How to Hire Your First Employee... and NOT Go Broke! [LIVE SHOW]

Foreign.

Show is back in business two days in a row. I will keep doing these as long as people keep calling. When that stops, we'll stop the show. So 7:30pm Eastern Standard Time, 4:30pm Pacific Standard Time. I'm gonna be trying to do these as often as I possibly can. And as long as people keep calling, I will keep answering the questions. So yesterday we had like 150 or 200 people that came in live. I don't expect that many people now because I have not publicized this, but I'm interested to see how many people show up. I'm interested to see how many people join the show. The first call is coming in from 443. Welcome to show. Thanks for coming on the Mike Andy show.

Hello, can you hear me?

Oh, I think you dropped it accidentally. All right, let's see here. Next caller is coming in from 9:1 3. Welcome to show. Thanks for coming on.

Hey, can you hear me?

Hello?

Hi.

Can you hear me?

I can. How's it going, brother?

Good.

How are you doing?

Good, good. What's your question?

So I started my business in 2020. I'm currently 14 and it goes under Aaron Vaughn care. And right now I'm a sole proprietorship. And I'm looking to change into an LLC this January. And I was wondering if I should rebrand my business. But I got like plenty of recommendations and one neighborhood favorite on the nextdoor app. And I would like to like grow my business, grow into my brand and like possibly franchise one day. So I was wondering if it would be better to go ahead and rebrand.

Now or how would you about that?

I wouldn't rebrand with franchising in mind because that's a national trademark. It's a little bit different. I'd be asking yourself if you're going to be switching to an llc, it's a good time to do rebranding because you're already having to do new entity documents. But also even that doesn't matter because you can always add what's called a DBA or doing business as or a trade name to your existing business entity structure. So in terms of rebranding, do you already know what you kind of want to call it?

Yeah, I would just change it to like, I don't many ideas. I just haven't picked on one yet. But like, I, instead of using my name, I would like to think of something like how yours is like Augusta instead of using my personal name.

Perfect. Yeah. So honestly, like, I would flip a coin. Don't overthink it. At this point, when you're this young, like it's going to be four or five years of growing this thing even as you're going through school and all the rest of it. So like flip a coin, get an LLC just for the sake of protection as you begin to grow. It is a good thing to have. But don't overthink the name of the business. Anything is going to be better than just your name on the entity name. So next caller coming in from 443. Welcome the show. Thanks for coming on.

Hi Mike, I'm on.

You're on. What's up?

All right, how you doing? My name is Sean. So I have a question first. Thank you for taking questions and helping us. But my question is I just started my lawn care business this year. This season I didn't really take on many clients. You know, my big thing was just getting started and but my dilemma is I work a full time job, so I'm still working a full time job. It's something that I'm doing part time. And next year, next season I would like to be able to really.

Put on more clients and everything. But the barrier for me is because I worked at full time job, I'm not working with that much of a window after my work to accommodate enough customers that I would like. So I thought about hiring someone. But my only reservation with that is just if something happens where employee is sick, they have to not show up or anything like that, then it will conflict with my full time job. I just wanted to know what was your thoughts on that?

Like ultimately, like are you like, let's throw a number at me like in terms of what you're making at your job right now?

Right now, about 53,000.

Okay. And then in terms of customers, how many do you have right now?

Oh, well, I had to. Like I said, I was just getting started. So I mainly marketed to people that I knew and everything like that, getting a feel for because I created my LLC and stuff. So I was just really trying to make sure it was something that I wanted to do long term.

And so I just took on a couple customers for the season.

Yeah, like I would cross that bridge when you get there. Right. Because like you probably could easily get 20 customers or so without even needing an employee. So unless you're trying to go from two employees to 100 employees in the next couple of months, I wouldn't worry about thinking about, you know, what you're going to do when you hire someone. And so I would at this point be like, go from 2 to 20. Right. And because I'm assuming 20 you could do on the weekends, you could do the evenings, you could make that work. And just try not to cross the bridge of oh, what am I going to do with an employee and my job when you don't even need an employee at this stage or simply trying to get this thing off the ground. And 20 employees will kind of prove the concept. And then all of a sudden you're at 20 customers and either A, you're going to raise prices because you can't handle getting more, or B, you're going to be able to go find an employee because now you're able to raise prices, get more customers and at a higher margin be able to afford to pay someone 3, 4, 5 dollars more per hour compared to the competition. So you'll get some of the best talent and that would probably be the type of person that would be able to run it while you're still at your job.

Does that make sense?

Yeah, it does, it does. Thank you. I think that's, that's all I had. I don't think I have any follow up questions.

Awesome. Thanks brother. Take care. Cool. If you have a question, feel free to call this number right here. 361-733-3333. Had a really good conversation with someone the other day. I might put it up as a call in here one of these days as kind of a consulting call. That was done. But yeah, I'm doing these, these Mike Andy's live shows really just to be able to answer any question about lawn care, landscaping, small business in general, you do not need to have a lawn care or landscaping business to be able to come on the show. Any sort of home service industry, contractors, cleaning companies, you name it, I've had some sort of experience at least talking with them. And honestly, in my opinion, when it comes to service based business, especially home improvement and home services, ultimately we're selling, we're all selling the exact same thing and that is time. And so whenever you have any sort of labor that you are selling to a customer, in my opinion, a lot of the same rules and the same logic applies. And if you're using budgeted hours, that is, how long does this job take? Therefore, that is indicative of how much I am going to charge the customer. If that's the logic and the prison by which you look through in terms of pricing and the vast majority of home services look very, very similar. Where I feel people start to get in, you know, fall apart or do things incorrectly is when they go into a niche or into an industry and they start to go very, very intricate and they start going into services that are extremely niche. And I know people say, you know, riches are in the niches, but honestly, if you are in 10 different niches, you, you are not in a niche. You are way too spread thin. And if you're in the, if you think of a niche as like a rabbit hole, right, you're way down here. That's where the riches are made. But if you do that 10 times now, all of a sudden you're not in a rabbit hole. You're not at the bottom of this niche. You are trying to do 20 different niches. You're like, well, I'm going to be like the guy who makes putting greens and I'm going to be the guy who makes ponds and I'm going to guy who like, trims very, very specialized trees. If you start spreading yourself out so thin, you are no longer in a niche, you are spread yourself too thin and you'll become unprofitable. Next caller is coming in from three three zero. Thanks for coming on the show.

Hi, Mike, how's it going?

Good. How are you doing?

Good, good. What's up?

So I had a question.

So We've got a 2005.

A trailer that we bought in 2005. We bought it new and it's pretty old at this point point. And we've, we've done some patchwork on the flooring and stuff and we fixed it up a few times. But my question for you was when do you know, like, when do you know when equipment has outlived its value and when it's time to, like, replace it?

Yeah. Like, the big thing I'm looking at is cost of downtime as well as the cost to maintain and repair. Right. So whether it be trucks, equipment, et cetera, when it starts to break down and be unreliable, that is like a huge, it's a huge cost to the business because now I need backups, right? So either a, I can get, go get four or five new trucks, for example, or I'm going to go get six or seven more used trucks with the expectation that there's going to be, you know, any given time, probably a few times a year, where one of those trucks are going to go down. And so you're either paying for, you know, nicer equipment, newer equipment, etc. Or you're paying for the fact that you're going to have some maintenance. And so when that maintenance starts to get extremely high that, you know, when it comes to trucks, you're thinking like engines, transmissions, et cetera, on something like a trailer. Honestly, you can usually patch it pretty good because it needs tires, brakes, and as long as the chassis is good, you know, in the dump operation or if it has a dump operation, and then it's like, well, what's the cost of appearance too? Right? Like the cost to your brand? Like, if you have an old piece of, you know, metal that's rusting and like looking horrible, that's definitely also should be taken to a brand equation. But honestly, like, is this a dump trailer or what kind of trailer?

Right, it's. It's a dump trailer and we're up in Ohio, so we have downtime in the winter and over the years we've, you know, maintained it over the winter time and the downtime and we've repainted it a few times. So I mean, it doesn't look that bad until you like, like if you know about dump trailers and you get up close and if you peer into the inside of the dump trailer, you can see that the floor is pretty warped. And it's probably to the point where, like, if one of my guys gets pulled over with it, it might, it might be like, I don't know, the cop might say something about it. But yeah, yeah, I think, I think it's outlived at times. But it's just, you know, like, when do you really want to allocate all that money towards investing into a new trailer? But yeah, like, something like a dump.

Trailer can usually last quite a long time with patching it up, repainting it, putting new tires on it, putting new brakes on it. You know, it comes down to the fact, like, if you're going to spend $10,000 on something brand new, like a dump trailer, the fact is, this dump trailer lasted you 20 years. If you divide, you know, $10,000 by 20 years, all of a sudden it's a 500 bucks a year. That's not so bad to get a brand new trailer, assuming you're using it every day. And if it's warped floors after 20 years, probably you're using it all the time. Could you cut out the metal, resurface, the flooring, et cetera? Yes. Are you going to spend how much on that? I don't know. Like, for, for some people, if they're really good mechanically, they might go get some great scrap metal, weld on, weld it all on, and for 200 bucks, have a brand new, you know, floor of their, of their trailer. If you're not mechanical like myself. And you don't know how to weld, you might pay someone 4 or 500 on top of that. If you're in certain some areas, that much metal might cost you five, six hundred dollars in and of itself. So then it's like, well, if I'm going to pay $1,500 to have this resurfaced, should I go pay eight or nine or ten grand to get a brand new one? It's going to last me 20 years without having to do this all the time. So there's always the cost of, like, also how long you are going to keep this piece of equipment. And that's why, like, a lot of times I don't recommend people buying brand new trucks, for example, not because I don't think it's a good investment, but because most businesses statistically don't last 10, 15 years. And statistically, in order to make it worthwhile, you need to keep the truck for five, 10 years. But if I'm speaking the vast majority of people that are starting a lawn care business, they are not going to be in business in five years. The vast majority of them, 10 years. Not a shot. Like, there's going to be a very few of them. And so when I talk about using, buying used equipment, you got to keep in mind I'm talking to general pop, the general public. I think buying a brand new piece of equipment is probably a good idea for most people if they're going to be in business for the next 10 or 20 years. Unfortunately, the vast majority of people are not. Next caller is coming from 646. Welcome the show. Thanks for coming on.

Dude.

What's up.

Baba Buoy.

How's it going, brother?

Baba buoy. Baba Buoy. Howard Stern's penis.

Unfortunately, I have never listened to Howard Stern. I know who he is. Never listen to the show.

Baba Bowie.

What can I help with, man?

Baba Bowie. Howard Stern's penis.

All right, we're gonna move on from that person. Don't know who they are. Okay. Does that mean I have to block all these things?

That was the first time we've ever had someone call and be like that. Come on. People like that. That's just dumb. That's just dumb. All right, anyone else want to call? I think I had to clear this queue, so sorry if I cleared you out accidentally. Go ahead and hop back in. All right, next callers come from 225. Welcome the show. Thanks for coming on.

Oh, whoops, I had you muted. Go ahead.

Hey, Mike, Andy this is Hunter. I just started lawn care business this summer, you know, the start of spring here, and I'm 16 years old, closing in on 60 properties. And I'm just wondering.

What should I do to find an employee or, like, trust someone I can trust, you know?

Yeah. Like, the first thing is. So you have 60 properties now and are you doing them all yourself?

Yes, I am.

And did you get all 60 this year or has that been over the past few years?

No, no, no. The past four months now, I've collected over 60 yards. And just recently I had gone to Lawn Care Media.com, your website where you sell your sample door hangers and everything. And when I went ahead and went over to this print and I bought 500 copies of the, you know, like the instant quote door hangers, and I went and handed them out and I got 50 more vons people calling me in, and I just don't know if I can fit them in and do them myself, which would be 100, you know, 110 mons this crazy. So I. I think totally.

And I'm assuming you need someone to kind of trust, you know, as you said, like, trust them a lot because. Do you still go to school?

Not actually. I got out of center, and as I was going into 11th, I went ahead and dropped out, got my GED, and now I'm full time in the lawn care and landscaping industry.

Okay. Yeah. Like, number one thing I'd be looking at is like, as you're working throughout the day, don't ask yourself how much revenue you're making. Ask yourself how much you'd be making after paying someone a wage. And when I say a wage, figure like 25 bucks an hour. Okay. Like high, because you're going to have payroll taxes and other stuff involved as you begin to grow. And so when you say, okay, I mean $300 a day, take out the fact that if you were an employee, you would have been paying someone $200, but. Right. $25 an hour, multiply by eight, that's $200. Now you made a hundred. Can you make the business run on the hundred? Right. And the reason I'm saying this because a lot of times what happens is you're running at 70, 80, 90% profit margins, and then you get your first employee and all of a sudden that drops dramatically because you now have overhead, you have an employee you got to pay wages to, you got taxes and all the rest of it. And so start figuring what you'd actually be making with an employee doing the work. And and then you've got to add like an additional 20 or 30% because they're not going to be as efficient as you. Right. And then if the business is still making money, I would, I would recommend making sure that that number works at a higher rate. Right? So if again, that's why I said $25 an hour, everyone's like, well, I can hire someone for 15, you know, a friend or whatever. Great. But is that sustainable? So that when you get to 120 mowing customers, because this friend comes and helps you along, you give them cash or whatever. Well, when that person bails on you, now you've got to go find an employee and you have 120 mowing customers. That's a big problem because you have not. Now, your pricing is not built in a way that sustains actually paying a real employee. And so even if you do go ahead and get a friend or someone to help you on the side, or they help you on the weekends or something like that, and you go from 60 to 80 or 90, that's fine. But make sure that your pricing is built in a way that if someone is going to leave and bail on you, you can go out and get another employee. And at market rates, which I would recommend keeping that number higher than what it really is in your head, because that's what you will need to be able to afford in a pinch if that employee drops on you. Does that make sense?

Yeah, that's totally understandable. Once I get to a certain point with them and.

You know, sooner or later gonna have to get another truck and trailer. When should I decide to start?

Like P for P I would get.

Or would that be an option?

I would do P4P as soon as your. You don't have oversight of the employee, right? So as soon as you get either a second employee or a second truck, that's when P4P needs to be instituted. Because now you can't have eyes on them all day long. Like if you get this first employee, technically you don't need P4P pay for performance because you're going to be able to manage them all the time. As soon as you get that second truck and they're out working separately from you, or you get another a second employee, which typically means you're going to split the crew. You want to have P4P involved. For now, just make sure that every single job has budget hours assigned to it because then Transitioning over to P4P will be easy. And furthermore, as you hire right now, if you're not using P4P, make sure that what you're paying people per hour is less than what you're going to be able to pay on base pay using P4P that way, if you hire them now, let's just call it 18 bucks an hour and then you're going to switch to P4P next year when you get another trucking trailer, for example, maybe make sure that at $18 per hour is what you're going to be charging for base. And if you don't know what you're going to charge for base, just go to p4psoftware.com training whole bunch of training videos in there I have in there. In determining you exactly what to be charging or what you should be able to pay on P4P and Basepay. All right, next caller coming in. 330-go ahead.

Hey Mike, I called in earlier, but I think I got disconnected.

Oh, what's up?

I wanted to know. Oh, have you ever rented any equipment, like if you bought a piece of equipment and you don't use it every day?

Yeah, for sure. Like what, what piece of equipment are you specifically thinking about?

Probably like a skid chair.

How often do you using it right now?

Right now we probably use it.

Maybe 50% of the time.

In terms of 50% of the time, you mean like two or three days a week? Are you talking 50% of the time, like 50% of your projects that are two or three weeks each and on half those jobs you use them?

I'd say when, probably for the season, we use it about 50% of the season. So like early season, it's, we mainly do a lot of mulching and like trimming of shrubs and getting plant material in order. And like all of our established clients that want mulch, we get them out of the way before we start on like other projects that we need to do like drainage work or yard installs or what have you, like hardscapes and, and stuff. That's when we really need the machine. But like early season, we typically don't really have it out very often. And are you renting later in the season?

Are you renting it right now by the day, or do you just like basically rent it like three or four months straight?

I typically, it's normally like close people that I know that I rent it out to. So like if someone needs it for like a couple days, I'll just, I'll, I'll give them a rate and then I'll send it out with them and I normally deliver it because most people that need to rent a skid, sir. Aren't really set up to haul a skid steer or anything. So, like, I bring it out to them.

I got it. So you're talking you. You own the skid steer, you're renting out to other people. I thought you were renting it from a rental company.

Oh, no.

Yeah. Okay. Yeah, I should have specified that, but you're fine.

Yeah.

It would be like equipment that.

Yeah.

You send out to other people.

Yeah. The main thing is just like, ensuring it correctly. Right. Like, if. If you tell an insurance company that you're renting out your equipment almost all the time, they will change your policy when it comes to, like, covering your assets. Or they will say you're uninsurable and you'll have to actually start technically a different LLC or business for, like, equipment rental business. So that would be my biggest apprehension is the fact that your insurance likely will not cover under your current general liability. And if, you know, someone rents it from you, even if they're a friend or whatever, and then they take that skid steer and drive into a car, like, technically, you will get drawn into that, that lawsuit from the insurance company. And so that would be my biggest fear. And honestly, it comes like heavy equipment, like a skid steer, excavator, et cetera. They can just do a lot of damage. And so I would just be very careful about liability and making sure that has been disclosed to your insurance company. And. And I can almost guarantee they either A, will not insure you if you tell them, or B, it'll jack the rates up quite significantly. Or have you. Have you already gone through this insurance side of things?

No, I have. I haven't insured it. That's why I've only rented it for people that I know and, like, people that I can kind of keep tabs on more closely than like, just a random stranger. But.

Yeah, that does make a lot of sense. And I've kind of tossed that around. And I know about the insurance stuff. I haven't really gone into depth with it, but I was kind of just curious if you've ever done anything like that.

Yeah, we've been tempted to. I think we originally, way back when we had materials that we would deliver, we also had the option to rent a trailer for people that didn't have a trailer, basically, and they needed materials. And it was. We didn't, like, sell them a lot. But it really came down to the fact that, like, I found out from my insurance agent that, like, it was like if you disclose that, they would immediately drop you. And I was like, well, then what do we need? It's like, oh, you'd have to start, like a separate business. I'm like, can't you. Can't I just say, like, oh, I'm also doing a rental company. They're like, no, no. It's like lawn care is here and landscaping, and then you have like equipment rental. Total different businesses. Putting that under one entity is going to cost an arm and a leg to try to insure it as an umbrella policy. So I would personally, for something especially like equipment, like, we're not talking about a trailer. We're talking about something that, like, could back into a house and crack the foundation. You know, there's just so many things that could be done with, like, heavy equipment like this. It could go over the ledge, it could malfunction and, you know, drop the bucket on somebody. Like, it can happen. And so as dumb as I hate, you know, I hate paying insurance because one of those things, you don't actually want to use it. But when it's hundreds of thousands of dollars or potentially, like, someone gets really injured, you definitely need to have it. And so I would just, I would just go to your insurance broker and be like, hey, if I do this, what's the ramifications? And then if they're like, oh, we won't, you know, we won't, you know, we won't cover it, then it's just a matter. You're taking the risk, you know, by, by giving out to friends and things like that. But it sounds like you're using it an awful lot. And I would lean on the fact that, like, you'd probably be fine without doing that. And increasing your premium might not be worth, you know, constantly renting it out to people.

Yeah, definitely. That makes a lot of sense. I also had one more quick question.

Go for it. Go ahead.

So I just recently got on an app called Jobber. I'm sure you're probably familiar with it, but we did like a little transition period with all of our clients, and I was wondering, so they have like a due upon receipt, a net 15 or a net 30 when it comes to invoicing. I was wondering, like, what you guys typically do with invoicing. Do you guys do like a net 15 or do you guys do a net 30?

Yeah, like, so some of our locations will do net 15, some of them will do do upon our seat. Just know that if you do upon put as due upon receipt means, like, as soon as they get it it's going to say overdue on it and then your automation sequence and how you do follow up in terms of collecting on that invoice needs to be hinging around the fact that it's past due when they get it. So what that means is don't have an automation that goes out the day after it's overdue because that is literally the day after they got the invoice and threaten them to go to collections. Right. So just make sure it's more important. It doesn't. I'm not really like I'm indifferent on 15net15 and whether it is due upon receipt. I would ideally like to have cards on file for everyone and just charge it that way. But if you are sending them out.

We have definitely seen you will collect faster. If you do do a pun receipt you will collect faster because when people see overdue they take immediate action versus if they say oh it's due in 15 days or I have 10, they'll let it sit or they'll come back to or they'll wait for the next like the first reminder, then they will take action. So you will get paid significantly faster when it comes to due upon receipt compared to net 15. But it's really just a matter of your follow up process making sure that it is aligning with whatever, you know, invoice payment system that you have. So awesome. Well, thanks for everyone coming on the show today. It's another edition of the Mike Andy show. We'll keep doing these as long as you keep calling in. That's the number I'm going to try to stay consistent with. 7:30pm Eastern Standard Time. But thanks for coming on and we will try to see you tomorrow. We'll just see how many times we can keep this, you know, show alive if people keep calling. I'll keep answering the questions. I appreciate all of you. We'll see you tomorrow.