How Much Should a Owner Pay Themselves (Home Service Business)

I have a business around the $800,000 mark and I have really good profits. How much should I pay myself as.

An owner if I'm going to give him that raise to 60 to 70k? How much would you be paying yourself? Myself and him? I guess at that $800 mark or $800,000 mark. Are you in the business at all? I am, yes. So I would pay myself a salary. How much? Very hands on. Very. You're very hands on. I would take a salary equivalent to them and then I would do distributable cash. I would say, hey, I'm going to take. You're gonna get 25% of distributable cash. You're gonna get this salary and I'm gonna get the exact same salary. Sound fair? Great. I took all the risk in building this business. I'm gonna get 75%, you're gonna get 25%. Does that seem fair to you?

I like.

It's awesome. Yep.

Thank you.

Hello, Mike. Oh, wait, I had to do this because I didn't forget. All right, so how this is going to work is we got. Sorry, what was the name again? Sorry. Jesse. So when Jesse is done, his question, this is what's going to happen? We're going to try this out because this is what Zach wanted me to do. All right, I'm going to say. And for Zach, everyone, three, two, one. And we're all going to clap at the exact same time. Let's practice. Zach, great question. Three, two, one for Zach. Fantastic. Next question. Mike, Eddie here from Irving, Texas. I run a irrigation repair, maintenance and install company. And.

Part of that is I want to get into the maintenance portion of it. Mowing lawns and. Mowing lawns or maintenance of irrigation? No, mowing lawns.

Okay.

All right. And so to measure, do you use Google Maps or something else? Just instead of going out there in the field, do all those measurements because they do the linear measurements too, as well in square footage. Absolutely. And talk to some other lawn care guys here. Get on the lawn care business owner Facebook groups that I have. Ask there. And you have 10 other suggestions in addition to that. Google Maps. Thank you for Eddie, everyone. Three, two, one.

Hey, Mike, it's Marco from Estrella Lawns.

My man.

If you have cash on hand, instead of taking three years to raise your prices and repeating, can you grow like jump.

Say the last part again. I missed it.

Instead of raising prices for like three years and, you know, repeating it.

Yes.

Getting to capacity, repeating.

Yes.

If you have the cash on hand, can you grow from like say 400 all the way to 800,000 in one year and then transition that into profit mode.

Yes, absolutely. As long as you have enough cash, you'll be able to do that. You just know that you probably won't be profitable doubling the business from 400,000 to 800,000. As long as you have the cash on hand, which I would say you need at least 150 to $180,000 to do that comfortably at least. I would recommend that if you have that capital. Yes. You can scale very quickly.

Okay.

For Marco. Three, two, one.

Hey, Mike. Sam with troops mowing. If you want to be an absentee.

Owner, you're going to give this general.

Manager a lot of autonomy in making decisions. Do you have a decision making framework? Obviously they want to be profitable, but do you take the guesswork out of it and have a decision making framework for those GMs?

Yeah. So on Saturday, I'm going to go over.

A framework for creating a system. I would say if you're going to take ownership of making sure you set up the gym manager for success, you, you're gonna have the business systematized already. If it's not systematized, you're handing them over a ticking time bomb and they will fail. And so I'll give you a framework for how to make the system. And you can literally take every single aspect of the business, estimates, project management, et cetera, and just put it on this graph and like, where am I on this continuum of from bad to good? And I'll have that continuum for you, for Sam, everyone. Three, two, one. On the left. Hey, my name is Connor with Schultz Lawn Care.

Dan says it's important to build your team. How do you turn a field worker and building them into a GM that is, you know, watching the YouTube videos and watching the podcast, that is currently not.

First off, I would probably say that you cannot force them to drink, but you can take them to water. And so I would probably put them in scenarios to see if there's any sort of appetite for it. Sometimes bringing them to a conference is helpful, but let's assume they don't want that. They're not reading books, they're not reading pod nothing. I would not hire them as a general manager unless they've already done this before. Because the only way for them to go from someone out in the field, even though they're trustworthy and they're working hard and they might have all of the street cred from the crew, and everyone looks at them as a Leader. If they do not gain the skill of leadership, they will still. Even at six to eight employees, the likelihood of failure is much lower if you have less employees. But it's still a skill nonetheless. And so I would probably try to have a one on one with them. I'd be like, hey, this is where I want you to be at and this is how I'd pitch it. You want this to come across? They should leave this meeting. Even if you don't hire them as general manager, they know that you love them. What I mean by that is, hey, can I add a name?

There's no name.

Oh, there's not a name. Okay. Mr. Bill, I want you to become a general manager. But I'm not going to say that. What I'm going to say is, Bill, I want more for you. I don't want you to be here doing this for the next 10 or 15 years. I know you got more inside of you now. That's what I think. But what do you think? What do you want? Oh, no, I'm happy. Like, this is great. This is where I want to be for the rest of my career. I am not pushing that. I've seen people do that. I've done that. I would not do that. If they're like, yeah, I'd like to make more. I want to have. This is my dream. I want to make more money. I need to provide for my family. I'm like, okay, great goal. Here's the steps to get there. Let's start doing a weekly meeting. Let's talk about a podcast. Let's look at video. Do you want to come on an estimate with me?

Right.

That's where I'd be starting.

I plan on implementing P4P this spring.

Cool.

And I know part of the P4P system in implementing it is they take initiative on learning themselves to increase their own efficiency. I'm hoping that step I, I can.

Kind of see if that will kick.

Them into gear and then maybe have that talk afterwards.

Yeah. Money motivation versus positional motivation is slightly different. Some people will be motivated to just become a general manager because they know that that is a more secure position. It gives them more authority, autonomy in the business, et cetera. Other people, P4P will be much more leaning to the person that is money motivated. So just be careful on that one topic. A great leader and sometimes is not money motivated. Or also be careful about thinking about the only way that people can make more money in an organization is managing people. That's a sure fire way to have a Bunch of hierarchy and a bunch of managers and no one doing the work. So also they might be a great individual contributor. So having P4P allows them to make more money. So the only way in your organization to make more money is not just manage people. That's when you have managers. Managing managers for Connor, everyone. Three, two, one.

Parker from Dandridge, Tennessee. And one of your first few slides. You.

Sorry, Parker.

Yes, sir.

Thank you.

You said to go from 500 as fast as possible with absolutely no projected growth in spring. I plan on being around 178,000.

Should I not worry about raising prices and just try to straight go to the 500 or 250 or should I raise prices? Like right now we're currently charging about 70 budget $70 an hour. Should we keep it there or should we just kind of like raise it to like 875.80 and still try to grow?

Are you solo?

I'm going to be hiring my father.

But at 178, I'll need help. Are you are at solo? Did you do 178 last year?

I did 130.

Got it. And you were so doing that.

Yeah, I just got some contracts for next year. Perfect.

Okay, so you're very efficient because if you're charging $70 an hour, you're running like a 95% efficiency score. Right. So very, very efficient. Just know that's not going to happen when you hire someone. So that'd be like my first frame. The next question is, do you. Do you jump through to 500? That comes down to how much cash do you have on. Do you mind me asking that question?

Not much so far. Only because I'm fine fighting with the contract.

Fantastic. No, it's not fantastic.

20, 20, 20, 23. What'd you do in revenue?

50,000. Great.

So you tripled the business year over year. I would spend the next year in profit mode. I would raise your prices from 70 to try to get up to $90 an hour. If you do that, you'll be making.

190 or so. And if you can make 190, I think you'll profit 40 or $50,000. If you get that in the bank account, I now know with confidence you can go buy a truck and scale with two trucks, three employees, and get to 500,000 at $90 an hour. So I would recommend stopping at one of those stages for a year or two, stack the cash and follow that recipe.

Thank you.

You're the man. Three, two, one. Right in the middle, Parker. Thank you, Dylan. Hey, Mike Dylan with Urban Roots Landscaping.

My question is I currently am looking to open a second location this spring and my general manager, I discussed switching him from hourly to a salary with some profit sharing. My question is do you switch your office admin or at what point do you switch your office admin to more. This is Michael. Yes, Michael. From hourly to salary and stagger up his profit sharing. So when do you turn into salary? Say that again. Sorry, you're asking when do you turn your admin person into salary? Exactly. Yeah. When you know that year round they are worth their wage. If they're not, I'm going to be laying them off or they're going to go into the field. So at two locations it is likely that an admin person and if you're doing say 1.5 million at that size, an admin person is going to be full time even during the off season and even just getting things ready for the spring rush. So then I would say yes. So if I was in a rock and a hard place, if this is like a topic I would give him a revenue goal around. When the business crosses this threshold then we're gonna put you on salary. He'll be motivated on follow up calls and as an admin person he can actually change that. He can affect that. So he'll impact the growth. And then to use your operationally sound gm, I kind of know the situation here. Use him to make sure things are efficient in the field. Then use the fact that you've incentivized this growth to a certain point, knowing that at 1.5 you're you hit a more profitable size of the business. Make sense?

Yes, it does.

Dylan. Three, two, one.

Hey Mike, it's Will Kelly with military lawn cuts. Quick question for you. So if we wanted to automate the sales process in our business, we'd just do simple services, bush trimming, de weeding and mulch. And we wanted to get rid of drive bys. What would be the best process or to automate that.

Yeah. So we're gonna talk about this in length tomorrow. There's three different ways to do this from very hard to very easy. And I will go through it tomorrow. It's instant pricing on your website and then there's other intermediaries that you can do if you're less technically savvy to make this work. So we're gonna talk about tomorrow. I'll give you three different ranges for it. But ultimately is I need someone to go to my website and book a job.

Perfect.

And I've got To figure out how I make my pricing work around that.

Awesome.

For will Kelly, everyone. 3, 2, 1. On the right again in the back.

Hey, Mike. This is Steve with Steven Stevens Lawn Care. I'm here with my father.

My man.

He's part of my question, so.

Okay.

Wow.

Don't say anything bad.

So with the models that you put up, I'm looking at the 500. We're right around that mark. One of our issues is location. We run out of a storage.

Sorry, real quick question, just so I understand this. Are both of you currently owners in the business?

Yes.

Okay, so there's not a GM and owner relationship, but this is two owners.

So quickly, we basically split the cost. He works. I have a job. I've actually talked to you before.

Okay.

But I got a side job, so I make full money. I do all the back end. He do the front.

Got it. You're admin. He's operations. Go.

Absolutely. Thank you. So we work out of a storage. We don't have a location. A lot of the turnarounds. You have a lot of guys out here get killer deals. What I'm wondering is, if we were to get a gm, could we plan on expanding? So there's a question that we have. He sharpens blades at the house or, you know, all our. Like, just stuff we need. Because at the storage, you don't have any power.

Yeah.

So, like, how do you guys. Or how do you recommend you, you know, negotiate? Or find a spot where we can have the trucks, the trailers, the guys can meet. Work on things to be able to be profitable and not, like, kill yourself, you know? You know, basically with, you know, overpriced land and things like that.

Okay, let me first off, make sure I'm understanding this question correctly. Are you trying to go to 1.5 or are you trying to make more profit?

No, I would like to make more profit. But if we were to.

That's it. That's it.

Cool. Okay.

You don't need to change where you're located. You're already making 500,000. The next step is go into profit mode. Don't buy trucks, don't buy more equipment. Don't hire more people. Just raise prices as more leads come in.

But if we were to say your model, exact model you put up on your presentation. Yep. We maximize this location for profit. We move. Let's say we want to multiply, copy and paste.

Okay. This is another location.

Yeah. So, like, if I need to sharpen blades and do all that stuff that he would do at home, like I would still need to find that location, right? Yeah.

Places are out there. There are shop spaces that have electricity. There are shop spaces that have water. You'll pay more for them. Is the vast majority of us should not think about buying land. It's a different business. You're gonna usually have to put 20 to 30% down, especially if it's commercially rated. You're not getting a 30 year fixed mortgage on this, and you're putting so much cash into that that the return on that money is extremely negligible. Compared if you spent $100,000 or $50,000 on your business, you double the size of business, two more trucks. So personally, I would do a better job of finding them. Finding it. I would be searching on Facebook. I'd be putting out leads. It's not like you're in a rush to find this plot. So when you're not in a rush to do anything, you'll make a better decision. So I would be on the hunt. I'd be talking to property owners. I'd be talking to empty, blank pieces of land sitting on corners. Like, I can go on the county assessor's office, find out who the owner is, call them and be like, hey, your land, it's commercially rated. Fantastic. I will pay you X amount per month to park my stuff on there and put a storage container sitting there.

All right, thank you.

You got it, man. Oh, for Steve. Three, two, one.

So my name is Dujon Blondel from Newton.

Yeah, I'm not gonna get that. Okay.

With Green Glow Gardens. Okay. And I'm year three into the business. This is coming up in my third year. Last year I did about 20,000 in revenue with about $1,000 in profit. And I wanted to know, what would you recommend for somebody that's running an organic fertilizer application business? Like, how would you recommend me marketing this service that I give to my area? Because my business is very niche.

Are there organic lawn care businesses that built a million dollar company?

Excuse me.

Are there organic fertilizer companies that have built a million dollar company?

I haven't done my homework on that yet.

Okay. So I would first do that because if you're trying to grow the business, it'd be a good idea to see if it's possible. Okay, I'll save you a little time. It is. There are lots of them that have done it. And so I don't think that believing you're in a niche is going to keep you from making revenue. What it is going to do is that you have to position Yourself as different than everyone else. Okay, so why did you start organic lawn care instead of just doing chemicals? Chemicals work better.

Well, I've done my homework and I've done my research. I come from a cannabis background and I've seen that when I've applied these fertilizers to my soil and created a living soil system, my cannabis actually grew a lot healthier. There was less disease, and the product that I was producing in the long run cost me less because I'm able to make my fertilizers on site, make all my inoculants, and scale that by myself.

That's your marketing message.

Okay. Thanks, Mike.

You're the man. 3, 2, 1.

Great back, right?

Hey, Mike Dalton with Dalton's lawn.

My man.

Let's go. So, got a question about pay for. Say you've got a field employee earning P4P and you're wanting to transition them into an operational GM and they're just crushing on P4P and making too much money. I'm curious, like, how would you go about that transition?

When would you transition out of P4P into something? Profit sharing? What factors would go into making that decision and everything?

Yeah, so if you have a really high producing P4Pmember, sometimes this is difficult because during peak season, they could literally be making more per hour on P4P than a general manager salary. So this is when having a conversation like, what is your objective of working here? Do you want to have what is valuable to them? Do they want longevity? Do they not want to be working in the field because they're getting a little older? Do they think about 10 years from now when their knees might not be able to take it and maybe like, okay, I'm okay with sometimes making a little bit less. But for the upside potential of profit sharing as well as the fact that I'm not going to be as hard on my body, I just need to know what they value and then I'm gonna build back end the incentives against that. Sort of like, no, I love P4P. I just like working hard. I would leave them alone, let them keep doing their thing and don't push them. But if you're like, you know, I'd love to learn about estimates, just slowly guide them into it. If they start feeding on it and they'll gravitate, they'll start in videos, they'll start getting better at it, and then they become a general manager and they're willing to take a pay cut of a few bucks an hour because they want the salary, they want the stability. They want the the position and they want the option to not work in the business, in the field all the time. Okay, that makes sense.

So more personal to who that GM would be rather than the business as a whole.

What is their goal? And then you simply make the benchmarks to get them to their goal. Don't think about you, don't think about the business. What's your goal? I need to know that because if it's not aligned with being a great general manager and what that entails, I'm not even going to like incentivize you to get there.

Yeah, that makes sense.

Thank you for Dalton. 3, 2, 1.

Hey Mike. James Suika with Yard Dogs from Canada.

Assuming your sales GM kills it, what do you do with him once you.

Send a technician to replace him as an operational one, what can you do with that guy? Some creative things.

Couple things. You can either a one part I didn't talk about today was the starter role. That's basically what I kind of do with Connor, where he started locations for me. So if you're trying to do the chain model, I would get them onto the next location and I have an operational GM behind them. I would incentivize them on that operational manager getting trained up so they don't just leave them in a lurch. So sometimes what we've done is we give them a perpetual distribution of cash based upon that location in perpetuity. So hey, you're going to start this other location, but I'm still going to give you 5% of this location. And then what happens is they kind of start to make sure that managers train better and check in on them occasionally because it is affecting their paycheck. Cool for James. Three, two, one.

Dude, it's all the turnaround folks jumping up today. Go ahead Brandon.

Brandon from Simply So what do you recommend for people who are getting their first non owner GMs and prepping their expectations? Because obviously we're sharing with them like hey, we're have scorecards, meetings, all that. We're expecting 30 budget hours a week. But due to our lack of experience as owners with managing GMs and spring rush hits and now they're at like 50, 50 hours a week and they feel like you were dishonest with them in the beginning. How are you handling those expectations when you're a first time owner? Managing managers.

The first thing is I would say is first off be very conservative. So profit sharing when I'm pitching a general manager, go low. Right. So even like my target plateau situation I went lower. I don't want people thinking, oh, my goodness, I should be making like 30% margin. It's possible, yes. But like, most people don't. So I'm going to go lower in terms of what I intend. I'm also going to tell them how hard it is. Most really hungry general managers, if you say these lines, they actually salivate. And that's like, hey, it's going to be really hard. It's difficult. It's hard managing people I know you haven't done. You've been in the field before. It's tough. And when the buck stops, it now stops with you. And if we go over in Spring Rush, you're the one picking up the slack. And it's difficult. I don't know if you're made up, like, if you can do it. But it's tough. And you tell them the stories of the pain you went through. You say, but I think you've got it inside you and you're gonna tug on their emotions here and you're gonna get them to commit to those because they will happen. Even if you do everything right. Spring Rush, it kills everyone. So I would just prepare them for the worst. And then secondly, I would communicate with them on that weekly cadence of how they're doing and going into it. You just told me I would tell them. I have never managed a manager. I'm new to this. I need your feedback. If there's something I can do to support you more or if there's something that's not tracking with what we've talked about today, I need to know about it. And that includes you working more hours. That includes you not feeling respected. That includes you not feeling compensated. I need to know about those things because I can't fix them otherwise. And I don't know what I'm doing.

If you say that they'll be on your team, they'll give you all the feedback faster instead of having a quarter go by. And all of a sudden they want to leave because they couldn't just told you in the first two weeks that they don't want to work 80 hours a week. The communication will fix most of it. Thanks, man. Brandon for three, two, one. Staying on your left side.

Mike. Hey, Mike. Caden with Tadaros Landscaping. I'm in business with my dad this year. We're doing about 2:30 and he's been in business 30 years going on. He used to be a lot bigger, but he's downsized. What should his role as somebody who does not want to do it Anymore. What should his role be in the company going forward?

Cool. He's been in business for 30 years. You guys started your business when together.

Really? This year.

Cool. First year? 230.

Yes.

Good work in the business. Are you 50?

50? No, we're about 80.

20. Who gets 80?

Him.

So he's the capital, you're the sweat equity.

Yes.

Fantastic. And your question is? Go ahead.

I just been the general manager for like the past year and he has not taken like anything out of the company.

Which I feel bad about.

Yeah.

Okay, so what should his role like be for the future? Because he wants to get out of it. He wants to hand it to me, he wants to get out of it long term.

Okay. It sounds like he's not in daily operations at all.

Never.

So he's not really in the business. He has basically funded this and in Exchange he's got 80%.

Yes.

If he wants out of it. Why would he not just give you the 80%?

Does he want return on his capital?

Yes.

Fantastic. I'm going to go to him, I'm going to negotiate. How much capital do I need to return back to you in order to buy you out? And so let's just say he put. I'm going to guess 50,000 in.

Yes.

All right. Hey, dad, over the course of the next five years, I'm gonna pay you 15% interest on that money, but I wanna buy you out. What does that look like? Can I do interest for the next three and then principal payments for the following two? I wanna buy you out. Have that conversation. He wants out. That's your. You have the leverage here. He wants out. He wants money. Great. Give him his money back with good interest on top of it.

Okay. What?

Would you have a follow up? Go ahead.

Sorry.

Do you have a follow up to that? No.

No.

Does that make perfect sense?

Yes.

You think he'll take that?

Yeah, I think he will.

Okay. Awesome. Caden. Three, two, one.

Hi, Mike. My name is Taylor. I'm one of the co owners of Midnight sun mowing and Irrigation. We're based out of Fairbanks, Alaska. So we find that we are extremely seasonal. We might get May through mid October. We've chosen to keep our services simplified as per your suggestion. And we don't do snow removal. Okay. Good thing this time of year because snow has been lacking in Alaska.

Yeah.

Where we're at. My question is, based on that information, do you have any suggestions on how we can preserve capital and set ourselves up for springtime without.

Putting ourselves at a disadvantage for taxes and whatnot? In the current year, we find that we often pay, you know, multiple. We pay our taxes and then try not to invest in shiny new equipment unless it's absolutely needed and find that we have a lack of capital to start up and wait for the money to roll in the door. We find there's about a 30 day lag time before we start to see that money roll in the door for contracts and whatnot.

Okay, I was going to go a different direction. Here we go. I would be trying to do a bunch of prepayments in December for your first following three months. So instead of trying to spend the money or like, oh man, we got all this taxes, I'd be paying your insurance up front. I'd be looking at every single payment and seeing if I can prepay.

I'd.

We try to negotiate discounts, the pre buy materials, anything. Because if you're thinking about I need to save money on taxes, I don't want to buy shiny equipment. You can still do that. Just prepay for everything.

That doesn't show us, that doesn't help us become profitable for that year. Help us show a profit that's showing less profit.

Okay. I was going after the tax situation.

All right.

You're talking though like off season. You don't have snow. How do I get to spring? Essentially. Okay, tomorrow, workshop. This is all we're talking about. Perfect. Yeah. I'm going to give you five different ways to do it.

Thank you.

Two more.

Let's do a clap for that. We like inflation. Yeah. Three, two, one. For Taylor.

Hey, Mike. My name is Ron from New York City. I represent overbooked AI. We developed a software in the past few months that specialize in AI services for phone answering, scheduling jobs and taking calls. If it's after hours of doing business.

Hours, I know it.

We are currently very strong in the plumbing and H Vac sector and we're looking to expand in the lawn care services. Do you think there is a need for this in this sector? And also we're looking to develop a product for AI. Estimating that you'll just put the data and it will automatically give you an estimate per project. What is your thought about this?

Yes, it's not really a door, so I'm going to move on from this. However, I would say 90% of landscaping lawn care professionals are not equipped to be able to use your software. Mostly because they don't use budgeted hours. And because they don't use budgeted hours, you cannot schedule automatically for recurring work. So I can talk to you a Lot later for him. Three, two, one. One more far left. Roy.

Hey, Mike, how you doing?

Good.

Hey, so I have a quick. Well, I have a debate.

Sorry, sorry for everyone else. This is Roy's, from Roy's Lawn Care. Sorry, I know most of you. Sorry.

So I have a debate that we're trying to figure out.

Debate.

Who's debating well in our leadership team.

And like the four of you, well, we got a little drama. Come on.

No, no, no. So we, we operated from one location.

But we service two service areas. Right.

They're about 40 to 45 minutes apart.

Okay, Wenatchee.

Right, Wenatchee. And then the second location is in Quincy.

Right.

But we operate, like I said, from Wenatchee.

Our debate is whether you're talking about.

Having two different locations. Should we, if we're profitable, everything's running really good from that location and I mean the numbers are great. Should we separate and have two different GMs at different. One at each location and operate like that or continue the way we are?

Yeah, your size. Cause you're above the 1.5. So you're in a bit of a different world. If things are working, you're making really profitable. You don't meet the category of I need to downsize and cut date employees. You've already gone to the fact where you have admin, you have sales, you have operational teams. And so it's not going to impact you the same way as like I want one general manager. Cause I want one person to be responsible for everything in the business. And I can only expect them to manage effectively eight people. Now if I start having a gm, a salesperson, an admin person, three office assistants, all of a sudden now they might be able to manage effectively 20, 30 people. And so it's just a different model. And traveling the 45 minutes now just becomes a function of 45 minutes multiplied by X amount per week, by how many hours it takes my crew and how much I'm paying them per hour. Or more importantly, what they could be making if they were working. If you take that number, you'll blow this out of the water. By the way, you take 80, 90, $100 an hour, multiply it by the hundred hours that they're driving every month, you'll be like, oh, this is not. This pays for the GM salary and the shop space rent.

So it just becomes a debate, do you want to do that? This is a different business model. If it's working now, I wouldn't change anything. I would say if there's pain down the road as you begin to expand, I would break that off and make it one location with one general manager with eight employees.

Perfect. That's what I wanted to hear.

Feroi, everyone. Three, two, one. All right, that's.