted to go over for next year? I might know it off the top of my head.

No, you're good. It's really honestly just a matter even if we don't go over it together, just. Just so you have them. And that is what the revenue projections are going to be for each month in 2023. That's the first thing. Second thing is what, what the profit on each of those months are going to be. Because there's gonna be certain months where you know, if you're marketing or even just when it's slower that you might potentially be losing. And then obviously good months, you're making more. And then the third thing is based upon those, how much cash is gonna be in the bank throughout. Cause what I really want you to think about going forward is obviously the decision, hey, we're gonna grow this thing, we're gonna utilize this equipment that we've purchased to basically outgrow the debt, right? And I think the big thing that I'd be trying to push you towards is keeping, keeping track of cash on hand and then using that as a ratio against your debt. And then that would be kind of the confines to stay disciplined with the debt. Because debt is just like a treadmill. You can just keep going and going and going, right? And especially if it's backed up with an asset like a truck, right. And so what I would recommend is to kind of discipline yourself is just have a number that's like, hey, I'm not going to go over this certain debt to cash ratio. So like I would Recommend Like a 5 to 1 debt, debt to cash in the bank ratio at a max, right? Like that's a pretty, pretty high number. But that would assume, let's say we have $300,000 in debt, we need $60,000 or more in cash in the bank in order for us to get any.

More debt as a reserve, like a safety net.

Exactly. That's my biggest concern for you right now.

Right.

Because I'm very confident in your ability to grow. You have all the assets you need, you have the ability to sell, you have, have the personality to do it. I think you're gonna do fantastic in the growth side. My bigger concern is the acute cash crunch and just making sure that never happens again, right. And so to discipline yourself, I'd be like, hey, look, if you wanna buy more trucks, if you wanna buy more equipment, great, but let's keep it in check using this math. And that is okay. As soon as I get above $60,000 in the bank, like cash in the bank, then I have permission to go give myself a little more debt. Cause we're at that $300,000 level now. I need that 60,000 in order for that five to one ra. And then it's just a matter of like, well, if I can pay down some debt and then I Can make the equation work more with less cash in the bank. Right. But it'd be a way to discipline yourself before you go out and get more debt. Because the last thing I want you to do is go get a 4 or 500,000 and we're still that, you know, 5, 10, $15,000 in the bank. And just this constant stress of having to service that debt.

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Yeah, I hear you. Yeah, I definitely need to have the discipline on that.

I know you didn't watch the video today, but today I even made a video talking about buying a little mini excavator. So, you know, you might get a kick out of it, but I think you're right, you know, I definitely need to have a stockpile saved up, you know, so, yeah, I'm going to end up getting a job where we're going to be planting 44 trees, you know, 24 inch box trees. So I was contemplating whether or not I should buy this mini excavator or rent it, you know.

But yeah, like ultimately the big thing that you don't want to do is buy equipment that's only being utilized even a hundred or two hundred hours a year. Right. Like if you're not using that piece of equipment every single day, I literally don't want you to buy it. Especially at this stage where the debt is at like it needs to be. Because like, for example, you go get more jobs with an excavator. Yes. Or we could just spend money behind marketing and take the current, you know, tree. We have a boom. We have a massive tree chipper. We have all the equipment to do tree work. Why not go spend $2,000 on marketing that generates then $30,000 worth of tree work and then takes the current assets that we have and makes them more profitable and efficient. Like return on equity is a very big number I would be looking at if that was you. And that is how often am I using my assets. The equity that I've put into the business, how profitable is it for me? And these assets have to be utilized more. And if they're only being utilized one day a week or even two days a week, like, I wouldn't even. Like, personally, I wouldn't even do that service anymore. I only want to take a current asset, and I just. Just beat the thing into the ground by using it. Because that's when it's. It's most profitable, right?

Yeah.

And so I know it's alluring because you could always add more services and add geographical expansion in order to grow. And in order to facilitate both of those things, you need more trucks and equipment, both to grow wider and add more services. I'd be really encouraging. Like, let's either cut services out or just take the services that we have and just sell more of those and not get allured by, like, okay, if I get. If I have one planting job with boxwoods, I've got to go buy a 50, $60,000 piece of equipment. Like, we can't do that anymore. The debt will eventually catch up.

Yeah, yeah. I'm going to hold off on it until I get some money in the bank.

And, you know, if you. If you. If you have to rent, you know, and say, hey, it's like $400 or $500 a day, just bid those jobs that are one off, as if you need to rent that piece of equipment so that you. If you do get the job, it's still profitable. Right. And then if you don't get the job, you're like, whatever. I, you know, wasn't meant to be. I don't have that piece of equipment. But then in your bidding process, just charge the extra five, six hundred dollars per day. But if I' it a few times a month is like, everyone always compensates that and says in their mind, like, oh, well, if I use it three times a month, and it's fifteen hundred dollars a month and it's five hundred dollars per day to rent, therefore it's like, equal.

Yeah, I try to do that even with, like, the boom lift that I have. It's actually used boom lift from Sunbelt Rentals. And I tell customers, well, I got to rent the boom lift, you know, and it's this much money. They don't actually know it's my boom lift. But on the flip side of that is I lose out on branding because if I did put all my logos, you know, my company name on it, then I think it may be better for branding purposes. So that's something that I've weighed, you know, I wasn't really sure, you know, where I should go, if I should.

I wouldn't worry about that. Because once someone's accepted a job, they've, they've committed, they want a result, right? They haven't seen your boom lift. They've already committed, they've paid for the job. They now, they now just want a result. How that job gets done, whether it be with a sun belt or whatever type of boom. They could care less. A genie. They just like, whatever, get the job done. I've paid you to get the job done. Now if you're talking about trucks, that's where I see a little bit of value of branding. Because they're going to see that truck prior to the sale, but once the sale has been consummated and they're like, yes, let's go for it. They put 50% down. Like, you know, they just want the job done right. I wouldn't worry about, oh, I need to brand it myself. And you know, the, the, the thing is, even if you break even based upon a rental versus buying and buying having like a payment on it, even if you do that, you got to remember the ratios and the numbers of your business matter. And having a high debt to income ratio makes the business like worthless. And so the goal is to be profitable, but also have the numbers of the business like the balance sheet in check. Because if you want to sell your business today, it'd be like, okay, well let's say the business is worth $500,000 and that's going to be based upon all of our equipment, all of, all of our trucks, all of the assets, all of the contracts, all the rest of it. It's probably more worth like 400,000. But now we've got to take away $300,000 worth of debt, right? So the asset value is relatively low. And so that's, that's something that's very key. And that's why like, if you can pay down that debt over time or reduce that debt, it's just increases the value of the actual business.

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No, I think, I think my biggest thing for you is like, hey, you're going to crush it. You're going to sell really well. I love you by the way. Like, your personality is magnetic. You're going to sell fantastically. I think you're going to have a good team around you too, honestly, because you're so genuine. And, and the thing is the debt thing is going to be your art. Like the thing you're gonna have to keep just like it's gonna be the thing you have to just keep pushing away from you. It really is. And I think if you just have the boundaries of hey, I have a debt to income ratio of five to one. I need for every dollar in the bank I'm allowed to have $5 of debt. That's still too much for what I would recommend. I have less than a one to one. And that's usually what I use in my business. I don't want like the reason I do that is because I want to be able to know in worst case scenario I can take all my cash, pay off all my debt. And I'm. Because as soon as that, that ratio is above 1, it ultimately means that you are handicapped and like locked and tied to your business. And that's something that's very scary as soon as you're dead.

When should I implement that? Should I do it today? You know, five to one.

I would be doing that right away. It's just a benchmark. Yeah, like I think if I was you, I'd say okay, in 2023 I'm going to be five to one. 2024, I'm going to shoot for four to one. In 2025 I'm going to shoot for three to one. The, the closer that ratio gets and eventually you get debt free and say five or 10 years. That's when you, the stress level just drops massively in the business. Because right now you are chained to. I must produce X amount of revenue just to break even. And that number is well over 50 to 60 thousand dollars a month right now just to pay off the debt service. So you're chained to this business of constantly selling, constantly getting more jobs when that debt is paid off. And now there's either no debt or at least you have a dollar in the bank for every dollar of debt you have. Liberty, like it's freedom. That's what comes with business ownership if there's not debt. And that's what I want you to see. And so I just use that framework If I was you, like 20, 23, I'm going to be five to one and I'm not going to spend, get a single dollar of debt until I have $60,000 in the bank because then I'm five to one and then I'm just going to keep every year go 4 to 1, 3 to 1, 2 to 1. And honestly, you won't have to pay it down very much because the payments will kind of just bring that number down as long as you don't go into more debt.

Yeah, I hear you. Okay. So, you know, I don't feel like extremely stressed, you know, so it might just be my personality, but I don't feel extremely stressed over this.

You know, here's why I think, I think this is, Aaron, is because you've dealt like when you were doing drugs and everything, it was so risky, like physically to you, like the place that you, you had to come out of and like the withdrawals and all the rest of it. You saw such an extreme of pain and suffering that this doesn't seem very hard to you and that, that is literally like a massive gift because you'll be able to experience pain as an entrepreneur and get through it no problem. And you still have this positive mindset like all the time. And it's because you've seen such a low low. This doesn' bad, right? What I want you to get into is a mentality of now the business is good to the point where now you become free to actually do things outside the business because right now you're working crazy hours and you have to just for the business to sustain itself.

Yeah, yeah. I definitely do feel like that's, I do lack discipline in saving money, you know, that I need to work on, you know, just become mentally stronger at being able to have that discipline to set the money back, you know, not reinvest it.

So like the high that you have of getting new equipment needs to be replaced by the high of having just stacking cash, like just stacking that bad boy up. The pride in, in, in personally because I actually don't think you are extrinsically motivated. And the reason I say that is because you were able to pull yourself out of drugs by yourself. So what that tells me is you have a ton of intrinsic motivation and self discipline and you don't care a whole lot about what other people think about you. So I actually have, that's why I don't worry about your pride and stuff. I actually don't think that's a big issue. Most people that buy a bunch of equipment. That's what I'm attacking. You don't have that problem. You have all the intrinsic motivation inside of you. I'm now pushing you to the fact that you've gone from gutter and you've improved, but there's a whole nother world of what you can achieve when you get to the place where the business isn't controlling you financially.

Yeah. Yeah. I'm excited for it, man.

I am, too, man.

Yeah.

Well, let's stay in touch. I really have enjoyed it, man. You. Like I said, I genuinely love you, man. Like, you have a good personality.

Thank you, bro.

Your story and what you've been through is fantastic.

I love you too, man. Thanks for your help.

All right, take care, Aaron. Have a good weekend.

Later, buddy.

Bye.

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