Essential Steps to Starting Multiple Locations (Coaching with Mike Andes)

Hey, everyone, it's Mike Andes. And today we're going to be talking to a landscaper that started his business about five years ago from zero as a school teacher. And now today, they're knocking on the door of a million dollars in annual revenue. But he's wondering, what should he do next? She starts second location, a third location. How should he have a general manager? What about his admin team? How should he create incentive packages for his managers to be able to succeed in their new roles? These are the questions we're talking about today in this coaching call. And if you want to learn more, go to mikeannies.com coaching and you can.

Book your own call. Long time no see.

Yeah, it's been a little while. Essentially, the reason why I'm reaching out is just because we're close to hitting that million, we might hit it this year. So I've never expanded my mind beyond that, to be honest. It's just that's been the epitome of the business. Right. So now I'm at a point where I have to decide if I want to stop there, get more profitable or just expand, maybe with another location or just expand this location, revenue wise. I think a lot of it, too, is my exposure has been a lot of your content. So my mind automatically goes to second location because that's a lot of what I see your content on. But what are your thoughts in terms of pros and cons of just growing a single location versus duplicating with multiple smaller locations?

Yeah, it really comes down to what you're looking to do in the future for yourself. Right. If you want to make it more passive down the road where you have general managers running it and you're not involved, it's just going to be easier to find the type of general manager that can do that. I would also say that once you start getting above 800,000, you start requiring two people at the top of the org. So right now I feel like almost a blend between you, Charlie and Mike. And if you want to keep it where it's more of a general manager, when it gets above 800,000, they need someone else's support. And so it's one thing, like even one of my locations right now, we might actually scale it back by 10 to 15% because we felt like the personal capacity of the general manager is being pushed so much so that they would need another person. But if I need to put another person, I've got to grow the business another four or five hundred thousand dollars. Okay. So I would Determine what business model you want to build and then just either copy and paste that or if you're like, hey, I just enjoy growing and I like to be involved with the crew, et cetera, then just one is fine as well. It really depends, like what are you trying to build it for? Is really the thing to think about.

Perfect. So the next question is financially. I've heard you mention 75,000 startup costs for a new location and part of what I wanted to cover was like possible projections on what to expect because I need a bigger vision for myself but also my team. And Charlie, he's very capable. He can go out and start his own business and do well. If I can create like a three year path for him or something, that's what I hope to get out of this conversation as well. So again, just pushing the next steps from this conversation.

So do you know what he wants?

I don't know, he just made a comment, he said, I do feel like this next year I need to shake things up, you know, So I don't think he wants more of the same. So if we're going to just maximize profitability, he'll probably be bored and start his own business. But if I were like, and I just told him a couple days ago, I said, hey, would you be open to being a GM in a new location? I'm just figuring out what you would even be open to. He seemed excited about it, but he also was being thoughtful about the team and he's what's going to be harder to hire for someone to replace him as ops manager or find a gm because we have two other shoe ins which that I have in mind but they're not as strong as Charlie. One is not as great of a writer, not as good on the computer. So can we supplement that with our main hub and have Michael or somebody in the office help with some of that. And then the other is a young kid. He may have a lot of potential, just hasn't been able to demonstrate a lot of leadership. But meeting a lot of those expectations, we would think a GM potentially could have. So I don't know, like where we should ship Charlie because he seems somewhat open, but he was also clear that he doesn't want to make less money. Right. So if going to GM is going to mean less money, then he's made up. He's going to make about 10,000 in profits this year or profit shares plus 24 an hour. So what's the potential that we could pay out to a gm?

Yeah, like I'd be looking at, for example, if you ran your current location and I would probably say to be safe, you wouldn't grow it anymore. You'd be able to kick off more profit. It would cover his extra costs. The cost of him. Right, like 24 an hour. Just not going to get great general manager that can run a million dollar location. And so I would probably put him on salary. I would then give him a, a profit percentage that would be very attractive because essentially what you're doing in this case is you are preventing him from going and starting his own thing that would take three to five years to replace the income that he's making with you. And if he sees the ramp that you're actually being able to give him over the past few years and then this big step up, it's okay, I'm not going to worry about trying to sacrifice and put my head down for three years, make nothing. I'm just going to go all in on this. And so he'd burn the boats and just jump all in, I feel. But it has to be a significant step up. But I think you can afford that. If you say, hey, next year we're going to 850, maybe 900,000, we're going to increase prices, we're not going to buy any more trucks, we're not going to hire any more people. It is simply a matter of profit maximization. Taking that money and throwing that towards your general manager and giving him a really good pay package that looks very attractive to him. And I think he's right that it'd be harder to replace him currently than find you just go start a second location. For example.

Sorry, I was a little bit lost here. So you're saying potentially keep Charlie where he's at as ops manager, go into profit mode on a salary and then with additional profit shares. Correct. That will shrink the top line of our business because we're raising prices. And that was actually going to be one of my questions. So just be okay with that because I don't want to keep buying trucks for this current location and then the profit. So what money would be, what does that payout look like for him? Like a reasonable for our size business or profits? What would a reasonable salary plus the profit share percentage. And then what would the pay be for GM opening a new location? Because I've heard you mention before, like maybe because it's not very profitable. New locations pay it more on like revenue per month, like goals and targets. I want to get all that hashed out if we can, the next 30 minutes or so.

Yeah. To find that person that is going to grow the scale that you're trying to get to 40,000 within a matter of a few months. Like they're going to be a savage salesperson. Savage. And so if Charlie's not the salesperson, it's probably going to be you that would have to do that or you're going to find somebody. I would agree with Charlie. It's harder to find that person than just for him to move into the op side of this current location and you become the salesperson for the second one. Because the person that you would go find, for example, that would start a location from scratch and grow it to 40,000 in the next three months, is not going to stay with you long term. We've just seen this over and over again. They'll grow it very quickly and then they'll get completely bored of their mind once it goes switches from sales driven to operations driven. And so I would recommend, and this is what we consistently see, grow the thing to 30, 40,000amonth and then go find yourself a general manager or bring someone from the existing team up into that role. But if you're the salesperson to get it to that 30 or 40,000, that's usually the safest route.

So would I be doing sales or actually jumping back on the field?

At that point you could really just focus on sales. Going from 0 to 40,000 like you have in your projections for over the course of a few months will require you full time sales. And so for example, like in my brain it makes the sense of hey, I can now pay Charlie what he's worth, put him over the whole location for the existing one. I would probably do some sort of profit sharing based upon how much you're involved in the business. You could also tie it based upon roles. Hey, hiring, marketing, like what are the things that he takes off your plate that unlocks more profit sharing for him. And then that would give you the time to go focus on selling and like scaling the second location to its peak, call it 40,000amonth. And then you'd go find a general manager that is more operationally driven. And it's likely going to be from your first crew that has actually been with you now for a solid year and you've actually seen and developed some of that talent.

Okay, so I'm there reporting at the new location pretty much daily in the new city, going out like you did your 30 day challenge thing, like door hangers, whatever I got to do to sell, putting out marketing. And then I Recruit just a couple one or two guys pretty quickly to just do the work. I'm just full time sales.

Yeah. And the reason I say that is because it's harder to find that person than to just take Charlie and plug him into what he's currently doing. Because you have both skills. You have the operations and you have the sales. So you have to ask what's hard to find it is the salesperson. And then we've just seen over and over where people start new locations and put like an operational GM I. E. Someone like a Charlie in that role. And they do not get to 30, 40,000 that fast. It'll take them a whole year and a half.

Yeah, okay. But Charlie's a beast. Let me tell you.

Operationally, like I genuinely believe, like you put that same person, hey, you gotta go to door hangers and you gotta make the marketing campaigns and make the ads and manage these ads and then go out, get leads and follow up calls. From what I remember, at least he didn't like doing calls and talking to the customers a ton.

He's a unicorn telling you so. It's just crazy. That's why it's like versatile. But I'm not opposed to hitting it hard and doing the sales piece and having him be more like running operations. Honestly, I feel like we're very dialed in. I could probably go there once or twice a week at the main location and they got it.

We'd run with that because that's the more surefire way. Now if Charlie's like, hey, I want to go start the new one and he's very opposed to it, I would probably go along with it. But the thing is this, the likelihood of the success of that second location will come down to the ability of the person to sell. He has not proven that he has done that in the past. You have you built urban roots.

Yeah. Yeah.

And so I think the likelihood of success when the owner goes into the second location, I've just seen way higher. Not because anything is tr. He just never done 0 to 40,000 before. You have.

Cool. Yeah. So much of this is like logistically how to roll it out. This is helping for sure. If I can visualize what my days would look like, that's going to help me a lot. So I would be at this location, be posting and we're doing the office work as well. Am I just setting up separate email? That's the main thing. Logistically. Are we splitting everything? New website, new Google, new business license, new everything like treated like a brand new business.

If you want to do the multi location operation. Now if you're only going to do two locations, I would probably just keep everything more or less together. Someone like Michael taking the calls and he can just determine where the leads go, for example. But if you're trying to make multiple locations, like I'm saying three or four or five down the road, you want them as separate as possible. So your GMs do have full ownership. Because if you have it where now everyone just blames Michael for mistakes, blames Michael for scheduling problems, blames him for billing, blames him for the fact that shared resource starts to become very murky in terms of costs as well. Because now they're getting a piece of profit sharing. They're going to have a real stake in what are the shared costs of the business.

That's how I've always been introduced through your videos and stuff is just keeping it all separate. So I'm just trying to wrap my head around like compensation and profit sharing and how that would look different with the gm. Because if I'm going to go on this path to start a second, I would probably want to start a third. So then is that enough to justify just separating everything and just keeping it that way?

Yeah, like I would say if you're going to do three, I wouldn't separate. And it's literally just for the fact that I can tell my general manager like you're getting a piece of the profits and you, you're basically running this location because when you do it as a corporate like if you do it one blended and just hey now they really just become divisional managers. Okay, you're over this area, you're over this area and you're over this area versus being like you're charge of hiring, firing, marketing, advertising, sales and we're going to track all these numbers separately, your close ratio is going to be different. You're going have a different login for copilot or whatever service autopilot. Like you're going to have a different login for everything. It makes them feel like they actually own the thing. And I've just seen more buy in over it.

I like that model. Yeah, so that's what I'm leaning towards. Okay, so based on our numbers, what do you see as like an a salary if someone's taking like majority of leadership, like if Charlie's running my main location, what do you see in salaries at?

Yeah, like I would see in your area minimum 70, 75. Just in terms of cost of living, assuming they're running that size, that's going to be your base and then you're going to do a profit sharing on top of that. You have to be over 58,000 as of last September in Seattle for this role. Like it's actually mandated if you're on salary. Okay. You get all the brunt of all these laws.

Let's go. Yeah. So plus, what percentage do you just. With the salary increase, you think that's enough to keep it at 5% profit.

Shares or I would do a sliding scale. I would probably do like an 812 and then 15 depending on how much he's taking off your plate.

Okay.

Dylan, I would slide that higher. If he basically makes it where you're an absentee owner, because now we're talking about, let's just call it 70 plus. If you gave him 20%, 4 40, now he's 110, that would probably take him a couple years to get there. But if he can run that location basically without you being there and you're making the other 150, that's not a bad deal.

All right. I was supposed to stick to the script. You're good.

Go ahead.

This is helpful. So gm, when does the GM come into play? If I'm the salesperson, it's not a full gm. It's like me being the GM in a way at the new location. And then I would just have basically P4P employees. And then the promotion there would be like, hey, once I train you up to run this on your own with one or two employees, I'm gonna bounce and then I'll give you more of the GM benefits and salary and stuff.

I'd be cheating for. If you're trying to get to 30, 40,000amonth in revenue, think about like this. It took you a year and a half to get there. Now you're now trying to do that in three to four months. To find someone that is going to be able to do that. Is either A, going to be you or B, someone that is literally five times more skilled than you were when you first started urban roots, that's extremely expensive. You're talking a six figure person. And so that's why I think it's like you get it ramped up and then your whole goal is to get to that 40,000 plus level. If you get an annual revenue of a location of 500,000, in my opinion, you hit profit mode, you increase prices, and you slowly, over the course of three years, dial it from 500,000 to 800,000 without getting any more trucks or any more employees. That's like going from say $80 per hour to $110 per hour. If you do that, you'll take it from $500,000 per year to 800,000 and you're extremely profitable.

Okay, cool.

So you're literally making 300,000 with the.

Same assets and everything. Yeah.

If you take in 80 per hour is your labor rate and you're able to move that over the course of three years at hitting at capacity, you just keep dialing the price up to 110. You're right there.

All right, so I'm liking this in terms of new location market research. I know like you all up is a little bit like east of us. I could go Northeast Tacoma, which we don't go up there. I know it's the same city, but it's 20 minutes around the port side. Probably like Northeast Tacoma Federal Way. So what do you do when you're picking a new location in terms of market research and what's the furthest away and the closest you would do in terms of just keeping it a separate location?

Yeah, like I'm a big fan of being close, especially because your first one, like I usually say within driving distance for someone's second location. Unless you have a hundred plus thousand to get started. Like if you're trying to start with 75, it's going to be a little bit squeaky. But if you're putting the labor in of the GM essentially, then you'll be fine. I would probably go the 20 minute route first and then I would start a urbanroots landscaping.com northeast Tacoma or whatever, have a new phone number, have a new Google listing and then tie all those separately to that website. So new Google listing, go to the new site, not like a new website URL, but just a slash that territory name. And so what you're going to end up doing is essentially just like mimicking what we do as Augusta. So it's augustalongerservices.com territory name. You're going to do urban routes landscaping. Change that site to be much more corporate feeling. And then you're gonna have slash Tacoma and you're slash, I'm guessing northeast Tacoma or Puyallup. So I'd probably go Puyall up just so it's not confusing. But I would just make it like the slash of those two separate territory names and then the main corporate site, urbanroots landscaping.com being the one where people would come to and then they find your location and they go from there.

Okay, all right, that'd be so weird to start another location without me being in the field. I'm just so used to building it from the ground up.

But if you're going from 0 to 40,000 in a few months, like you're trying to do the amount of leads you have to get through, it's literally a full time job.

Yeah, okay, cool. It's just wrapping my brain around new concepts here.

But this is the cool thing. You've already done this. That's why I'm so confident saying Charlie should stay in operations because he's done that role already. You have already done the sales, that the likelihood of success here is higher because both of you have already done these roles to some extent, if not entirely, versus you have to train him on sales.

All right, so hypothetically, let's say Charlie pushes back and says, no, I want to do this new location. I'll be bored if I keep staying here. And then I'm like, all right dude, you're on your own. Or not on his own. But I guess my question is what level of support would we be helping with office work with writing estimates, or is he pretty much. It's like his thing. I'm just training and giving advice.

You're gonna have to train him quite a bit. It's underestimated how much training you're gonna have to give him in terms of follow up calls, walk around the property with the customer, like all these other little things that right now he does. But he's doing it as a secondary like person in the field, like a crew lead versus the estimator. And he's going to be doing that all day long. If you're going to grow that fast, like what you're doing there is the amount of leads that you'll be pumping out per day. You should be getting between 8 and 10 a day doing the simple services that you offer. And so that is going to be a full time job. That's why, like again, I'm confident he could do it. It's a matter of whether or not he wants to change from being on the field very much with the hands on, with the guys to essentially being solo doing sales all day long, like a huge trans position for him. And so let's assume he wants that though. I would probably give him the same base and then I would make a massive ramp. What you did in terms of based upon revenue, I'd probably increase the ramp though, because the value of that role is so much higher than what you have there in terms of him hitting those goals. Over the course of, let's just call it four or five months. If he hits those goals and you actually gave him like, let's call it two grand months, you paid him like eight, nine grand. I would make a huge jackpot around 30 and then 40,000. Because I know once a location gets over 30,000amonth in revenue, if it's ran by a GM is usually when it can become profitable.

Okay, so just to clarify, you're saying my percentage that I would give, I was just doing that flat 5% for 30,000. 5% of that is $1500. And that'd be like a monthly bonus, right? Whatever they're doing that month, boom, you're at 30,000, you get that. But you're saying a higher percentage, like 10%.

Because your burn rate, if it goes from four months, if it takes eight months, you'll burn an extra 20 grand. So I'd rather give him 10 and just incent massively in four. Yes.

Is that a sliding scale or is it 10% across the board? If you, what if you were like some kind of miracle, got 50, 60 grand a month and it was like 10%, is that overpaying or do you.

Be crying if you had 50 to 60 grand a month?

But I, I guess what my big fear is, and part of my line of questioning is just I don't want to offer something that I have to take away because I'm overpaying a position, if that makes sense.

Yeah, you can always do metrics that balance things out. For example, they have to hit a certain efficiency score for their crew.

Right?

Hey, you got to go over 70% efficiency score on P4P or something like that. So we're not underbidding jobs where a percentage of the revenue recurring. Right. So you can get to 30, 40,000, sell off a couple big contracts. You say, hey, I'm not going to actually incent you on that. I'm going to actually incent you on the amount of monthly recurring revenue. Because I know if you get 20,000amonth in recurring revenue, you probably need 100 mowing customers. But that's going to probably put you at 40,000amonth in revenue because you have projects and one time jobs coming in.

Okay. And that was my thing is like other structures of incentivizing, not just based on revenue strictly. I was just curious about how you do that, how you incentivize people. You never do like number of recurring clients. You do like revenue from recurring clients.

We literally just do revenue. I like to keep it really simple. I know that the marketing, I control the marketing. So if I'm advertising for mowing and they're getting a piece of revenue, like yes, they could upsell people into projects. But like I'm controlling the funnel, which is I'm going to advertise the recurring services.

I guess in my mind I was thinking about how it went when I started and I was like in the field, I was only selling once a week. But if Charlie were to slide into that role, he'd be doing the same thing I'd be doing. He wouldn't really be in the field. He'd be full time sales like I would be. I guess I'm just like wondering about the prep, right? Because I know you said the kind of the path of least resistance probably would be to slide me into that new role. I'd be probably in this new city almost daily, probably every day, and then Charlie be taken over. But hypothetically, let's say Charlie's out of the picture and I had to find like a GM or somebody else. Like what role is it? Essentially like they're an owner, like they're doing everything. Like that kind of blows my mind to think because I've always.

It's the only way you retain someone like Charlie. This model is not the path of least risk is the path of being able to retain someone like Charlie that would otherwise just go start his own business.

Yeah. Okay, so all right. What do you think would be beneficial for us to help the new location with? Would I be answering all the emails? I'd be doing all the admin. Basically, Michael wouldn't be getting any emails, any calls. I, I'd forward it to my phone and take that off Michael's place. So because what I in my notes, I was saying we are stretched thin. Right. Like I felt stretched thin as a salesperson spring Michael. So I couldn't dump a bunch of stuff for a second location on him or unless I hired a second person. But it sounds like I would just be that sales office person for the new location.

Yeah. Like this. There's 10 ways you could do this. And a lot of this comes down to me knowing, knowing Michael and Charlie. So I think the path of highest degree of success would probably be exactly what you said. I would scale back your current location in terms of no more buying trucks, no more hiring more employees. We're going to raise prices. And if it does, 850 or 900,000 next year, great. It's Michael and Charlie. Essentially you got your admin and then you got your sales and operations and they're kind of splitting operations from how I see it working. You would then like you said, get this 30 to 40,000 and then what I would probably do then your next hire is you're going to hire another admin assistant and then you're going to hire a GM for the second location.

Okay. And then I would have to bump to the third location probably at that point.

Or you become more or less a regional manager and you're helping both of them scale up together because like that role is going to be important because you're going to have this office admin role, the secondary person. And that's what most will actually hit. A really big bottleneck is the admin side because now you've got to figure out, okay, so now we have calls coming in from two different areas. How do we figure that out? How do we go into different accounts? That is probably where you'll have to spend a little bit of time. And then you'll only be able to done that because you've gotten that second location to profitability to 40,000 with a secondary GM.

Okay.

I usually see people take a year to really figure out how admin are actually going to work well when they have these two locations now fully functioning.

I guess now what I'm afraid of is if we just start getting it all mixed into our main account on our CRM. Should we be splitting it from the get go?

If you know you're going to eventually do it from the very beginning, otherwise it's going to be very painful to tear it apart.

Okay, so new phone number, all that stuff. Even though I'm running out it's new number, all that stuff new.

It's also from a asset protection perspective. So if someone sues one entity, as long as you keep everything separated like we've just talked about, it keeps anyone from piercing the corporate veil. And you can still just file one tax return, do an S corp and then underneath that have an LLC that's for the Pulalip. But then the LLC falls underneath the S Corp. You file one tax return.

Okay.

And that way if you do it the secondary location start all the startup costs will offset all of your profit from the first location. So this is what I did like when I started my the seven locations is I just would start them with the profits. So that way I had 1s corp with LLC, I'd start one, get all the equipment, et cetera in December, launch it the next spring. And I just kept doing that over and over again.

What would you do about Michael in terms of a raise for or just any office admin person who's gaining some experience and maybe taking on a slightly larger role if I'm going to be gone next year. Because we talked about Charlie at maybe 75,000 salary plus a sliding scale of 12 to 20% profit shares. What about Michael? Is he just generally on a lower pay scale over time or what would you say?

I think I'd have the conversation with them. Hey, once you get clear the vision, then you have a lot more leverage. Because right now, like that's where you're stalling out is you don't know exactly what to look like. Once you nail that, then you can go to these individuals and incent them based upon execution on the vision. So, for example, we know if we're going to eventually do two gms and then an admin hub, Michael will probably be the office manager and he'll need an assistant and you do a third location, he'll probably need another assistant. And so I would just incent based upon, okay, when X happens, for example, I would probably say that second location, once it hits a certain amount of revenue, he gets a pay bump. And then I would say once you have an admin person fully trained up underneath you, you get another pay bump. And I would just incentivize. The same way you would incentivize a salesperson based on revenue in a new location, I would incentivize him based upon him getting replacements office admins underneath. Because right now you have a big bottleneck there.

Why would we incentive them or give him a pay bump? If I'm doing all the admin at the new location, you're going to dump.

That on him and he's going to need an office admin. And so while you go out and do the second location, you're like, hey, just so you know, when I get this to 40,000, I'm going to get an office admin and we're going to put all of this stuff back on you. And by then I need you to systematize this role so you can get an office admin. And when that happens, if you're able to pull that off, you'll get a raise.

So all that flow of calls and emails for the two locations would be like on to him and he'll have to delegate to a new office person and it's up to him to help build out that role. And that's why he's earning that raise.

Exactly.

Okay, so it's a little delayed probably from what, where Charlie's at. But okay, that makes sense in terms of giving myself a raise. I pay myself 5,000amonth. Do you think I should be bumping it up or. I could afford it based on what we're talking about with aggressive growth on A one or two new locations.

Yeah. I would highly recommend, like, from a tax perspective, you want that as low as possible in terms of a W2 because you're paying 30 plus percent when you are paying yourself a W2. And if you can keep that money in the business and then put that towards a secondary location, you'll pay zero taxes on it. And so it just comes down to how much do you need? As if, like. But there's not personal need for the money. Like, I would be very encouraging to keep that money in the business, invest in the second location and not get taxed on it. But just like, that's the tax in me. Like, I avoid taxes like the plague. And I'd be looking at what your brackets are. Like, if you can stay out, go up, keep from going into another bracket between you and your wife. Like, I would be avoiding that by secondary locations.

Okay. But I. I do think that it would be nice for the family to have a little bit of a lifestyle change. Right. Like maybe tutoring for my son who needs it. So things like that where it builds another one to $2,000 a month would be nice for that part of it.

When you say 5,000amonth, is that W2 though, or distribution?

W2? Yeah. And I did 5% profit sharing. Two or one quarter and then a 10 another quarter this year.

Yeah. Do you have any sort of accountant, like right now that helps with this stuff?

Yeah. But honestly, it's just. I don't know, he's so quiet and I don't know, it just feels like if like not. He's smart, he's competent, he has a good firm. I just don't know. Maybe the right questions to ask. I have a bookkeeper that helps with the monthly stuff. But then, yeah, like, he helped, I think helped me file as an escort maybe. I don't know. It's all just a little confusing to me. Still.

You're getting to the point where you want to understand this stuff.

Yeah. I've also just signed up for a coaching thing because I have to force myself to understand all of it. Yeah.

And it's not even like knowing it yourself. You need someone else that can know it and then break it down. Just do this. So whether it be the S Corp with LLC from underneath it, you don't want to be finding out in three years that, like, this whole time you've been pierced in the corporate veil and now someone sues you and they can take everything. That's the type of thing you just need to start.

Is Brad still doing his thing over there?

Home service, epa? Yeah, I think, don't quote me. I think he has spots available for taxes, but he's going to probably lock air pretty soon. I would recommend someone like that, though, that is going to just be like, here's why you should do X, Y and Z. And they're familiar with like, multiple location stuff and they can just break it down. What is a form 1120s. And like, why does that matter? And when do you switch over from an LLC to an S corp and just give you a little bit more understanding around it to Pay, like, the W2 stuff. No one's, like, telling you, your accountant, you should increase your W2s. I'm sorry, I'm moving on. Like, you want to take what is considered a normal salary, and there has yet to be a single case where that ever has ever become a big issue with the irs. Like, nowhere.

That's his thing. You need to increase your salary.

Yeah, no.

And you need to also be like, having a lot more taken out of your paycheck to go towards federal, so you don't owe as much at the end of the year. And it just all feels. Even though I pay myself 5,000 a year, it's like inflated taxes being taken out for federal.

No, it's insane. Let me give you a YouTube channel to look at a couple videos around this and literally just look up like, W2 versus distributions or something on this channel. It's Mark, Mark Kohler. K O H L E R. Okay. He's a. He's a cpa, makes videos. Highly recommend. Watching a couple of his about W2. And he just breaks it down and shows that this is an absolute fallacy.

Okay. This is what I'm finding. Like, when I look at coaches and I look at accountants, things like that, it just seems like an unfamiliar path to a lot of people. Everybody's, oh, maximize profits where you're at or grow top line. I'm like, no, this is what I'm saying I want to do. And everybody's just. It's like a foreign concept or something. But to me, it' not foreign because this is my exposure. So I don't know. That's been my frustration with trying to, like, search for coaches and stuff. But. Okay, all right, cool. I think I Worked on most of that on this page. How are we doing on time? Is that doable? Like doing 335, 000 in a year the first year for a location and getting it to close to 657 the second year.

I think you're gonna have to spend more on the 70 more than the 75 to get started.

This high marketing spend, it's gonna be.

A high marketing spend. You're gonna be pretty inefficient, whether it be you or a salesperson. Like you're gonna be pretty inefficient. You're also. Your rates are gonna be lower just to get. Because you're trying to maximize close ratio. So I just see a lot more burn than people expect. And when I see people go from zero to thirty or forty, I'm usually seeing closer to a hundred thousand dollars being spent if they're gonna grow that fast. Because there's a lot of waste that comes with growing from 0 to 40,000 in a matter of a few months. You're doing jobs that are outside of your territory. The routes are inefficient. The guys aren't making P4 a higher percentage to make up for their the lack of the route density. So there's just a lot of little things I've seen stack up. If you're going to go from 0 to 40, which a couple of my locations did, like I spent 100 grand on them.

Okay.

But keep in mind, as long as they're under 30, you're burning money typically. So that's why I would rather incent someone very heavily to get above that than allow it to trickle around at 15, 18, 20 for 6, 8, 10, 12 months. That's when you bleed all of a sudden an additional 50k simply because you're under the burn rate.

Can you explain the concept of the burn rate? Why that's the magic number, like 30k or plus? Yep.

So if you have a GM and they're on salary, let's just call it seven grand a month. Once you include taxes and all the rest of it, then you get two employees and then you get insurance. Your fixed costs of rent, utilities, insurance, etc. You literally have to be making 30 grand unless you're investing your time. If you were doing sales in addition, you could probably get down to 20 and make it make sense of it. But for example, Nick Reed, my regional like he has his own location is being ran and they do about 35 to 40 makes $10,000 a month profit. If you start going below though, like down to 20. It just you don't make money.

Okay, and when did you say I would make the transition out of the second location and hand it over to a GM to mostly run on their own. So what revenue level per month like.

I would be shooting for that 40,000. That's like the most conservative because if you can get it to 40, you can basically then throw it into profit mode. So you're probably at three or four trucks. You get a GM and likely you're going to pull a high performer from your first location or your second location, but likely your first location because you've worked with them for a long enough period of time. And I would probably do is set Charlie up being like, hey, I want your best guy in six months. Be this the gym, like that's what we're going for. It also allows him during next spring to be able to recruit using that as a bait. Right. So as in all his team meetings, hey, this company, we're going places like we're going to do multiple locations. There's an opportunity to be a GN drone manager. Dylan's out there hustling, trying to get it off the ground and he wants to hand it off to one of you.

And then how can I incentive chart incentivize Charlie and a three year plan. Does he have more upward mobility after being the essentially a GM for the main location, then it's okay, we get a second and third. Does he ever move into a different position that affords him more money or benefits or it's going to come out.

Of him like life will change for him too and his goal. But I would say you're trying to show the vision. It'd probably be the regional manager which you are going to serve during that. Once you get a secondary GM and you start go start the third one, you're going to start serving as regional. Now if you have three gms, there's going to be problems and you're going to need someone to be able to step in. And for now like at the beginning it would be you. But once you get three locations, let's say they're all around 800,000 a piece being profitable, you then put a regional above it. So there's somewhere in between you and the GMs in terms of if something goes down, if someone goes to a life event, you're not now jumping on a truck.

If there's say Charlie's in between me and the GM's is regional, like what the heck would I be doing? Whatever you want.

But that's like the role. Then would be like, do you go, are you the starter?

Right.

Are you starting more locations? But again, I think in three to five years, life's going to happen. And so there might be other objectives you want to be. If you want focus on more stuff with the family you like more or less just mentoring the GMs, mentoring Charlie. There's a lot of places that will go. I would be flexible on how you get there. But do you want three locations or do you want 10? And then you got to actually, like, then build backward from that.

We'll see if I get a bug for certain locations after one or two more, and then we'll see.

Yeah.

Okay, cool. Okay. So I was just trying to figure out how to avoid perverse incentives. Like I said, going back to the GM role of like, growth, and I was like, just bonusing on the 5% per month or per month based on, like revenue for that month. Is that. Should it be that plus a little bit of profit sharing? Is there a mix of both or are we just assuming there's not gonna be much profits anyway? So we're just going strictly on up to that 30,000 mark? We're going strictly on revenue.

Yeah. If you're trying to grow that fast, there's not gonna be any profit. So I would just incentivize heavily on revenue growth. And even if you made it based upon, you can make it really easy. And it's unlock a dollar amount when they hit a certain amount per month. So it's, hey, if you hit 10, you get this amount. If you hit 20,000amonth, you just unlock these cash bonuses, essentially.

Cool. Now, logistically, do I just open a whole separate bank account, like under this llc? Whole everything's separate. I'm just trying to figure out, like, for me, expense wise, it seems like it'd be eas. Then wouldn't I be paying double the bookkeeper fees? Because they're going to charge. How would I separate things?

So it costs about $2,000 extra per month to be able to do this, to separate out locations.

Yeah.

And so there's two things you're doing it for. One, the fact that you're going to have a general manager that has the mindset of an owner. Secondly is asset protection. So for example, if one of my locations, they in an accident, they can't come after my other location. They can't come after my real estate, they can't come after anything else.

Yeah.

So you like when you talk about real estate investors, that's why they talk about doing an LLC for every single property. It's not because they want to do five different bank accounts. It's because they want. So if someone slips and falls, they can't go after all their other assets.

Yeah, yeah. So, but are you recommending I do that I go that route or you just think that 2k a month is not worth it?

I know. I think the 2k is worth it.

Okay. Okay, so right away, let's say I've. I think I have close to upwards of over 2, almost 300 in my account right now. So I just switch over a hundred. Boom. I could just transfer it to a new bank account. And then how does it look like to my accountant? What do I tell them?

Yep. So owner's equity is gonna be a hundred thousand dollars. That's your opening equity for balance. You start at 100k and you're gonna spend out of that. It's gonna be in a new ein number, a new llc. It's daunting when you start your second one, but like now, as time goes on, you will do all of this in one day. New bank account, new IEN number, new llc, Boom, you're good to go. And then that new bank account's gonna have a new stripe account. And then like insurance, you're gonna do for whole entity because it's under 1s corp. But then you're gonna do a. A journal entry between the two LLCs or the two QuickBooks accounts, for example, at the end of each month. Okay, so these four trucks were used here. These eight trucks were used over here. Great. Go to journal entry and QuickBooks. It charged the main account and then journal entry over $500 because the other four trucks are on this other account.

Okay. Yeah. I'm gonna need to connect with another accountant who's familiar with this that can help me navigate through it, I think. All right, cool. I've gotten through most of my questions. I've probably eaten up a lot of our time.

Half of half of it, Dylan 2 is asset protection. From a dollars and cents in the near future, you sticking with one location is going to be better because you're still very involved. It is a matter of building this where the business can run without you. And there's people actively thinking like owners inside the organization. And from an asset protection perspective, you're in the clear. If you have, let's just say a four million dollar business down the road, I would rather have that intense consent or five concentric circles that are all completely legally separated. So if Any one thing happens, it can't bring down the whole business.

Yeah, no, that makes total sense.

There's gonna be more accidents, more lawsuits. When you start making enough money, if you talk to a good lawyer, they don't think about tax. They're like, I don't care about tax. I want to make sure if one bad thing happens, you don't sink everything. Yeah.

And I like, it's reducing, what do you call it, key player risk. Right.

Because there's times you won't feel as enthusiastic about the businesses. There's gonna be times where you feel like that. And so the more other people that are in the org that are driven, motivated and incentivized to keep running at high speeds, the likelihood of you continuing the businesses is higher.

Yeah.

And you'll keep people like Charlie. You will not be able to keep Charlie if you're like, hey, you're a divisional leader now. I'm just gonna pay you more. He's I want some skin in the game and he will go start his business otherwise. And honestly, it's probably not a better move for him. Just like from a numbers perspective of how much he can make and like the dependability of those earnings is much greater. Being a GM for you and immediately from day one probably making almost six figures.

So like when what if I graduated him to the first GM after I get it to 30, 40,000, then do you think that would give him a pay bump from his 75 salary plus profit shares, you think?

And the challenge is you finding someone that can run a location that's at 800,000 from day one. With no experience with the crew. I like to usually make the GM the person that's worked with me for some time. Unless there's someone in the org at his location and he's, hey man, they could take this over, no problem. I'll take the smaller location. I'd probably leave it up to him, but I have a feeling he's going to be like, I want this location. I'm comfortable with this. And I get dominated. But if he would rather he likes new stuff, he might want the smaller location. I would leave that up to him, but it's just going to be a matter now. You got to find a GM for that location, right?

Yeah. Okay, cool. Okay. Can I just rapid fire a few more at a time? Do you do separate social medias or just keep it all the same, like a Puyallup, like urban roots Puyallup location or separate Facebook page and all that?

I recommend it. Yep. Because that page is separated on your Google listing, links to a different URL. Etc.

Okay, market research for a new location. Do you look at a lot of demographic information like, like median income for a certain area before picking a city or how do you research that?

Yeah, we do. In terms of market research, we pull a whole bunch of data from the market pretty well. If you have firsthand data like you do and you've gone in that market and probably done a few jobs, I've never seen anyone be wrong about that. You've lived there long enough, et cetera. But I would not worry about that too much. I know that area too. Like, it's great.

Currently we're at $90 an hour for maintenance and $80 an hour for projects. So I'm thinking of raising prices on one or both of those next year for our current location. Strategy wise, do you ever recommend going low and then raising prices or do those prices sound about right to start a new location?

Yeah, I would move those up at the existing location to make it more profitable. At least $10 an hour on both and then they'll bring your close ratio down a little bit. Probably do less work, but you want to be in growth mode and buying trucks, which adds huge amount of complexity for the gm. And then on the new location, I would go low. I'd probably do 70, 80.

Oh, wow. Okay, perfect. Yeah, my close ratio seems a little bit low even at these prices, but yeah. Okay. So should I try to simplify the new location in terms of services, or is that just contingent on what workers I have? Because right now the perfect business model to me would be maintenance, property cleanups, bark insulation, gravel, boom, that's it. But we do sod super annoying plants. Even more annoying. We don't do hardscapes at all. So we have drawn a line on that. But do you recommend taking on more of the projects when you're launching a business and then simplifying later?

If you really try to grow fast, then you simplify later. If you're trying to simplify your life in two and three years, I would just do it from day one. So all my new locations, we started off with simple services and took a little bit longer to grow. And I was fine with it because I knew how painful it was to tear off where 50% of our revenue was coming from big projects and like the pain of tearing all that out. So I would just make sure you match whatever your locations are doing, like just do it across the board so that way you can move people between locations if needed. GMs, laborers, whatever, without there being like, oh, you gotta learn this whole new thing. So I think I would probably say, for example, if you're like science, just kill us, I would strip that out when you give the thing over to Charlie, because that's a whole nother layer of complexity he's gonna have to handle. And then your new location, the same thing. We don't offer that.

Slower growth, maybe, I don't know. We'll see. I'll talk to the guys about it.

All right. We talked about, I need to talk to someone about more pay for myself. And rather than doing like a W2 higher pay like you said, owner draws basically more frequently, like monthly or quarterly.

Yeah, exactly. Yeah. Listen to the that YouTube channel. Mark Kohler, just literally some of his highest views videos are about this topic. There is not a single case in the United states where the IRS has penalized someone for taking too low of a W2 second man.

Yeah. Wow. Okay, cool. Any suggestions for like ongoing academies? Because I joined one, but I just, I don't know if I'll benefit from it. I obviously gained a lot from spending time talking to you, but on an ongoing basis. Like, any suggestions for like mentoring and how to navigate that?

Yeah, I think I have it coming out in a video very soon. I look at it as like you have public mentorship, which is usually videos, it's free essentially, or like maybe someone's course or whatever. And then you have usually peer mentors. So like usually you're getting a peer group and then you have basically one on one coaching. Right. And so sometimes you'll get into a network with one year now that you get a little bit of mentoring, a little bit of the one on ones, a little bit of blend, right. And it gets more and more costly as you move down that scale. But you want to be more focused as you go down that scale of what you're looking for, what are you wanting? And so I think right now you're probably going to get the most from peer people that are around your size. They've grown a business, they're between 5, 600,000 and 2 million. That's probably where you're gonna get the most. Because one on one right now you're gonna talk to someone like me, for example, on a one on one and they're gonna be like, oh no, like we should do this. Let's go into this vertical. You need to niche down. And it's because they've niche down. And if you would have come to me with a different set of problems, I would have gone a different direction. I've been to your place and I know like you want simple. You're building this around Charlie and Michael. There's a very specific way you're trying to build this. So I'm not going to tell you to go to irrigation because you can get like 200 bucks an hour. And so that's the only thing to be careful of is like first know what you want and then you will get advice like how do I get here? Instead of being like what should I do? That's. That's when I see people get into problems.

I've been more assertive with the direction I want to go and I've actually rolled coaches out because they would not even hear the vision that I wanted and that was problematic. I think I may have asked you most of my questions. I'll probably think of one or two more.

But yeah, I guess I'll see you in January probably.

Yeah, I would like to. I'm trying to drag my life out. I have made the mistake of taking team members who had zero interest. So that was like hunting down the toilet. So I've got to really see if there's buy in there. And then yeah, I'm reluctant to end because I know I'm gonna hang up and be like forgot to ask that question. But yeah, I appreciate your time.

Cool.

Thanks Dylan. You have a good one.

Take care now.

If having a one on one coaching call with me is too expensive, I understand. For that reason, I'm gonna be doing a one day full workshop inside of a three day conference called blue collar summit. And you can book your ticket to tickets today. Go to blue collarsummit.com on that workshop. We're going to solve your off season problems. We're going to make sure you get customers year round and make sure that you're profitable every single quarter of the year. We'll see you at blue collar summit.