Exactly How We Pay Our General Manager

Hey, everyone, it's Mike Andes, founder of Augusta Lawn Care and Homeworks. Today we're going to be diving very deep into how to compensate your general managers, your operations managers, sales managers. You could kind of fill in the list here. But one of the biggest things when it comes to hiring and attracting great talent is explain to them how much they're going to be compensated. So there's something called on target earnings, which allows you to be able to show prospective applicants and how much they would make if they perform at certain levels and certain amount of profitability in the role. Today is actually going to be behind the scenes because at Augusta Lawn Care, we every single week do what's called an office hours call. It's a live video on zoom with all the owners. And this is actually going to be the first section of the office hours with Nick, our owner, success manager, and Lee, who's our head of sales. They're going to be talking about on target earnings and how to use this document. You attract great talent as managers in your business.

We got something special planned for our office hours for Thanksgiving week. We have a VIP guest. Our VIP is the VP of sales. I would like to welcome Lee park to office hours. Lee, how's it going, sir? Hello.

I feel truly blessed to be here now.

It's good to see all you guys.

I know I don't get to see everyone as much as I used to, so it's good to see everyone. But yeah, Nick invited me on. We're going to talk some fun stuff.

Excellent. Yeah, figured we'd just kind of geek out, take you guys a little bit out of the data data day, maybe some more head in the clouds kind of stuff. As you guys are grinding through the last bit of the season here, we're going to talk about something that's very familiar to Lee and his world, the sales world, which is the concept of on target earnings. So I know for many of us, even me very recently, not familiar with the subject and how it relates to us and what we're doing. So Lee, I guess from like a really ground level perspective, what is OTE or the concept of on target earnings?

Yeah, it's a great question. It is typically a phrase that is used pretty heavily when you look at like sales jobs. So on target earnings, meaning how much money could I potentially make at this job? If I am performing to a certain level, what could be my take home pay? And so ultimately the idea behind an on target earnings chart or on target earnings plan would be to ultimately tie someone's performance to potential pay. It shows what is the output that I might receive for my input and it makes it very binary around the numbers. And so you've all probably heard of this. If you've ever had a sales job or talk to anyone in sales, it's like commission based pay, right? Okay, if I sell a certain amount of commissions, I'm going to make a certain amount of money. But what we wanted to do is more so conceptualize this concept of on target earnings to actually potentially tie to what general manager performance might look like inside of Augusta. On target earnings is not something that's typically talked about outside of sales. And Nick and I had an idea and Mike and I think it was actually at the seven Figure Club retreat that it was like, would there be a way to potentially show general managers what their pay might be instead of just saying, oh yeah, it's a distributable cash or it's profit sharing or I'll give you a piece of the bottom line. It's like that. That doesn't matter. That doesn't mean anything. That's not. Those aren't real numbers. How can we actually show those numbers to potential general managers? And so that's what on target earnings is, is. What could I potentially make? What. How is my performance tied to my pay?

Yeah. And so Lee, you know, given learning this concept in the sales world and then just thinking about how could he take this and apply it to what we do with general managers and basically incentivize them towards hitting these targets that they want in order to make their pay and see how those connect. Lee created a really awesome spreadsheet that he's going to pull up and we're going to kind of go through some different scenarios. So I guess Lee, if you're ready, we can kind of pull that up and just kind of show everyone generally and then we can kind of walk through it, maybe build out a couple of different scenarios.

Yeah, yeah, 100%. Let me share my screen here. Give me one second. Going to try to figure out where to put this because obviously there's a ton of information here. Now don't read ahead because there's a lot of information. We are going to make this available, available through the dashboard for you to be able to access and edit it yourself. And I would also say for owners too, if you're like, hey, I don't have a general manager, I might not have a general manager for the near future. It's a great. Build this scenario for yourself. Like, what do you want to take Home. What goals do you need to hit in order to take home a certain pay? Right. That's ultimately what it is for. It is. What can I take home? And so when we look at this scenario builder, I just want to zoom in over here on the left side and then, and then we'll actually get into the numbers. So Nick, feel free to cut me off. And obviously, you know, this is, this is your show, these are your office hours. But anyone, feel free to interject, ask questions. So if we look over here on the left side, it ultimately is a general manager compensation scenario builder. Now what you would want to do is put in the general manager's base pay. Now this is just a kind of standard salary based pay of around 5800 per month. So 70k per year, which is, we're just going to assume that this is for an established location. If that's going to be your base pay for a general manager, you're probably going to be in the fifth stage of growth. This business that they're managing is probably doing 800,000 plus in annual revenue. So we're just going to make a lot of assumptions here while we show this chart. Now there are variables when it comes to compensation. The first variable is the percentage of distributions. How much are we actually paying out to our general manager? Now depending on the size of business, the roles and responsibilities of that general manager, that percentage may fluctuate, increase or decrease. Okay, so that's the first variable. The second variable is what is the business's target revenue? Because we're obviously going to pay based on the performance of the business as a whole. Then we have the distribution threshold. We'll get into that in a second. But that's ultimately what can be distributed out distributable cash through bonuses, through this bonus structure. Then we have cash on hand, quite literally. What's the money in the bank account that the business has? Then we look at the distributable cash. So that's basically an equation of distribution threshold versus cash on hand. So how much can be distributed out from the business. Then we have the potential general manager's bonus and then we have the base pay. So I'll walk through the chart there as we go. Any questions or anything you want to add clarity on there, Nick?

Yeah, really quickly. Kind of the general distribution threshold that we use is an a rolling average of your last three months of revenue. Right. So if I did, you know, 80,000 for the last three months, that's my distribution threshold. And if that drops off in the Winter. Let's say I do 40,000 for three months. That's the distribution threshold. So everything beyond that number of revenue equivalent in your bank. So everything beyond the average of three months revenue, 40,000. Anything above that is on the table for distributions. This is a nice way you can fine tune this over time, especially if your manager has had consistent distributions for years. You can set maybe more of an arbitrary distribution threshold. But this is just a good starting point. And it what's nice about it is you never have to make any adjustments. As long as it follows that general rule of thumb of an average three months of revenue. As long as you have that equivalent in the bank, you can safely distribute that and the business will still have enough money to operate the way that it needs to.

Yeah, 100. Great clarity there. And also with this chart we are kind of assuming, hey, 25 net profit. So this is a location that's established. It is going to be running in profit mode.

Right?

So 25 net profit. This is not a business that is growing at an aggressive rate. They aren't purchasing a bunch of assets, spending much on marketing. So we're also once again making a lot of assumptions here. So this would be I guess to generalize too, this comp plan, this would be built around a location that's more so in profit mode than growth mode. Because if you're in growth mode, you're probably going to incentivize your general managers differently. I mean that's what we recommend. We talk about a new owner training. This is more so profit mode on target earnings. Now to add a little bit of clarity before we jump into the actual numbers because everybody wants to actually see, okay, what can, what can we actually make? What can we actually take home in this document? The yellow cells are more so for the general manager to edit. Now technically the owner of the location should edit this and then provide it to the general manager with guidance. But I also want the general manager to feel like they have ownership over this document. Hey, you can you have control. You can edit some of these cells because you are in the driver's seat of this business. Now, the light green cells, the owner would edit and then really anything else doesn't need to be edited. The cool thing about this document is all the equations are being done on the back end so you don't have to do anything. Just fill in the yellow cells, fill in the light green cells. All the numbers will, will populate automatically. Now when we define some of these terms, business revenue target, that is the money generated that month or that year. And for some of you, this is going to be like, yeah, Lee, that's gr. We're pretending that you are providing this to a general manager. So they need to know what these terms actually mean and that the definitions are understood, not that you're just telling them that, hey, you're going to make a bonus if you work for me.

Right.

So we're defining what these terms actually mean. Distribution threshold is the average monthly revenue for the quarter. So Nick already went into a deeper explanation of that. Cash on hand equals the cash available in the business bank account at the end of the month or quarter. And then distributable cash equals the money available above the deposit threshold. Now, we also have kind of like a little Q and A. And we might add to this, especially after this session, if anybody has thoughts on like, we could add more clarity around X. Great. But some of the questions that your general managers might have is how much cash on hand should a business have? Because if you're going to pay me out of the distributable cash, how much should you have? What is a good rule of thumb? And we always recommend never below one month of revenue. Cool. Anything you want to add clarity there, Nick?

No. Good to go.

Fantastic. So let's actually jump to the numbers because that's what everybody actually cares about is what, what am I actually going to take home? So once again, we are assuming here that this general manager is getting a base pay of 70 grand. Now I'm going to zoom, I'm going to make this bigger so it's a little bit easier.

There we go.

So we're going to assume that the general manager is getting a base pay of 70 grand. That means, and this is pre tax, obviously, $5,833 paid out per month. That means in a quarter they're going to get $17,500 in. Now, if you remember here, yellow sells, the general manager gets to edit. Light green sells, the owner gets to edit. So with your general manager, it's like, okay, what are our goals per month? What are the business revenue targets for each individual month? Okay, we fill those out there and that gives us our quarter total. Now the quarter total here is $175,000. We also have a green cell here that is the owner editing. And in this location, the owner is willing to give away 25% of distributable cash. So probably a location where the owner is not show going up much. Right. That's a pretty hefty amount of distributions. But that Means that the owner probably isn't going to show up there. So they want to incentivize that. Now, the way we get our deposit threshold. Excuse me. Is once again doing that math. We have our cash on hand here. So these are green cells. The owner would put this in. So the owner needs to put in what should our projected cash on hand be for each month? So you can see here these amounts put in, and then basically your quarter one total is just going to equal whatever it was in that last month there, as you can see. So $107,000 is the cash on hand. So our distributable cash equals $48,667. Now, that number came from these two numbers. Above our deposit threshold was the average monthly revenue for the quarter. So you can see if you average out these three totals, that's going to equal, excuse me, $58,333. The difference between the threshold and the cash on hand is distributable cash. Everybody follow that? Did I explain that clearly enough? Cool. So the distributable cash for this Hypothetical location is $48667. 25% of that is to the general manager. So now this general manager's potential bonus for this quarter is $12,167. Anything you want to add there, Nick?

Yeah.

What's great about this, you guys, is it's kind of a collaborative approach to giving your GM clarity into how much money they're actually looking at making. And what's great about this is they can actually take it and tweak the numbers. If they want to make more money, it's literally okay, like, produce more. Right. If you want to make more money in January, instead of doing $45,000, 65,000, and do it profitably. And again, one of the nice things with this is it connects top line revenue with take home distrib. So it really solidifies that link with the GM. Like, okay, it's not just, oh, hit 60,000 this month, and you did a great job as a GM, it's hit 60,000 this month. Make sure that you have 25% net margins and you're collecting on that money by the end of the quarter. So you can actually get a distribution bonus. So it connects that really well. But that's what's great about this is the owner sits down, builds it, obviously the cash on hand. That's just assuming that 25% is just stacking up every month that 25% profit. But they go through build this with the GM. Talk about some of those, you know, like clarify anything that's unsure. But then you can hand this to your GM and say, hey, run wild. You want to make more money. Like adjust, Adjust our monthly revenue targets and ensure that we still hit profitability. And then Lee can go through the rest and we can chart this out through the rest of the year. But that's, that's what I thought was really valuable with this is, is getting the owner and the GM to collaborate. And then also if the GM wants to make more money, it's the same thing that we say on performance pay. Hey, if you want to make more money, produce more. Same thing with the GM.

Yeah, 100%. I even like to be, you know, if you, if you have the, the relationship capital with a general manager and employee, it's like, hey, I'm a business owner. I want that number to be as big as humanly possible. So if you want this number to be bigger, make this number bigger.

Fair, right?

And that's kind of like the. Cut out all the noise like there, there are no biases here. I want to make as much money as possible. And if I want you to get paid for making that money. So if you want this number to be bigger, let's make this number bigger together. So it becomes a very collaborative approach, as Nick was saying. Very cool. So all this is broken down into quarters because we obviously recommend that your GM compensation plan be paid out on a quarterly basis.

Right?

So all this is broken down into quarters, not going to go into each individual one. You can see I'm scrolling through it here. And then it actually totals all of it at the end of the year for the general manager, because this is on target earnings, meaning on target for the course of a whole year, for the course of four separated quarters. What could I potentially make? So instead of saying, hey, I want you to be a general manager, the base pay is 70k and there are bonuses versus, hey, the base pay to be a general manager for me is $70,000. Now I have the numbers from last year that we can put into this document and I can show you exactly what you could have made last year on this bonus structure. Then what we can do is put in the numbers that I want to do this year and show you what you could make in bonuses this year as the manager. And now it gives them something tangible to actually hold on to. And if we run these numbers and these numbers aren't crazy like Nick and I, when we put these numbers in for this example, made it semi Realistic. It is.

Okay.

If you had a business in the fifth stage of growth doing 800 to 900k in annual revenue, you can see that here. So that's our business target revenue, 900k. What could you pay out to a potential general manager in bonuses? $42,000. Add that to their base pay, $70,000, the on target earnings for this business and it probably runs like clockwork. Like this General manager is not a slacker. They are high performer, but they are worth that $112,000 in our opinion, based on this model. Nick, anything you want to add to that?

Yeah, and you can certainly exceed this. Again, this is just like the standard. This is like the template. And then Lee is going to share this on the dashboard. It's the same as always. File, make a copy and then you can just fill in the columns on your own. But the sky's the limit with this. And that's what's so great about on target earnings is you could just tell the manager, hey, if you would like to make more, figure out how to produce more money or sorry, figure out how to produce more revenue and then also make sure we ensure profit. And that's how you make more. So it's never like, hey, can I have a salary raise or anything like that. Like that just doesn't exist. Right? Same concept as P4P.

Yeah, yeah. And obviously you can edit this, right? That's where these, the owner sells. Let's say, you know, you, you make up the compensation plan with them where it's like, hey, I'm going to give you 25% quarters 1 and 2. Assuming I don't need to show up to the business after six months of you running the thing, I might bump it. I might bump it to 30%.

Right.

And then that's going to increase their bonuses as well along the way. So you can see that bumped at $2,000 for the year. Right. So let's just do 30% in Q4. Boom. That just bumped their bonus up five grand. Right. Just by changing the percentages slightly. So now I'm making like quick changes here. But ultimately it gives you a tool to play with. Like what can I afford if the business is performing to a certain level? Also, what can I as the business owner afford to pay a general manager? Oh yeah. And if I do nothing, I want to pay a higher percentage and if I need to be there a lot. Like I said, like you could start them at, hey, you're going to get 10% in your first quarter and then you're going to get 15%. Now, I wouldn't recommend doing this, this, you know, as aggressively, but you could do like a ramp where it's like, hey, you're going to get 10% and then maybe you're going to get 15% and then more and more and more so you can see how it changes. And then that year end total obviously is reflected in those bonus changes.

If this sort of discussion is helpful for you as you begin to copy and paste and do multiple locations, having this sort of community and training is what, in my opinion, sets Augusta Nation apart and allows you to be able to copy and paste multiple locations much faster and with more confidence and success. We already have the command center built, your website's done for you. The ads, everything is put in place so you can copy and paste with the greatest amount of ease. So if you have read the book and you're like, that'd be a lot easier if I was just on these office hours and able to answer my questions and have these sort of on target earnings just done for me, then I'd recommend joining Augusta Lawn Care. You go check out augustalawncareservices.com/ Franchise and book a call with Lee and his team and I'll see if joining Augusta Lawn Care is the right fit for you.

Yeah, a couple questions that came in through the comments and, and Marco, Tim, if, if you guys are available, I think your cameras are off, so if not, no worries. Oh, Marco, I think you're good, man. Do you want to clarify your question that you put in the chat? Yeah, if, if it's. Does it stay the same that, that combination compensation model that you guys are showing? If it's an operations manager that doesn't handle this compared to a manager that handles both the sales and operations?

The same thing. Yeah. So this is, this is based on distributable cash. So this is not like a sales comp plan. It's straight, straight across. Is the business profitable and are we above a certain amount of threshold in the bank account? Then I can pay you bonuses. So that's Mike's preferred way of paying out general managers is through the distributable cash model. There are no incentives here around growth or sales. It's strictly run the business as profitably as possible. If you wanted to do sales bonuses, that'd be completely separate from this.

Yeah, like this is, this is really in line with like the whole Augusta model that we preach. One person at the top of the organization who answers for everything and then they just get a Cut of distributions, that's it. Versus having crew leads and operations managers. And then they get a cut of distributions, but they don't really have full ownership over the results. So then it gets really muddy and then people kind of lose that link between their performance and their compensation. So again, this is really just for the Augusta Standard model. One GM running a location just under $1 million.

Yeah. And I think, and I do see a hand coming up and there might be other questions. One thing as well that like this is the big caveat for this is this is an established location in profit mode. Eventually, would I like to build out a comp builder for locations in growth mode? Yes. There are a drastically increased number of variables when trying to make a comp plan for a location in growth mode. And it also kind of depends on what you are willing to pay out to a general manager when you are in growth mode. Because if you're like very risk tolerant and you have maybe additional capital available in an extra savings account somewhere, you can just redline the thing and pay out way more per sales transaction than maybe some other owners. So this is, as Nick said, this is around the Augusta business model. We have a business that is running very efficiently, high rate of recurring revenue, command center handling everything, one overhead position. This is what we can confidently pay them and reward them for their hard work.

Yeah. And that, that kind of answers Tim's question in the chat, you know, he said if, if you're in growth mode, is it good to compensate based on revenue targets since there's not going to be profit or distributions? Yes. And again, just in line with what Lee's saying, if you're in growth mode and you're not bootstrapping it yourself as a manager, you're coming in as more of an investor type. You're supplying capital and the manager's on the ground doing everything. You're going to calculate that in your business plan. Your five year projection that's going to be part of your burn rate is like you're going to burn money. You know, you're going to be paying out revenue goals when they're doing 30,000amonth and you're negative because you're incentivizing growth. But then once that location matures, you park it. Then you switch to distributable cash.

Yeah, 100%. I think there were a couple of questions, Matt or David, I don't know if you guys can unmute yourselves. I can't see the chat or anything. So.

Yeah, I know you mentioned how you.

Could use this for compensating an owner as well.

Are there any changes that you would.

Have to make to any of the calculations or basically just switch? Yeah, it's completely up to you. Basically, the only cells we recommend editing are the light green and then the yellow cells. And then you just put in, like, what is your base pay? And then how much are you comfortable taking out of that distributable cash threshold? So, like, for an owner, let's just say hypothetically here, and I'm not saying this is. You say you're like, hey, I'm just going to take bare minimum, like, cover my kind of cost of living out of the business. Like, I'm just going to take, you know, 50k.

Right.

I'm going to take less than five grand a month out of the business. And then. But then I might give myself, you know, 50% of distributable cash. Right. So let's just run that on this, like, very profitable model. Hey, you've worked five, six years to build this location. You're willing to take a bare minimum salary, but you want to get those nice distributable cash distributions. And now you can see, like, hey, even a way lesser salary, you're still making more. And your bonuses are 84k. Right. The distributable cash is $84,000. Your base pays $50,000. You're taking home $134,000. But the business is objectively very healthy based on all of these calculations, assuming we have a 25% net profit.

Yeah. And in the perfect world, everyone would work for free and they would only be given a commission based on what they produced. But obviously we have to guarantee base pay. Right. So it's very similar to what we do with the fixed. The field tax is like, you know, a base pay that's high enough to get them in the door and, you know, satisfied in case things go wrong, but then low enough to give them an incentive to perform. So kind of in this example that Lee just gave, obviously, I don't think any of us would ever put a GM on this compensation structure, but you can see how, you know, their salary is much lower than their upside on their distributions. So the salary would probably be the majority of it, but there'd still be strong, healthy upside. But I guess just throwing that out there is. Yeah, yeah, right.

But, but I will add, I will add here. I'm not going to give away too much, but, like, this was effectively my base pay when I ran Mike's location, the Bellingham shop And I was paid out more in my distributable cash than I was my base pay. So, like, there is a balance to it. But that, that was a risk for me as the employee. Like, I'm betting on myself to perform. And so if you employee that is willing to kind of bet on themselves, then, yeah, you might give them more of the distributable cash because they're taking a lesser base pay. Now, obviously that's within reason, but as Nick's saying, generally speaking. Yeah, like doing like a nice solid, you know, 65, 70, if, if you're running a business of this size and then giving them, you know, a reasonable 25 to 35 is, is very fair.

Very fair. Yeah. And, and Tim mentioned this in the chat. This is part of kind of a new thing. It depends on which state that you're in, how aggressively that they're pushing this. But basically, I know there's a federal limit and a state limit, at least here in Washington, for the minimum salary threshold that you can have someone on without having to pay overtime. So that's something to look into. Now, if you're like us and you love simplicity, we don't want to deal with that headache. We're just going to meet whatever their requirement is. It's like in Washington, I think next year, it's like what? I don't know, it's like 70,000 or something. Something like that. To where? Yeah, because we don't, we just don't want to track. Yeah, we don't want to track overtime. We don't have to mess with that. So anyways, look at your state. I know every state's different. Washington's literally jumping like 10 grand a year, which is just insane. So.

Yeah, yeah. What I'm. What I'm live doing to that point. What if you're going to have a general manager on, say, hourly instead of salary. Great. What I'm going to do is I'll build here a salary calculator. So that way you can have a nice round number for the top here. So if you do want to pay a general manager on hourly, you can basically say, okay, here's your hourly pay. Here's how many hours you're typically going to work. Here's generally what your salary might be. If you want to get around the idea of like, salary caps are like, I think to. Next point. Yeah. Washington state is bumping up salaried employees to, I think like 80k next year, which is like very high. So it's like, hey, then we're just going to keep people on hourly and try and make sure we're tracking it. So I'll build a salary calculator as well.

And I guess the whole point leads is like, we don't want to track that. You know, you don't want to be micromanaging the hours of your GM spent. Like, you know, it's working well when the GM is incentivized by their targets and they just make it happen. So I don't care how they spend their day, I don't care what they did to get there, as long as there's no issues in the business, Clients are happy, employees are happy, we're getting reviews, whatever. The only thing that I'm tracking is the metrics. And are we hitting our targets, are we're hitting our financial targets. So, you know, I don't care how many hours they're they're working. I don't care how they're spending those hours, Whatever. It's like, results that matter. That's why we don't want to track their hourly. Because then even without caring, you're just gonna start to be like, oh, like, I don't want to pay overtime. And, you know, it's like something you don't even want to do. You're just gonna start feeling like you have to track it. So thank the government.

Yeah, Cool.

I don't know if there are other.

Questions, but one thing I did want to share. I kind of was hoping there'd be a question on this because this is one of my favorite features here. Now, let's say hypothetically, this business here is not in a great cash position. So if you're not watching, you're not able to watch your screen, you're going to miss the fun here. But let's say this business is not in a great cash position. Something happens, whatever. But I'm just going to change one month here. We know that for Q1 distributions, our distribution threshold is $58,333. Now, let's say, hypothetically, the business only has $50,000 cash on hand. Something happened, things went haywire. Whatever it is, there was a big mistake, big job failure, whatever it was. What happens is, you can see here, all these. These cells go zero. And it doesn't affect their bonus in a negative way. So we also want to show the. Your potential general managers that, hey, if the business is still in growth mode, if we're still spending a decent amount of money going into spring, you might not get bonuses, Right? And so that's a very Good way for you to be transparent and upfront with your general manager. Like because you might be promoting a general manager into their position at the end of the year, but you know that Q1 next year probably isn't going to be very profitable because you're still paying off some assets, maybe have some large debt payments, maybe you still haven't figured out your seasonitis care and you don't have that consistent cash flow through the winter. So this is a way for you to show your general manager like, hey, in Q1 we might not be in a great cash cash position. However, if we can hit these remaining targets, you're still going to make a really nice bonus at the end of the year. So once again what we're trying to do is ground their performance with their pay and ultimately being open book managers and showing them that hey, we may have a down quarter, but you still can based on your performance, still make some really nice bonuses here. Fair enough. And that's where they get buy into the system.

Yeah. And it's, it's worth walking through this again. It's like, you know, we can't assume that they understand distributions and all this stuff. It really helps walking through and seeing this visual. And like Lee said, it's like having the long term perspective that like same with performance, it's like so it parallels with performance space so much. It's like hey, if you have a bad day on performance day, but the other nine days of the two week pay period, you crush it. Who cares about the bad day? Like you're still up. Same thing here. And especially if it's projected now, if it's not projected. Right. That wasn't a plan for the owner and now you have a down quarter. It's like whoa, whoa. Right. But yeah, I think it's great. It's you know, obviously the leader being the gm running the day to day, the leader needs to know where the business is going. And that's kind of when you're taking leap from the employee mindset of like oh let me just focus on what's in front of me to oh, I need to actually start thinking about this business in a higher level and seeing how my daily actions connect to the end goal, which is the money that.

The business spits out 100% and it creates a little bit of, I guess, well, the whole idea behind it is creating clarity. But instead of using the word clarity, I think it creates a stability for a general manager as well that they know like their long term performance is what gets the payouts not a down month, not a bad quarter. It's like long term performance. I need you committed here for the long term. And the payouts are going to be great long term. So I can speak from my personal experience as a general Manager of Mike, Q1 and Q2 were typically my smallest bonuses. Right? But that's because you're hiring a bunch of people, you're getting a bunch of assets, you're spending money on marketing, you're working long hours, the crew's working overtime, you're tired, you're stressed, you're like, oh man, these bonuses aren't worth it. But then I knew that in Q3 and Q4, the bonuses were really nice. And so it allows me to kind of have that stability of, okay, I'm willing to grind it out, put my head down and work hard for Q1, Q2, knowing that my long term performance will give me those really nice returns. So it also gives them that stability as an employee and some sanity. In all honesty, when you're trying to get through spring rush and there's not a lot of money on the table, but, you know, Q3, Q4, there should be, then it gives them that stability to want to commit and work long term. Any other comments, Questions? Yeah, poke holes. Tell me, tell me this is a bad idea. Like, I don't know. I'm, I'm here for it. It's his office hours. I don't know how this works.

Yeah, I guess. Anything on the on target earnings or general questions.

Overall, what stage would you decide that you want to put a general manager in? Would you want to just kind of flip it to profit mode at 500, put someone in and then move on to the next location? Or would you kind of want to sit there for a year or two, get it to 800 and then hand it over?

Yeah, I mean, I would default to. This is where I'd push it back to Nick. I would say book your coaching calls. But generally, yes, it comes down to, like, what your long term goals. So generally speaking, we don't recommend if you just look at like the stages of growth and the Augusta business model and what you're optimizing for. We recommend get the business to half a million in annual revenue with you as the owner operator before you hand it off to a general manager. Now, hypothetically, you could hand off a location under half a million in annual revenue to a general manager if they had sales incentives. This document is not covering sales incentives. This document is assuming this is a location in profit mode. So to Your point, Matthew? Yes. You could hand a location off at half a million annual revenue and then we could run the math for a location that's at half a million in annual revenue and then you could go start your second location or do whatever else else it is that you are trying to do. So that's where coaching has a lot more context. But generally speaking, yeah, get the business to half a million annual revenue before you hand it off to a general manager.

Yeah, Matthew, to parrot that, I think it has a lot to do with your specific goals too. So like we know the working gm, it's basically like you being in the wilderness. You know, you're producing out in the field, but you're also handling all the admin and you're doing that transition from 500,000 to 800,000. It's a difficult stage to be in. In my opinion. It's not sustainable long term. So that's something you'd have to ask yourself too is if you have someone who's in position at 500,000 and they're okay with that and they're willing to just price increase and just slowly do a slow and profitable growth up to 800,000, great. If you're like, dude, I cannot find that person, they're a unicorn. And you're willing to spend some extra time over a year or two price increase, get up to 800,000 and then put a GM who doesn't have to be in the field in there from day one, except maybe in the off season, that would be much easier to find that person versus a person who's, you know, skilled at 30 hours of production, but then also going to manage all of the other business tasks. So I think long term, obviously the 800,000, one GM in place mostly out of the field year round, I think that's the end goal. But if you're really, if you're have plenty of capital, you're moving quick and you just want to offload that location, move to the next one 500,000 profit mode, raise prices, put the working GM in place and then go start the other one. So it's, it's very circumstantial. You could play it either way.

Yeah, I'd really love to be out the GM plus model. So if, if Lee would mind, like what, what would that look like as far as distributions when you're trying to split it between an operations manager, a sales manager, a little bit for yourself like that. That to me, that seems like a lot of distributable cash just going out.

Yeah, and that's where the percentages change based on a lot of factors that aren't necessarily in this document. Like we have the variables that are like, okay, what are the bare minimum variables that a general manager needs to know about their potential compensation? Now the variables for paying out compensation and distributable cash, when you built a location to 1.5 million plus the GM plus model, 1.5 million in annual revenue, you're probably going to give away a lot less than that. So like I don't mind sharing my percentages from when I was Mike's general manager, my distributable cash for running the Bellingham location was 10% because Mike built that location over the course of seven to eight years. So he was not going to give me 25% of that distributable cash, which is completely fair and within his right. So I was given 10% of distributable cash for the GM plus model. So what you could do, Matthew, to your point is like if you're the person getting the business to that 1.5 million in annual revenue, what I would recommend is potentially, yeah, just drastically reducing the percentages. So you have a salesperson, maybe you give them 3 to 5%. If you have an operations manager, they're probably driving revenue a little bit more in terms of, excuse me, they're driving more profitability.

Right.

Operational efficiencies, keeping the trucks running, the crews running, things of that nature. I might give them 6 to 8%. If you have an in house office staff. Yeah, you might give them a smaller percent, like 1 to 3%. You're still around 10 to 15% in total. So I think that's something that as we've kind of built out what we call the GM plus model, I think we'll build more, we will build more frameworks around what that looks like for distributable cash. And I would also, you know, in true sales guy fashion, join mikeandys.com black Friday but no, Mike's next book is going to actually highlight a lot of that, Matthew. Like, like a ton of that is going to be highlighted in terms of like how do you actually separate ops sales admin at a profitable rate as you scale a business? Like his next book covers all of that in depth.

Yeah. And maybe just a small side note to that, this is just kind of what I was thinking about because it's like, okay, if you're doing GM plus and let's say you get your GM in there and they're getting 25% distributions at 500,000 and then they have like. And then they slowly increase to 800,000. But then you're, you're in there as well. You're operating, you're scaling the business. It's sort of like if you raise prices on P4P but you never adjust their hourly rate. So like if I did, if I raised prices to 150 an hour, but I'm still paying 33%, I'm paying an insane amount of money to my crew just because I'm priced really high. So what we know we do at that point is we take our percentage and lower it, but we still demonstrate to the crew that they get upside down. So I'm assuming, Matthew, you would do the same thing in this situation is if they were at 25% but you're doing GM plus, you would probably work that percentage down over time, but you would somehow show them that based on the growth of the business, even at a lower percentage, their on target earnings are going to be significantly more than they were at the 25%. So that's one of those things, I guess it would be like cross that bridge when you get there. But that's just how I'm thinking about it in my head. It's like you would just work the percentage down, but demonstrate it's like, hey, you're getting a smaller percentage of a bigger pie and you're going to be much further ahead than you were prior to end on that note, the. I did this when, when we were doing all the price increase stuff before I made a document where it shows how to illustrate the decrease in percentage but the increase in pay. So there's a document to that, I'm sure once GM plus becomes a model that more people do, which I know it's not like the gold standard right now, but if more people go that route, more systems and things will be built around it, I suppose.