Can Adding More Debt Save this $2M Business? (Coaching w/ Mike Andes)

My name is Mike Andes. I'm the founder of Augusta Lawn Care, where we have over 150 lawn care and landscape locations around the world. Southern Landscapes is a landscaping business that does almost $2 million in annual revenue.

I was very nervous about the whole thing.

Now today's coaching is actually from behind the scenes of an episode we did. And this is the uncut, extended version of the coaching I did with the owner.

Getting pretty light on the bills, the payroll.

I'm going to go over exactly how they can turn the business around within the next 5, 48 hours.

This is stressful. We have less than two weeks worth of cash flow on hand.

It keeps coming around.

Yeah. Okay. And so do you have a line of credit though, as a backstop?

We do not.

Okay. Have you tried to look in to get one?

We talk about that.

We talked about that.

Yeah. I would highly recommend, like, as much as, like, I want to be like, don't need debt, go forward at $54,000 in the bank and you're doing 1.8 million. It's just a matter of like, yes, we can cycle through it quickly, but that would be like a stress, huge stress reliever. It's just knowing that if something crazy happens that sucked, 30, 40 grand, which in a 1.8 million dollar business can go tomorrow, like, we're not, we're gonna be able to hit payroll. And right now, when you quote, unquote, don't need it, is when you want to go with the line of credit. If you get 50, 100 grand.

Even if you had to collateralize some of the equipment that's paid off as a way to just secure it. And right now the interest rates gonna be horrible, but you're not gonna use it. The goal is like, open it up. So that way in the event of something crazy happening, you have something to fall back on because that is literally less than two weeks of revenue in the bank account. And at 1.8, like, I have a very similar size location, so, like, I know that can just disappear like that. That's a truck going down, one crash happening out in the field, and there goes 30, 40 grand. Right. It's the insurance premium going up.

Is that location you have, is that like majority residential properties that you do?

Probably 95%. 95%, yeah. Is this a debate you all have had about residential versus commercial? Yeah, yeah.

I wanted to ask you about that.

Well, that's what I was fixing to tell you is when I first started in 94, you know, I grew it up and it Was all residential.

You started mowing grass in 94. Let's go. The OG so.

And I had probably 30 years, 280, 300 residential houses.

Okay.

And just the, like Adam said, the problems that you have, the, you know, and it was only me and, like two other guys, so I had to have back surgery.

So when I had back surgery is when I kind of joined in that partnership with that other guy.

Yep.

And then it kind of went from there with, you know, five years, I guess four years. So we just made the transition to the commercial.

As far as there's way through your phone calls to the office, way fewer.

Complaints.

But we're throwing around the idea.

Of doing more residential. Okay. All right. I'm just fact finding I have things in my brain that we'll get to, but I'm just trying to get. Make sure I have the piece of the puzzle. So. Okay, what. What's your, like, what's your target hourly rate right now for the commercial work? For maintenance specifically, like a.

You're talking about man hours or when.

You'Re doing an estimate. What are you multiplying the hours on site by, like, the dollar amount? 60 per hour. Okay, that's the goal. Okay, cool.

That's the goal.

Now they're not all there.

Right.

And we. We bought another landscape company and some of those properties, I mean, that's on our list of things to do especially right now, is increase the percentage on all these properties by whatever amount.

Pricing. Okay.

Yeah.

And it's a longer process because it's commercial. So contracts renewal, that's when you would be raising the prices. Okay. All right. Okay. And so 60 is the target. You're probably. If we actually had took a blended average, you're probably thinking more like 55. Probably. Yeah. Okay, that's what I'm looking at. Okay, cool. All right.

In terms of the. The debate on. On residential when it comes to that, yes, there's more phone calls. Trust me, we deal with a lot of phone calls.

But you have that command center.

Yeah, but.

We. We charge at least 80. And so, yes, there is a difference.

Of $80 per man hour.

At least. At least cruise or one or two. Doesn't matter. It's all based upon how many people are. Are in the truck. So if. If there's two guys, I would expect that job to still be done in half the amount of time. So we're still trying to shoot for 80 plus per hour. So. And a lot of them go for more. 90, 100 per hour for residential because they see the value of the communication more than the commercial client, that will drop you and go try Brightview for a year or two. Because the cost and like that's just the game we're not going to win in terms of price. And so we've just seen that the price sensitivity of the residential market is less than the commercial. Especially when you have a bright view competitor. Because like yours never it's so difficult to be lowest bidder. And so many of these bids, especially the big ones, go to lowest bidder first. So even if you lose the contract and then they find out how bad they are, it could be two or three years before they come back to you. And so I'm not, I'm not pushing to say hey, you must go residential, but if you feel like you can only close 50% of the jobs and you're only charging $60 per hour and really what you're actually hitting is 50 to 55, which is more in line with, I'm thinking based on the numbers, that's a hard business to make sense of financially. Like right now at 60%, 60% of revenue is going to direct labor.

Then we have another almost 20% going to indirect labor, which is office estimators, your wages, etc. That business will never make money those with those numbers. You will never make money in this business because it's when you take 50, you know, 60% plus, let's call it 15 or 20%, we're now dealing with 25% of the business, 25% of revenue to deal with all the overhead, all the other expenses not included with labor. Like if labor is literally sucking 70% of the revenue, there's no, there's no room for profit.

Wasn't Brad saying it was like 57% or something?

57% was direct labor. And that include kind of like the split with the, the some of them being somewhat.

Subcontractors and then another 293 of indirect labor. So you could attack it two different ways. Like I think most people, if they just looked at those numbers like the $293,000 indirect labor is where we need to target first. I'm not so convinced of that based on seeing the operation because you need the person in the shop with this much equipment, you kind of need them. You need the part time salesperson because you guys are both not involved as much. You need the operations person because again, you need to back up to you guys. And so my question is of that those wages that were reported, are you all taking a salary inside of that or not?

Yes.

Okay, so that's better.

But still, when 70% or more of the revenue is going out to just wages, that means we got to cover rent, insurance, fuel, new trucks. Everything has to be covered with 30% or less of the revenue. And any business I've walked into that the direct labor is more than 50%. I have never seen them be profitable. Like that would be the first thing. So like when I see 57%, I either see A prices are too low or B inefficient labor. And so this is like where you attack it from either A, do we go for trying to raise prices by going to residential, or we raise prices over time to our commercial jobs. That's one, one lever or second lever is. Is there inefficiencies in our current crew that we can somehow weed out? Typically there's less of those on a commercial site because you have less stop and go. It's like everyone's on site and we're. And we're rolling. But at 1.8 million, if you can make your, if you can make the labor 10% more efficient, you'll get $180,000 in extra profit.

And so there is something to be said about how can we take our current 24 guys and instead of going out and hiring to 26 and 27 by growing the business, how do we go from 24 to 20 and let natural attrition get some rid of some of them but still be able to produce as if there's 26 or 27 of them? Is there better training? Is there performance like PVP type of situation where you can pay them based upon budget, hours completed or you know, getting done earlier, whatever it might be. So those are like the two levers. You either have price to make that number better, the 57%, or it is simply going to be, I need to make them more efficient through training and all the other levers you can pull.

And that was one of the things that we wanted to talk about too is the P4P. How do you do it on commercial properties? Because we've got, say we got one property and they go there five days a week, every day.

How do you.

Because they're not. They can't do any more property stuck to that one property.

So when you do an estimate for a commercial job, how are you breaking down that estimate? Is it a matter of.

Man hours that you're assigning? Like when you do just do the basic estimate, are you breaking it down by man hours at all?

You base it off this one contract, they wanted a crew there.

Yeah.

That was five days a week, part of their contract. I mean, we did basic, roughly off of man hours, but then part of their stipulation was they wanted a crew, crew on, on site five days a week, which we were kind of like, you know, didn't necessarily like, but.

Right. And so when you, when you have a contract like that, say, hey, we want you on site five days a week. What, what man hour rate are you using? Is it 60 in that, in that instance?

I don't remember.

At 60.

Probably 50. Yeah. Okay. It's lower. Yeah. That's where I'm getting concerned with the commercial because you're dealing with Brightview, they're going to be your anchor because they're at 40, 45 depending on where they're at. That's industry standard for commercial. I see 60 being pretty standard. And I actually think if you.

This is just direct on site. Yes. Like if I'm looking at man hours on job site, if you're charging 16 commercial, usually you can get away with it because there is less operational drag in terms of people in the office, etc.

So you're saying their competition is holding at 40%?

No, 40 to $45 an hour. Right. And it's simply because they can operate in such thin margins. They have huge economies of scale because they have, you know, when they buy trucks, they buy thousands. Do you usually hold your salaries at percentage watts salaries? Like for direct labor, I want to be under 40%. So for Augusta, it's like, it's a little different because we do have residential, but we want to be under 40% in terms of direct labor on job.

Site, do you use that as cost of goods or do you put down.

That'S cost of goods? Since it's direct labor, then I'm looking at, okay, is there overhead in the form of office sales, et cetera? And then that's a different discussion. But you know, I think if a commercial, if a commercial company can get to 45%, then you're good. And if you take 13% off of what you're currently paying direct labor, we have a profitable business. Right. The question is, can you do that by raising prices or making your crew more efficient? That's the only two levers you got. And so if we can't make the crew more efficient, and if that's like, we can't do that, well, then, then it's a matter of can we raise prices without losing all of our customers? And then it's a matter of, well, if you've raised price in the past and you lose lots of customers, we then potentially have the problem of should we switch from a more commercial base to residential? Where I know in this market, based on we have people around here in Augusta that are charging 80 to 100 bucks per hour because customers on their $80 lawn, the difference between an $80 lawn and a $60 lawn, well, that's not very much. Okay, well, let's say your cost of goods and your direct cost is 50. 50 bucks. Well, if you're charging 60 now, all of a sudden we have a, you know, 18% margin business. If we can charge 80, we all have a 35% margin business.

If you're charging 80 to 90 per man hour, you find a lot of those properties are kind of more premium properties.

In part. But the thing is, when it comes to man hour rate, it also comes down to efficiency. There's two levers, right? Because if I can do a job for $40, and you're charging $40, but I do it way faster because my crew is more efficient, I'll all of a sudden my man hour rate goes through the roof. And that's the hard part about commercial is if they're saying, we must have you on site for five hours, well, now you've handicapped your crew and yourself from actually being more efficient. Like, why go get better equipment and better crew members and train them up better if you're like, you just gotta be on the property for five days, Right? I don't like that sort of contract because what it does is it instills in my crew that, like, your body on this project is what gets the job done. When it's not like they're paying for a product, they're paying for something to be fixed and solved and maintained. And. And I'd rather just have that as the benchmark and then be able to compete with myself on getting that done as quickly as possible.

One of the fastest ways to improve efficiency and turn around a business that doesn't make a lot of profit is to ensure that the frontline team members and laborers are properly incentivized, to ensure they actually want to work faster and do a good job by having a pay for performance system or some sort of model where their frontline team members actually care about getting the jobs done efficiently. Southern landscapes can make a lot more.

Money, but is there a certain amount per day we're trying to achieve with these guys? Or is it more a matter of, like, I would have to look at.

The, like Each day, you know?

Yep.

Little rough number.

Probably 800 and a thousand.

Oh, yeah.

At least say between a TH000 and 1500 somewhere.

Say a thousand per group. Yeah.

If you look at the math, that's usually it's be probably a thousand of twelve hundred. Right. Because if you have this many crews times it out for like the whole year, it's probably at 1200, something like that. Okay. So, like, it really comes down to you guys, though, because right now you're saying, hey, you got to get back within eight hours, but you could technically just put more in their schedule and expect that to get done. That's gonna put more pressure on the. On the crew, I would assume.

Right.

But you're. You're. You're telling these guys they must get done in eight hours. So effectively, though, if you. If you were able to put 10% more of the jobs on their schedule and then get done within the eight hours, that would be okay.

Yeah.

Okay. And right now, do you get pushback? So, like, let's say your crew. One of your crew leads is like, hey, we can't get this done. We want less. Is that happening a lot?

It happens some right now.

It's easy. It's more summertime when it's, you know, 99 degrees outside. We can only do so much, you know, so. But I mean, this is really the first year that we really, you know, because the crews and all that have kind of. Since the old business, I've got new guys, new crew leaders. So this past year was the first year that we really, you know, made them all salary and everybody was hourly. Everybody from crew leader down.

We were looking at how much money we were speaking, spending an overtime per week, you know, because they were just eating it up.

Yep. Oh, yeah.

Somehow this has got to go away.

Oh, yeah, man. I remember these days. Yeah, you're like, I don't think in the. The current model, you're able to switch to an actual P4Pmodel where everything is based on budget hours and they get a percentage of labor revenue. Because it doesn't sound like you've broken that down granularly enough on the contracts for them to actually show up to a job site. And, like, we're making $200 of labor revenue on this job as part of a, you know, $300,000 project or contract. However, what you could do is really focus on what's the revenue per crew and then compensate bonuses based upon that. I would probably look at it two. Two fold. And that is like overtime, because you Want your crew leader to be limiting that and then overall revenue production. Right. Because. Because yes, salary is good, but I want them to be maximizing their crew on that eight hour crew, that eight hour shift and not asking you for less work. Right, right.

So an incentive for the overall.

So the crew leader right now gets salary. Do they have any incentives?

No.

Okay, that's huge. Because I think we can eliminate a fourth man. I think that these guys can all increase by 15 to 20% if you just have the incentives aligned correctly. To do that, you're going to have to get granular with how much revenue each crew is making. And in order to do that, you're going to have to make sure that you know how much when a crew does show up to a job. Like, okay, this is one of five visits this month. Every single visit is worth X amount. Like this is something you can run in service, AutoPilot or any CRM. Just like Run a report somehow and figure out this number. And even if it was a matter of budget hours, like that's the best way to do it. So if you have a big contract and you're like, oh, there's 3,000 budget hours. Well, if we're doing 100 visits, that's 30 budget hours per visit. Okay, now I can break down how much they actually completed a day because they completed the 30 budget hours. If you can break it down by crew and then give these salaried guys a piece of the pie and these guys a piece of the pie, I'd probably give these guys. Because what you want is tension in these crews right now. You have no tension. They all are fully aligned to making these jobs go as long as possible. Right. And then you have the crew leaders, basically they're gonna their team, hey guys, we gotta ask for like less hours. Like, this is too much. It's hot. Right? And they're all aligned in that. What I would probably do is incentive. Your crew leads on overtime and then incentivize your whole team, the whole crew on revenue production. So even if it was like some way that we could track either budget hours or revenue per crew, and then we'd be giving a piece of that pie to crew team members. But then the crew leader, if they start going to overtime, he freaks out. So you have this perfect tension of like, I need to be revenue producing, but I don't want them to go into overtime.

Because now your team is going to be coming to the end of the month, like, hey, we want more jobs, please put more on our schedule. Because we want to hit certain levels.

What percentage do you roughly figure out to give them those jobs?

You already have base pay installed at certain levels, I assume. Is it based upon tenor? Is it based upon skill? Is it based upon.

I would say it's a combination. Like.

I guess if you base it hourly for that crew leader. For a top crew leader, you're looking at.

Per hour. 22 an hour.

Okay.

Approximately for the crew leads, so probably 40 to $45,000 a year of salary. Okay. And then for the team guys down here, what are they typically per hour?

It's anywhere from, say, 15 to 18 per hour.

Okay. So I would be trying to get at least 10% of their wages. At least. At least. More like 25, if you can get there eventually in incentives.

Because I really believe that by having incentive for revenue and then reducing overtime, that tension there with the. I look at each of these individual businesses, right? When you have someone on salary, and they're directly managing three to four people every single day. And it's not like a lottery of who's working with who. It is a matter of, like, these guys are running their own operation. And if you can make these six guys, like, always think about profitability, efficiency, getting their crew in and out like this, sort of, you can make this 20% more efficient like that.

Getting the laborers to be more efficient is just one part of the equation. I actually want them to understand what the business is doing financially and open up my books. This is called open book management, where they're going to see all the pricing, all the expenses, the financial statements, and actually understand how the business is being ran. Once they have the information of an owner and they're being compensated like an owner, then I can expect them to actually operate and work like an owner.

Would. Tell me the fear behind opening up the numbers to the team.

It's basically like Adam said. And I don't know if they've just got blinders on, but they see all this money sitting there. Well, how come you can't pay me $30 an hour, you know? And that's when I'd have to break it down to, like, showing them all the numbers. But really, I really want to be transparent with everything. So I think it's just we need to do it, like.

Yeah, I guess one of the fears would be, you know, you don't want them to go find another job. Like, oh, are y' all tight on money? Which we're not. You know, we're not struggling, struggling. But if it's not, you know, they Think, I mean, it's kind of nice now to have. Well, you have employees who are like, man, you know, they can pay me a lot more money if I do more.

They can afford for me to sit in my truck for an extra hour today. Because there's a lot of money.

Like them having information. So if you want them to think like an owner on the job site and actually think this way, they need two things. They need to be compensated like an owner. That's the incentive program. And then secondly, they need the information of an owner, and that is open book management. Because if you all went on the and did a crew lead for one month, I guarantee you'd be 50% more efficient than these guys. The reason is because you have two things. You're paid like an owner, 100% commission, and then you're basically, you have all the information. You know, there's only a week and a half worth of revenue in the bank. And yes, right now, if they saw $54,000 was sitting your bank account or in the business's bank account, they'd be like, wow, they have a lot of money. Okay, let's break that down. That goes out in payroll every single, every single pay period.

And I kind of have gone over it in our weekly meetings of, you know, when this, when y' all drive the mower off the side of this hill and it cost me, you know, two grand to fix it. That's. I can't give anybody more money because you're tearing stuff up.

Yeah, unfortunately, the.

Idea when they hear that is he wants more money. Right. They don't have complete information. They don't know, like, this is, like, this to me is a big, big problem. $50,000 in the bank on 1.8 million dollar business. We are literally a week and a half away. That's like, that is a, literally a matter of like payment processor not going through correctly. That is a matter of an insurance claim. That is a matter of insurance premium going up. That's one truck getting in an accident. And when you actually bring the gravity as leaders to let the business get to a place that is that fragile at this size is.

Not being a good steward of what we've been given as just leaders. Right. And if I was just talking to you one on one, that's how I would say. And it's not like any, you know, bad. We have a $1.8 million. Like, that's something to be proud of and there's something there. But we have to, in my opinion, open the books of the team.

I got a question. We did talk about the line of credit being one of the most important things, especially during the low season. You let every one of your members know everything about your numbers.

100% they understand it. Oh, I sure hope I try to get them to understand it. So if I just show them a P and L, they're not gonna understand. A lot of these guys, they don't like math. They see a spreadsheet and they'll run 100 miles away. So I break it down as simply.

As possible, open up your books to your guys.

You're showing them everything.

You're not saying, here's the utility.

Oh, I show them the. The profit and loss statement. I show them the balance sheet. I show them everything, and then I try to explain every single line to them. The reason is because I truly believe having all the information for them is the most important. And there's two reasons why you would not open up the books. One, you're losing money. And to your point, you're afraid that by sharing the numbers, they will be afraid, like I should go look somewhere else. Because these guys are literally. They might not be able to hit payroll this week.

The older profit loss doesn't show cash. It shows efficiency. And I do agree with that. You know, at a certain point.

Yeah.

I was just curious about. I mean, your bottom line guy knows everything about your company.

Yeah. Yeah. And the reason.

In one location. So, like my, my first location only has about 20, 25 people. But then like all my employees, I don't get this 150.

So 150 can pull out and know exactly the percentages.

Yeah. Like even the media team, they see the profit and loss statement. So every single business sector, whether the software or the individual locations or even the franchise, like, I share all the numbers.

So just out of curiosity, what are the goal? What are your goals of your company? You're 100% owner in your company.

Yeah.

What is your goal in your company?

Maximize profit. Make sure that every single person on that team is able to get forward in their career, whether it be internally or moving on to something else. Yeah.

So that's your goal.

Yep. Yeah. And so are you an S corporation? I have multiple S corps and a lot of LLCs, usually wrapped up in them. Cause I have multiple locations that I like, actual mowing locations. And then there's like the franchise, the software, stuff like that. But yeah, like here's the thing, like I said on the side of like, not making enough money, that's why people don't do it. They're afraid people are going to be worried.

And on the other side it's like, well, what if we make a bunch of money? Then I got to show them how much cash I have because that's the position I'm in now. I go into a group of guys where I see them maybe once a month now, maybe twice a month for 30 minutes. I go into that location and I got to sit down like I have. In three weeks, two weeks, we're going to have an off site meeting. I'm going to go over the numbers with them for last year and I'm going to see hundreds of thousands of dollars in profit. And they will have seen me. Some of them I wouldn't have not yet met because they're going into spring rush and they're hiring a bunch of people. That's a different situation. So these are the two reasons why people don't share the numbers. Either A, they're going to see all my money and think I'm like super rich and they're going to ask for more money. Secondly is they're going to see me how struggling, how bad things are and they're going to get worried and leave. Here's why. Neither of those are good reasons to not share the numbers. If you're not doing well like this right now.

I truly believe that if you did that, if you shared your numbers with 24 guys, maybe one person leaves because they're concerned about how bad things are. I think it's a rallying cry to make efficiency 10 to 15% more like that. I guarantee you if you open up the books in the morning and took a 30 minute meeting and actually explained things so they understood and I can go through how to do that. I guarantee you that next week would be the most efficient this business has ever been in terms of the shop time. Things will get done faster. Your crew leaders will be getting back sooner. I can guarantee it because now they have complete information.

The thing is on the other side, like, well, what if they see all my money? Give them a piece of it.

This is what the incentive program is, right? So I'm going to go stand in front of these guys that they see me once or twice a month for 30 minutes. This one look, the first location, hundred thousand dollar profit, that all goes straight to me and I'll tell them how much I take out of the business and they'll see my salary. The way that I explain that to them, the way that I rationalize that is I'm giving a piece of all of that to you. So that way we all are incentivized in the same direction, make more profit. Because if this business makes more profit, you all make more money, I make more money. And therefore we all get along. We're all incentive is selected, incentivized in the same direction. Oh, and by the way, if there's a bunch of profit and like, tons of it, I'll add benefits, I'll add more paid time off, all the medical. I'll add gym reimbursement programs, a whole bunch of other stuff. We'll do that assuming that there's a bunch of money. And guess what? I'm happy to do it because there is a bunch of money to have. And if the business had more profit, had more cash in the bank, if there was $540,000 instead of 54,000, you would probably be a lot more inclined to give incentives, give out bonuses, give out, give out medical benefits, et cetera. Like, let's start a 401k program.

And you could literally have benchmarks of cash on when you install certain incentives. So Augusta, Georgia, the location, that's close to here, when they started with us, they had like 100, I want to say, $150,000 of debt. And they were really concerned about opening up their books. They're like, we're going to literally show these guys we are less than this in revenue or in cash in hand, and we have $150,000 of debt sitting on the books. That's bad debt. I said, put a thermometer up in the office and literally just have, as it gets to certain levels, what happens to their paycheck? And so when they got to the bottom, they had a big celebration bonuses. Everyone's base pay went up. But I guarantee every time the guys came in, they were watching that. That number. And when they. When they had off site means it meant something. Because, like, if there's 30 grand at the bottom line, that means 30 grand goes to that. And if we can get that down, we're all getting a piece of the piece of. And you get a rallying cry. If you're doing poorly, you band a bunch of people together like, hey, we are the underdogs. This is really bad. But we can turn this around if we do X, Y and Z. Oh, and by the way, in asking for you all to do X, Y and Z, I'm now going to give you a piece of it because I want us all to be on the same page. And if we win the business, I want you all to win too. And here's how much more money we will make. And here's what I'm willing to give you every single month if we hit these certain targets so that we can get out of this.

Now, showing them a P and L isn't going to do you anything, right. It's got to be broken down into, okay, guys, last paycheck or last payroll. We paid out $48,000 in the bank. We have $54,000. Here's the bank statements, here's payroll.

We have less than one payroll's worth of revenue or pay one more. One payroll is in the bank right now. Right now. Here's the P and L. Our insurance last year was more than the money in the bank. Our fuel was five times what was in the bank. And you start going through it with them. So one way we did when we first opened up the books, I took a dollar bill for every $10,000. So in your case, you'd have $181 bills. And you literally go through the P and L with them. But to make it like reality, it's like, okay, so you are fuel, $200,000, twenty dollar bills. You are insurance. Okay, they're six dollars bills. And you literally break it up between every team member. And now they all of a sudden see when you get to wages for your business, it's gonna be 70% of that stack will go to somebody. And in your business right now, you're gonna get to the bottom of this stack and it's gonna be a few dollar bills in profit. And you're gonna hold it up and you're gonna say, guys, the whole goal of this, of this business is to get the dollar bills in your hands back into this one so that I can be able. Because out of this is all bonuses. Out of, out of this is how I pay for medical benefits. Out of this is where I pay, how I'm able to make this place work. And so come back next week as a team. I want you guys to take your individual expense line item. Cause you have 24 guys, you're gonna have about one expense item per person. I want you to come up with an idea of how we can make the business more profitable and efficient and get one of your dollar bills back into here. And then they're gonna come up with 24 ideas of how to make this place more efficient. And I promise you, they know where all the leaky holes are. And so that's what we did. Because I came to the bottom, I had hardly any money and so I'm not saying something like to make you guys look bad. I did this. And it's a little bit humiliating, but it made a lot of sense to them because they see physical dollar bills like, whoa, that's a lot of money that just went to wages. And okay, out of that stack, we are literally this much out of profit. Like, we are what, a 2% profit margin business? That's kind of scary. And then what we did the next week, we had another meeting. We had the same projector on, had the numbers up, and I said, okay, give me your ideas. And they started firing them off. Everyone voted on the best idea. Guess what it was. Mike should not be driving a truck. He should be driving a car.

So I demoted myself from truck. Nice F250 down to a Honda Civic because that was the guy who had fuel. He realized that the estimator doesn't need a truck. They just need a car. They're just driving around.

And so I did that because there was five or six other ideas they also came up with that also saved the business money. Everything from, hey, we shouldn't be cleaning out our trucks. What we should do is have a kid that's cheap on the weekend so he's not overtime come in and clean out the trucks. That happened. Okay. We should not be paying him to clean out the trucks. We should have a rag and a.

Spray bottle in every truck that's installed and. And is the responsibility of every crew at the end of the day to wipe down their truck inside and out. All right, let's do that. Oh, we have fuel on site. This is again, every single person. These are all ideas from the crew how to sharpen the blades faster. That came up from that one meeting. There's like four or five things at that location specifically. But we still do to this day because that first meeting when we did the cash and then what we did is the reason I mentioned the truck one is cause that's who got all the stack of bills. So I was like, hey, let's get out as money as we can back in here. And then I took all the cash and we voted on who was the best and he got it. Of course I have to be demoted from my truck. But opening up the book because again, we were talking about pricing and efficiency. That's the two levers we got. If we can't pull pricing and we're not going to change from commercial to residential, then it's a matter of we need to go to efficiency. And I think you get 10 to 15% by opening the books and another 10 to 15% by giving incentives aligned with profitability.

Yeah, I mean, we've talked about it. We just got it.

So we would need to show them the overall, like P and L. But plus in order to incentivize each crew, really show them their efficiencies and so they would see how to make their crew more efficient. Try to ask for more properties.

Yeah, and honestly, like, what I don't want to happen is paralysis by analysis. Because if you can't break down these numbers by the crew, if that's going to be a daunting task.

No, that's not.

It's not. You think that's possible? Okay, then like, then it's easy. Because what you do is in that first meeting, even if you don't have the numbers yet, I'd open up the books. And so what I was about to say is still open the books and tell them you're working on trying to get a split down of revenue by crew so that you can give incentives based upon the hardest working people. And you can simply say this because this is what hard working people want to hear. We want to make it here that the harder you work, the more money you make. And right now that's not how it works. It's just based upon who asked for a raise. And just be honest. Like these are the things that they know and no one talks about. Because this is what I was going through before instituting P4P is whoever asked for a raise if I needed employees, guess what? They got it. If we didn't really need employees, they didn't get it. That's not fair. Like I guarantee you, without even, you know, any hourly wage company I go into, I can guarantee you it's not fair how you're paying your guys right now. There are guys making twice as much profit for you that are making a dollar more per hour, or worse yet, a dollar less per hour because they didn't ask for a raise or whatever your most loyal, most profitable employees could potentially be making as a crew leader, 22 and on the field, 18, $4 more per hour and yet producing two to three to four, five times as much profit for the business. Yeah, that makes no sense.

And if you're gonna get aligned with them and they. Because they don't think it's fair either. And guess What? Out of 24 guys, they know the five guys they want to cut tomorrow, but they're not incentivized to cut them right now. They're not Incentivized to be like, hey, Adam, these guys in my crew, if you cut them, we can still do all the work ourselves.

And you're like, fantastic. I'm going to put an incentive based on how many crew members are on your team. So if there's less crew members now, all of a sudden the benchmarks for how much revenue is produced just went down for you to hit your bonuses. I guarantee you, guarantee you, you have crew leaders saying, hey, I want this guy axed. And don't worry, we will get all the jobs done.

Right.

Guarantee it.

Yeah.

If you put incentives aligned with per crew revenue.

I think if we did that and then, I mean, we know our route density too is needs to be a lot tighter.

As we grew, we took properties all over the place.

Yeah.

And I know we can be more efficient and make more money than that.

And this is the thing too. You can like, there's structural things and then there's like spreadsheet math. This is spreadsheet math. This is like a meeting. This is like, let's put together a compensation plan. Let's like figure out revenue per crew. That's like the lowest hanging fruit. Because you can literally do it if you really wanted to in 24 hours. In 24 hours you could be sharing numbers, have a comp plan based upon crew revenue and you could be rolling. That's like lowest hanging fruit. Raising prices on commercial especially, that's new contracts. That's meeting with the people, stakeholders, blah, blah, blah. Do you have to address the scope of work? So I go after the low hanging fruit first, knowing that when I raise prices, I'm going to use that as the mechanism to fix things like route density. Because I'm not going to blindly raise all my prices. I'm going to be like, which customers do I kind of want to cut anyways? Raise them all first. Okay, no one left.

Let's raise the price on everyone else and we. And if they leave, who cares now?

So use price increases as a way to like fix our density. If you raise price enough, eventually they'll leave. But I'm willing if they, for all we know, we raise prices 30% and they're like, we still want you guys. You guys do a great job. We will drive an extra 30 minutes for an extra 30%. Right.

So I think it's like a two prong approach. Number one, open book. Open up the books. I know it's scary. Trust me, it works. Like right now, the scare being scared of like them leaving or them thinking you have a Bunch of money. You can show you don't have a lot of money. And now all of that thought process of, oh, I can just chill out. Because, you know, Jody and Adam, like, they make a bunch of money. They have the fire department plus this. They're, like, making gravy. They're gonna have this big retirement thing that goes out the window because they actually see it. There's not enough money in the bank to pay everyone's payroll next. Next week.

And that should. Yes, that should freak them out. And you can be honest with them and be like, I'm not proud of that. I don't think it's really right that I have ever. All of. All of you guys here, and we can hardly make payroll next week, and it will get quiet. If you've ever seen a team meeting when guys are checked out, that will not be that one. They'll be locked in. Like, you have everyone's attention. And then it's like, but here's the game plan. Like, this is the rally cry at, like, halftime when someone's down 20 points. This is what they're talking about. It's basically this, hey, we don't have the money in the bank. Let's dig deep, boys, and let's go get them. Like, that's what the coach needs to do. And as an owner, especially in your role, where you're not in daily ops, as much as, like, your role is the coach, and that's what a good coach will do. They have to come up with something at halftime to turn things around, you know?

And all the Hispanic guys who don't speak English will know something serious.

Yeah. So, like, out of the 24, is that, like, half of them that don't speak English?

Yeah.

Okay, great. So now you just got to simplify things even more. Right. So it's a matter of profit and loss. Needs to be, like, baked way down. So the dollar thing works good. Really good. Right.

They can actually see.

Do you have someone, like, that can translate?

Yeah.

Is that what you do at team meetings?

Yeah.

Okay.

We have two guys who kind of translate.

Yeah. So I'd probably brief one person on the meeting beforehand so they're not shocked, and then ask them to do a translation for the whole thing. And then even if you need to practice with them, just make sure it's smooth because it needs to come from your heart. And, like, if there's some tears shed, great. Like, be authentic with them. They will be able to know whether or not you are doing this for you. Just want to maximize Profit and you don't care about them versus we want to actually have a place. And back to his point about like he amassed me why the business exists, the secondary thing in terms of making more profit, the reason that exists is cause I know by making more profit I create opportunities for all of them. And by creating more opportunities for them, second thing happens, they get, they move forward in their career whether it be internally or they move someplace else. And you talk to these six guys, these crew leaders at a meeting like this, separately, do you have separate meetings with the team leaders?

Yeah, with the crew leaders and you know, everybody.

Yeah, like I have separate meetings with their crew leaders more often because they are acting right now as like basically independent businesses with their crews. And those ones, do they all speak English? To some degree. Okay. So those ones, I'd be digging in deeper with more numbers and spreadsheets because now their pay is going to really be affected based on their crew. But if you can affect them, you're going to have a 4x output because they have a crew members. But like.

I would just really. Man, we get extra 200 grand a year just by opening up the books. Yeah, that's, that's 10%.

That's it's savings and it's, it's increased revenue. And I truly believe you'll get as much as you're currently getting done now with 24 guys, with 18 if you open up the books and then you give incentives around making more money and then you give a clear plan in terms of. Okay, Q1 guys, this is what we're doing. We're making this plan. We're going to make sure everyone's tracked. We're making sure when the business wins, you guys win.

How often are you showing the numbers so they know how often they're on track?

Every week. Every week? Yeah. For P4P, they have a daily scoreboard. But in terms of like seeing the businesses numbers every week and we make it an optional meeting, they don't get paid for it and they can come show up.

Look, paying people by the hour is super easy, super basic, but in my opinion, lazy. Instituting something based upon performance when it comes to compensation can, can be a little bit more challenging to explain to team members and take more time to track. There are certainly challenges also associated with getting the team members to actually care about the numbers of the business and see how their job affects those numbers. But once they actually understand the numbers and there is open book management, they'll actually come up with meaningful solutions to become more efficient. And increase their pay for performance.

When it comes to legal things, hey, there's a thing. I have no legal department. If I can't make money, I need to focus on making money first. And the reason this business exists is not to be legally compliant. It exists to make profit. If we make enough profit, we will become legally compliant because we will put things in place. We'll have an advisor tells us, you must have two people. Right. But let's focus on making profit.

That's more how we operate. Yeah, to that point, we do have a process, But I do agree that's a bigger one.

This guy needs to be gone because you.

They know the dirt, right? These guys. Honestly, if a frontline team member was like, Was saying something about someone, like, they're always lazy. That's why we're not going at the scoreboard. I can't hit my bonus. You know what you're do? Go talk to your crew lead, tell them what you're seeing, and then have the crew lead come talk to me. Everything in terms of. I would personally make sure that you give a lot of responsibility Crew leads in terms of who is good, who's bad, blah, blah, blah, blah. Because.

They feel like an actual crew lead. If you tell one of their people that they report to them, hey, I need you to go back and talk to your crew lead and say whatever disagreements you have with so and so who's lazy, and the crew lead needs to come talk with me. I guarantee you're gonna have four people like that within the first few weeks.

Yeah, I definitely agree with that.

Four people is 100 grand. We just made $100,000 by opening up the books, Doing a little bit of math in terms of how much revenue per crew makes and then giving them more money. And they won't care because of the difference between them making 15 bucks an hour and 18 bucks an hour over the course of a pay period, that's 250 bucks. That's $1,000 a month. They will come in, they will make sure they rat out who's the lazy people. They'll also tell you exactly which contracts maybe raised prices. And all of a sudden, your f crew might become your b crew because they're money motivated and they're willing to cut people on their team and do the same amount of work.

What percentage increase.

Is another dollar? Or how much revenue would be like, how do we need to figure out that out?

Well, here's the fun thing. When you're paying people by the hour, Every dollar above a certain threshold is Pure profit.

Because it's literally a matter of you're paying them the same amount no matter what. Let's say a crew rate now makes.

30 grand a month. Pulling a number out of my hair. Say they make 30 grand a month. If they made 32,000 right now, it cost you exactly zero more. It costs you a little bit extra in fuel to drive them around and buy a little bit more maintenance on the trucks. But it's effectively probably 70 to 80% profit margin. Any incremental dollar you can get above a certain mark. That's why I know moving the revenues but on these guys by 15 to 20% will literally mean 10 to 15% of straight profit. Because you're on hourly. Like for us, when we raise prices, when we increase efficiency, we give 33% of it to the crew.

Right. Because they're on P4P, they get a percentage of the revenue. So personally, I would be. When you start looking at the numbers on what these benchmarks are, I'd be trying to give at least 30% of it to the crew. So if they. If they go from 30,000 to 33 grand, I'm willing now give a thousand bucks to that team.

Because they're the $2,000.

So if you. It sounds like you're very confident you can break down that. And that. That's surprising to me. And if you're able to, fantastic. If you. I really do believe in 48 hours, if you can break this number down, come up with a comp plan around this. And again, from a legal perspective, it needs to be a bonus. Do not change their actual hourly rate from 15 to 18. You have all sorts of payroll issues. Have, hey, here's your base. Everyone's now getting paid this. But now it's going to be variable based upon how much revenue you're making. You're going to run the math and figure out exactly how much for the past 12 months, what each of these crews have been making per month. And then you're going to set the thresholds for them to start making more money just a little bit beyond that. That's how we become profitable immediately.

Because you're going to have some that are literally double what other crews are making.

And so the question. This is a matter of. And this is what you share the team. I don't think it's fair. There are people in this room that work their butts off every single day hustling. And guess what? Most of them think that's them. Let them think that. And then the same person working the same amount of hours, gets half the amount of work done, takes 58 breaks, four smoke breaks, 10 stops to the gas station, and somehow makes a dollar less per hour than the person kicking butt all day long. I don't think that's fair. They're all, you're gonna go. Bunch of people, yeah, boss, let's go. Because they all are going to assume mostly that they're the hard worker dude. And if they don't believe that, they will leave like that. Because they say, oh, things are changing around here. And all of a sudden they're not gonna be able to just like, sit around the truck. Because if they're sitting in the truck right now, guess what they are making. They are incentivized to do that. It's like having a baby. It's like if you just incentivize the baby every single time they eat the Twinkie, they're gonna keep eating the Twinkie, right? It's just like human nature.

And so, like, the goal in all of this is like, how do we incentivize the team? The same way you're incentivized. We want to make more profit. Great, let's make sure that they want to make more profit, because eventually the business become very profitable. And then you start giving them a piece of the profits. You start giving a piece of the profits every single quarter. You start seeing that on the thermometer. Now, it's not like debt, debt, debt. It's like, how much is our cash balance going up to where we can share money.

Now on that thermometer, would you do profit or cash?

The first thermometer I'd probably do in terms of if that's the direction you want to take, is debt going down to zero with a massive something at the bottom. I'm talking big. Because if you could push a button right now and pay off, let's call it 150,000 of debt, you'd probably give me 10 grand.

So it's a matter of like, okay, guys, everyone here is getting $1,000 when that hits zero. In order for that to hit zero, though, we need to get this cash balance to be one month's worth of revenue. Every dollar above that will go towards that. So at the bottom, you're have your cash balance and you're going to have how much is in debt. It's going to take us three to six months probably to get enough cash in the bank to actually start chipping away at it. But the bottom of this, guys, based upon how long you've been Here you're going to get x amount per month or whatever. However, how you want to break that down and. And there could be people making two grand in profit sharing based upon our bonuses.

So you're recommending the cash balance be.

One month of revenue. I'd say that's like your safe. Like the safe.

They can also line Credit.

Oh, yeah, 100%. Yeah. Yeah. Like, line of credit is like, I.

Sure hope I don't have to use it.

I never want to use it. But when I need it, it's not there. Comes all the changes too. Like, I default to violence. Do it harsh. Like, do it like, there's a way to do this over the next six months, next year, or is like, within the next 48 hours, we're going to determine how much revenue for crew. We're going to determine how much revenue per employee. We're going to create a scoreboard, we're going to create an incentive program around this and we're going to get done. We're going to open up the books and we're going to make some mistakes. But take violence. Like default to violence. I really do believe in 48 hours, this thing gets turned around. Like, I've never said that before. Like, I really do believe that because I think there's so much being left on the bone right now in terms of incentives, misaligned.

Crews not being incentivized the same way you are. There's just so much sitting there. And I know it's scary to open up the books. I know that. And you're gonna make some mistakes in the first meeting. You're saying something stupid or they're gonna ask a question. You're like, I don't know that. That's fine. Like, I don't know that. Next team meeting, I'll have an answer for you. You and I'll figure out why that number is messed up. And that's why a lot of people won't share their numbers either. They're afraid of ask a question being asked. They don't know. Like, you're human. Be a human. Be like, hey, I don't know the answer. I will find that out for you. I will contact Brad. I will contact someone in the office. I'll do whatever I need to do to get the answer for you. That level of transparency is what you would want as an employee. You want to know what's going on.

And we have a good group people of guys. I think if we can explain this to them halfway decent, they'll actually be excited. We have, like, we've really cut out some bad eggs that were kind of poisoning us. So the people we have now, for the most part, especially our crew leaders, are.

I think that was one of the questions one of them asked is, well, Mike, Andy's coming. Is he going? Are you talking about franchising?

None of the guys want to work for anybody but you. Good.

No, no, we're not. He's not coming here for that.

Yeah, no. 100%.

What?

Well, like, that's indifferent. Like, the matter is, especially if they're saying things like, they want to work for you, you got to make this talk, right? Derek's gonna be there, and he'll support. And, like, I would definitely bring him in the loop before all of that. That happens. But, like, you need to make this. This. I would have no notes in front of me. I wouldn't stand behind anything. And I would just talk from your heart. And I'd be. I personally would share more intimate details about what happened last year, how much struggle that's been for the business and how you don't feel that it's right that this be the cash balance and how that makes you feel. They'll connect with that, and they'll see reasons why this needs to change. And then you're going to come with, here's the game plan, right?

And don't put any of it on me because they, oh, this guy comes in there all fired up and stuff. No, no. Like, this needs to change, right? Here's what we can do with this business. If we had profit, we aren't hitting. Like, we aren't doing this, guys. Like, I feel really bad that people are making 15 bucks an hour here. Like, if you say that to a group of guys, you have everyone's attention. Like, I want to be able to put $300 on your bonus, but I can't afford it right now.

Like, I still remember team meetings where people were asking for company phones and company trucks. I said, I can't afford it.

And so if you don't open up your books, you can't use that. You can't actually show them that. And, like, yeah, I cried. It's embarrassing. But they can see just how genuine you are. Like, how much it means to you. It is not right for a leader of a business to allow their company to be this low in cash balance. It is not being a good steward of what's been given to us. All those assets, all the trucks, all the employees, 25 families plus. Like, it is not being a good steward to where we don't have one paycheck in the, in the bank balance and then we absorb the hit because that hurts and then share that with the team. And yet 30 people going the same direction, we solve that within a matter of a week. It took me a long time to realize that just being open and transparent about we want to make money is the right way to do it about business. Because that's why they're there. They're there for a paycheck. And then if you can add on all the other benefits of like, well, we're trying to help this charity or we're trying. This is why we are in business. And like, for me, I'm trying to change the level of professionalism in the landscaping industry. It's a big, lofty goal. But if we don't make any money, we'll never get there. Right. And so just one of those.

Way down the road. Way down the road. I would like to eventually, but way down the road. So cool. Any other, like, hard pressing questions? Because I know that we're going to want to get shots of the crew working and things, all the fun stuff, but anything else?

You said not to go with co pilot yet, but we're already like diving into it.

I'm working hard to.

Yeah. If you're deep into it and you're not using all the complex stuff, you'll be fine.

I mean, we're basically used. Billing routing. Yep, that's it.

Yeah. Like, I think, you know, obviously I believe in it long term. I think that, that when I look at your business, that's not the first thing I'd be looking at. Like, you must change your software. I only know that's going to move the needle as fast as what we just talked about. Moving the software can take months at the size of business to really do it well. Yeah. Right.

A lot of the automations and upsells and things like that.

Yeah.

That make it very easy. And we haven't done hardly any of that stuff with service autopilot just because there's so many. The more I tried to add on with that, it just.

We just.

I just ran into problems and problems and problems.

We just stopped. Yeah.

Basically use it for the basic level.

Yeah. Like again, obviously I believe in the long term of copilot, that's not going to be a thing. That in the next week we can like immediately add $200,000 of profit to this business. Right. So I would just say like, sure, great. Keep chipping away at it. Feel comfortable when you're when you do the transition, you know, I'm moved all my business over to it. So obviously think it can sustain the size of business, but it's more a matter of this will. Will ultimately fix the problem more faster, etc. Software, yes, it should make you more money, it should make you more efficient. It's not going to solve problems, right. It's not going to get you, your crew leaders to like tell you who they want fired off their crew. It's not going to take us from 24 guys to 18 in literally one week and same amount of revenue being produced.

So a lot of times people will dildly with things like software when there's structural issues like this that need to be solved.

Not worried, but I guess intimidated by figuring all that out and doing it right. But excited too, because I think absolutely, if they're incentivized to do more and then make more money, then it's going to be good for everybody.

That's what I like about Mike, is.

That you can tell he cares. That's that's the winning ticket.

To be able to get more leads and to add more, you know, properties to each crew is they have to see the numbers and want to be able to make more money. They've got to see all the numbers.

I get the benefits of it. Jody gets the benefit of it. We'll take casualties as we go.