Fuel Gets Expensive, AI Hype, Robotics, & How to Invest $100M

57% of revenue went to wages after the owner was paid.

The number one offender on a P&L across almost every single company is, is labor. And if you drive down labor, that's the biggest lever that you could pull on to move the needle in the business. I would far prefer you spend your every extra dollar you have just dialing in the operations. You can find agencies that can get you moving in the right direction.

It is a great product. Like when we swapped, everyone likes it. It solves about 81% of all incoming tickets. They are happy. Like they say, yes, that was a good experience.

As an entrepreneur, if you want to play this game, you have to accept that all kinds of stuff is going to get thrown at you and you're going to have to bob and weave and pivot. It's getting compressed and you've got to be willing to bob, weave, change, learn faster than you've ever done it.

They'll be the ones that in 10 years, like, they're the biggest companies.

Yeah, it's all opportunity. I think people in home services have almost nothing to worry about right now.

Well, the All In podcast, when you listen, they have, you know, I had to channel my Jason Calacanis because he has names for everyone. You know, you have the Sultan of Science, you have, what is it, the Rain Man, David Sacks. Friedberg is the Sultan of Science. So I had to figure out what was JP's The best I came up with was the Sultan of Service.

Of Service. Okay.

You know, but then it kind of—

that's my world.

So we're gonna have to come up with names. I think for everyone listening, you're gonna have to help us out down below. We have— we— I asked ChatGPT, we got the Turf Titan, we got the Baron of Bugs, but I didn't know if bugs—

nah, I don't think that's it.

The King of Chemicals.

No, I'll go— I'll pass on that one.

The Cash Flow Cowboy. So, you know, we have the Sass Sodfather. You know, kind of mixing software and lawn care.

Yeah.

But it's still workshopping it.

All right. That's cool. I like the first one the best so far.

I was listening. I was listening to last week's episode while I was working out this morning.

Of you and I or of Mike Andes?

It launched this morning, so I went ahead and listened to it while I was working out. And it was funny because I was like, you know, I need an icebreaker. I need to like jab him with something, get him off of his guard a little bit, you know? Too many safe questions.

And all right.

And then it came to the part where you're talking about Loom and you slide, you slide this one little part in there about how you use Loom when you commissioned an artist to do a painting for you.

I had a commission, a painting commissioned one time. I, well, I've done that many times, but a painting commission. I literally, to the artist, like, hey, I don't like this. I don't like this.

Can you change?

I do it with Loom.

Like, and so my, my first thought. I'll be honest, was like, you know, we all need to be instructed how we commission an artist. That's where my head went, right? But okay, so I started going down this rabbit hole while I'm working out, and lo and behold, I look on the latest subscribers to the Mike Andes channel and I see John Patochnik.

My dad.

Yes. Never had seen that in my life before. And so I ended up watching— well, listening to a 4 years old— 4 years ago your, your dad, Riley's grandfather, interviewing him 4 years ago about web design and art, etc. And then I went down the rabbit hole. I had to watch some of your dad's videos. It was fantastic. And I have to ask, the commissioning of the artist, because his whole channel is about painting, is that actually your dad? Or, you know, give us the world of what it looks like to commission an artist.

Okay, you know That was a crazy example to use, and I just say what pops into my head sometimes, and I guess that popped into my head. Uh, so my whole life I grew up in the art world and my dad's been an artist. My mom stayed home and my dad's been an artist. He made his living painting paintings, putting them in galleries and selling them. So while he wasn't a business owner like you and I are, he was a business owner in a sense. He was an artist. And I've always thought that was maybe one of the most influential, important things in my life. I didn't see him go to an office. He, we had a studio. But I saw him do his own thing, so I never thought I had to get a job. So I grew up in this art world, and so I appreciate art. Like, when I was little, my dad would say— he'd bring a painting into the house from the studio. He's like, what do you see first? Like, he'd ask me all these questions, and that stuff has bled through to how I think about marketing and such. And so as I've gotten older and ended up with money, I've— I like art. If you were— you were at my house the other day, but you didn't come in. Uh, next time you'll have to come in. My house is full of art. I have tons of art. I, I'm, I'm sure our friends are not quite into art like me. Like, why do you have these kind of paintings? I just grew up in that world. And so I have art everywhere. So, uh, we have two really great couple friends. This particular painting that came to mind, we have two really great couple friends that we've known since our boys were essentially born, and we've traveled in different countries together. We do stuff together all the time. And we have a picture from New York of us all at a dinner toasting with like wine glasses. And so we were in Telluride one time, Tiffany and I and the boys, and there's this restaurant, All Reds, in Telluride. And when you walk in, there's an artist with a painting of glasses toasting. I basically, you know, the way you commission a painting is you track down an artist and say, hey, I want to commission you to paint me a painting. Most of them will do it. This is what I have in mind. And so that was the idea. I, I told him what I had in mind. I sent him some pictures of this moment we all had in New York, and then I used Loom to go back and forth because I grew up in the art world. Like, he might paint something and I don't like the hand, right? Like, stuff you would never notice normally, but I notice it.

Yeah.

And so that's why I had to go back and forth. But I've— my dad's, uh, recently did a painting of Slovenia. Wow. Uh, a really neat place that Tiffany and I like. So I've now done I've got a big commission of, I've got 4 commission paintings, I think.

Yeah, 'cause this account had 5,000 subscribers. I'm like, you know, maybe Jonathan has the 5 for 50 and then this other account that he uses to sleuth around on YouTube. But sure enough, it was your dad and it was quite enjoyable. I sent one of the videos to Brianna. I was like, you gotta check this out. This is like, this is awesome.

Does he still do it? Yeah, my dad got into the whole doing, he like, he's got several books. He's got art books. He's got DVDs that teach people. A lot of people call him the artist artist. He teaches a lot of people to paint, like, at a high level. And so he's made a really incredible career out of what he's done. He's very successful. And so, um, I, my brother and I kind of got him into this idea of doing YouTube stuff, and I just wish he could have done it, you know, 30 years. Well, not YouTube, but, you know, started this way back when, because I think he would have done phenomenal, like, if he had been doing this kind of stuff back in the early days of YouTube.

It felt like he enjoyed it. Like, that's why. Yeah, he just like, he enjoyed the process of educating. And that's the part that I kind of felt like was the through line to you when it came to business, which is like the enjoyment of not just creating, but then sharing and educating.

I'm sure I got it from Dad. Like, growing up, he was, he would teach Bible studies and at church he was teaching classes and then he would teach, people will fly him in to teach art, uh, They'll bring in lots of people and he'll teach art from the front of a room and teach people how to paint like other artists. And so he's always done that in addition to being an artist as his real career. So I'm sure that largely impacted who I became.

That's very cool. Well, I want to, I want to start the podcast off with that, but that's cool. I thought what would be fun each week when we come together is like kind of starting off instead of just jumping right into the docket is talking about something we're currently working on. Whether it be something this week we're working on or that we have learned, like very, as narrow as possible. And even if it's something that we're not currently, we have not fixed or solved yet. So I'll start it off if you wanna, if you don't mind right after.

Yeah, please. Let's hear it.

But mine's somewhat embarrassing.

So, okay.

A few months ago we switched the chat support for Homeworks to Intercom. And so Intercom is very smart. They have changed the way they do billing to per resolution. Instead of per-seat basis, or like some sort of subscription, as they've seen AI go the way it has. And so basically they're incentivized to ensure that they solve as many chats as possible for you. Well, the problem is, uh, I kept having members being like, hey, I've been reporting this bug for months. And I'd go in the back and I'm like, I don't see this anywhere. Like, no, there's no report. There's, I don't see them reporting this anywhere. Why? Like, I don't wanna call you a liar, but I don't see it. Sure enough, this week I go in there like, "You know what? I'm going to try submitting a bug." The AI was basically caught in this loop of telling me to report the bug in the chat, but never actually taking it, creating a report for the human to see. It was so annoying. I was so frustrated. We fixed it, but for probably the past 3 months, there have been times people thought they reported something. The AI is like, "Oh yeah, definitely this is how you report a bug right here. Copy that right here." You would do it and like, "Thank you." to submit a ticket, and it was not going through to the humans. All that being said, I think the takeaway was you have to keep testing the core loops of the product just to make sure as a sanity check that it's still actually working.

Like your estimate forms on your website, are they still actually—

Exactly, or like calling your office. It's funny 'cause I was like, immediately came back to like, I will call the office occasionally just to see how things are going. I'm like, okay, this is the exact same thing. I cannot trust this AI to do its thing without, yeah. Anyways, that was, that was my, uh, my learning of the week.

So interesting. I gotta ask you a couple questions. So real, Intercom. So I had originally been considering Intercom or Podium for City Turf. And then when Riley started working on EveryChat, cuz I'm so close to it, I knew where it was going. I was like, man, I'd get faster results if I went straight to Podium or Intercom. But if he, if I go this route, I'll ultimately get exactly what I want. And, um, the reason I tell you that is, so I've paid a lot of attention to Intercom and I was listening to a podcast the other day and he said since they've introduced, and I think I'm repeating this right, since they've introduced AI functionality in their billing per case, their revenue has gone up $100 million.

Yeah. Was that, was the Stripe founder?

I don't remember who I was listening to.

Yeah.

I don't think it, I don't think it was the Stripe founder because I know who he is.

Okay.

It might have been, but I thought it was like fascinating.

They had a great podcast. Founder of Stripe, or co-founder of Stripe, and then the founder of Intercom. And yeah, similar vein of thought. But it is a great product. Like when we swapped, everyone likes it. It's just the fact, and it solves about 81% of all incoming tickets.

Okay.

And we consider solved as they are happy. Like they say, yes, that was a good experience. And then they end the chat. But yeah, all that to say, Nonetheless, you still gotta inspect what you expect.

That was a, that was a very good, good story. So, um, the thing that came to mind as soon as you said it, so I guess I'll just go with it, is I'm working on marketing for City Turf. That's where I'm spending the majority of my time, like most all of my time. However, I have, I've been for a long time now really obsessed with what's happening in AI. And especially what's happening in code. And since my background is in software and I, I love software at the end of the day, I want to not love it, but I still love it. And, uh, and then because Riley, for those that don't know, my, I have a, my oldest son, his name's Riley. He's done lots of things and he decided he wanted to build a software business at one point. And so we talk about it all the time, his software business. And I love software and he probably gets annoyed by all my advice. Like back when I did this, or this is what I learned, or don't do it this way. This is how we did it. Like he hears all that stuff. I'm sure he gets tired of it. Anyway, I'm so obsessed with where software is going that I decided to try my hand at building my own entire estimating system. Not like a little estimating system, like more than even what SA did. And SA's estimating system was a lot of work. It's very, very flexible. And, um, I am amazed.

Yeah.

Oh my gosh. I mean, I, so I mean, I don't know how to write code anymore. I still argue people should not be writing their own software. I'll bet just in the design of this, I have at least 60 hours trying to think through it. And I have this massive advantage. I did Service Autopilot. I can hear in my sleep everything everybody hated about us, everything everybody wanted. You're like, so I have a lot and I know how we built some of this stuff. I know what to do, not what to do. I'm not trying to build a Service Autopilot. I just wanted to see if I could build an estimating system. And I haven't actually even got to the code phase yet, but I've built all of the front end, you know, all the designs. I got a 56-page document of everything that has to get built, like all the rules and everything. It just— I guess my summary is I've been distracted from the things I should be working on, which is City Turf. And I've been staying up super late working through the weekend, but it is so Unbelievable.

Oh yeah.

That, I mean, and I already knew it going into it. I just continue to be more and more and more amazed. Yeah.

The thing that I, I'm, I'm super fascinated and excited about is the fact that even once you've developed code, let's just take off account for the fact that it's gonna take 200 hours to build the thing.

Yeah.

Once it's done though, that it would, it would be very useful for you. I think the part that I get worried about, like we talked about last week, is like when people are like, oh, I should allow other people inside of this. That's when it starts becoming a, a, a, a, a bag of, of problems potentially. But like, yeah, for if you're like, hey, I'm going to use this tool in my business because I do estimating this very specific way, that's where I feel like this is just so much opportunity. And yes, the, the, the, the amount of sleep I have required, the more excited I get with AI just continues to amaze me. Exactly.

Yeah. So I mean, I just, it's so amazing, but I still argue that Like, for example, I'm building this estimating thing just to see if I can do it. Yeah. Improve it out. But we would never actually use a self-contained estimating system at CityTurf. It makes, like, no sense. And so it's got to be wired into everything else for it to be great. So it's more of a project where I'm trying to see what's possible. The last thing I'll say on this is I just continue to see what I've already believed. If you are building from the ground up and it's very contained, it's really, really amazing. But as soon as you have to start re-architecting the underlying structure or fixing problems or now and now you've got all this different functionality and you're trying to put more functionality into something that exists, that's when it can get off the rails. It can work, but it is not a cakewalk. If you're building something from scratch and you never have to touch it again, probably gonna work out pretty good. It's the next phase that may make you hate having built your own AI software.

The fun part is the front end and like the stack.

Everything else sucks.

As soon as you put full stack, put a backend user management and secure, like, they just, oh man, now you're getting ugly. And then it takes way longer for the prompts to go through because it's gotta do so much more engineering.

Oh, it gets expensive when you get to that part. So anyway, that's what I'm doing. And it's like, it's fun. I mean, it's a fun time.

Let's go ahead and jump into fuel surcharges. I had sent an email about this a couple weeks ago.

You did.

And I, you made note of it. So go ahead and tee this one up.

I saw your email about fuel surcharges. And I just remember battling this all the time back in the days with Service Autopilot. People would like, you got to build surcharges into the software and we have 90 other things on the roadmap. And it always kind of conflicted with my general belief. It's not that I can argue on one hand that you should pay really close attention to your P&L, and you should. And so you should constantly be fixing these holes in these leaks because that preserves profit margin. But I have a different opinion than many on how much you worry about fuel prices and therefore implement a fuel surcharge. So let me kick it over to you. Like, what have you thought about over time? Maybe you can talk a little bit of that email and give a little more color around it.

Obviously, the price is up about 50% on average from just a couple of months ago before the whole war in Iran. And so when it goes up that fast, I think is what everyone freaks out about. But actually it was, it was higher in 2022.

Okay.

In terms of the average cost per gallon, it's just that it kind of trickled up after COVID for about 12 months. So it's this really fast ramp that everyone all of a sudden gets their attention. But what, 'cause I have the same inclination as you and it's funny because I put our last transcript into AI. I'm like, hey, how could we make this more entertaining? It's like, you always need to disagree about more things. I'm like, but it's so hard. Yeah, I know. So, but when it comes to what happened and I saw all of it blowing up on social media and people talking about how do I increase prices by 3%, 4%. I'm like, instead of getting mad about it and just saying my opinion, let's go to the data. So that's when I went back through and I keep all financials I've ever looked at from all different industries. Across the Turnaround Show, and I have thousands of them. So I took everything from 2025, and there's about just over 600, and it was everything ranging from about $300,000 in revenue to $14 million. And I looked across the whole board, ran it through the, as an LLM. I always whitewash like the, the business information, so the, the, but I have all the P&Ls. And so when it, when it came through, was really interesting, was 57% of revenue went to wages after the owner was paid. Now, that's a good— that's a huge blended average of size of business. Whereas the— I think exactly, I think it was about 4 to 5% was fuel on average. Was it 4 point something, I think. And so when I saw that, I'm like, are we really attacking the wrong problem? Because if we went from, you know, last year 4% and this year becomes 6% because it goes up 50%, is that the problem? Or is it the fact that it's 57% of our revenue is going out to labor. And right, we should figure out like route density or making this more efficient or figure out an incentive program or something to get that 57% down to 50%. Um, so yeah, that's where my mindset goes. And I think it's, uh, we also all look at the news and the headlines and it's much more fun to get anxious about those things.

Yeah. So I got 2 points on this one, and my first one is just unfortunately complete agreement with your position. And what I would say, and I just say it a different way than you're saying it, which I agree with, is what you're doing in business, or what the ideal to do in business, is to constantly be thinking about what are the issues in our business that then create the opportunities. And you're sort of doing the stack ranking exercise. There will never be a moment we can do it all. You know, as you know, it's like just a few things can fit into our quarter or a month, and every team member can do only so many things. So what are the biggest offenders? I think that's the gist of your argument. It's like, it's not a disagreement that, yeah, if there's now a 2-point difference on the P&L, that means if this were to persist an entire year, it would hit your net by 2% or by 2 points. That's meaningful, like, especially as you get bigger. But your argument is— the reason I agree with it is because the number one offender on a P&L across almost every single company is labor. And if you drive down labor, that's the biggest lever that you can pull on to move the needle in the business. And so every time you look at your P&L and say, I've got an offender, oh, fuel's an offender, I can show you 4 other bigger offenders. So why would you work on that one before you work on the other ones? And I think that's the gist of what you're, you're saying.

Yeah, like labor is so expensive, but it's so easy to discount because we just get to know each other as people. But when you actually look at the P&L, it's like, for example, when we got this head— the headquarters building, the office, it was like, okay, This is really expensive. This is like double our rent. And I was like, wait a second, this is cheaper than one engineer. And I would hire another engineer like in a flash tomorrow if I saw the need for them. But for, for rent, it seems like this huge expense. But from a— when you actually compare it to labor, it's somewhat inconsequential. And so I've even seen people where they're like, well, I've got this shop space, I can rent it for $2,000 and it's outside town, about 15-20 minutes from all my customers. Or there's one, you know, very central for 3 or 4 grand, but we don't wanna spend the extra $1,000 or $2,000 a month. But I'm like, look, if you just extrapolate across 20 employees, you're paying probably $6,000 or $7,000 in additional labor, additional labor, windshield time. And so, um, yeah, I, I think it's just, it's so easy to get focused on the loudest problem instead of the biggest problem.

Yeah. And I'll add one more idea to this. Mm-hmm. And that is, I don't know how many listening will remember these days again, I feel like I'm getting old, but I remember when I was young sitting at the kitchen table at night, you know, having dinner with my parents and the phone would ring. You know, it's like the, it's the telemarketer world. Okay. So if you've had it, you could think about on your cell phones, you can just ignore them. But back in the day, the house phone would ring or whatever. There'd be like this interruption or, or you could think about for many people, unless you're, if you're door knocking and you make money door knocking, you like door knocking. But if you're on the other side of that, you hate door knockers.

Yeah.

Everybody. So door knocking is like telemarketing to me. They're the same thing. And so where I'm going with this is I believe that like TruGreen used to just telemarket all the time. And I remember even before I was ever in the law, well, I guess I mowed lawns through high school, but I remember thinking TruGreen sucks. They always call you at your house, you know? And I kind of think about that with the door knockers, except I like the door knockers. Activa or whoever it was just came to my house yesterday. I engage with all of them. But if I was, if it wasn't me being interested in talking to these guys, like they're you, I was doing something work-wise and you just broke my concentration. Like, and so where the point here is this over time, do certain activities in a business, this is a big buildup to make a point. Do they create this like a little bit of annoyance, like subtle annoyance with the company? I'll use the TruGreen telemarketing or Scott's telemarketing. And then when you get their door hangers, like, The first thing you think of, these are the guys that call me every night where we're eating dinner versus somebody else that doesn't do that. So do these little annoyances build that you can't as an owner put your finger on? You don't quite know they're happening, but they slowly build. If you want to own your company for a very, very long time, they're a drag on the success of your marketing, your ability to slow close, your sales rate, all that. This is a little bit of my argument with fuel surcharges. There are these little penalties where we— where the client, like, they can rationalize, oh, I get it because I'm feeling it at the pump, but it still feels like nickel and diming. I mean, I could think of the number of times in Service Autopilot years where people would forget to include sales tax, for example, on an estimate. Wasn't a Service Autopilot problem. They just forgot to add it and their customer would make them eat it. And so— and if they ate it because if they made the customer eat it, they're afraid they'd never do business with them again. There's all these little things. Another example would be over time, there's companies like traditional private equity comes in and what do they do? Not all of them. There's good private equity, but a lot of private equity is trying to optimize price. They start cutting customer service and the phone call, the who's answering the phone. So then a company that's competing that always answers their phone live and has great people and can always— they start to slowly get the better reputation where the companies who are— yeah, maybe you're making more profits and whoever owns the company is looking at the P&L like, this company's killing it. This is so good. This was a good decision. But you degrade the reputation of the company over years and years. That's a little bit of my argument, not specific to fuel charges, but a lot of these little decisions we can make. I don't know the tax that I just incurred. Like, great, I recovered 2% this year and it wasn't even going to be all year. It's probably going to be a 4-month hit. I recovered it, but I did a little bit of damage to my reputation. I did. And now my marketing— and I do this a couple of times now— my marketing cost me just a little bit more. My conversion is a little bit lower. And so do I really save that money? Maybe in the short term, but in the long term, do I pay a price? I don't know for sure that that happens, but I'm kind of conservative and I play a long game in life and I always worry about that kind of stuff. So it's a big buildup, but the, I think there's value in that psychology as secure. If you're not just flipping this business, then what are you doing or not doing that will make sure your business is always perceived in the absolute best way possible in the market? And I worry about those things and that's always been. Actually my single biggest argument against a fuel surcharge.

That's super interesting because I, I have not actually thought about in that way about like the little nicks, the, the little tiny things that eventually over the long run causes someone to churn, cause them to decline an estimate. It's kind of like having a lot of terms and conditions inside the estimate, for example. It's just another— it's friction in that sales process. The other thing that comes to my mind just on that same note is passing along credit card fees. And so I'm—

this is exactly the same thing.

Here's the thing. Here's what's so hard though, for me, Jonathan. This is what's hard for me. So we built it where they can just check a box and it passes the fee along automatically. Whatever Stripe is charging us, it gets charged to the customer and it flows through. And here's what's crazy, because, because I agree with you and I've always been like very much on this same side. No one leaves. It's almost as if they just eat it. But to your point, it's hard to measure what it's doing in the long term, the brand reputation and that relationship with the customer, especially because some of them are doing this, they're just toggling it on and they're waiting for maybe 1 or 2% of people to even notice and contact them. Um, because most people realistically don't read the email that says, hey, by the way, in the future we're charging your fees. So I think that's a great point. I had never actually been able to verbalize in that way, which is it's just another little thing, but it's hard to measure that. It's very hard to measure the impact of that 2 or 3% in a year, 6 months down the road when they might not give the referral, they might not take the upsell, they might not mention it to their friends and family. That's super interesting.

Yeah, it's so hard to know because I too have companies I've worked with where I pay that credit card fee. And I guess they're good enough in all the other ways it overcomes it. But I always like, maybe because I'm on the different side of the table, I was like, this is not a good idea. Just, just raise the price. But I still work with them. And so maybe the way to articulate it, and again, I, I'm a conservative guy. I think long-term, I really value reputation. I believe the long game is customer service and quality. And that is how you create a brand. It's a byproduct of doing the right things over and over every single day. And so to me, this is a little bit of branding. It's doing the right and best thing for the client in the little things. Like, I don't really believe if I charge a fuel surcharge, everybody's gonna leave me and the business is gonna fall apart. I, there's no drama here. It's just that it's like over time, all the compounding of this little thing and that little thing and this little thing just gives a person this little feeling where they're not as excited about the company.

It's just so hard to measure that.

I don't know how, I have no idea how to measure it. So it's just a bet. Yeah, but that's probably what we as business owners do, right? We just, we just make a lot of bets of, I think this is probably the best thing to do. This is probably not a wise thing to do. And some decisions you can't back them with data. I don't want to go too far off the weeds, but I'll— again, I'm not a negative guy on private equity, but I also see a lot of negatives in private equity. Private equity, I'm picking on them and I don't really want to, but they come in and optimize everything based on data. And it's funny how a lot of companies will just be killing it. And they, they use data, but they also make a lot of gut decisions, like based on what they feel is best for the customer, how I would want to be treated, how I would think about this. And so some of those decisions aren't made by, with data, they're made by just very being very human. Mm-hmm. And sometimes when you become too clinical and every single decision is made by data, it looks really good in the short term, but accidentally in the long term, it creates harm because you're being less human. Maybe that's another way to say it. I, I don't know how to articulate it, but it's just a, yeah, it's a belief I have.

Jim Collins wrote the book, um, how something like How the Mighty Fall, or like, is the opposite of Good to Great. It was the companies that end up going bad. I forget the exact name.

Oh, okay. I haven't heard that.

Fantastic book. And inside of it, he has this demonstration or this, uh, story about a, a candy company and they got bought out and the company comes in, young guy, and he looked at all the ingredient lists of the candy. And there's like 19 ingredients. And he said, this one's so expensive.

I've heard this story.

Yeah.

Keep going. Great story. Fantastic.

Took out the one ingredient, immediately boost profits that quarter by like 25, 30%. And he's like, oh, fantastic. Well, let's look at the 18th most. And, and over time he was able to like double or triple the profits. Eventually though, several years later, all of a sudden the demand for this product that was soaring started falling off. And then it started decaying to the point where now they're unprofitable. No one wants the, this product. And they go back to the fact that now that 19 ingredients was something like 6 or 7. And even though it, it on paper, every single cut made sense financially, he then put the, the piece of candy, kinda like what I did the other day looking on Intercom, puts a piece of candy in his mouth. He's like, that's not even good. It's not even recognizable to the original thing. But each of those decisions made sense economically, uh, potentially didn't show it in the immediate effect, but in that long-term brand of what people expected, it was doing damage.

That was such a Perfect analogy right there. It's like, there's this— I believe in data to my core, but there's also this art, artistry, or creativity that's involved in a business. It's both. And that's maybe why public companies tend to do best who are still ran by founders. Like, it takes both. It's a balance of the two. And when you shift all the way to just winging it and everything and putting your finger in the air and guessing on everything, that doesn't tend to work really well. When you just live pure data, that doesn't— it's the two together. And so man, I, that was a perfect analogy.

Okay, let's switch gears because we know that the thing that you've been trying to focus on is getting marketing manager at City Turf and all the marketing side.

Yeah.

You've been distracted with, with the AI stuff.

AI, this AI thing.

Yes. But let, let's go back to the fact like City Turf is hiring, you know, you're trying to get a marketing manager, but let's look at like for whether it be smaller or larger, when you're, when to hire a marketing manager versus an agency, when to outsource it, What's sort of your opinion on the size of the business and when it kind of makes sense to do one or the other?

Yeah, I don't think there's an obvious answer. I, I mean, the, the, my gut feeling is that it's just an impossibility and it doesn't make sense for companies for sure. Uh, for sure is too strong of a word, but let me just go with it doesn't make sense under $10 million. I'm just gonna make up this arbitrary number, and the reason for that is I would far prefer you spend your every extra dollar you have just dialing in the operations as much as you can and just being incredibly good there and doing the marketing. But you can get— if, as long as you don't get stuck with an agency, you can find agencies that can get you moving in the right direction. You've just gotta be willing to move on from agencies when they're no longer delivering. And again, again, this is kind of a, Making up the answer. There's no rule here. I just feel that as you start to get to this $10 million and greater number, and, and possibly sooner if you have the money and if you're a fast-moving organization, I tend to like to quantify that way. There's things you do way earlier in a business when you are just going and you have money. You make different decisions, but for most companies, they finally start to have the kind of money it takes to hire this kind of a role. In that $10 million plus range, because you could get a marketing manager that's $65,000 a year. I'm talking about a six-figure person. I'm talking about another level there. And another way to say it is there's the person that's learning on your dime and there's the person that's already done it and they just bring all the answers. I'm more talking bring all the answers and run that part of the business because I got to stay focused over here. And that's why I tend to think this $10 million number. There are good agencies. Um, I, my experience with agencies has been that most of them fall apart as they start to get bigger. Like when they're really small, they're really focused on you. They do a great job. And then as they get big, maybe they're good at their agency work, but they're not so great at running their organization or whatever the scenario is. Or you can get, you can get ignored by the agency for longer periods of time. Without you realizing they're not actually working on your stuff. And so that's where I tend to think you might have to make changes from time to time. That's been my experience. And, um, so $10 million, sort of my number here.

My thought actually went to even before you go agency, like when do you go from I should do it myself to handing off to an agency? And one of the things that we've seen a bunch this year, cuz we started doing it for the owners. And it's just a flat monthly fee. But like what we found when we started opening up their accounts was amazing that when they run it themselves, a lot of these AI features that some of them are really good, like with the Andromeda update, it can find and target much better. But for home services or for local businesses, your best targeting is like market inside of this circle and the level of granularity required is so much less than if I'm like going after the whole country and I need to based on interest or psychographics or where they've been on the internet, et cetera. Versus just being like, hey, if they're between 40 and 65, I want to, you know, market them in this area. And what we found though is people were toggling on AI features inside Meta specifically, but even inside Google and reaching audiences they should never be reaching. But it's in the effort of making it as simple as possible and like leaving the defaults on, they were spending way more than they should because of now AI optimizing. But now you're showing up on the audience network in areas like, like we scrubbed 9,000 sites and basically import for every location to where we don't want to show up on Google because gaming sites, children's sites, you don't want to be showing up there. Like, you know, you're not going to have any buyers there. And so there are little, little optimizations like that that we have seen people moving from themselves to, okay, when do I actually go get someone, an agency outside of the organization, pay them $500,000, whatever it is a month just to do this for me versus being like, I've got to scrimp every single dollar.

I think you do that very early. I think your argument holds up, but there's a different argument, and that is what's the first thing you stop doing when you get busy? Anything marketing related.

Yeah.

So if you want that function to continue and you don't want your business to just be this constant roller coaster of we got leads, we have no leads, we got leads, we have no leads. Then you need to get somebody else that thinks about that all the time. And so my argument is, in fact, I have a video next week coming out on Five for 50 that talks about what you do to get to $10,000 in revenue and then what you do to get to $1 million in revenue from a marketing standpoint. And my argument is that you, as fast as you can, you get somebody to take SEO and things like that off your plate. You gave the example of Facebook. I'd give that example of Google Ads as well. Mm-hmm. Like, The amount of money that's wasted on that stuff, if you have somebody just watch it and dial it in, you'll pay for that person. They're free. I mean, I think you get that role as quick as you can. I'm a little different than other people too, because I like marketing. If I could just work on software stuff and do marketing and never have to do anything else ever, I'd be totally happy with that. I like marketing. Not everybody feels that way. So you have to, you know, know that about me when you listen to my advice. I've read and studied a lot. I've thought about this a lot. I've spent a lot of money experimenting, so I can say this is how I would do it, but that's unique to me. And so for most people, I think you use an agency and then someday as the org gets big enough, then you go bring that stuff in-house. But it doesn't mean you bring everything in-house. That's a whole— maybe we should talk about that. That's a whole nother part of the conversation here. Even if you have a marketing person, that doesn't mean they do all this stuff. Because I also think there are domains of expertise, ex-SEO. Paid ads, organic, uh, or social. There's all these different areas of expertise. So if you're gonna— if you're thinking you're gonna hire one person to do it all, it's gonna be back to the same problem you just articulated, Mike. Like, if a person isn't good at Facebook ads, where are they wasting you money? Where even though they're the manager of the business, they— you could just go hire an expert to focus on that thing. And so that's how I tend to think about it.

So when you hired your marketing manager, for example, I don't know if you have or are going to.

I did. You did? I fired him.

Okay. Okay.

Sucks.

Oh, you did? You— in the last few weeks?

No. Oh, okay. I fired him last year. I'm the marketing manager right now.

Oh, okay. Okay. But like, when you're looking for this person, and to your point, this is the hardest part when I was hiring the department lead for Augusta Leads, was Facebook is its own thing. Google is its own thing. SEO, its own thing. Organic is like, what did you just have to determine what's most important to the business currently and kind of optimize around that first?

To hire the marketing manager?

Correct.

Man, I struggled with this one. I'll kind of tell you my criteria, but I struggled with it because, you know, Service City Turfs, we're at a good size, but even at this size, I'm not sure exactly who we need as a marketing manager. It's like my goals, my next goals double it to where we're at. So 40. What's that look like? Like, what do we need? I even at this moment struggle with exactly who I need. And I've had CMOs and marketing people like this is— I've done this and I'm still struggling looking out into the future. So trying to understand, am I hiring somebody that has done a $20, $30 million business? Am I hiring somebody that's done $50 million? Like, do I— am I hiring somebody that can do the copywriting? And maybe manage this, and then they, they can manage people and outsource all this other stuff. Like, what's their core skill need to be? What happens is now that you're starting to get into these numbers, if I were to say I'm going to go hire somebody that's ran $50 million marketing budget, not budget, but been at a $50 million company running marketing, there's a high probability they haven't done any of the actual work in a very long time. And all they do is manage people. Like, well, I don't need a manager of people. I don't need a strategist. I want to be the strategist. Or, or I could hire a marketing person and then I could pay the equivalent of strategy groups or agencies to make— we'll make the plan and then we go execute for 6 months. So, and then we make a new plan and we go execute. So do I need a CMO that can even do strategy? I don't know. Like I could talk myself in circles here. So what I landed on was copy is insanely important to me. And so if I could find a marketing manager who's really strong with copy, that'd be cool. If not, I can put together a group of outsourced copywriters. I had 4 criteria that were like non-negotiables. They had to be all in on AI. I have no desire to pay somebody to say I wrote my own copy or I did my own thing. Like, cool, you're slow. Like, we could do this faster. I don't want you to just like ask AI, prompt AI, and then take exactly what it gives you. I want you to be smart enough to work with it. I'm not looking for you to get, uh, use AI to solve the problem in 5 minutes. I'm using you to use AI to solve the problem in 2 hours with the most incredible solution. So number 1, are you gonna use AI and in a meaningful way, and you're gonna learn it in a big way? That was criteria number 1. Number 2, data. I believe in data. You like, so are you, do you understand data attribution? Can you help us set up data attribution systems? Will you actually look at the data? Will we make decisions on the data? So those were two really critical ones. And then the ri— the understanding of marketing itself, like writing copy hooks. I don't need you to be the best copywriters. I can find them. But do you understand marketing headlines, persuasion, all that stuff? I needed you to be good at that. And then the other one that was kind of negotiable was, is this is kind of where I, I was going a minute ago. I could trade off if I had a great copywriter, that's cool. A little bit harder to find. Um, if I found somebody that was really good at managing paid ads, because you can spend a ton of money there, be kind of cool, but I'm also okay outsourcing that. So I guess actually those were my big criteria. I, there is one other and it is slipping my mind right now what that was, but I didn't need you to be a designer. Oh, project manager. That's what it was. I needed you to be able to manage projects. That's it. So, um, that's what I hired for.

Yeah, that last one, the project management part, was the one I was really trying to optimize for because the challenge for us is like, it's— you're not working with one owner, you're working with 100. And so mine, I actually found most success in going and getting someone that had worked to the very top of an agency that was used to working with a whole bunch of clients. And then they were thrilled with the fact it's like, oh, I only have one brand guide, I'm working with one brand and I can duplicate this, I can work way faster. And instead of having like 10 different companies I'm working for. And so that was, we lucked out so hard with like the, our mark, the marketing who's over Augusta Leads.

That's great.

But it was one of my, those things that I was really concerned about going into, just knowing that like, okay, I know I'm like a, a, a solid 6 out of 10 when it comes to paid ads and, and paid traffic. And, and I know enough to interview, but It was a gamble and I'm just like super thankful that we lucked out with that. 'Cause it's, it's just such a hard position to fulfill. And especially when you know you can do the work pretty good. It's, it goes back to what we tell people to do with when it comes to operations, stepping out of a million, $2 million business. It's so hard when you know how to do it better than they do. And so it's either A, you're gonna go hire the person that's done there, done it, been there before. But that's sometimes very difficult to do when you open up your pocketbook and like, okay, this is gonna cost me something. But one thing I want to go back to, you mentioned, is copy and that being so important. There's one throughput I've always seen when it comes to people I look up to when it comes to advertising marketing, like Dan Kennedy, for example, even Alex, Alex Hormozi, yourself, you've always gone back to copy. And even I remember way back in the day when you talked on YouTube about like the copy of the flyer, of the postcard, of the door hanger. What is it that distinguishes between someone that can just throw it into AI, versus what you just said, the 2 hours spent with AI to make it world-class. What is the difference that you're looking for in the output from those people?

There's a lot of things, but the simplest, we'll call it top-level thing that comes to mind is persuasion. And the way that you persuade somebody is by really understanding them. And understanding what matters to them, what they would get them excited, what would, uh, what makes, you know, I love the vision, the visual of what is the thing that keeps the person up at night that they're angry about, they're pissed about, they're frustrated about, they're stressed about. What's the thing they first think about in the morning when they wake up? What's the thing that they worry about? Like, when you, and so when you understand those, those triggers, and I don't mean in a manipulative way, but when you understand them, then you can talk to them in a way that means something to them, where they have an emotional reaction to what you're saying. So for anybody as a parent, if you have kids, you immediately know the hooks to use when you're talking to another parent if it has anything to do with risks to their kids, anything happening to their kid. Like, it's so— it's that kind of— if you're a parent, you could kind of relate with, you know, anybody could relate with something happening, my kid getting sick, something happened, my kid being in an accident, or my 16-year-old riding with a friend in the car. And that is— that kid a good driver? What kind of dumb decisions are they making? Like, you can relate with that little fear, that little like thing that nags in the back of your mind where you worry about your children and it never goes away. And that's an example. Or there— or if you're a business owner, that nagging thing that never goes away where you're worrying about your business and the economy and the market. Like, there are these little things. Well, when you really understand your prospect, and what life looks like for them and what they think about, what they worry about, what gets them excited, then you know how to write to them. That's, that's the top level. And then whatever the problem is that you're trying to sell to the person, like on this specific thing, what would get them to feel pain around this? And it, unfortunately, we're all driven by fear and pain. Like if curiosity works, but fear, think about you, like fear works the best, unfortunately. And it's what we, because we're all probably wired to, you know, watch out for bad things happening to us and our families and friends. And so, um, whenever you're selling something, you're trying to get into the mind of the buyer and understand the problem. And then you're poking on that problem and you're agitating that problem. You're making them feel that thing at an emotional level, and then you're relieving the pain by giving them a solution. But all of that requires you understand them. So you asked about copy. Copy is about really understanding your buyer. It's about having avatars to understand your different buyers, because none of us have one buyer. Like, I can, I can say generally my buyer 65% of the time is a female, 30s to mid-50s. She has two kids. And, you know, I can kind of get like, I know my market about what the home costs and such. I can kind of get there. But even within that group, I've got different buyers depending on whether— if you're in my neighborhood, it's doctors and entrepreneurs. Like everybody in my neighborhood owns a company. And, but so that's a different buyer that's willing to spend a different amount of money and has different concerns and isn't price sensitive. Like they just want it solved because they're making $3,000 an hour running or more running their companies. Like they don't, give a flip about a $15 variance in a bill. But you go to other neighborhoods, that's a different buyer persona. And that— a long answer here, Mike. So, but it's— that's the crux of it all. And then after that, you just learn the techniques of writing the copy. But if you could just master that one thing of really understanding your buyer and then speaking to the one thing instead of 90 things that they might be feeling and zeroing in on that, creating the pain and then relieving the pain. Then you, everything will perform so much better.

When I was looking at hiring for this, the marketing manager role is like, can they go one level deeper and not just be, speak about the feature, but the benefit? But then also like the 2.0 version is, can they speak to the benefit of the benefit? And that's where I feel like it gets to the core problem that's actually being solved to, to speak to and, and show empathy through the copy.

Yes.

And, and so, I'm reminded of like when we did a turnaround for a pool fence company and they're doing around $14 million and they did the fencing around pools to keep kids from falling in.

Yep.

And the immediate benefit is, hey, you don't have to, like the kid does not fall into the pool, they don't drown. Huge opportunity, it's fear. And I said, can we go one level deeper? Which is the benefit to that benefit is now as the, very busy, stressed out mom of 4 kids, they can go play in the backyard and you don't have to worry. And you can take that time inside apart from them and know that you're— they're not gonna fall in the pool.

It helps a lot, you know, at the end of the day to know why you're doing it and that people are getting a good benefit out of it.

And that's like the benefit of the benefit is the time alone to be able to take 20 minutes and decompress and not be looking out the window every 3 minutes to make sure no one's you know, fall inside the pool. And that's where I've always looked at, like, the levels of, you know, go past the feature to the benefit, but then the benefit of the benefit, and really the psychology of the problem.

Yeah, that's smart. And you made me think of this, like, so when you sit down to think through this, you're, you're literally doing a brain dump, and you're putting all that, those benefits, the benefits of the benefits, the fears, you're putting all that down on paper, and then you're trying to figure out where you're going to zero in. It's back to, oh, I won't spend much on this, but the idea of segmentation. This is why segmentation is so important because when you really understand different buyer groups or different avatars, then you're writing your message, your copy, your offer, everything just to that group and it just works so much better.

Yeah. And that's even, even when we changed like the site from Copilot to Homeworks recently, it was like, who are we actually going after? And like, how do we call them out very explicitly? But also everything needs to be written for them. I can't write and solve the benefit of the benefit for every single buyer type. And unless you're going to have literally sophisticated of like we split, for example, ads now with AI is really nice with landing pages to be able to segment people based upon things like, okay, if they're between 35 and 50, I want them to go this direction. If they're 50+, I want to go in this direction. It's now possible, but still it's a function of how I speak and communicate and the problems I identify for them and the solutions I offer to them. Very much is indicative of what problems do they have and do I even understand them? And that was the big thing. Like when we went to the brand change, like we have to identify who are we serving here and who are we not serving. And that's actually the harder part because it's just so easy to say yes to everyone, whether it be home services or software, doesn't matter. It's like it's so easy to say yes to everyone's money, but saying no to people is actually gives me the clarity of who my buyer is and that I'm able to reach the benefit of the benefit because I've, I've more narrowly defined who that person is.

Out of curiosity, in, in, uh, your business, when you tell people no, do you have a problem with them just going and signing up anyway? Because, so we used to have this problem at Service Autopilot. We're like, we're not for you. Like, you're going to be disappointed here. You're going to feel like we let you down here. We didn't build this for you. And it's almost like nobody's ever told me no. I don't trust anybody. But now I, you guys told me no. Like there's this level of trust and then they go sign up and we're like, now they're just gonna be unhappy. Do you ever, have you had that experience yet? It was a meaningful enough thing that I was aware of it.

Yeah, I think in part the reason it happens is because we built trust, both you and I, on our social media and like the brand side to where they trust you so much that when you say that, it just is immediately like, I will buy this just almost as a port. So what I ended up doing, 'cause it was happening too much and it really actually hurt us because the wrong people got inside.

And they get to onboarding, it's just, it creates a different, yeah.

And I'm like, I told you, but like, no, they still, so. So now it's a function of I will actually tell them to go use such and such product.

Okay.

And so I got pretty prescriptive, like, hey, use this product until we're ready. And like in 2 years, maybe we'll be ready. Like I had to get more prescriptive with not just saying like, don't use this, but like, don't use this and use this instead. That seemed to be a little bit more beneficial. Yeah. So long-term, to your point, like by say allowing people in, it's kind of like the credit card processing fees and the fuel charge. It's another nick on the brand.

It is. And it's hard on the team.

Yeah. Yeah.

No, really hard on the team.

Totally. 100%. So, okay, I want to pivot a couple topics to be a little more, as I like to call it, like a higher, higher elevation or higher altitude. These ones I don't have as much experience in, so I'm much more looking for how you have addressed it. And then there's some of these elements that I'm planning for. So, for example, when you sell a business, Yeah. How to plan for the taxes. And you've done a couple acquisitions and sales. I am thinking down the road when our eventual goal is do IPO. And so I've done some stuff like QSBS, which is Qualified Small Business Stock, and you know, switching to a C-Corp and some other elements.

That's gonna be on the list. Yep.

Yeah. Okay. Okay. So let me pass it over to you and then I'll, and I'll probably get some ideas and also think about some of the things that I'm doing right now to kind of plan for what's come.

Okay. So on this one, I made myself a little bit of a list. I didn't want to leave any— well, I mean, there's lots of things you could do, but I wanted to make sure I didn't get off target here and kind of focus. So I've got my— I made myself a sheet of paper here I'm looking at. And the reason I tell you that is if it spawns any ideas, Mike, chime in, like if it gives you any thoughts. So the QSBS— oh, how I wish I had known about this one. So Service Autopilot was when we sold that business. Which, uh, was the most— is the most meaningful thing I've done, um, just from a pure economic standpoint. That was an S-Corp, basically. Yeah. And I didn't even know about this QSBS thing. And so I don't think we need to spend a lot of time going into it, but it's, uh, Qualified Small Business Stock, maybe.

Okay.

Stock. Okay. And, um, the, this, this brief summary, and maybe you can chime in a little bit on this one since you probably know more about it than I, since I didn't do it. You could, you could basically not too difficult. It's pretty easy to save yourself $10 million, not $10 million, but not pay tax on your first $10 million. There's also this other concept around basis where depending on what your basis is, I think you get like 10 times your basis or something like that. So there's these unique strategies where you can already have a business. You can roll it in to this, to a C, to a C corp, and that becomes your basis. I'm not educated enough to talk on this one. I will just tell you through pain I learned this might be one you want to consider. Yeah. Is there— you want to make— do a better job than me at explaining that?

Yeah. So the cleanest way is to make sure you've held the stock in the C corp for 5 years.

Yeah.

Right. Like there's some other loopholes, but the last thing you want to do is, you know, get on the IRS's bad list right after a huge acquisition. And so we actually when we went to a C corp and then 5% of the company, we allowed owners of Augusta to participate in. When we did that, they got what's called SAFE, so Standard Agreement for Future Equity. But what I'm really happy about is it forced me to get really diligent about like, where's the equity? How am I planning for this? Making sure, is QSBS eligible? So you actually have to document for those 5 years that you are eligible every stage. Because if you're— if the amount of assets that you have is over $50 million, it's no longer qualified. And so you can't be like a $300 million company with $60 million worth of assets and like, oh, I want to be QSBS eligible, and in 5 years sell the company. You have to declare it and it has to be eligible before $50 million in assets, which is not revenue, which is not valuation, it's assets. So you could still have $100 million in revenue, you could still have a $200 million valuation, but if your assets are under $50 million, then you're QSBS eligible. And the cleanest way is to first off be a C corp, have 5 years where it's proven in writing, has been documented that you are QSBS eligible. And then, oh, the— what's really crazy, so this recent, most recent big beautiful bill, what thing they slid in here is moving this from $5 million to $10 million. But also, um, you can give the equity to different people, like in your family. And so the ability to get like 1% here, 2% here, 1% here across your family. So because like obviously if you have a liquidation, there's an element of, hey, I want to buy my parents a house or I want to be able to upgrade my lifestyle to some degree. And the ability to be able to do that tax-free is a great advantage, but it takes a lot of planning to know 5 years before an acquisition that you're going to do it. Because I would imagine for you with Service Hub, like 5 years before, you weren't thinking about selling the thing.

We weren't thinking about a year and a half before. We weren't, we weren't planning to sell the business. Like someday we thought we might, but we weren't planning to. So yes, this, what, what we didn't go through any planning ahead of time because this wasn't on our radar. So had we, I'm sure we would have probably encountered this and I probably had heard it before, but it didn't stick because I was like, I'm not, this isn't something I'm worried about.

Yeah.

So when you converted to a C corp, what were you before?

S corp, 3 S corps actually, because the 3 entities and now that's wrapped up in the C corp.

All right, so let's say you convert to a C corp and you never sell the business or it's way out in the future. What are the negatives in your mind of being a C corp?

Double taxation. Like, if you're like you, you only go C corp if you're raising money, you have a bunch of investors, or if you plan to go public. But like, there's not a lot of advantage of a C corp in the United States, at least. Like, the S corp is so awesome. The fact that like profit can just flow directly to you and there's no money coming between. Like, I had to start taking a salary from the C corp. For the first time ever this year. Because like, it was foreign to me, like distributions in the past from an S corp, just move it over and like, however much I want to take this year, we're good to go. But like, by having investors, obviously, where money's not flowing to me, but more importantly, like having a W-2 and all these other aspects was very, very interesting. But there's not a lot of advantages to a C corp if you're not doing those few things.

Yeah. And I think that would have probably been where my mindset was because we didn't think we'd sell the business. It's kind of the same with City Turf. City Turf's an S corp. We're not really thinking about selling the business. I'm sure going to kick myself if we change our mind, you know, and you've got to decide 5 years in advance. Like, and so that's a pretty long time in advance, but if you're building to sell, then I think this is— it made my list. And so I felt that if you're building to sell, then this should— this has to be on the list.

There are some loopholes. There are some loopholes. Like, for example, you know, maybe I should say this off record, but like, like you could potentially have IP held in a C corp, for example. And then pay like fees across. There are some loopholes that people have played.

Oh yeah, there's—

But like, I much more was like, we have to do this really clean 'cause I do not want it to be where like I've told, 'cause like you have to have stock certificates to the family members. And so I'm like, hey, here's what's gonna happen. You're not getting all the money by the way. A big chunk of this is going to other people. But to be able to get like say $30 or $40 million stock-free or tax-free would be a huge advantage. Uh, but I think for 95% of people, staying in S corp is the right move.

Is it tax-free at the state level as well? Just federal, right? It is state.

It is state as well. Yeah, it doesn't affect me as much, just depending on where everyone lives. Um, but it is, it is free of state as well, which gets me to my point number 2.

Okay, if you want to save a lot of taxes, you need to be in the right state, dude.

Okay, all right, so we just— I just had this conversation with Brad. He's our in-house tax guy. So, okay, and then I had the conversation last week with Brianna and I said Brianna, listen, Texas is looking really good from a C-Corp perspective, especially because like in Washington we get— we don't have— we don't have income tax all the way up to $1 million. So I just made sure like, hey, I'm not going to make $1 million on paper. We're good.

But you will when you— if you had an event.

True. And capital gains. But the thing is, we have excise tax and that's on top line revenue, about 1, 1.5%. And so we started running the math like, hey, how big does the business have to be for us to spend 6 months and 1 day in Texas Yeah, you know, we like Dallas, not gonna lie.

Texas is a great market. I thought I was going to leave this place, and I'm here all these years later, man.

The food is good, you got good venues, good airports.

Insane.

Oh, you got two of them anyways. Um, but yes, moving to the right place. So assuming that you can't pick up and leave your lawn care business and from state to state, something like software, definitely moving would be certainly an opportunity. I'll add one thing, Jonathan, because I've been, I've been researching this a bunch, is like for those people that could potentially move there, maybe not in home services or a local business. What's interesting is the IRS is pretty lenient on where you incorporate. And basically what they look at is strategy and decision-making coming from that place. And so my biggest concern is, okay, if I'm building a headquarter building here and having 100 employees inside this office, is that going to be a problem for me? And it's like, no, if you move there and you have your leadership team or you, you're there, you're making decisions from that place. From what I can tell in terms of case records and like looking through where people have gotten in trouble, I'm in the clear, which is kind of crazy to me that you could literally move, have most of your operations being, but because strategically in decision-making in one place, you could still incorporate in that state.

Yep.

Crazy.

Yep.

So you might see us one day in Dallas for 6 months, you know?

There you go. I've got so many friends because of Service Autopilot. We used to throw events here in Service Autopilot in Dallas. And so I've had so many friends have told me they might end up in Dallas someday. I've heard really good things. Not the summer though.

Not the summer. I can't handle that.

Yeah, I agree. I guess I'm used to it. But yeah, if I— in my perfect world, we would spend 3 months of the year somewhere, the 3 summer months elsewhere. July, August, and September are the 3 months.

Too much.

There are the ones you don't want to be here, but—

okay, let's go back. We've moved, we moved to Texas and Dallas. That's what— that's the second option. What else?

Yeah, so this isn't really about saving tax, but I felt since we were talking about selling, I had to interject this. If you were to sell your business— and I won't go into much detail, Mike, unless you want to ask me— I would tell you, you have to run what's called a process. So what's going to happen is you're going to get a lot of people that might call you and express interest in your business, and they're going to want to talk to you about maybe buying it. And their offers are going to sound great. Maybe you talk to a couple of people and offers sound great, but there's still 100 more buyers out there, potential buyers. And what happens is when you create competition or you even tell everybody that you're even up for sale, you then create a bunch of competition, which creates a bidding process. And that bidding process will raise the value of your organization. You cannot convince me that this is not the— I will— there is literally a less than zero chance I would sell a company without running a process. And so you might say, well, like when I sold the Service Autopilot business, we paid millions and millions of dollars to the investment bank. I made more than that. I mean, so my argument is, worst case, if you run a process, and you use a bank or a broker to sell your company, you will at least get back all the money for the advisor, the broker, the whatever you want to call them. And they will have done a lot of the work for you. They will have de-stressed the process. They will, if you pick the right one, they will be able to introduce you to the right tax attorneys. They will be able to help you with so many things. They might even, if the good ones will even be able to say, Don't do a deal with them. Do a deal with them. Like, they'll be able to give you a lot more than just helping you facilitate the transaction. There's a tremendous amount of advice that comes with this. So this doesn't necessarily say you— it actually, it does save you tax. I'll say how in a moment, but this is more about just getting the maximum value for your company. Just remember, when the day comes, you want to run a process and research that. I hinted at this idea of they can also save you money. So when you go to sell your business, like, how are— how's your business? Like, assets are taxed in one way, intellectual property, stock, they're all taxed in different ways. And so how you position the sale is really critical to your long-term tax bill. I'm not going to do a deep dive on that. In fact, I don't even think I could possibly recite all the details to you. I put most of that out of my brain. It was painful.

I think the basic is like, on that one, it's like, usually the buyer wants it in assets. Yeah, you don't want it in assets because they want to be able to amortize or depreciate it. You want to— don't have to pay taxes on— yeah, cool.

That's exactly right. I think assets become ordinary income, if I remember. And so that's why, again, if you don't create a credit, uh, competitive process, you have less negotiating power here. And so one, it might, it might drive a lower valuation for your company, but it could also drive lesser terms. And terms are things like The classification we just talked about, the terms could be your earnout. Like, do you get paid all the money now, or do you get paid in tranches over time for hitting goals? Uh, how long's your non-compete? There are so many details that have to get negotiated in these transactions. Creating a competitive process puts the— puts you in a little bit more of the driver's seat. And so I would tell you it both benefits you in the total valuation and also benefits you in terms of what the tax bill might be after the fact.

And I think to just come into the negotiation table, especially if you're dealing with a sophisticated buyer that buys a lot of businesses, private equity, et cetera, they have done this dozens if not hundreds of times. And if this is your one shot, the fact that you would think that you could do it on your own without like an investment banker or some, at least some advising is, is crazy. And this, One thing that I've always, whether it be yourself or other people that I look up to, is they always rely on, and they're never afraid to pay money for advice. And this is probably getting ahead of ourselves, but like even, I know you mentioned recently in one of your videos how like you use, uh, I think Goldman Sachs and it's like that's hundreds of thousands of dollars, but what it unlocks and, and I think what so many people, including myself that were, you know, we, we raised with not a lot, we have this mentality like, I'm not gonna pay a couple hundred thousand dollars for someone to push a couple buttons for me.

—Yeah.

—But it's the relationships and the things that they, 'cause they have done it 1,000 times before, the doors they can open up for you that are worth far more than their fee. And I think when, to your point, like around creating competition, also is somewhat linked to getting investment bankers, people that have been at this kind of transaction before, that will prevent you from walking into a trap where, oh, you know, 50% of this is an earnout and you gotta be around for 4 years and you gotta hit these targets. And all of a sudden you've got these very, very golden handcuffs.

Yeah. And I think it's important to know, like you, Mike, I didn't grow up believing these things. This is, this is a process where I've come to believe these things. And I look back and say, man, I wish I had believed this earlier. I was a little more in the, as I went in the earlier days of business and as a younger entrepreneur, younger person, I was very careful. I was like nickel and diming things. I mean, I was saving every penny kind of guy, being really careful. And that slowed me down. But, you know, there's, there's pros and cons. Like you can go too far the other stream, but I totally believe in paying experts to just buy speed and give you the answer. It doesn't always work out. You get bad advice. Not everybody's legit, but on the whole, you win in a massive way going that route.

How, how do you navigate that? Because like, I've always thought in one, one regard, it's like, oh, people are trying to be cheap or they're trying to save money. But then sometimes I think it's like, it's more of a matter of pride. Because if I use anyone else, I will not be able to say I did it myself. Like if, if, if I take someone else's advice, if I get someone else's course, if I use an agency even, for example, or if I, I get an advisor to help me sell my business, I'm not able to say I did this. I'm not self-made. Yeah. There's almost like this pride. I just wanna win. Yeah, exactly.

I've, I've done— go ahead. And there's like nothing in my life I can say it was just me. Like, yeah. Like I gotta grow up. In what became Dallas, Texas. Like, we grew up in, in, on, in the country, like full-on country. I could, I'd have to ride 10 miles on my bicycle to see my friends, like full-on country. And now my parents have a Tom Thumb across the street, church around them, a car apartment complex. Like, my dad just, like, they had, he, when my dad used to race bikes for the US racing team, bicycles, when he was leaving California, he was either going to go to Wichita, Kansas, or he's going to go to Dallas. And I, wow, I thank my dad, thank you dad, so much. And so, like, had Dad gone to Wichita, I don't think any of us are gonna be talking to each other. Like, and so none of us are self-made. My dad, you know, taught me so many things. He helped me make my first flyer for my lawn care business. My mom drove me in the minivan and dropped me off in town. None of us are self-made. And so I just— we all, like, we all should take every advantage we could possibly get because millions of people have advantages and do nothing with them. Millions. They have so many advantages. It's not about did I get an advantage or not? It's about did I take the advantage and did I do more? And so like, we're not— none of us are purely self-made. That's nonsense. And so I'm sorry, got me going there. I just— it doesn't matter.

So, so creating competition, using, using advisors, investment bankers to be able to go faster. Is there another one you want to tell?

Oh, I got, I got several. Okay. Okay. Okay. Um, So another one would be, and this is again, not quite tax savings, but this is a little bit of a learning. Um, I would suggest for most people, you go ahead and hire a wealth advisor. So, and let me tell you where this knowledge is, where this is coming from. So I started investing in the stock market when I was 20. My parents didn't invest at all. Like they didn't do this. My first, I got my first job at my only job at a software company when I was 19. This is an interesting story. My boss, what eventually became the CEO, uh, COO of Service Autopilot when we started the business, he retired 2 years— he was like retired at 40, was very successful, and they lived in Vail and didn't work for 13 years. We started Service Autopilot, he came and worked with us. And, um, why I tell you this is he got me when I was a 20-year-old kid. He said, hey, you should use Vanguard. He was an investor and I started using Vanguard. I liked finance already, but I didn't know how to do it. Nobody had ever shown me how to do it. So I started using Vanguard, then I started trading stocks on E-Trade and I started doing that whole deal. So I tell you all this to say, I love finance. I've been doing it since I was 20. There were absolutely times in my career where I had to cash out the money for my businesses and build. Things happen along the way, but then I'd get back to investing as soon as I could. And that's always been my wiring. I used Vanguard. I had a lot of money at Vanguard. I used Wealthfront. I've done all these different things. And, um, I actually didn't start using Goldman Sachs till I sold the business, the Service Autopilot business. And I've been negative on financial advisors, actually. Um, I'm a big, big fan of Vanguard and I had a lot of money there where I qualified for the private client group at Vanguard. And I still feel— so I wanted to say that, and that's my belief. Yeah, I still believe it's generally worth the money to use a financial advisor if you can get a high-level one. High level is very important. Like, there's a million financial advisors. I am negative on the most of them. You got to get the right ones. Now here's the reason. Because building a business and being an operator and protecting your asset financially by having reserves and just all the decisions you make are very, very different than having a, a wealth creation event and now having a pile of money you've got to invest. The psychology is very different. Fortunately, I already, was comfortable with this, but I've learned a lot even since then. Um, and so I would tell you that whenever you have a deal, I have seen so many people lose money, like so many people. So you pay your tax bill and then you invest in other people's companies. You do angel investing, you buy a bunch of real estate deals, you put leverage on those deals. I mean, the stories are never-ending of very wealthy, very successful people who have just set money on fire. And I think a wealth advisor for most people is really smart because you are being challenged. At least let yourself be challenged where you have to defend your idea. Just that will probably save you a ton of money. So for most people, I would tell you, use a wealth advisor. Okay. And, uh, and then the other one, and then I'll give you the rest will be tax savings. The other one would be really think about what you might, if you have the luxury of doing this, what will you do next? I see a couple of things happen here. A lot of people have a transaction and they just go right back to doing what they did before. And you have this moment in time to do any— maybe if it goes well enough financially, to do anything you want, to shift gears, to try something new, to stretch yourself. Like most people are just like, it's just robotic. And you wake up again in 5 years and you're living the same life again. What did you accomplish? You just put a bunch of money in the bank account, but nothing else. Got better or changed in your life. I'm not saying it needs to, it might not need to. You might have loved, loved, loved what you were doing. It's just that if you have a little bit of a plan going into this about what might be my next chapter, what I'm going to try, I think it will be a more wonderful experience for you. Having been one of the very fewest people in the world that gets to sell something and then have maybe a moment of freedom to figure out what's next and create the ideal life. It's not about tax savings. That's just about pure quality of life. So try to think about that and go on a journey of exploring, talking to other entrepreneurs. You do? What did you try? Um, and that was a really good one. So, okay, now, now the rest are all be money things. Um, I put a bunch of money into what's called a DAF. So, uh, what that is, it's called a donor advised fund. I was using Vanguard, so I used Vanguard. So as an example, it's not something we talk about, but Tiffany and I give money. So if you know you're going to give away money now or in the future You could just give all that money away today, essentially. But so what happens is, I'll just put a number to it. Like, let's say you sold your business for $10 million and you give 10% of your income, hypothetically. So you could right now give away $1 million today at the time you sell the business. So you pay no tax on that million dollars. That million dollars goes into what's called a donor-advised fund. So I have mine and I've refreshed it many, several times. And that, so that million dollars would be put into the donor advised fund. You still control it. You can't, you can't spend it. You can never get it back. It's gone, but you control it. So you can invest in the stock market, REITs, fixed income, whatever you want to invest in. You can let that money grow and then you can give money away from that charity.

Is that through charity, a trust, or is that flowing? How's it going to your tax return? Like if there's interest or appreciation?

It doesn't. It's like its own separate thing. I don't— if you literally don't own the money anymore. Interesting. Yeah, it's— you've— you have— you just Google DAF, D-A-F.

So if you sell a stock though, like, and, and it's appreciated, that gain, is that taxed?

No, tax-free. Oh wow. You, you can never go get it back. You can't spend it. But if I, like, if I put a million bucks in there, and I have a lot of money in mind You know, and so it just keeps growing and growing, and I give money out of it, and it's easy to give money. Everybody accepts these, and you just have Vanguard wire the money from your thing to the charity. And, um, there— this is a huge thing. And so if you put a million in, it could go to hypothetically $2 million. That's all tax-free. I mean, it doesn't come back to you in any way. It's, it's like it— there's no taxes, period. The growth— it wasn't taxed going in. You didn't pay tax on a million bucks, and all the growth is non-taxable. And then you can give it. Like, it's almost— what's that? I've never had— is there a limit on it? There's, there's something in my— where I'm thinking, like, when it gets under like $20,000 or $10,000, you have to pay, um, maybe a, a small management fee to Vanguard or something, but it's like nothing. It's like a couple hundred bucks a year or something. I can't remember. I haven't— yeah, I keep refreshing it. But that way you can take your tax advantage right now. So if you have— if you're a person that gives money away, I can't recommend this enough. Yeah. Yeah.

One of the things we talked about, like owners at Augusta last year, we started what we called the 7 Figure Club. And one of the things, the first things we talked about is like setting up trusts for even just when you pass away, making sure that tax event is clear, like who owns the business, where are your assets, whether it be, you know, 401, IRA, the, the, your house. Yeah. From an insurance perspective, from an asset protection perspective. And then also just from a, you know, when you pass away, like making sure that your family's taken care of. It was like, I think for a lot of them eye-opening, even the idea of like, oh, my assets go into probate if this doesn't, you know, there's a big process. If I got hit by a bus tomorrow, my kids and family could potentially be impacted a lot.

I was going to talk about this one, so I'll mention a little more on that because that is really, really critical.

I think even in a smaller size business, like I know for a moment, like, You know, we're talking about, you know, tens of millions, hundreds of millions, but like even for someone doing a million-dollar business, especially if you have kids, if you have a family, like I think this is something that we can really, you know, it's really important.

Yeah. Yeah. So I would like to add a little more to that, but you said a lot that like, if you just, if we just stopped right there and somebody went and looked into this, I can't recommend enough. It's more important than a will is at least do a will. Yeah. If you don't have a will. And if you, if you don't have a will, at least just go do, um, What's the really popular sites where you, uh, power of attorney? No, a will. There's like online sites. You could at least go do it today. Oh, like, oh, anything. LegalZoom. Yeah. LegalZoom. Like there's at least do that and then make it better later, but at least get that done because it's a mess otherwise. Um, let me give you a couple others. There's a, have you heard of opportunity zones? Yeah. Yeah. Okay. So opportunity zones, I chose not to do them. Um, I'm a pretty conservative investor. and I don't like to let the potential tax savings drive investment decisions for me. So I chose not to do opportunity zones, but that doesn't mean you shouldn't. But there are these areas where, uh, opportunity zones have been defined. Like I'll give you, I can't remember all the details now, but back, and I didn't know about them actually before I was selling Service Autopilot, it was presented to us. So as an example, maybe there were Opportunity Zones back in the day in Detroit. I don't know if they still exist today. So, but there are Opportunity Zones all over the country where they've been defined as areas that are trying to be revitalized. And so if you invest money in those areas, you get lots of tax benefits and you get lots of tax savings on the growth of the investment as it appreciates in that market. I won't say a lot more about it than that, but Opportunity Zones is a, a word to keep in mind, especially if you like investing in real estate. But you can invest in businesses in opportunity zones. So there's a lot you can do with them. I just chose not to go that route.

How much, how much of this, when you look at other friends of yours that might've had an exit, is all the time, energy, and effort put towards trying to get around taxes versus just pay the tax bill and live your life?

I think people think about it, but I think they, they're just going and they try to, you know, like they want their accountant to try to find stuff, or they're like, ah, my accountant doesn't try very hard. You know, like you hear those kind— they're not pushing very hard. But I don't feel like it's not a mass— it's a conversation, but it's not a massive conversation. In the world I live in, the bigger conversation is actually the trust. It's more around thinking about what happens to all the wealth if something happens to me, more than it is about saving tax money. Of course, you don't want to waste tax money, but I would say it's more on the trust side where I hear the bigger conversations, which I'm going to mention here in just a moment. Yeah, go for it. Um, just again, try not to go too deep with these things, but to expose you some with some things. I think there's another track tax strategy where the broad descriptor of it would be called like tax. I think they're called tax-aware strategies or this. I don't want to go too far down this. I'm going to lose most everybody, but it's like this, this, uh, where you can buy long on stocks and also short the stocks and you're generating all these losses. And I think one of the big strategies out there is called AQR. I may be getting my acronym wrong. I've got a good friend that does this. His name is Nick Bartolo, and he has a company called Essential Partners. So if anybody's listening to this, I'm not trying to plug him, but there are very few people that can help you with this strategy. And I trust Nick. And again, not a plug here, but if you are somebody that's about to sell, This is a strategy you want to do before you sell, because what can happen is you can generate all these losses and then you can use them to offset your capital gains. It's a— I didn't know about that. I don't even think it existed in this form when we were doing our transaction. It is a fascinating, fascinating concept.

You probably need a year or two, probably, right? Though, to accumulate— I guess it depends on how many, how much losses you generate.

Yeah. How much money you can put into the strategy, how big your exit's going to be. But it's, uh, it's crazy. And I know a bunch of people that do it.

Just at a high level, like his business model is I will get you losses and you will like it.

Yes. But he also generates, this is the crazy thing. It's actually generating gains the whole time and losses. Wow. That's cool. It's insane. Yeah. And it's, there's billions and billions and billions of dollars. This is the kind of stuff where I do think, I think the, it's a little overblown. How all the really wealthy people find all these loopholes to save money. I, it exists, but I think it's largely an overblown concept. Good for TikTok. Yeah, this is amazing. It's just like, but, but if you have assets, you can participate in something. It's like, isn't limited to billionaires. It's not limited to people with 9-figure net worths. This is, people can do this. It's a fund, you, like a hedge fund type concept you invest in. It's incredible. I know a number of people that do it. I trust Nick. And so I just want to let— I want to more let people know, like, what's out there. So if this event ever comes, maybe you'll remember this, like, oh, I should look into these things. Let's talk about the trust stuff. Yeah. Okay. I'm only going to go so deep here because a lot of this too will not apply. So I'm going to give you some words that if you have any interest, you could go put these in ChatGPT and you can Google. Top level, you need to get a trust. You just need to do the work to set the trust. What's going to happen to your assets? What happens to your business? What happens to your different kinds of assets? Putting these things into a trust can protect them from creditors and loss. There's lots of advantages depending on how it's set up. Like, I'll give you an example. That's, you know, not something you normally have to think about. And what I'm about to say, I would hope never happens, but like the wealth that we've created. Will pass on to my boys. And I even have my trust set up, and I don't know how this will come across, that if for whatever reason my kids ever got married and divorced, the other party can never take that money. It will always stay with the kids. They wouldn't even have to sign prenups, and the money's protected. And so again, I hope that never happens, but there's so many little things you can do, or you can set up whenever something happens to me that my kids don't get the money until they're 40, or they don't get the money till they're whatever age you deem, But if there's a medical event or education, they can get the money. There's so many things you can do inside these trusts that if you have any amount of assets, or maybe you don't have a lot of money, but if something happened to you and the business were sold, it would create assets. You want to be thoughtful about what happens. And yes, it's going to cost thousands of dollars, but in my mind, it's money really well spent.

Yeah, I, I, the biggest thing that kind of hit home for the owners when we did this with them was a lot of them have kids, 5, 10, 15 years old. They don't want them getting a few hundred thousand dollars when they're 12 years old. But with the trust, being that it's like a separate entity, it's like you can determine all sorts of requirements in terms of how they get the money, when they get the money, things they have to do. Like, hey, they have to graduate before they get it. They have to get a degree. They have to do— and so it's a lot more customizable, I feel like, compared to even a will where it's like, hey, so-and-so gets the money, but like there's not, as much granularity you can do with a lot of the assets. Even things like your 401 or IRA, like where's that money gonna go if I get hit by a bus? And I think a lot of this is just being a good steward of the business for your employees' perspective, but then also a good steward for like the family if you have dependents to make sure this stuff is set up. And I think for people listening, it's like we're talking about like QSBS and tens of millions of dollars, et cetera. But like if you have a million-dollar business and you got 5 or 10 employees and you have a couple kids, like this is something to think about. It still matters. And it doesn't require $20,000 to $30,000. $4,000, $5,000, $6,000 from a good attorney can walk you through setting up the trust and set up protections so that you can almost take more risks in a way, I feel like, because you're not always this cloud over your head, like, if I get hit by a bus, everything's gone. My kids aren't going to be taken care of. What's going to happen to them? Obviously, having things like life insurance is helpful because the money can get, can move pretty quick. but you don't want your business locked up in probate. And I don't think it's talked about enough of how often that happens.

I agree. And that's— I think this is a really, really important one. I did this a long time ago, way back, Will, and then I got more advanced and did the trust thing. And I've believed in this for a long time, and I highly encourage almost, almost everybody to frankly do it. If you're a business owner and you think you're going to have any level of success, The last two things I'll say are related to trust, and I'm just going to kind of give you the acronym and I'll just say a couple of words and it will apply to very few people unless you're going to have a sizable event. But it's worth hearing it so you know it exists in case that might ever be you. And there's, there's a lot more than what I'm about to say, but there's the trust like we just talked about it. But then there's also ways that you can basically protect a massive amount of money from ever being, um, taxed when you die. And so one acronym is SLAT, S-L-A-T. Another acronym is, uh, FLP. So SLAT is, um, spousal, uh, spousal lifetime access trust, maybe. I can't remember. I think it's like spousal access. Lifetime Access Trust. FLP is, I believe that one is like family limited partnership or something like that. And then there's another one called ILIT, which is for insurance, but, and there's more. But the idea here is that you can move assets into these trusts, still control them, still live off the assets, but that money is locked away that when you die, it'll pass to your kids tax-free and all the appreciation will pass tax-free. And where this might become important to you, and I'll, I won't say much more than this, is we right now— my, my data is going to be wrong, but it'll— you'll get the idea. Maybe when Obama was president, you could pass like $5 million to your kids tax-free. Can't remember the exact number. Maybe it was $5 million per spouse, don't remember now. And then Trump came into office and he upped it to, I think it was $12 million per spouse, so you could pass them— call it $24 million. Numbers are slightly off. And so You can actually move assets you own into these, these we'll call, we'll use SLAT as an example. You can still control those assets. You can still live on those assets, but when you die, those assets are protected from tax. And if you moved $5 million into it and it grew into $40 million, the $40 million would go tax-free to your kids. And these are things that I legitimately think are kind of the When somebody says like, this is stuff rich people can do, that just feels like not fair. I agree. These are the things that feel not— there are a lot of games played in this way, but some of it also comes with some risk. You can lose control of things. The reason I gave the Obama to Trump example is my general operating belief is the future is more taxes and more taxes comes in the form of higher rates and then more wealth tax in terms of what we pass on to our kids. They'll bring those numbers down. Further. Um, like that whole SLAT concept, like the setting aside money, that expires at some point in the future and it goes back down to the old limits. And so I just want to make you aware of these things. If you ever have an event, there's ways that you can push money out of your estate into these other entities that you don't lose control of it, but it will massively impact the amount of money your heirs will inherit.

Yeah, and I think just to kind of wrap this part up, I think the, the vast majority of people listening, one thing that I was, as I was thinking about this topic today while I was working out, it was like the biggest tax strategy is building a business that's worth selling in the first place. And that's the number one focus because like when you look at the number, just the pure data of what percentage of businesses get sold, let alone sell for a good multiple and where there is this type of money where trusts are important and SLATs and FLPs and DAFs and actually all these acronyms. It is because the business was built first. And so I think sometimes when people hear this stuff, it's like, I've got to go do a DAF. It's like, whoa, whoa, whoa. We have $20 grand in the bank and you're growing the business year over year by double. Let's just focus on that thing. And so I think building the business that's worth selling should be the goal. And whether or not you sell it or it becomes more of a passive dividend, you hand it off and let someone else run it. Either way, that's, that's the goal for 99.9% of us.

100%. And I, these conversations are dangerous because on one hand, we're introducing new ideas that might get people distracted. I'm all about go sell more work, find the people to do the work. Yeah. Yeah. Just keep doing that all the time. And so this is, these kinds of conversations are dangerous, but what I do love about these kinds of conversations is if they just kind of get into the back of your mind and one day, if you're so fortunate to find yourself in this position and you, like, you just remember any of this, you'll now go know to look and it could save you a crazy amount of money. So it just expands your knowledge base and it just makes you look at things differently or ask more questions. That's why I like this type of a conversation. But to your point, Mike, just try not to get too distracted here.

And look, you can always send us that 1% commission when that happens down the road. That's right.

We'll take the cut. That'd be wonderful.

I'll take it. Speaking of distractions, I want to wrap today up talking about something, and that is robotics, AI, the timelines that have been put on these in the past and even now, and really just kind of deciphering between what is legitimate, what should we be thinking about? And I think the theme of today is really like, where's your focus? What are we actually— are we solving the biggest constraint in the business? But really, are we getting distracted with what's going on on social media? A lot of times the fear, like we talked about copywriting, is very evident when it comes to the news or social media. And that is the thing that gets the clicks. It's the thing that we all are seeing in our newsfeed, whether it be about AI or robotics. And so I wanted to talk about this notion of it being inflated. Is it inflated? Should it be? What percentage of our mind space should be focused on something that's gonna quote disrupt our business or put us out of business? And I think my, my thought from, from wanting to provide my audience value is you've been around for a long time, you've seen these things come and go. And I think living through a recession or two gives someone a lot more perspective as well as living through boom and bust and news and hype cycles. And so from your perspective, when it comes to AI, I know we talked a little bit about last week in terms of vibe coding, et cetera, but what are you seeing? You're also a practitioner of it in the software side of things. And also been on boards around things like robotic mowers. So give us your perspective in terms of what that looks like.

Yeah, I, the short answer is I still don't know. I just don't know, but I can give you the way I think about this. Uh, what, what I struggle with, like if we were talking about robotic mowers, it's easier for me to just say, this is my belief at this point. And I've been so wrong. I think you've felt that way maybe too. Have you felt like, do you feel, Have you been tricked by the speed of robotic mowers, or do you feel like you've been pretty correct so far?

I remember your, uh, com— your, uh, keynote at SA4. Okay. And that's when I think you were just getting involved with Robin at the time. Or, or maybe they just came out. I forget exactly the timeline, but I think I left that conference a little freaked out. I was like, yeah, you know, I'm not gonna need to be mowing. Uh, you know, I need to have a 5-year window of getting out of off the mower and focusing just on projects. And I think I actually left there thinking I needed to get more into projects because that was gonna be harder for the robots to to do. And, um, so I was wrong there. I think going forward, it's very easy to pontificate, you know, where the future's going. Now we have self-driving, which is very exciting, but I always go back to this, and that is we were told self-driving was right around the corner in 2015. Great example. And it is, if, if anyone's driven a Tesla, it's good. But I also wanna ask like, what percentage of people watching this today are using self-driving? We all still have a steering wheel. And the vast majority, probably 98% of us, are still driving our vehicles. And so I have to ask myself, okay, the robotics thing, technically possible perhaps, but then there's legislation. And that was a big thing that I think you really brought up to my, my perspective like 4 or 5 years ago is like, hey, this whole line of sight thing is a problem. When you get a big piece of equipment in the backyard, if I have to have an operator standing right next to it, I'm not actually saving any money. I'm just reducing risk.

And paying for a more expensive piece of equipment. Yeah, exactly. That breaks more often.

Yeah, and the customer doesn't pay anything more for it. If anything, like the whole, you know, electronic, uh, you know, electric revolution for when it comes to the green industry proved to all of us no one's willing to pay anything more for this. They just want the service done. And so if you're not going to provide extra value, they're not going to pay any more money. And so if the customer's not willing to pay more, I'm just going to spend 5 times more for a mower it's hard to reconcile. And so I have kind of backed what we talked about last week around AI is just like, it's just like, I will serve the customer and I'll provide value and I'll just keep getting better and better at that. And then there'll come a day where maybe the robot makes sense financially. It does a better job, it produces more value, and I will then use the technology instead of being the one out front blazing the trail, spending gobs of money like we did with the stinking AI voice thing where I almost had like this revolt inside of Augusta because I spent— and internally I'm like, This is the future. We've gotta do this. And it probably is, but not in 2023. Right. And so I'm, I've almost got off the, like, I'm not gonna be the one spending all the money, going through all the hurdles, figuring all this out versus if it works. I'm just, I'll just use AI phones for example. If it works and it's gonna be revolutionary and save you a bunch of money and your customers are gonna love it, you can go buy it next week. And if robot mowers are gonna come along and they're gonna put us on, you can go buy them next week. And so that's where it's like, what's the point of getting afraid or buying into this logic that I'm gonna somehow revolutionize my business or change everything when I just have to do what's always worked, which is serve the customer better. Um, but you, you have a much better perspective cuz you've been inside some of these rooms around robotics.

Yeah. But I do think that that's a really good perspective. And some pretty important information there. So let's use robotic mowers to argue for and against how fast AI in general robotics is gonna go. So my big, and you touched on this, so back whenever, whatever year it was that I gave that talk, I had thought based on what I was seeing, we're probably, you're just guessing, we're probably about 5 years away before robotic mowers are gonna be good enough that they're not gonna dominate, but they're gonna be a lot of ro— we're gonna wanna be using them. It's gonna be a competitive advantage. And a little bit of that belief was coming from the progress we were seeing in self-driving. Not that it was dialed in or perfect, but you were just really seeing these improvements. And then I also knew at that time that the robot mowers were gonna be moving from just GPS, but they're gonna start getting different forms of technology, camera technology, and, and they were gonna, they're gonna eventually work and have to have the equivalent of the Invisible dog fence and such, the wire. And so I was pretty optimistic on what I was seeing. It's like 5 years from now seems like a very reasonable timeframe. And so my general argument was that I don't think I would have been arguing you needed to be first, but I do know I was making the argument that you need to start exploring. Because what happens is if you deny, deny, and somebody else is doing it, then eventually they've been doing it for like a couple of years, then you accept, then you have several years of the testing phase to figure it out. And why in robotics I say figure it out, it's a little different than say the phone scenario is because you've got to really change your business model and your pricing. All these things like your people model, every, everything changes, your marketing, sales. Whereas in the phone example, which I think is such a good one. So when it comes to so much of this technology, if you just wait, we're going to be able to buy it. Somebody else is going to say, I can make $100 million doing this. So they're going to create the most amazing Solution, we just buy their solution versus us building it and, and they'll test it, prove it, and then we can implement it. The robotic mower isn't actually just about buying the mower, it's about everything that changes around the buying of the mower. And so that's where I was arguing, it's like, hey, I think this is going to be a thing in 5 years, it's going to be ready. So at some point you need to start testing it. So at City Turf, to, uh, I feel like to the chagrin of my business partner, we tested them and fairly quickly realized, oh my gosh, like there's so many, like, yeah, they work in a perfect environment, but as soon as there's a slope or they're by a pond, like a million different factors, it all falls apart. Uh, not completely, but it falls apart. Okay. So, so that was the idea of why, uh, of kind of what happened. Then when I sold Service Autopilot and I was trying to figure out what am I going to do next, I got really interested in robotics. I thought I want to do something and I didn't want to do the stuff I was like attracted to. Could I do something totally different in life? And so I thought it'd be cool to do the robotics thing. So I got more involved at that time in the robotics mower thing. And so I'm interacting with Husqvarna and other groups, and that's when I came to conclude that the adoption— I concluded a couple things. One, on the robotics side, even if the technology is really good, how much money will operators really be able to spend? Because how are they going to finance these? Like, who's going to give an operator $7 million loan on robot mowers? Like, almost nobody's going to get that loan. Like, There. So if you are able to get $100,000 of robot mowers on loan, who cares? Like, that's like a nothing in your business model. And so it's just a distraction. So, so how are people even going to finance this? And nobody can predict how long these mowers are going to last. They're worried about safety, like, or not safety. Well, safety, but also security. Are they going to get stolen? So that financing is a mess. So until financing gets resolved, this industry can't go. Operators are just not gung-ho about this idea of figuring out entirely new business models and reinventing everything. And so there's that up— headwind. And then there's the headwind of just the technology being really, really good on the right property and a full-on disaster on the wrong property. And so again, if it's only going to fit and work at 10 or 15% of your properties, is it then just a big giant distraction in the business? So there were all these problems of that sort. And the biggest of all is what you said. It's the freaking government regulation. It's like, it's the craziness. Maybe it's crazy or not crazy. It's just that it will slow, be too slow. So if you gotta stand there holding a button, like with a button all the time to hit your button to stop the mower, like I can just put that guy on a mower. Like I don't need to do this, play this game. And so there's that. And that's where I really realized this stuff's gonna go slow. So those are the, Those are the things that made me think robotics will go slow. Now, the counterargument to that is we had a very small amount of money and the smartest people in the world, uh, were all working on other things. And that's the difference I think in robotics today and in AI today. You have all the money going to these two places and the most intelligent people in the world, the, the brightest guys in the world were not working on robot mowers. I'm not putting down anybody in robot mowers, but all the smartest people were in robot mowers. And so, uh, I'm sorry, we're in our, in regular robots like Figma and all these other companies. And so, or Tesla or whatever. And that's the thing. I think you do have to be a little bit careful saying, here's what happened in robot mower. So here's what's going to happen everywhere else. I do think it's different. It's kind of like whenever, when all the money and all the brainpower and all the focus goes in hardcore and something we've proven in society, how fast things can move forward. But when we make the argument, when I hear people say we're going to have robot and humanoid robots in 5 years mowing, like, I don't even feel like I need to comment.

It literally, it was, it was like a, it was a quite a big conversation in Augusta. So we have like the daily mastermind and we do live Q&A and one of them was like, hey, I'm really concerned. I saw Elon's presentation of this humanoid robot. And like, I always just have to go back to, it's kinda like QR codes. In theory, QR codes sound fantastic. Put it on your truck, people are gonna scan it. We did that and we tracked it and it was like such a, like, I literally think it was less than 10 across Augusta that we saw people scanning QR codes on trucks. Makes great in theory, but like, no one does it. And so like, it's like, look, if you can't get a human or a robot right now to do something like pick up your laundry, like, we're not outside yet where there's rain, let alone being transported, let alone being charged, dealing with wind, dealing with people pushing the thing. Like, none of us even have it pulling our laundry away yet.

So I truly don't even know what we're talking— I mean, one time on the All In podcast, I heard him say in 3 years. I know, like, what? Like, what if you have a kid or a dog? Or the joke I've heard, I did, like, what if, like, people are, like, people are already think everything's— we're being spied on. I'm sure we are being spied on all the time in every way. Now you're going to put the thing in your house with sound and vision?

It was like Gary Vee, like 12 months ago, he'd go on a— I forget whose podcast. He's like, I predict in 12 months, we're going to be having, uh, 10% of marriages are going to be to robots. Your grandkids will marry an AI human. What's your conviction level on that? 100%. What are we saying?

This makes for such great social media. Totally, totally, I know.

That's what we need to do, Jonathan.

Come on, we need to go on Twitter and— I know, I do so much, like, yeah, 5 for 50'd be so much better if I just start making up stupid stuff. Totally, and those people never get criticized, right?

Like, what you get criticized for is saying the boomer thing, which is like, oh, this isn't gonna take over, and then having the clip 10 years later of being like, the Yellow Pages or Yahoo, and being like, oh, this isn't going away. Everyone's so afraid of that, so it's just like, let's just err on the side of being completely way too optimistic and completely missing deadlines, but it's okay because we're making progress and we all know directionally that's where it's going, and so I can't be wrong if we're headed that direction, but I can give these random timelines and make stuff up and somehow it's okay. But what, the reason I have a problem with it is it just distracts us from what, like I go back to, solve the customer's problem and do it better than anyone else, and that always is the fix. Um, and the, the distraction from that core element is the part where I see it as a, uh, a potential detriment.

Yeah. I, yeah, I'll sum up my position in this way. Um, I am invested in AI. I've got investments in OpenAI and Anthropic. I'm invested. I believe in it. Um, I invested it, strong valuations, and I believe, you know, that was a while back, but they've gotten stronger and I think they're gonna keep getting stronger. So I, I'm not, of the belief it's all about to end. I believe the robotics thing is going to happen. I've had opportunities to invest in robotics. I've been a little more leery there. I feel like it's going to be a hype cycle here for a while. The valuations are really expensive, and I think we're going to just go through some ups and downs. And I— that one scares me because I don't know what those timelines are, and I don't need to know. I don't think it's going to impact me in any— it changes absolutely nothing about what I'm doing, how I'm— it has no impact on anything. One day they're going to show up and we're going to figure it out. But I'm not even slightly worried about robots. Do I believe they're coming? Do I believe they will be everywhere someday? Without question. I just don't know when. And so in the meantime, it's what you said. I'm not going to worry about it. It has no impact on anything. AI does legitimately have a major impact on things. But even then, I don't know. Back to the Elon thing, everything is so overhyped. And, and even in most, and people are overhyping stuff to raise money. People are overhyping things because they're excited. But I even think about like just simple benign things, like back to my Service Autopilot days, we would design something, we'd get it, we'd go to code, everything looked great. Like this is going to be out in 2 months. Tell everybody, everybody's excited. And then the system's running slow. Yeah. So all the engineers get pulled off. I was like, dude, these guys for the next 90 days are working on that. We're not writing that code anymore. Like, And so you just never know what distraction's gonna happen. That's a bigger fire, or you don't know when you're gonna run into problems in the code you were writing, or I didn't think of this, like, and so that happens in tech. So even, but like guys that are being completely legit and honest, they never know what they're gonna bump into. This stuff's insanely complicated. And so on the AI thing, I'm a firm believer it's gonna probably get crazy, but is it gonna get crazier than it is now in 2 years, 10 years? I don't, 5 years. I don't know. So I don't know if I said it last week on, uh, or I was talking to somebody, but, you know, as an entrepreneur, I'll kind of say what I said before. As an entrepreneur, if you want to play this game, then you have to accept that all kinds of stuff is going to get thrown at you and you're going to have to bob and weave and pivot, change directions, try new things, learn new things, grow yourself. It just used to be that you could do a lot less of that over a long period of time and it's getting compressed. And you've gotta be willing to bob, weave, change, learn faster than you've ever done it. And if you can accept that, then all the opportunity is there for you, just like it's always been. And it will filter out a whole ton of people that are not willing to play that game, that are gonna be scared. They're gonna say it's too hard. The world's rigged against me. Billionaires are like, uh, whatever the nonsense is. If it is, but for the people that are willing to learn, pivot, try new things, and live in a little bit of a world of uncertainty. I tend to believe if you just keep building and your head down, you're going to be good. And so it's just, it's just going to be a different world. And we were never promised easy ever anyway. So I don't worry about the robotics thing. I don't really even worry about the AI thing. I actually think the AI thing, I worry about AI more in software, but in terms of home services, I see it as opportunity. I see it as we might have talked about this year. I know I've said it's like, The future is your, your labor budget is this big. It's not that robots are gonna shrink it down to this, but it's like on your P&L, your labor budget's this big and your technology budget's tiny and the technology budget's gonna get bigger and bigger and bigger and labor budget's gonna get a little bit smaller someday when robots come in, it'll get way smaller. Who knows when that is?

I almost look at it as like in 2010 to 2015, the companies that now are the biggest were the ones that adopted just getting a website, getting online. Yeah. And I think the same thing with AI is going to happen, which is like the companies that get on board, adopt it, don't think it's something crazy that their, you know, nephews working with, they'll be the ones that in 10 years, like, they're the biggest companies. Yeah, it's all opportunity.

Yeah. So, um, I'm very optimistic about this stuff. I just, I don't think any— I, I think people in home services have almost nothing to worry about right now. Just everything you said, ditto to that. Just do what Mike said, and I think you'll you will find yourself in a really good place.

All right, I have two things to end up the pod. Okay. One is not necessarily a question. The second one is a question. So the first one is more commiserating. It is me sharing my biggest problem right now. Okay. And it's, it's, uh, so in HomeWorks, we were switching everything from PHP code over to React. And, um, it has been the bane of my existence because refactoring. Refactoring. Yeah. Yeah. We've done it in piece by piece, but the, the core part that's still left is events. Everything to do with— are you calling automations events?

Like triggers and events? Or what is it?

Not the triggers, not the triggers, but the actual like recurring schedules is the biggest one. Oh yeah. Yeah. Okay.

Okay. Yeah. Yeah. It's always the stuff that you can break everything when you're messing with.

Oh, it's so painful. 'Cause it's so frustrating. To explain, like this is the part where I feel so much more, I feel everything I saw you go through and you were just like, I'm just not gonna explain this techno, the backend. I'm just trying to try to make this as surface as possible. It's so hard to explain to people when it's like, we've done a bunch of stuff like the customer portal we broke off, then like the billing, we made sure that was solid. We made sure just like all these parts, but events is kind of fundamental. Like if you change a recurring visit and then something disappears, That's a big problem. And so— Now you can't unwind. It's such a rat's nest. And then in one way it's like, hey, we should go guns a-blazing. Guns a-blazing still is gonna take 6 weeks and it's gonna be an absolute mess. And I can't do that in the middle of the year or any time of the year. And so that's my current biggest problem is how do we slowly pull this thing apart? The last part of the rat's nest, which is events, which is fundamentally why you have a CRM, You can't mess it up, but it's basically the downstream part of 80 to 90% of the quote issues. And so, uh, yeah, that's me commiserating.

Boy, do I understand. Billing was that for us as well, because our billing was so— it was quite advanced. Like you could bill weekly versus biweekly versus daily charging. There was a lot going on. Prepayments. I don't, I don't even know if you have to or need to deal with this stuff because we started so early. You had the whole prepayment thing, you had deposits, you had invoices where work was being worked down against the prepayment. Have you had to do any of that?

Is there demand for that these days? Yeah. So we, we have like deposit thresholds, for example, but Stripe was able to bake that all in. So the first thing we touched was billing because we could go to their new API and they basically have really allowed us to like pay in full deposit thresholds, a lot of stuff that they now baked in.

I forgot about that. There was no Stripe when we built. We, we literally wrote every line of code for all the billing and stuff. So there was no Stripe back then.

And so, um, when we went through Blackout, it was like, what, what's, what's the worst part that we have to address? And we were like, billing is one of those things you can't mess up because it affects the customer. And it also becomes a huge liability to the customer, to the business. Right.

So, yeah, boy, I, I, I, uh, I feel your pain.

All right. Last question then. Everyone wants to know that, that, okay. So. You mentioned Elon, you mentioned hype. The question is, are you going to be buying into the SpaceX IPO? All right. That's all we needed to know. I'm on the same page. I just feel like it's too hyped. The way that the structure is with the, the way that the equity is structured is just a little off to me.

So, but, and the valuation is already going to be so rich. Like there's so many, I mean, it's not easy to double your money, but there's so many ways to double money. but to double your money there, I mean, there's, was it going to come out at a half a trillion, 1.5 trillion to what's the IPO at? Yeah. Yeah. Like, and so then to go from there, it's not that the company can't become worth $10 trillion, but that's really hard for me to get my head around. But even if it just goes to $4 trillion, it's only going to be a double. There's a lot of places that I'm more, but anytime I say crap like stuff like this, like We just need the clip. I'm always wrong. I can't even believe what happened with Tesla.

When it hits $4 trillion, we'll be able to clip this. It'll be awesome.

But now it feels, yeah, we, we, we talked about this. I think it's unfortunate the markets. I think Google went at like $80 billion. I think we talked about this, like when it IPO'd, I can't remember what the number was. Maybe it was a lot more than that. Maybe it was Microsoft that did that. But it used to be that these companies IPO'd so early you could get in and then still just become insanely wealthy off these stocks. And so a lot of people think when they hear, oh, it's going to IPO, and they don't really understand valuations and market caps and all this, they just think about all the stories they've heard of. Had I bought Amazon early, had I bought Microsoft early? We don't live in that world anymore. All the private equity guys and all the insiders, they got the bulk of all the growth and they made bulk of all the money. And so the— from the moment it goes public until whatever it matures into, it's not like an old Microsoft or Amazon story, and people don't understand that. And so they, they don't understand that they're investing at a very, very different point.

Well, even like recently on Google's earnings, they came out with their earnings, but like almost, it was actually more than half of it was just paper gains from SpaceX, Anthropic, Stripe, and all their private investments. And so when those companies IPO, it'll be, it'll be Google.

And, and they're, yeah, cuz they're a massive investor, aren't they, in SpaceX? Yep. Yeah. Yeah. So no, I'm staying away from it. I am a pretty simple— I mean, I make some bets, but I'm a pretty simple investor today. I, I really believe in this idea. You make your money in business. You've been given this ability and gift in life to go build things. You make your money in business, you grow it through your investments, but you do it in a careful way. You don't swing for the fences in your investments. You more swing for the fences in your business is how I think about it. Um, that's my operating philosophy. So I, I'm heavy equities. Like, so some people might still see that as a lot of risk. Um, but I am kind of careful about how I do a lot of indexing more than I do a lot of individual bets.

Yeah. No, that's fantastic. Well, we'll go ahead and wrap it up until we hear from a better comment of a better name for Jonathan. It's going to be Sultan of Service, but we get, we're open to ideas. We're open to ideas. So comment below. And I'm open to ideas too for myself. I don't know what it would be.

Uh, yeah, you've, you've started something here. I'm gonna have to think about this now. I didn't know you were gonna do this.

Down in the comments, I'm sure they'll let us know.

Appreciate you coming on, Jonathan. Likewise. Cool. See you later. See you later.