Customers that Bankrupt, Raising Prices, When to Buy Land

Welcome to the Mike Andes Podcast where we discuss the ins and outs of owning a small business. Today we have three exciting topics for you that are super relevant to running a business during a recession and how you can actually take advantage of that. We're going to look over how to improve cash flow and get money from clients fast and efficiently. Then we'll discuss raising your prices while avoiding long term customer fallout. Lastly, when is the right time to buy land for your lawn care business to operate from? You can find all these video versions on YouTube under Mike Andes, but let's jump into it and hear what type of clients can actually make your business go bankrupt. Absolutely something to look out for. Here we go.

We're going to show a video from actually a Q and A that we did last weekend. And it's about cash flow.

Because if you believe it or not.

You can actually have a profitable business.

That goes bankrupt and loses all its cash and goes out of business.

Not because it's a bad business model.

Or they're doing a bad job of.

Their customers or invoicing or whatever, but.

Simply because their accounts receivables keeps going up. People are not paying them and they're.

Not collecting the money that they've earned. So this is a good question and.

I think something that a lot of.

People struggle with when it comes to cash flow. And so let's go ahead and dive.

Into some of the things that you.

Can do to improve your cash flow.

Get money faster.

And it's not just get credit cards. There's other things that you can do to be able to increase your cash flow and make sure that you're receiving the money faster than it is going out the door.

What's up, Mike? My name is Anthony, so I am born and bred. My dad was in the landscaping business prior to me, so pretty much all I know he about three years ago, he, you know, retired. We worked out a deal where I took his company over, which was about 65 accounts. So I was cutting, you know, maintaining those lawns, me and one employee, obviously not too much overhead and expenses. Last year, at the beginning of last year, I purchased another company, bumping me up to around 215 accounts. So now I have five employees. And my question to you and obviously a lot of overhead and expenses that I didn't previously have and I sort of did go 0 to 100. So it's been, you know, a struggle. But it's, you know, what I do and what I know. So I'm definitely not complaining. But my question to you Is, do you have any advice on cash flow? Because I. I use Aspire for my route sheets, and I'm collecting a lot of data. Obviously, I use QuickBooks as well, so I'm collecting data there also. And my numbers are all pretty good. My profit margins are nice, and I'm happy with the amount of money that we're generating. It's just getting the money in that seems to be my biggest hurdle.

Okay, so a couple of things. So you're saying getting more money in is the problem right now, or is it when you say money like revenue or profit?

No, just cash flow. I just need cash flow. Like everything. The profit margins are there, the revenues there. It's just keeping up with the, you know, customers that are not paying, holding out on payments. And obviously I have, you know, a decent size not to come up with every month for payroll. So that's. That's my biggest struggle right now as far as operations where, you know, we crush it. You know, we. We really do. We have a great team here. But it's just get. Getting the money in. I'm always owed so much money, you know, out on the street.

So a couple things. It's very common this time of year to be in this situation because we're kind of going like most money in home improvement, almost all of it in terms of profit is made in the second half of the year. So this is usually like the kind of the. The. The bottom trough of profitability or cash flow, right. The next six months, we kind of collecting on people that were overdue and all the rest of it. So here's what I'd say. Here's the really easy one that most people do, and it's something that's simple, is get a line of credit, right? That if, you know, you're profitable and just a cash flow issue, getting a credit line of credit will help this problem, and then you'll pay it off in the second half of the year. That's like the simple, easy answer. Another. And if you have good tax returns, you're gonna be able to get a line of credit pretty easily.

Right.

If you can show good balance sheet in your business, et cetera. Go ahead.

No, I was agreeing. Okay.

Yeah. And so that's like the easy thing. Then you gotta look at further beyond that.

It's like, okay, what actually operationally can.

I change to improve the cash flow? Is like, okay, do I make sure I have a credit card on file? So that way someone cannot go to collections. Like, they don't. It cannot not pay Me, can I require them to have a card on file? Can I invoice them every week or every day instead of every month? Those are the more operationally things that you'd have to change your response to those. What's that?

So, okay, line of credit. Yeah, obviously I thought of that. Now what I was afraid to do is actually require people to.

Give me a credit card or have some type of car payment on file. And obviously reason being is just, you know, that my expenses are so high if I get pushback or they don't want to, you know, I'm just nervous to try to, you know, back them into a corner like that. And then they, they say, oh no, I'm going to go to the other guy that I string out for another two months. And you know, that's pretty much my fear.

Let me ask you a question. This question could backfire on me.

Out of all of your bills, let's say you have 100 bills. How many of them do you write a check every single month for versus having a credit card on file or bank? Like, ach.

I understand. I. Dude, I know. But this, it's also, this is the business. And it comes down to, it's like a supply and demand thing. There's so many, everybody in their brother's a landscaper. So, you know, I'm, I'm easily, I do provide an amazing service. We show up on time every week. Nobody ever has to worry. But in the same breath there's a guy out there that will do it cheaper and you know, that will put up with, with not getting paid and stuff like that. But I'm at a point where I'm realizing fast because my second year doing it with this amount of employees that I can't, you know, I can't keep doing it the same way. It's not working.

So.

So why would someone choose you over him? Why would someone choose your business over him? Because he's obviously cheaper. They don't have to pay him occasionally. Why would they choose you?

Well, I would say quality and reliability. That's what's going to be the separation right there.

And so what you're going to do is require your car. Having a credit card file is going to flush out 5 to 10% of your customer base. All the ones that give you the most headache and always the ones that give you the most problems about your pricing and you showing up at the right time. And they are the ones who are 30, 60, 90 behind. So putting little occasional like price increases or requiring things like credit Card file allows you to get rid of those customers and then you're going to have way more time to go focus on getting new customers that are actually willing to pay a price. And furthermore, we always think of like require a credit card as like a bad thing. Keep in mind, personally, all of us like to do it. Secondly, you're actually paying for their convenience. They're going to get their extra 1% back or their air miles or whatever. And most people actually want that. And so either a, I would like say if you're hesitant about it, make your onboarding process of a new customer much more pushing them towards that by really talking about how your customers love it. It's a great auto pay and it's like the next step of the process of getting set up as a customer. And then if, if you like, literally if you do that correctly, 90% of your customers will use it because they want to. And then if you want to, if you still need the cash flow, require the next 10%, put a car on file and guess what? Those are the 10% that are causing all the cash flow issues. And so they left. You shouldn't really worry. So I think first of all, you got to spin it. First of all, it's actually a positive thing for them. Most of them want it, most of them want the air models and the cash back. If you're hesitant about making a requirement, make it much better in the onboarding of the new customer as an email that's like, hey, the next step here is to set up autopay. All our customers love it. Click here and then just go right into the form.

Right now. I don't know how much time you have with me, but to even push, push the envelope a little further. What do you think about more? Because like, look, everything's subscription based and I think that's the name of the game in landscaping. Almost like alter it to be like a subscription like Netflix. Like you pay for Netflix the month before you use the service. Do you think that is something that's feasible in the landscape industry? Basically like saying, hey, if Your lawn costs $160 a month, you know, we chart, we build the cards out before we do the work.

If you think that if you do services year round, I'm a big fan of this. I would do this in a heartbeat.

Okay.

If I, if I was able to mow your lawn year round and that is charged at the beginning of the year. We have a couple of our franchisees August along here that do this and they have the Best cash flow in the world. But the problem is if you don't mow someone's lawn for three or four months or maybe once during the winter just to kind of keep up with it, it's very difficult to, to convince people that they're paying for something prior to it happening and then you don't see them for three months. Right?

So.

Well, Mike, Mike, I was saying during like our cut season, during like our window of cut season, just as far as, you know, let's say I do ask all my clients to get a card on file. And then instead of saying, hey, look, we're going to bill you out after the four cuts are done for the month. We're going to bill you before the four cuts. If it rains and we don't come, you'll get a credit for the next month. I think that's like, I think that's like the best way to stop that cash flow problem.

Totally.

But I just don't know if.

No, I agree 100%. There's a few things why we've never done it. And the number one positive thing is cash flow. I'm all on board with doing level billing even for like say eight or nine months, doing it prior to the month starting. There's a few things that throw a little bit of a glitch in this. Number one, you're going to have months where there's five services, right? So you can't just multiply it by four. You're going to have to bake in like 4.3. Right? So then they start running the math against the guy down the street that's giving it per cut price. And they're like, well, you're like $10 per cut. It's like, well, no, I'm baking the fact that there's going to be five cuts on three of those months. And so, you know, you're starting to get this game, like explaining things. But I'm, I like it. I, I like having upfront card on file. You charge at the beginning of the month. And the reason, honestly, it's an admin side, right? So say for example, someone cancels on the 15th of the month. Well, now they want 50% of their that month refunded to them, right. What happens if someone, you know, now it's a matter of like, if they got long grass, you're still gonna do a per cut price to get them up to spec before they can go on to that. So you're just adding more friction to the beginning of the sales process, right?

More Variable more variables can arise from.

But, but you do solve my cash flow. You solve that problem for sure.

But I'm also locking myself into a set price. There's no room to adjust is what you're saying.

Yeah, but you can raise, you can.

Raise prices like, like a subscription, right? You can absolutely do that. It's just that I've seen it harder to upsell customers too. It works really well. What you're talking about works really well for full service and 12 months. Right. So when I say full service, I mean you're doing their weeding, their bush trimming. You do everything when you show up at the property. I've seen it work really well for that. And for 12, if people mow year round, it's a little bit harder. When you are trying to upsell, for example, mulch, now, you're going to bill for that after the fact. Right. It's just more explaining to a customer. And I don't know how to oppose that. It just, you're adding friction to the upfront of the relationship. And if you're not trying to grow, that's probably fine. And so I'm a big believer once someone stops wanting to grow their business and if you're at that point, I, I, I, this would be a good move. And that is you're going to start adding some more friction to the sales process by requiring, hey, I need, by the way, if you want to do mowing service with this, I'm going to take a card right now and I'm going to charge you $250. Like that's more friction to, yeah, we'll be there tomorrow and we'll bill you at the end of the month. Which can all be automated. Right. So you're just adding more friction. But I think, you know, based upon what you've said, I think that's a good move for you. I really do. You're going to add more friction. You don't need to grow. You're not in that stage where like I need to grow, grow, grow. You can change that policy if you need to go ahead.

But in the same breath, I am 29 years old and you know, I'm fortunate enough to rent for my parents. So basically it's like, you know.

All hands on deck for this business. So I, that was my next question for you is I'm at that 200, 215 mark. I have five employees, three on one truck, which is my big, dense route, and then two on my other truck, which is more, you know, spread out. How Do I get, how do I break through from that like $400,000 revenue mark to like let's say a million or you know, obviously I know there's levels in between, but how do I, how do I push it?

It all depends on how fast you want to do it. Right? If you want to do it fast, you're probably not going to do 12 month billing card on file, payment prior to service. That's going to be a more friction up front of the sales process. If you want to sell over the phone, get them on the schedule and bill later and you have a car and file then, then you're probably gonna scale faster. Now that's, this is the thing, if you want to build a million dollar business over the next 10 to 12 years, I would do the more cautious approach, better cash flow approach that we've talked about. If you're like, I've gotta get there in the next three years or I just want to quit, that's when it's like, okay, well then you're gonna have to, you're gonna have to sell over the phone. You have to reduce friction of the sale. You're not going to be trying to do all these other services and you just want to focus on selling and that, that again, just, just a matter of close ratio.

Yeah, I'm trying to think what else I could ask you. Honestly, dude, you put out such good content. I appreciate, I appreciate the time.

My pleasure, brother. We'll stay in touch. Have a great weekend.

Be well.

Well put. Finding the ratio between growth and a steady cash flow is, is all about the future you see for your business. Knowing your numbers and where your business is at will help you make these kinds of decisions. Lawn care Bookkeeper will help you know how healthy your business is doing. Providing payroll and bookkeeping coverage at an affordable monthly rate. These are the same bookkeepers that run the books for Augusta franchises. So they know exactly what they're doing, especially when it comes to lawn care industry. Check it out today atlawncare bookkeeper.com now let's find out how one company raised their prices and had an 80% drop in business. Can you raise prices without triggering massive fallout?

Here's how I'm going to be reacting to Keith Kalfus who is a landscaper on YouTube as he talks about what happened when he raised prices and the impact of inflation and the recession that's currently happening in, in the United States. Regardless of whether or not you know who Keith is, I want to make some points today about how you can position your business in these high inflationary times as we're heading into a recession, how you can make sure that you not only stay in business, but actually thrive and grow your company during the.

Next couple of years.

Now I'm going to go, go ahead and play a couple minutes of Keith's video and you can watch the entire thing on his channel. But I want you to watch these couple minutes and we're going to, we're going to break down some of these numbers about his close ratio, about inflation, about what happened when he raised his prices and for. Let me just be very clear, this is not about trying to bash Keith. I think Keith is a great guy and he did what was right in recovering from losing a lot of customers by increasing his prices. And this is not about making him look bad. This is a matter of someone that is open and honest enough to express and share what's happening. And trust me, it's happening to hundreds and thousands of other landscapers, home improvement professionals and small business owners right now. They're just not making videos about it. So I'm going to use him as an example. But just be very clear, this is not about trying to make it make Keith look bad. I've been in interviews with him, he's a good friend and there's no bad blood between us. I'm just going to use this as an example though of what you can do and what you can learn from it. So let's go ahead and play a couple minutes and then jump into what we can learn from project based work as we head into a recession.

This inflation is no joke. So this inflation is very serious for our industry, all industries. This is insane. This spring and I put out a video about this too. I did the math and I raised the prices 12.5% for existing landscaping clients and then 20% for all new customers.

Right.

To compensate for the inflation. I was like, we're gonna be fine. You just raised the prices dog. Well, this new price increased resulted in us losing about. And I just posted this on my Instagram at Keith Kelfas. This resulted in us losing about 10% of our existing clientele and lowered our close rate for new clients from 50% because we have about a 52% close rate of qualified leads. I'll explain that in a second. 50% all the way down to a 10% close rate of in person quotes qualified leads. What I mean by that is we took 300 new phone calls qualified, 30 of those, right? So that means that.

Literally 90 out of 100 phone calls we conversate with them over the phone and we have a script. And if the customer is not a good fit, we figure that out over the phone before driving to their property. And so we'd do like 10 quotes out of every 100 phone calls, right? And then from those we would close about half of those 50%. Well, this brought the close rate all the way down to 10%, which means we did out of 300 phone calls, 30 in person quotes and only closed three new jobs. Could you imagine taking 300 phone calls and only closing three jobs? You'd be like, that's insane.

I close 90%.

Well, next thing.

These three jobs were priced properly to afford to run a legitimate license and insured tax paying landscaping business that pays the employees and the owner a living wage.

So a couple things I want to take away from the video is this. First and foremost, there's recurring work or existing customers that he has. And these existing customers, I would assume he does landscape maintenance. So probably trims the bushes, rakes out the beds, pulls the weeds, etc. Now regardless of if you're doing lawn care and landscaping, what you want to focus on is this type of work. Because realize that when he raised his prices by 12% to these customers, he lost only 10% of his customers. This is a great deal. He probably will double his profits on this work just by increasing his prices by 12%. So it's a great move. Now I want you to realize that recurring work is going to survive better during a recession. Project based work, someone installing a paver patio, someone installing a new hedge, someone installing a new roof. Project based work typically does less well during a recession because it's more discretionary. Whereas maintenance type work and recurring work, where for example, he has to go back and trim the bushes, rake out the beds, pull the weeds, typically does better in recession because not as discretionary, as long as you have the right customers. Now there's always going to be people say, well, you know, in a recession everyone's going to mow their own lawn or they're going to turn their own bushes or pull their own weeds. But if you have the right customer base, that is affluent and retirees, they're not going to be able to physically do the work and they financially are going to be able to be insulated from a recession. So if you have the right customers and they go into recession, they can't physically do like they're old. They would literally be risking their life to pull out a hedge trimmer. They would be much better off spending the 40 or $50 for you to come do their service when they have millions of dollars of net worth, multiple homes, et cetera. So having the right customers is a great way to insulate yourself from a recession. But furthermore, having recurring customers like they're going to protect, they're going to protect their assets, they're going to protect that house, their home that they built all this equity in over the past 10, 15 years of their life. And if they are retired, a large part of their net worth is wrapped up in their real estate in their home. So they're going to want to take care of it. It doesn't mean they're going to want to improve it though, because improvements on real estate and someone's home is usually does really, really well in an appreciating market when real estate is going up. And over the past 14 years, since 2008, that's what we've seen. And that's why installation of new projects and new work has done very, very well over the past 14 years. But now, as real estate prices will start to be compressed, that's what's going to have a really adverse effect to projects. And that's why when he raised his prices by 20% to new work, he literally had an 80% reduction in the amount of work that he got. All right, so let's run the math here. He had 300 calls, now he weeds out 90% of them by qualifying them. He doesn't want to grow a massive business. He has no ambition to do that. I've talked to him and interviewed him before. So he qualifies down to the 30 leads the actual wants to go after he goes out and does an estimate proposal, talks to the customer, whatever IP, and he only got three of them to accept. Now that used to be 50 over 50%, like 15 or 16 people would have accepted in the past. So literally he has 80% less customers. You could say 80% attrition on project based work, whereas 90% retention on the recurring work when he goes and trims the bushes and recurring work work with existing customers. So this is what I want to focus on and that is, number one, recurring work is going to do much better during a recession, assuming that the customer base that you have is affluent and insulated from the recession as well as they're older and they're going to, there's not an option to do it themselves. They have to hire a service. The second thing to keep in mind is when you're raising prices, you're going to have a Stickier service for the existing customers. Now this is something I just talked about the other day. Watch this whole video here about just how important is to raise prices on existing customers, not just new customers. Because a lot of people were like, well, I'm just going to raise prices on only my new customers. I'll grandfather my other ones in. And then this is what will happen. What happened to Keith? And that is all of a sudden your close ratio drops down really, really far. And like, oh my word, I can't do that. And you retreat back to lower prices that you can't actually make a profit on because of inflation. But you do that because they're new customers. I would rather raise prices because to existing customers. Now, some people think that's a bad thing or that you're somehow, you should grandfather them in because they supported you when you're earlier off and all the rest of it. And I appreciate that. However, you've got to realize that you've added value to the customer experience by having them on for a year, two years. You've been serving them because they don't have to go and find another provider and have that big question mark of whether or not they can trust this person. That's why when you raise prices in new customers, they, they're more inclined to go find someone else because they haven't already crossed the bridge of trust with you. If they didn't work with you for a year, two years, and you increase their prices like Keith did by 12%, they don't want to leave because now they've got to go risk making a wrong decision, finding a different provider, different vendor. And that vendor might not show up on time, that vendor might not be professional, that vendor might not communicate very well or efficiently with them. They might, you know, come and do drugs on their property, do something stupid and damaged something on their house, they do not want to make that wrong decision. And the fact that you've had now a time pass where you've made them happy, you built that relationship, now they trust you. That's a lot of value. And that value is what you can go and raise prices on them and realize that you've already produced value in just having them make a decision and trusting you. And they don't want to go switch services. They don't want to switch and go find another provider and get five more estimates. So there's two big takeaways I want you to take away from this video. Number one, in an inflationary time, you must raise prices. But what type of work should you be focusing on should be focused on recurring work to be able to get through this recessionary time when people are going to be spending less on project based work that is adding to the value of their home. But when that value starts coming down, people are less inclined to spend money that. Again, 14 years that has been the opposite. Appreciating real estate. Everything's been going up and people have been spending money like crazy on projects. So recurring work, great. Number two, if you're going to raise prices, focus on the customers you've had for a long time. I know people that haven't raised prices for 5, 10 years on their recurring customers and if they did, they'd probably retain like Keith did, 90 plus percent of their customer base by raising the prices and being able to stay up with inflation, pay their employees as cost of wages are going up and cost of fuel and equipment and everything else is going up. This is the time when you want to be focused on recurring work and raising prices to your existence. Existing customers. Oh, and by the way, if you only do projects and one time big jobs, you don't have any recurring work. You don't build up the relationships and the rapport with customers to have that you can raise prices and then not leave. Because every single job is a new bid, is a new job, is a new customer, is new rapport. You have to build new trust. There is nothing that you can fall back on. And that's where great value and margins comes into play is when a brand starts to build a relationship with the customer. Because guess what? If this iPhone goes up by 100 $200 next year, I'm still going to buy it. Because the brand, the affiliation with Apple that I've created, I don't want to.

Go switch to another provider.

I don't want to figure out a new operating system. So I'm just going to pay the new price. So instead of trying to sell your customers a new phone every year, like new project. Oh, this phone flips out. This phone Change. No, like just marginally change it.

Improving.

You're always making your business better, but you keep raising the price because you've already created that brand and that relationship with your customers. Focus on recurring work as we head into recession and focus on raising prices to those customers that you've built trust with over time.

Looks like ultimately the trust between you and your customer is everything. Establishing a lawn care brand that can build strong relationships can take years of trial and error. If you're just starting your lawn care business and are Looking for a comprehensive guide for success? Check out landscape businesscourse.com Landscape Business Course is a step by step resource showing you how to grow your monthly revenue to 100,000 in just three years, including 30 plus lectures and tons of bonuses to dive into. You can find out more@landscapebusinesscourse.com finally we're going to see when it might be the right time to buy land for your business. As well as some tricks to you can use to get the most out of your land. Take it away.

Today we're actually going to be I'm.

Going to show you this property here.

A lot of people ask when you're.

Doing any sort of home improvement business, where do I put my shop? Where do I put a place to store all my equipment, my trucks? Maybe you have to have dumping like the debris for a landscape or lawn care business. So it's difficult to find space because theoretically you're supposed to have commercial land. Now if you're under like six or seven trucks, this is kind of a hack I want to show you today. And that is how can you use residential land and kind of an outside of the city limits area where it is technically residential, but how do you make it where it actually will work for your business? Right, so I'm actually show you a real property right now. This is actually what happened is the.

Owner of this property is subdividing into.

A couple different lots and trying to sell it off. So up front there next to the main road is half an acre and then back here we have another half acre. And the big thing that I'm looking for is can I dump debris? If I'm a lawn care landscaping company, I gotta dump debris. And we've been renting in this location locally, the city that we're in today, we've been renting. We pay like $800 a month and it's fine, but the landlord doesn't want us to dump any branches or anything besides grass clippings, which means we gotta go to the dump like every couple days. And it's annoying as I'll get out. You gotta pay for dump fees and.

You gotta drive there. It's inefficient.

For the guys on P4P, not good. Probably cost us about 1200-1500 dollars per month in rent and the extra time it's wasted. So when I'm looking at a property like this, it's got to make sense financially and it's got to make sense in the case that the city comes along because a neighbor complains and says, hey, you cannot have your commercial. You cannot run a business out of.

This residentially zoned area.

So a little bit of a tip and that trip trick, if you're trying to look for land, first off, let's make sense of it financially, okay?

So I'm gonna walk around a little bit, show you a little bit of the property.

It's not super exciting. It's blank land. Now, as we head into a recession, land like this is gonna get very, very cheap. And so I'm really trying to hold off on buying this because I don't want to buy it right now. I want to buy it when it is half this price. So they're $189,000 per half acre. Guess what? They're not gonna get it. So I offered half of that. They probably won't accept, but that's what it's going to become over the next.

Six to 12 months.

In my opinion, land like this is the thing that drops the fastest in value, because no bank will want to touch blank land. You can't get a loan for blank land almost never, almost all the time. If you want a loan from blank land, you need a construction loan, because the bank only wants to lend against the land if you're going to build an actual structure on it, because that's what actually has some value for. For them to be able to foreclose and actually get some value out of it. So no one wants to just get blank land. You can't get a loan for it. So if you can come in with cash when everyone else is dropping their.

Prices on land, you can get a good deal.

So first step, when it comes to financials, wait until a good recession, because you can get land for dirt cheap, because no one wants to lend against it. If you have cash set aside for that, that's a good opportunity. Now, the alternative of buying land like this is that you go get a shop space, you get, you know, you rent some land. That's ideal.

That's cool.

But then you can't, like, invest into the land itself. You can't put the gravel where you want. You can't, you know, make it your own. You can't put up fences because you don't want to put a bunch of money and sink into a property that you're not going to be at for very long. Or you could potentially do, like, a storage facility or like a storage unit, even if it's a nice big one, like, say, 12ft by 40ft.

That's great.

But now you're looking at a thousand fifteen hundred. Rent's gonna keep going up and up and again, that money every single month is kind of getting flushed down the toilet. I'd rather put it into something that I can keep for the long run. So from a financial standpoint, this is the math that I'm running. Let me show you this. There's a walk back over here. I can tell they've been doing some inspections on the wetlands here because they've got these dig sites kind of throughout the whole property. When I'm looking for land as a landscaper, what I'm really looking for is can I dump debris and not bother the neighbors? Because the last thing you want to.

Do is get reported.

And so I'm looking for is could I build some fences and could I dump back there? Right, so there's a really good spot. Also look, they're already dumping up front here. They're already dumping all the stuff from when they cleared the site. So a good indication is okay, I could dump there. It's not visible from the road, it's not visible from the neighbors. And so I could potentially get away with it as long as I manage it with well, I make sure there's not invasive species, I turn the debris, I make sure it doesn't smell all that good stuff. I want to be the neighbor and I don't want people to complain. I try to be make very good friends with my neighbors so they don't report me because that's usually what happens when you get in trouble. But also I'm looking around. Okay, over there we got a shop. Big, nice, big shop. Okay, over on this side, these neighbors, they got an excavator and they got a tractor. These other neighbors don't have like a super high, high flute and tootin neighbor backyard thing. They got planting and gardening and a tractor and a bunch of farm animals. Behind this thing there's another house. But guess what, they're already using this for dumping. There's a whole bunch of debris on the other side they're using for their grass clippings and all the rest of it. So this could work. All right, we're not in a really, really nice part of town. It's residential, but it's a half acre, plenty of space. We're gonna have like, we only have like seven trucks, so we can easily have that as our dump site, have our storage containers. Cuz we don't need an office command center takes all the phone calls, does all the emails, takes all care of the admin stuff. And, you know, we don't even have a GM that goes into the estimates all day. We do them all over the phone. So all I really need is a place to park my trucks and a place to dump my debris and a place to put these storage containers, which are the shipping containers, and I can put them on both sides. Here come me security. I'll put a fence around the half acre. I'll level this out and put gravel. So all in. I'm looking, looking at this, all right, looking at probably $15,000 to bring a bulldozer in here, strip this off, and put gravel down. Probably looking another $15,000 to put a nice wooden fence six or seven feet tall around this whole thing. And then I can park my trucks. I can have a dump site and have plenty of storage space. And now this is the part that's really cool. So from a financial standpoint, this is how I make sense of it when I look at the. Let's say it's $1,200 per month that I'm burning right now in rent and the cost of having to go to the dump for all this other debris that our landlord is being a bit of a pain. So $1200 per month. If I multiply that by 12, that is about, let's just say $14,000 over the course of the year that I'm paying in rent and the cost of being at another facility. Now, if I can buy this land for $100,000 cash, because cash is the only way I'm going to be able to buy this. I'm not going to finance it because I'm not wanting to build anything. I don't need an office space. I don't want to go get a $300,000 loan to build an office. I'll have command center take the calls, and I'll deal with that as a. A variable expense instead of fixed expense. I don't want to get in the real estate game with my business. I just want a place to park my trucks. So how I can make sense of this is $14,000 per year. Let's check this out real quick, though. This is, I can tell you, digging. We've been digging in here to check on the. The wetlands. So you can see this big hole. There's like 10 of them throughout the property. So this, this property is already ready for a septic tank because it's not on city water, which is a good thing when you're looking for land for your commercial space. So $14,000 a year. Now, if I Put a hundred thousand dollars in cash on this property. Am I able to get it for $100,000? Can negotiate some somehow with them? If I can do that, that would imply a 14 ROI on that $100,000, $100,000 down. I see $14,000 per year. That's a 14% return. Now I'm going to need to put about 30 grand getting this place ready. If I get site prep and a fence, that means about I'm 130 in. Okay, so let's just say about a 10% return on my money. If I spend $130,000 on this and I get about $14,000 per year in savings. So 10% on your money. Not bad. Not bad. Better than inflation right now, so far. So now that's the financial side. That's how I make sense of the financial side. The next side of it is what happens. Don't tell anyone, right? What happens if the neighbors do report me and they say, hey, he's running out of business out of a residentially zoned area? That is so bad. Now I'm gonna be a good neighbor. I'm gonna make this place look pristine and beautiful. It's gonna look 10 times better than.

This, I can promise you that.

But it can happen. People will report you for running your business out of a residentially zoned area. So I've done all my investigative work of hopefully mitigating that and not making it happen. I'm gonna take cookies to them. I'm gonna be a nice neighbor. I'm gonna mow their lawn for free. I'm gonna do something nice, maybe pressure wash that building. Anyways, I'm gonna do that first. But then I'm also going to make sure that in the case of the city coming shutting me down because I'm using this for commercial purposes, that it can still work financially. And so what I'm going to do is let's say I put a hundred grand, $100,000 on this property in cash. They come along and say, hey, can't do that. So what I'm making sure to protect my downside is I'm making sure this property, without the build, without having this as a commercial space, would still work as a rental property, say, well, there's nothing to rent.

You're right.

But if I put a hundred thousand dollars into this land and then I go get a construction loan and I say, look, I'm going to build a $400,000 building, and guess what? This is already has electric in the road. I do have to Do a septic tank, but it's rated and zoned for, for a residential dwelling and an adu, an accessory dwelling unit, which means I get two units here and I can rent out both of them. And I could probably produce about 3,500 to $4,000 per month in rental income, which would easily cover the mortgage on a $500,000 construction loan. And so this is the cool thing. If you know that, if you already know that this land is ready to be built on, it has electric, everything is good to go. Here's the deal. If they come along and say, hey, look, you can't do your commercial stuff anymore. I know that it is ready to have two rental units, and I know I could go get construction loans, let's say $500,000. I already put $100,000 into the deal. That's my 20% down. I could literally go to a bank and be like, hey, I want a $500,000 construction loan.

They're great.

You're going to have to put 20% down. Like, boom. I have $100,000 in equity. The land's paid for. I could literally get a building project started the next day, getting that construction line loan on the $400,000 that I need, because I have 100,000, 20% in.

Equity on the deal already.

So worst case scenario is they report me. Hopefully I can get a few years out of it. Worst case scenario, they report me and I do that, get a rental, Prop 2 rental units out of this. Again, 3500 to 4000 is easily what I could get out of this property. In terms of rental income, my mortgage on that would be about 2,500, so I'd be just fine. So make sure if you buy the land, you protect your downside risk. And the downside risk of using this as commercial is that someone comes along and says, you can't use it anymore.

That's fine.

That's totally fine. Now, best case scenario is I don't need half an acre. So theoretically, if everything goes smoothly for a year and a half, I'd probably build a property with an accessory dwelling unit, get the rental income and still be able to operate out of this just fine. Because I don't need the whole half acre. If I'm just parking trucks. I don't have an office. I don't have any in interior computers and stuff. I don't have any. I don't even need to bring electricity in here.

I'm going to use an outhouse to.

Be able to, you know, go to the toilet. And that's how we operate. Very, very lean. It's a good return on my investment if I'm able to stay here and not pay rent. And it's also protecting my downside. So if I do get reported because I'm in a residential area, I can still make good money on this property by turning it into a rental income, rental income and rental property. So hopefully that was helpful. If you're looking for land, don't think that you need to go get land. If you have one or two trucks, you don't focus on building the business. When you start buying land, you're getting a completely different business, and that is real estate. It's a completely different business. It's a completely different metric. And if I'm looking at 10% return, guess what? If you have $10,000, much better if you go spend that on your business and scale that up, because you've got a whole lot more than 10% return on your investment. Investing in your business. But when you start getting the point when you need land and you, you have more than one or two trucks and you're like, I can't find shop space for less than a few thousand dollars a month because the rental, it's craziness. Right now with everything going on, this might be a good option. Make sure you're on the city limits. Right behind here is a bunch of farms. I got tractors and trailers. I got big shop. I got people already dumping behind me. This could work. Just a thought. Hope it helps. See you tomorrow.

Always a good idea to look into your options. Hopefully these were helpful to you. If you want more Mike Andes content, head over to mikeandys.com or check us out on YouTube. That's all we got for you today. We'll see you next time.