Buying Out a $800,000 Lawn Care Company (Coaching Call w/ Mike Andes)

Hey everyone, it's Mike Andes. I'm the founder of Augusta Lawn care. We have 170 locations around the world. But today we're actually talking on a coaching call with an owner that actually just purchased a new lawn care company that's doing $800,000 in annual revenue. Now the catch here is that this is coming from one customer and one contract with the city of Dallas Fort Worth. You're going to have to staff and buy assets based upon these massive contracts. Now he's making this acquisition, he's purchased it for 4, $450,000.

I talked him down to 450, but I definitely know I probably could have haggled him even more.

And his goal is to be able to keep doing acquisitions down the road to grow a massive company with four to five locations.

Where would you direct my energy to make the best business that's profit focused?

We're going to be talking about regional managers, general managers, how to do compensation and a host of other things when it comes to marketing a service that is targeting these big contracts. Let's go ahead and jump in. It sounds like you're buying a long hair business, so question on the operations manager, etc. So let's just go ahead and jump in and whatever I can help with, I'm happy to.

Yeah, man. So the reason I really connected with you, I come from the fitness world. I own six boot camp and small group training facilities in SoCal and lived in California and sold those when I moved to Texas. I'm in Dallas now and now I have a marketing agency for J. Warner. So that's kind of my world. And just as I was like prepping for my next, you know, I guess you call it act in life or phase in life, I was like, man, you know, I, I love fitness but you are selling something that people need versus what they want. And so I was just like, I'd really like to test out my, my marketing and business skills and something people want where they're actually calling you excited. And that's where I started looking at home services and eventually landed on this landscaping business in Fort Worth.

So.

So yeah, we're acquiring that and just excited to put all my marketing and business know how because it's very outdated. No website, everything's paper and pen and so modernizing it, bringing it up to the front beginning of the world. So I'm sure you, you're, you know, not, you know, that's not something you're unfamiliar with.

So just to give you what they're doing now they only have one contract and that obviously put some fear in my mind, but it is with the city of Fort Worth. It's a municipal contract. It's for five more years. It was six years. They've done one. And they just from this contract do between 700 to 800,000 a year. And basically it's just depending on their mowing cycle. They'll either have them do it weekly when it's raining a lot, or they'll go twice a month if it's more normal. And so that's kind of it. And then they release the mowing schedule the first week of February and they have the mow all the way up to Thanksgiving and then they go dark on December and January. So the company literally has zero revenue. And the way their org chart was, was it's the two owners which one is moving to Austin, one staying here. He's going to help me stay on and run it kind of like as needed and be a consultant. He's on a seller note for five years. And then they had two drivers who had five crew members with trucks, trailers and they have like the big commercial mowers that are like, you know, six feet wide. You can go 15 miles an hour on these things. So they, they go to a halfway house because of the tax write off benefits and then they're going to be okay with getting less pay. They take, you know, 15 bucks an hour and then they're okay that they're going to get let go at the end of November. They tell them from the beginning it's a seasonal job, we only need you from February to November. And so they don't really have any hard W2, which again, as I'm learning more and more of this world, that's pretty common to hire people for the season and then let them go during the end of the season. For me, from Fitness, which I'm sure you know, that's weird. I had to get used to that. I'm used to paying people all year round and so I'm learning again the seasonal aspects of this. So that's that, man. I got some questions lined up, but any questions you need to ask to clarify on those things I shared.

No, that's great. So a couple clarifying questions. One, there really is just the one contract. There's nothing else. Okay, got it. And then secondly is in terms of the acquisition, like the terms of that, is it all cash? It sounds like the seller financing. What are the terms that?

It's 450 sale price and I only am giving them 50 down. So the rest is literally 400 of its seller note. So that's all paid out. And so, yeah, it is a pretty hefty seller. No, I think it's like 5,000, some change for 5,500. So that's going to eat up a good chunk of cash flow. I think it's somewhere between 20 and 25, depending again on the cycle, if it's every seven or 14 days. So it's taking like one fourth of the cash flow. But you know, again, to acquire it with a, with a, you know, nice size contract and all the equipment, I felt comfortable, I guess, you know, again, I got probably a bigger risk appetite than most.

Yeah. What was the, the amount of the valuation of the assets, like the actual trucks and equipment? Do you know what that was put at?

I mean, it depends if you ask my valuation versus theirs. Right, right. So for them, I mean, they were, they were pretty fair. They went with the trucks and they put them on KBB and they were about 15k each. So, you know, that's 30. The mower, they said brand new. The big one was 40 and then the others were about 15 to 18. And then the trailers were like 10. So it was like under 100k. It was probably about 80, 85 in the physical assets.

Okay, cool. And has the acquisition already happened? Like isn't that passed or is this like still in negotiation?

Well, we paid them the $10,000 good faith payment, but that's really it. Um, okay, if you got any tips on updating the terms, you know, again, we could do that.

Okay, cool. Awesome. Well, let's jump into questions. That gives me enough context. I could, you know, jump into that more. But let's just jump into the questions then I'll probably circle back on a couple things.

Yeah. So my first question is this being a completely clean slate, you can go any direction with it. How would you coach somebody to maximize profit to put their energy? Because again, we know it's strategies, limited resources against unlimited opportunities. So they're only in municipal. Would you go chase commercial? Would you go look at, you know, design and build projects for residential My, you know, from talking to lots of other landscaping owners, I've been talking to at least 10 or 20. They said, hey, residential mowing, very low margins and the amount of volume you need, especially in Texas, where unfortunately there's a lot of illegals that are doing it for low cost. You're going to, you're going to just, you know, go crazy, go find, just spend more time being A sniper. Go find big contracts like this municipal. Go get commercial. Go get municipal and have less contracts and try to get some year round revenue through hoas apartments, things of that nature. So I guess like, where would you direct my energy to make the best business, you know, that's profit focused?

Yeah, yeah. So like how I look at this acquisition, you're actually buying an annuity. So on the 7, $800,000, we basically have this guaranteed, you know, five more years. So you're essentially buying a third, let's just call it 3.5 to $4 million of revenue. Let's assume we have, we're 10% profitable on that or 15% profitable on that. You know, we're coming up, you know, we're basically buying five to seven hundred thousand dollars over the next five years. That's what we're buying. And so like my biggest thing when I look at just kind of a holistic perspective is like, I think you, your strongest suit, like your strongest skills might not be used in this type of business, like this specific municipal, because I think the marketing aspect that you're going after isn't going to be used if you're going after municipal. It's much more like who you know, much more about networking, tenure, how long you've been around and it might actually handicap you if you go that direction. Whereas like, if you went, whether it be residential or even commercial, even if you went commercial instead of municipal, I think it would allow you to use your skills of like how do we brand, how do we market, how do we, I'm sure you know the gym world, your funnels and you know exactly how to. Actually, I think that's your, your, your, your forte. And, and if you went municipal, I don't think you'd be able to tap into that. And, and, and you're probably in the top 1%, if not higher of marketers in lawn care landscaping, because most of them can't do it. And so I think your strength might not be utilized if you went municipality. That being said, they're definitely set up for it. Like the way they're, they've done the trucks with five people in it. I'm a little concerned about the structural part of the business being built around one, one contract. Not just from a revenue perspective, but like the business has been built around it. So whether it be the labors and their schedule and their housing, the way the trucks and equipment set up is now it's basically for municipal. I think you could go after commercial though. Like if I was, if I was buying this and this has happened, I'd be like, how can I pivot this to a more commercial, commercial setting? How can I get five to six contracts so I don't have as much income concentration because you basically have a fuse of five years. In five years you've got to be able to replace this revenue and ideally grow It Ideally in five years, I'm assuming like 2 to 3 million in revenue. Hopefully we have 6, 10 contracts. Like the income just, you know, concentration basically makes the, the multiple on this revenue worthless. Like if 100% is coming from Rev1 a contract, the only thing that holds you is that contract and is the annuity. And so the actual valuation in anything in excess of assets becomes almost nothing.

Yes. Okay. So yeah, I agree with you. I definitely know that from what they even told me. Municipal, it's just like a website where they put up things for bid and you go and you bid on it. And Fort Worth happens to be one that pays really well compared to others. But they told us the other three or four that they said pay next to it and to go. You know how you can go after those. But they did say it's very safe because they actually completed a five year agreement previous to this and renewed for an S6 one and they do about a 10% increase on them every year. And the city kind of doesn't really get phased by that. So that's where I felt again, a little bit of safety. But I definitely want to diversify. So with paid marketing, going for commercial, you know, again businesses or even hoas, how do you find is the best way to do that? Is there, is it more just like an outbound email, is there an ad that you've seen work or is this more of a belly to belly, you got to walk in and talk to a decision maker type of thing.

Almost all three. Like a lot of times it comes to commercial, you're talking to property managers. And so what the thing is, if you can Crush it with one property manager, you'll unlock 10 properties. And so it's a matter of when you're dealing with these larger contracts, they're really going to be wondering do you have the actual bandwidth to manage this project? So just I would really highlight the fact that you are a, you know, call preferred vendor partner of Dallas Fort Worth if you have this big municipal contract. We also service the commercial side.

You know, you could always go after more municipal contracts. The business is set up for that. I'm just concerned about even if you had two or Three contracts. I still think that's a lot of income, you know, concentration, because you're going to have to staff and buy assets based upon these massive contracts. And so you're just one canceled contract away from having huge amounts of excess capacity. And I see this all the time. That's really what I'm trying to guard against is the, the event that any time down the road, 25, 30, 40% of your revenue just disappears because immediately the business becomes unprofitable. And so that's my biggest concern. And that's why, like when it comes to acquisitions in general, if, if anyone has more than 50% of income concentration, I basically discount all of that revenue because it doesn't do anything for me. The value they have here is the contract. They have like a signed contract for five years, then you're buying that annuity. So yeah, that's kind of my thoughts.

All right, good to know. Now again, I don't want to get too ahead of myself. I want to spend the first year very much deeply learning this business. But the goal was to continue to grow it through obviously typical growth revenue plans, but also through acquisition. We want to continue to buy more landscaping businesses at about the pace of one per year. So this is all good feedback. When we do the next one, like, you know, again, less client concentration. You know, for me they were originally asking 600, I talked them down to 450. But I definitely know I probably could have haggled them even more because of again, the high risk on my side.

Yeah, I think, I think with your experience too, like in especially of acquisition is, is the growth strategy like you can, you could go and buy a commercial company, say does 1.2 could probably get them for 6 or 700 grand. And now you put together a strong commercial with that municipal contract and then you can now you look more appealing to a property manager. You also have the ability to serve more customers. And so whether that be property managers, whether that be, you know, hoas, certainly an option and to diversify the income not only from a client perspective, but from a service perspective like commercial and municipality.

Okay, so on that, like protecting it so that it has year round. Is that foolish to think of it? Is this more the norm that you kind of like lay off some of the staff? You know, it could be completely a reduced pay during the holidays or like water opportunities to keep revenue going during those winter months. Like I heard Christmas lights. One guy told me, leaf cleanup, tree trimming. What are things that you recommend?

Yeah, it's tough for municipal and commercial because a lot of times they look to you like, oh, they're the landscaping crew. And so like unless you diversify into a completely different service. And I would say if you're going to do that, what you want to look for is a, is an inverse demand curve. So that the worst part of home services is that we're extremely seasonal. And so if you're going to actually add services to the business, there's, it's always the fastest way to grow revenue is just add more services. Same thing with service area. Like if you're willing to serve further away, you'll, you'll get more contracts, you'll get more jobs. And so, but it's also usually the least profitable. So I would say if you're going to add a new brand or a new service or a new like actual, like different offering, completely look for an inverse demand curve. So for example, we do Christmas lights and we, we added the whole brand of the franchise. Because I know that during those two, three months when that, when Christmas lights are super busy, we don't do mo, we don't mow grass. And so it's an inverse relationship. What I see a lot of people do is like, oh, we're going to add irrigation. Okay, great. That's also going to be the busiest during spring when you're also already crazy busy with the existing demand. And so if you're going to add services, I would think about that. I would also think about can you upsell existing customers into something during the winter or do your scheduling of your contracts in a way where a lot of the work that isn't time sensitive is not during the spring rush. So for example, you know, maybe inside of a contract you have trimming bushes, you know, mowing the grass, trimming trees, whatever it might be. If I can trim the trees during the winter, that's my ideal case scenario. Um, obviously they grow a lot more during the spring and during summer. But if I can just maybe trim them once, but then do like in the, in the early spring and in the late winter do my two big trimmings. I'm now able to just simply fix my seasonal problem with just scheduling. And that's actually what I like a lot about 12 month contracts in commercial and municipal. As long as you control the schedule and they're like, hey, we are paying for these services to be done. And then you can just, you determine when they're actually getting done.

Then you can push off like the big projects, the cleanups, the installations, especially in your market where there's not snow and not too much rain during the winter. Like I'd be pushing as much of your installs and your project based work during that off season and then focusing on the maintenance side when it's growing and you actively have to be doing it.

Love it. Okay, well, I'll shift gears. This is more about like ops manager, like compensation or general manager. Again, I don't know what, what kind of titling you would recommend works better, but I was thinking that it would be a 60k base and then some sort of rev or profit share. So I was just wondering how you recommend setting that up again. This would be the person that would like drive sales and like answer all the leads that I want to generate for them and then also manage the team and quality assurance them and maybe do accounts receivable and payable, you know, be like their top three.

Yeah. Like I think, I think if, if you stick with the current business model with just the one contract, that's more of an operations manager. Because there isn't outbound sales, there's not lead. Like you're just managing a contract. I think if, if you're thinking the acquisition channel and you want to go that way over the next couple years, I'd probably build it from the start like that. And what I would probably do is I'd have my general manager and I'd probably have an operations manager for each division. So I'm going to have an operation manager for say municipal, which right now would literally just be that one contract. But then as we think about expansion, if we start a commercial division, that operations manager for the commercial would make sure the crews are running, everyone's doing their thing. But your general manager typically is going to be kind of your bridge between admin operations and sales. And so as soon as someone goes into sales, I usually say like, it's very hard, especially in this industry, finding someone really good at operations like in the field, but also really good at sales. And so if you're going to go do marketing and getting leads, which they haven't been doing, I wouldn't expect my operations person, especially if they're currently there, to think that suddenly they're going to do lead nurturing and sales and outbound or anything like that. So as you think, like more holistically, like the strategy of acquisition, I would probably look at more of a structure of like general manager, operations manager for each division. And even if you start with the operations manager currently for the municipal and then build up the GM model, once you do an Acquisition, that's probably what I would do. And when you do your next acquisition, see if there's talent that you could be, that could become the general manager and then use that as a bargaining chip in your acquisition as well. So, so for example, if they have a really good gm, be like, hey, you're going to be a GM of now of a larger company. I'm gonna. You're able to pay that person more. But they should have some sort of sales background because now they're gonna step out of operations in terms like trucks, sharpening blades, crew management, etc.

Yes. And so, yeah, they do not have. It's. It's. Again, I know probably doesn't sound like a great deal, but they literally have one driver, SL crew leader coming with the business. No manager, no. No team guys. And it's because they sent all these halfway home guys. But I, I actually like it because I want to build the team with the core values and the mission that we have and started from scratch because I, I've done acquisitions with gyms and the old team usually phases out and. And then you got to rebuild your team. So I, I don't mind that I, I have found a candidate I really like. He actually owned a landscaping business. He built it up to 6 million and then he sold it. And then he was pretty young at that point. He was 42 and he. Retirement was just not what he was hoping to do the rest of his life. So he went and got a job and it's not in landscaping, so he wants to get back in. He saw my job posting and then he saw my plan, which was to, you know, expand to five to ten locations over the next ten years through acquisition. He's like, man, that sounds exciting being some part of Big. I just built mine in my city and that was it. So you're saying for him, you know, he, when he was an owner, he had to sell and he had to manage his team. That's why I thought he could kind of step into both. So you're saying at this point I should just have an ops manager and then I should separately get a salesperson? Or do you think a guy like him could handle both?

A guy like him could be the general manager above the operations managers. Right. So the thing is, especially when you have these big contracts, you have a lot of employees on the field. If you're trying to scale quickly, you want your GM thinking mostly about sales and admin. Like the operations actually like firefighting throughout the day of like, oh, this tire got flat. And like this mower needs to get fixed like you want an operations manager handling it. And at 7,800,000amillion in revenue each department, you can have operations manager over each department and then have a general manager basically running sales, making sure like the connection between admin and operations is smooth. And then that way your operations managers don't need to know how to sell, they just literally need how to manage the crew. And that, that is a position of 60,000. Whereas your general manager, you can go out and you know, go to bat and pay someone well knowing that they have much more leverage due to the fact they're going to focus most of their time on sales and not operations.

Okay, what would you say is a good base for a GM of 60s, for an ops guy, it's really going.

To come down to like how long of a vision are you looking for this person? Because if they're going to eventually be ranting money five locations, what's going to end up being is they're going to be a regional manager over five general managers, each of those general managers over two to three operations managers. That's what like the eventual org looks. And if you want them to follow all the way up to that, then you're probably going to have to pay up. And it sounds like this gentleman probably expects a pretty good compensation package just to get interested. I would probably make that bet if you had a five year window or less to kind of make this happen with all the acquisitions, I just go right to the top. Because you'll save yourself. Because he'll be able to find the gms. Like I always think about, like how can I hire the person that will hire the general managers. And so that's usually a regional manager. Again that's probably down the road. Like if you're looking at just this business, we really right now need an operations manager. That's it. Then it's a matter if we scale this and we add a commercial component, we need a general manager and then an operations manager for the commercial side. But then as you look at multiple locations, it'll become a regional manager position. I would go after that guy like if he's willing to and like pretty excited about it. He has the skills to be that. And he could grow into it too because he probably doesn't have the skills right now to be a regional manager, but he could definitely be a general manager. And then if you want, if you thought, hey, in five years he will merge into regional, you know, it sounds like he has the skills to do that.

And what Would be the various ops managers you said municipal. Would there be one for like project install kind of jobs? Because I imagine that's a whole different world. One for commercial mowing. Like what would be all the different ops managers?

Yeah, it just depends on what, how you know, if you want to kind of do all these aspects. Right. Like I'd say right off the bat municipal mostly because you already have 100% of the revenue coming from that. And then you could probably, you could probably add some commercial in with that underneath that person. Because municipal and large scale commercial act very much the same. Definitely. If you want to go residential, totally different division total. Also if you want to do projects and you know, hard escaping of any sort also same thing different. I think it really comes down to if you're going to acquire a commercial company, that's when I'd be saying okay, do an operations manager for municipal, operations manager for commercial. Let them run, you know, cook in their individual divisions and then be able to measure their metrics independent of each other. I think if you were like, hey, we're going to buy this one company and I'm going to start doing sales for commercial work. That's when I would probably just have one operations manager and then let them learn the commercial side as it kind of sticks to the business slowly.

Okay, so how, how would you recommend setting up either rev or, or, or profit share? Because I'm saying 6k base. My thought process was maybe a 5k bonus for every 100k of revenue he adds and that is paid speed at which we collect it. So he can get 100k on contract. But if we don't collect it for 3 months, he won't realize it till next quarter. But open to feedback. What, how would you recommend that?

Yes, like for the general manager position, assuming they're available and in charge of sales, then I would be, I'm more inclined to maybe incentivize growth. The operations managers, I'm strictly thinking about efficiency and profitability. Like I never want to incentivize based on revenue because them going faster leads to all sorts of problems. I need them just think about these jobs need to get done correctly and the crew needs to be efficient. So I'm usually incentivizing someone in operations much more based upon efficiency and profitability. When it comes to the sales side, if they're driving sales, whether it be a general manager or a salesperson is the only time I would ever allow for top line revenue growth incentives. Keeping in mind that I, I need to have it counterbalanced with using some sort of profit sharing. Because if they just go out and sell, they could sell another one $700,000 project or a contract and get a huge bonus. But if that was $200,000 below what it should have been priced at, it's handed off to an operations manager that's going to freak out at them. And now you got perverse incentives. So I usually like our general managers, we only incentivize on revenue growth while they're in their first 12 to 24 months. So when they're growing, once they're out of growth mode and the incentives of the business for me is profitability and distributions, I then tie it directly to distributions. So for example, if you say, hey, you know you're going to get a sliding scale of base pay based upon how much your division produces. For example, you do 800,000, great. If you do 900,000, you get a slightly higher base. If you get a million, you get slightly, a little higher base. I would just probably make that based on their base pay fluctuate slightly. But I would incentivize a lot of the compensation package on profitability and especially a general manager who makes the buying decisions, hiring decisions, they manage the metrics of the business. I want a lot of their pay package coming from profit sharing. And even, even furthermore, as the business matures, distributions. And so, for example, I'm willing to give up a bigger chunk of distributions to where like, hey, if I get a dollar out of the business, you get 50 cents. If you, however, you break up that down the road. Because I just want to know that when I'm gone, especially when you do multiple locations, when I'm gone, they're only thinking about the metrics that I want. And once you're just once you're in profit mode and once it' established, the only thing you care about is distributions as an investor. And so as long as the incentives are aligned with their incentives are aligned with what you want from the business, that's the main thing. So if you're like, hey, I just want to scale, then do revenue, project revenue targets. But just know as soon as you do that you and that general manager is incentivizing revenue. There's going to be friction with your operations people because they're going to feel the pressure of being able to have to hit certain numbers because of an an aggressive salesperson.

That makes sense. I've seen that before, so definitely familiar with it. Okay, what would you say is, I mean, I know it's probably a hard question. To ask, but what is healthy growth in this business, like a realistic revenue you can add in a year?

Yeah, I don't know if you have any input.

Yeah, usually. Usually as like anyone, you can hit a million. Anything more than 20% annualized growth is going to require significant amount of cash investment. So, for example, adding in $100,000 little contract, you guys are going to suck it up. It's going to be profitable. You add a few more hours, maybe one more crew member, you're good to go. If you start. If you go from say 8, you know, 800,000 to 1.4 next year, you're going to have to buy more trucks, more equipment, hire more people, probably expand your shop space. And so it becomes capital intensive. And so what I would really recommend is figure out what is our capacity using our current trucks and equipment. What. How big can we get without having to buy more stuff? So can we put a six person in each crew? Can we work a. A week? How we can we have a weekend crew? Because whatever that number is, if you could, in terms of capacity, I would grow to that as quickly as possible. That's probably why I always incentivize my manager on to get to this number as quickly as possible, knowing that once I'm there, I'll probably raise prices or I, in your case, because you can't really do that. It just be optimized. Right. I'd be trying to get there. I'd probably. Any new prospects inbound, I feel much less inclined to go be aggressive with because I know as soon as I get them, I'm above capacity, I got to go buy the trucks, I got to get more equipment. And so it just become a capital expenditure game at that point.

Yeah, they, they pretty much said with their current team, they're pretty much maxed out, but we did. They did admit that they only had about 85% completion rate. So even right there, there's more revenue to realize from the city because rained out, caught sick days, you know, et cetera, et cetera. They. They'd even capture everything that they could from the city. So, yeah, like I said, you know, why don't we have Saturdays? And they said one owner was for it, one owner was again. So they just never went to that. So that's. Again, I want to have that on the hiring stage. Like, hey, are you in a mode of your life that you really stack cash and you'd work a Saturday, right? So we can, we can get things done and we get rained out on a Wednesday.

Okay, now Another thing that I want to ask you about with the ops manager, or I guess any manager moving forward would be the use of personal vehicles that, you know, if they're not given one by the company, how do you compensate them for that? Do you make it a goal to one day provide them with one? Because that's, again, another big expense for the company. It's got to be parked insurance, etc. But this is someone that's not going and doing any mowing work. They're going out and they're bidding, and they're driving around and shaking hands and kissing babies.

So, yeah, yeah, it just really depends on, like, how you want to set up your comp structure. Right. Like, I think I would be pretty flexible in this with my GMs. Like, hey, if this is important to you, great. I'm going to take that into account when it comes to your compensation. Right. It's like, do you want a higher base or do you want a truck? And I would be pretty flexible on this. We usually don't give trucks to our general managers in terms of company vehicles, but throughout the day, they're using a company vehicle, but they don't get to take it home. So there's. There's kind of like, levels here. You can do give them a truck and they drive it all over the place, they use it personally, et cetera. You can say, hey, look, there's a truck here. It's available for you, but you can't take it home. Or you can say, hey, you drive your own personal vehicle and it really just comes down. I match what my GM wants typically and then just adjust their compensation accordingly.

Okay, got it. All right, so you're saying whatever they're looking to get compensated for personal vehicle use, you would just take that from the base pay and apply it to that, right?

Yeah, it's like, look, oh, you want to. You want to have your own personal truck? Great. Instead of 70 grand, I'm going to give you 60 grand. Or do you want to just have a higher base and then you can cover the vehicle yourself? I usually don't like the mile thing because it's another thing they got to manage. I'd rather them focus on just running the business. And so I either bake it into my comp, like, hey, you're responsible for travel on your personal vehicle or as part of the package, you get your company vehicle or access to a company vehicle throughout the day.

Okay, got it right.

Now, I guess the next one is this the same ops manager he brought up like when he was running his business he had like a, a secretary kind of administrative assistant role. Now in my world we do a lot of hiring virtual assistants. We place virtual assistants for gyms. Do you think that that is something that can be done or is it better to have live presence right there in the shop with the ops manager so they can work more cohesively, you know?

Yeah, like it's a tough one because right now like there is no admin hardly in terms of the customer because there's one contract. So it's really like what do you want in the future for the business? The thing about commercial municipal is you might have like if we, if we really grew this thing and you had 10 contacts, there's very little add in required. And so I usually would probably put that burden on my operations manager. If there's literally five contracts you're managing, in this case one. I'm not going to have someone in the office because the main value of having someone in the office is going to be reactive stuff like the phone ringing, emails coming in. And so I'm assuming like right now they probably don't have like a website or like a front facing trying to get leads. Right. So until that's there, I definitely am not going to have a secretary. I wouldn't even have someone overseas honestly, because the only communication is going to be coming from like right now the city, but even down the road be like a couple property managers. And so that information is going to flow directly to the operations manager anyways. Um, so I would probably in this case, like if I had an operations manager over say a million dollar business, I might get like a, a virtual person, like sort their email, do some payroll stuff like some of the, the basic things. But most of the actual customer service will have to go to the operations manager anyways.

Yes. Okay. All right, so P4P I, I've definitely been diving into that, think it's awesome. Want to, you know, use it as we build out this new team. Because again I wanted to get out of that, you know, hourly wage. Can you use that for municipal and commercial or is that mainly meant for residential?

You can do as long as you have budget hours assigned to every single visit. And so what I would be doing as a starting point is, okay, what was the cost of direct labor last year as a function of the revenue? And so let's just say last year they did 800,000 and 200,000 of that went to direct labor. Okay. That means 25% of, let's just call all of it labor revenue was going to direct labor. Well, then on P4P, I know if I did 25%, I probably wouldn't make any more money, but I would change the system to basically be much more equitable in terms of who's doing the most work. Then it's a matter of, like, are they accurately budgeted hour? Like, are they accurately bid? Because sometimes municipal, you'll lose your shirt on one aspect and you crush it on another. Certain elements of the jobs are more profitable, etc. You gotta be careful of that because you have one crew that just feels like they're stiff for the entire week because they have. They're on one part of the job that's just nuts and they can't make any above base pay. So, like, accuracy of budget hours is extremely important. Now they have a set dollar amount already. What you could do is step in and be like, okay, you can even just talk to one of the people who've been around for a while or even the owner, like, hey, let's break this down. So let's just say it's $80,000 a month is like the budget. Great. Here's all the stuff we have to get done. Let's go through all of this knowing that we have $80,000 our target. Let's just call it 60 bucks an hour. Okay? We're trying to shoot for 1200 hours in the, in the month. Okay. How do we allocate all of these jobs? We've got to fit within 1200 budget hours and get as accurate as you can. And basically what you're doing now is making it to. When the crew shows up, they know how long the job should take, and they're going to get paid based on how long it takes. But since they've never used budget hours to do the estimates, you'll have to reverse engineer, which is take the cost and work your way backwards. But I'd be pretty confident knowing, knowing your direct labor from last year as a percentage of revenue, and that's probably the percentage you want to use on P4P. If you're just trying to change the system and if you're trying to be more profitable, you go lower. Like if you. 25% last year, like, well, we. I want to squeeze out some margin. Okay, go to 22%, right? Cause you can always go up, right? So you could always do 22%. Tell your crew, hey, go for it. And if they're highly motivated, they might all of a sudden, like, we usually see about 25 to 30% increase. In efficiency. So you can sometimes get away with actually, you know, squeezing out that margin. But it really would come down to can you even put budget hours in these jobs? Many times with the municipal contracts, it's like, hey, you just need to have crews on site for three days a week. Well, it's like, well now the guys can't be more efficient. And so whether or not the contract can even bear budgeted hours is, is the key there.

Yeah, yeah, I definitely think there's room for efficiency improvement because they were even saying it was like the same dudes that would work when it was seven day cycles and 14 days. So I'm like, so is that just like it's possible doing seven days? So they like milk in the clock, like dragging it out over 14 days. So that, yeah, I think that we could definitely get some more efficiency.

And how I look at it too, Dustin, is like, let's say they're at max capacity, quote unquote now. But you could say like add one more day in the week, get a little more out of them. You can also do P4P. You lose your lowest two performers, but the work still will get done. Now all of a sudden you can add two more employees and now you extend your capacity and do 1.1 or 1.2 million with the existing trucks and equipment. That's where the real opportunity is going to be. Like the efficiency gained and then being able to, without increasing capacity of trucks and equipment, be able to make an extra 3, 400,000 in revenue. That will be like, so basically all that revenue, you'll, basically your net profit will equal your gross profit because the only thing you'll have to pay is direct is cost of goods sold most of their labor because you already have the trucks, you already have the fixed expenses covered. And so that your most profitable revenue is between, you know, your top capacity, your max capacity and what you're making now. And so if you can push this up by simply making the guys more efficient, that's where all the profit will be. Like, that's where you get the 5,500. And this is what acquisitions are cool. You can get a 50, $500 a month from the crew you just paid your acquisition for. Zero.

Yeah, perfect. Love it. So in terms of like establishing the base pay, you know, guys are saying like, hey, well this guy, he's multi skilled, he can tree trim and he can, he can weed eat and this guy's great at running the mower. And so like they're trying to like throw these different numbers so I'm like, I'd rather, I'd prefer to just have like everyone's base pay and then performance is where you, you win. Is that kind of what you're saying would be the better way?

Okay, it's definitely the best. It's just a matter of can you get away with that using budget hours? Like if they're not accurately scheduled the, the visits, then you're going to have mutiny. Because the, the Moen guys are like, oh my word, we don't have enough time in our jobs. And the guy who's doing the trimming is like over here just crushing it, making 30 bucks an hour. And so it's really matter can you get the accurate and if you can do that in a way that's equitable or even do a trial period. So what I would recommend is do the budget hours, have it in the system, run P4P without even telling them. Because you can just use even P4P software and just like put the manually clock them in manually, put their budget hours, see what they're at. Know that until it actually hits their paycheck, they will be, they'll be 25 to 30% less efficient. But as soon as you announce the program and say, hey, by the way, Billy Bob, if you would have been on PPP last pay period, you would have made an extra 150 bucks. That's, that's what gets them motivated. And so you could run the numbers in the background and make sure it's fair too. Because that's my biggest concern with these big municipal ones is when you do the budget hours, there's just things are stacked up against them.

Yes. So the way they have it right now, because it's like one of the biggest parts of it. It's like a seven mile Runway. They kind of like leapfrog. So like it's almost like they're both working together on the same thing. So I think that'll slightly, you know, even the scales out. But yeah, I definitely hear you. I'd want to test it out and play with the p for fee P4P software and do one of those dry runs.

I think what happened, Dustin, is you're going to realize that two of your crew members aren't needed. And what happens when you do P4P and they're all mowing on that seven mile course? You'll get three calls throughout the day of people would be like, I don't want to work with this guy. He's slowing us down. Because now they actually care enough because it's affecting their paycheck. So as soon as you level the playing field, like everyone's at the same base. But now when you get that seven mile Runway done, you all get. You're. That's when you're getting paid. And you're paid based upon finishing it. Now every time someone's slow, taking long breaks, taking a nap in the truck, you will hear about it. And so that's the advantage.

And that's what got me excited because again, it sounded like a lot of milk in the clock and like really giant gaps of either it's high performers or low performers and one's really in the middle, you know, and so it's like, get all the high performers.

Yeah, and, and what's crazy is when you get really the low performers, like literally your production does not change. And so if you can get rid of them by just literally instituting the system and then you immediately have an extra two, three guys you can actually get in that are good and increase your capacity.

Okay, this, this is a low level question, but do you have any insurance recommendations? Because, you know, guys are saying a million for liability, a million for auto. Any companies that you trust and you.

Like, honestly, you just want to go to a broker. Anyone that doesn't have one, one specific line is who I'd be going to. Every single state is so different now, even for our location. But you don't even have a preferred vendor for insurance now because it's just so localized. I would say, like, especially if you're going after commercial, you would want to like, maybe talk to some property managers locally because a lot of times they will have a certain minimum requirements. So if you're going to go commercial, they'll start caring a lot more about like, what are your limits and things like that.

Okay, all right. Last topics were marketing focused. So what do you see working as an offer? If I want to go in, let's say a commercial, ready's got a landscaping company. What could I do to get them to give us a chance? Is it, we'll, we'll do a month for half price. We'll do a little section for free. Like how would you see going in and getting a yes from them for an offer?

Yeah, like on the big ones, it's like, what is their pain? Right. A lot of them immediately go to price because they're doing triple net. They're doing, you know, some sort of, you know, whether it be tenants or splitting the cost, et cetera. So what I like to go after is like quality because then they're less price sensitive. So I'm usually looking for commercial properties that just are not well maintained, or I go to the job site or I'm at a mall and I see their, their landscapers literally sleeping in their trucks. That just tells me there's a, there's meat on the bone here that I can cut down on. And there's likely enough cost that is being baked into the current bid that I could cut out. When it comes to municipal and commercial, it is a cost game. And so that's why being efficient is such a huge tool. Because if you can be 25% more efficient, you can be 5% more, 5% less expensive. And when the win the job. And so that's why the margin with P4P, even though it's more difficult with commercial and municipal, if you can get 20 to 30% difference, like in residential, 25, 30%, there's so many variables like are you professional, do you have a uniform, do you have a website? When it comes to commercial and municipal, it's so based on price. And so if you can just get 20, 30% more efficiency, you can bring your price down and be price competitive or even outbid people because they have to bake in the fact that people take breaks in the truck all day long. So I'm leaving you looking for like low standards of work. I'm looking for like uncut edges, bushes that need to be trimmed, that are overgrown, sprinkler heads that are busted and spraying water out into the air. And then like in terms of the offer, you just want to ask like if there's a pain point around quality. You can make an offer on quality, for example, like if there's a complaint from any tenant. Here's what we do. Like 24 hour guarantee, like response time, for example, like emergency response time, 24 hour, you can immediate texting. So for example, it's like, hey, whether you're using like a CRM, like copilot or whatever you're using, it's just a matter of like, hey, we have a texting line directly to the, you know, project manager and within 24 hours we respond to any complaint. Like I would just like revolve all of that and what is their pain point? Because a lot of times they'll say it's price, but it's really like the responsiveness of the contractor, the fact that when the crew shows up, they park in weird spots. Like there's a lot of that sort of thing that can just be solved with software. So for example, a lot of times commercial clients get peeved by like literally just where the truck is parked. It's always different. It's like, hey Mr. Jones, no worries. We actually do a site aerial map for our crew. We tell them exactly where to park. It'll be the same place every single time. And so you're really just trying to like get to know what their pain point is. And usually that is the belly, the belly part, like just getting to know them. Hey, if there's anything that comes up for bid, I would love to be on it. Here's what, what makes us different. I'd be probably revolving around service because your property managers, the thing that you can do for them that they don't like, that the owner of the property doesn't care about is you can do the property manager's job, which is site inspections. So you can say hey, when we're there every week, we don't just do the service, we're actually take a video and send it to you and it's going to be on our client portal or we just send it to you along with. Because now you're doing their job for them. They're making. Because they usually have to do a site inspection for things like broken windows or like, you know, people loitering or whatever. And so if you actually become that where you like, hey, we do site inspections for you on a weekly basis or bi weekly basis, that's like a value ad that literally takes you 10 seconds because you're already at the property and you might already do it for quality control but you share that video with them. And so things like that is like the foot in the door usually, but it is a price game. And so if you can be more efficient, that's ultimately what kind of gets you the contracts.

Okay.

And then.

With a SEO friendly website, like they have zero. So like I guess what can you expect to pay to get like an SEO friendly website for, for local search, you know, like again, any, any input on that? What it would generally cost to get it up and running.

Yeah. So like you can, you can either do like a, you know, build from scratch, you know, fully custom that like a one time build or you can do a subscription. So like I'm completely biased on this because we have long hair web design. So it's just, it's just a flat monthly fee, there's no contract and we do all your SEO, et cetera for you. That's 499. So it's like it's you know, 500 bucks a month or you can usually build one for five to ten grand, depending on what you're looking at. Just regardless of who you go with, the main thing is you do not want to go after residential. Like if, if you're going municipal and commercial, which I would recommend, and not going residential based upon the current business model. You just don't want to be ranking for things like lawn mowing. You want to be ranking for things like property management.

Grounds maintenance. You want to be targeting when it comes to ads and keywords, property managers, HOAs, those are the type of things you actually want to go for. Not, you know, lawn mowing in my area because then you'll spend half of your time at the admin will just be weeding out residential customers. And so your branding needs to just really speak to. This is a commercial operation. And the, the, the balance of commercial and municipal that you're trying to, to breach here is going to be extremely important in the design because when someone gets that site, it needs to scream, we are not for res. Mo for residential customers. We are for municipal. So like, you're going to show yourself on these massive contracts. You're going to show a massive drone shot of you doing these huge commercial projects. And so as long as that's intact, you'll be fine because you're. Anything's better than nothing. But those are kind of two options, usually five to ten grand initial build. We like the subscription thing because every year or two you have to redo your SEO based on what Google's doing and then also like seasonal offers. So for example, when I'm going after a, a property manager for in the fall, like I'm really highlighting things like blowing out their irrigation, their, the leaves are falling down, the trees are overgrown versus the spring. Different stuff I'm highlighting in terms of banners, pictures and video. And so you know that game really well. And so I just make sure that's why we do the subscription thing is because, like, I just know that we need to be updating it consistently.

Love it. All right, well, I didn't know that you guys do that, so I'll definitely be hitting you up. That'll be way easier to hire somebody that's got a playbook for making a website than making it myself.

Yeah, if you do talk with them, Tori has a few in there that just, just do commercial and you can see some of the sites if you just go to lawn careweb, design.com go to our work, you'll see some in there in the portfolio that just Commercial, so you can kind of get an idea of what you like, what you don't like. But I just like, really encourage. And Tori will know. Like, he, he'll know exactly. This is like, we do not want residential. I, I wouldn't even do estimate request forms. I would really gear this towards. How do I get the, the big guy at the city to be like, they're professional. That's what you're looking for. Like, you're doing a bid. You need them to go to a site like, okay, these guys are legit.

Yes. Now, as we expand and, and acquire, is there healthy margins within residential mowing? Is that something I should consider or should I just try to keep acquiring within commercial municipal space?

It really is a different business and like a different acquisition channel. Right. So if you want to, that's fine. Obviously, that's mostly what we do.

So, like, I'm a big fan of it because, like, I, I do have more price flexibility and I can raise prices much faster on residential once I've proven myself to the customer.

I would say with the current acquisition, I would probably stick. If I was you on municipal, then I'd probably branch off into commercial. And then only when I had a really good acquisition that's already doing 800,000 plus would I go into residential. Because your. Your current equipment setup is just not set up for residential. You would have to completely revamp your setup. Yes.

Yes. Okay.

It's like smaller mowers, you'd have to get twice as many trucks because usually anything more than two crew members in a truck for residential, you're not gonna make any money. So it would require an extra probably $150,000 of investment to get a couple crews to do residential.

Okay. And then.

Final question would be software stack. You know, P4P sounds like it's mainly, you know, like team facing payroll. What other softwares do I need to. To like, you know, run the business?

Well, yeah, so like municipal, like, you have a lot of options because you have so few contacts. Right. So like, no, again, I'm biased here. We, I run copilot, so we, we are much more focused on recurring revenue and like a lot of customers. Because, like, we're going to focus on mass text, mass email automations. I mean, this will. They don't care. They're just like, finish this contract, have a client portal, you upload some stuff. It's pretty simple stuff. So like, you could look at copilot, especially if you're going to start going after property managers, you want to have a Database you want to do newsletter to them, text messages, alerts when you're on the property. That, that would be nice. But honestly with. If, if you went in, if you stayed in the channel of 1, 2, 3 municipal customers, you could literally flip a coin. Like Jobber would probably be fine.

Okay. Is co pilot. I mean, I'm a big fan of ghl. Is it built in there? Go high level or it's your own priority?

It's our own stuff. Yeah. We really focus on recurring visits. So like, even though you. You aren't are ideal of the huge municipal stuff, you are visiting there multiple times. What's nice is budgeted hours is baked directly into it and it integrates with P4P. So if you're going to do P4P, that's when I would say, hey, give a look at Copilot at least because it'll integrate with the two. So what happens is the crew, when they log in their app in the morning, they will actually see how much revenue they're going to earn for the day and how much their wages are. And as they finish the jobs, it actually shows them live how much they're making. So it's kind of cool. But I wouldn't be like, I think it could work. It's just which way the business is going to go in the future. Because even down the road, if you have multiple locations in Copilot, you could have. We have what we call command center where you can access all the different accounts from one one account. So, you know, how far ahead do you want to build this for? Is probably the question too. So if you're, if you're familiar with go high level though it might be the move because you only have a few customers right now. It just, it's like, where do you want the business to be? And like, are you going to be more text and email driven, et cetera, you know.

Yeah. Even right now the city submits all invoices through their own app. So it's like we literally would even need to talk to them. Outside of that, you submit photos, then they pay you and you know, so yeah, like, until we get into like lots of communication happening, we don't need to add more than that. I was really gonna get P for peeing a website and. And off to the race as we go, you know.

Yeah. The only real value then you could probably almost use the free version of Copilot because you have less than 50 customers and that would be the dispatching and routing. Like that would be nice. Right. So that Way your crew clocks in, they know their next stop. It gives the most optimized route throughout the day. So if they do have multiple stops or spots in the contract, they gotta go. It tracks their drive time. Like you can see them on a map driving. So you literally might be able to get away with the free version, honestly.

And what would the margins be like in residential if we decide to acquire one of those? Like, that you can at least strive for, I guess.

Yeah, on a million, you can get. You can get to 20%. Whereas with municipal and commercial, most of the time, 10's a good. You know, if you can get 10, you're doing pretty good. And so it's. It's better margin, less price sensitivity. You're also going to grow much slower because, like, I think with your Skill, you get five contracts and you're running a $4 million business. Right. Whereas you get four contracts in residential and you have a thousand dollars a month. So it's just, you know, which way do you want to take it?

Yep. Okay. All right, man. Well, those are all my questions. Anything else? Any other sage advice for somebody that's like, again, trying to learn as much about this business as possible? I'm listening to your podcast. Just consuming as much as I can to devour it and. And learn it.

You definitely reach out to some of the people in Dallas. There's. There's a bunch of really good operators that do exactly what you're doing. It's a. It's a more popular down there up here. Like, this is not the model in the northern part that we use much, mostly because we have so much more of a winter season. So definitely reach out, like, if you can get in the community, like, I have one. It's a free Facebook group, just lawn care business owners. And you're like, hey, is there anyone doing, you know, a million plus in commercial down in Dallas Fort Worth? There'll be several, like, city turf. You might have heard them of them. They're a good player out there. They do about 6 million to several others. So I would definitely do that because you could literally just get a network and potentially pick up contracts from people that don't want certain stuff that you want. And that game of when you have literally just a few customers, you're one contract away from making the acquisition an absolute slam dunk.

Well, thanks very much, man. This is a great call. And yeah, we'll definitely probably stay in contact as we keep going forward.

Awesome. Thanks, Dustin. You have a great day invested. Luck to you.

Thank you, sir. Have a good one.

Take care. You got it. All right. Bye. Bye.