I almost told this business to SHUT DOWN

Hey, everyone. My name is Mike Andes, founder of Augusta Lawn Care. We have over 150 locations around the world. But today we're dealing with doctor diagnosis and we're breaking down lightweight debris removal. Thanks for letting us come out. I appreciate it. And we're looking at their actual profit and loss statement. These are real numbers from last year's revenues and expenses. And we're going to be breaking down what we can learn from their profit and loss statement. So what's our payment total for all the debt? Because nowhere else on the Internet is people going to break down real financial statements. So that's why doctor Diagnosis has a job. So this business specifically is a husband and wife combo. Powerful dynamic. Let's go. They're doing $258,000 in annual revenue by themselves. It's very rare that I tell someone to close their business down, but this might be one of those times. And what do we look at first when we look at a profit loss statement? Well, top line revenue, pretty good. $258,000. Not having a ton of employees, so I got wages down here, it's only like 25,000. So like some part time help, not bad. Then we look at the bottom line here. We're looking at $24,000 or so in profit. Now, if I break down the numbers and the math on this, we're looking around an 8% profit margin based upon what is on this P and L. Now, this is what's crazy. A profit loss statement like this that has what seems like a decent net income actually is hiding the fact that this company is very, very close to shutting down. And the reason for that is because they have no money. They're not taking any money from the business. It's not making $24,000 in profit every year. Well, how is that possible? Well, the thing that we're not seeing right now is the balance sheet. And what the balance sheet holds is your assets and your liabilities. Okay? Now, the reason we call it a balance sheet, how I like to think of it, is it's got to balance out assets. Must equal liabilities. How do you think about that? Well, an asset is like an easy asset, is something like cash. Now, over here, I. I also have a liability of a loan. This could be debts, et cetera. Now, if I'm going to pay off my loan with my cash in my bank, I say, hey, I have $10,000 in my bank, I'm going to take $5,000 of cash and I'm going to go pay off some of this loan, well, assets must equal liabilities. So when I over here subtract $5,000 in cash, I also over here subtract $5,000 of my loan because I did a principal pay down and paid it down all. What that means is my assets still equal my liabilities. I took the asset of cash and I turned it into reducing my liabilities of my debts. So the balance sheet, the thing that you're not seeing here is that they owe almost $500,000 between a Freightliner semi truck and a Suzu dump truck, as well as something like 28 or 26 different massive bins that they use for their debris removal company. So there's really two different departments in the company. One was like kind of like junk removal. And then the other one was they would take these massive bins on a freight liner big truck and have it delivered to a construction site, filled up for the week and then they haul that off the dump. And so that's why the dump fees are pretty significant. You can see here About 15% of revenues going out the door to just dump fees. This is part of their business is like taking stuff to the dump. However, when you have $500,000 in just straight debt on a Freightliner and Suzu truck and, and a whole bunch of these bins, well, all of a sudden $500,000 of debt, even if some of it's at 0% interest, it doesn't even matter. Like if I look at the P and L, what I'm looking for right now is interest. So interest earned. That's not what I'm looking at. That's like money in the bank account. I don't see any interest expense. So this is something that I would address with the owner, mostly due to the fact that I know they have debt, a lot of debt, and I don't see any interest expense. However, the one thing I am also seeing on this P and L is they have a lot of Ask my accountant. That's a lot $20,000. In other words, like almost 10% of revenue is ask my accountant. Typically this expense line item or this chart of account, this category in QuickBooks is used as a way to say like, oh, I don't know where to put this on my P and L. So I'm wondering if they're throwing some interest expense in there. Potentially. But the thing about paying down loans is this transaction of cash being turned into paying off debt. This does not show up at all on a P and L. The only thing that's going to show up On a P and L is your interest expense on debt. And so I'm not even seeing an interest expense unless it's hiding inside of the ask my account in line item. But what I know for a fact is that on $500,000 worth of debt, I know they're paying about 9 to $10,000 per month in debt payments. So what that means is if we're spending 100, let's just call it $100,000 debt payments every single year, all of a sudden, when I take $100,000 out of the cash flow that this business is generating of $24,000, this business is losing money. The cash balance is actually going down despite having a profitable business. And this is why you must have the balance sheet and the P and L to tell the true health. Because we're doctor diagnosis the patient. We can't just look at the P and L. And this is why people can have Great P&LS and look very profitable. And they'll come onto Facebook like, I'm running a 30 to 40% profit margin business. Fantastic for you. I want to see your balance sheet, because what's not being taken into account is the payments on the debt. Because this is a balance sheet item. This has nothing to do with your profit and loss statement. That is when cash is being used to pay down your debts. And I can guarantee you on $500,000 in debt, that over $100,000 per year is being spent on debt payments. And it's not showing up anywhere here. And if I take that $100,000 and I take out what their current cash flow of profit is of 24,000, the fact that $100,000 is being spent on paying down the loans, we got ourselves a big problem. How do we fix this? Well, first and foremost, I don't believe they're fully utilizing their assets. That Freightliner, that Isuzu truck, and their bins. Why? Because only about 5 to 6 out of the 28 bins, 5 to 6 out of the 26 bins for the debris are actually in use. The other 20 of them are sitting at their shop space, basically just being stored there. And they have to pay for shop space in order to store them. That's insane. So there's two ways to make this business get fixed, because right now it's losing a ton of cash despite it looking like it's 8% profitable on these P and LS. There's two ways to fix this. One is you've got to grow out of this. And in my opinion, this business can do easily $400,000 in annual revenue. How? Take these 20 empty bins and put them out on job sites. Make sure that the freightliner that you're paying thousands of dollars for every single month in maintenance and insurance and debt payments, all of that, you've got to make sure that the asset is actually being utilized and actually driving around, hauling these bins around. And I believe if they can do that and actually go from 250 to $400,000 in annual revenue, they can actually make a profit. Because we've got to get this number over here at least to 150k just to comfortably cover our debt payments. And so they can do that by increasing revenue by an extra 150 grand. And guess what? A lot of your expenses in this business are fixed expenses. You already have the trucks, you already have the bins and you don't have any labors. So when you have high fixed costs, a lot of times you can grow yourself out of this problem. Because adding more customers is not going to increase their cost very much. They're already paying for the truck, they're already paying for the debt and the insurance and the gas, those are fixed besides the gas, which marginally is not going to improve, increase massively when we double the revenue. Because we've just got to take all the assets that we currently have and utilize them more. And is what we call asset utilization. What percentage of the day, what percentage of the week, what percentage of the month are your assets actually being used? If you have a really low asset utilization, I would recommend you grow the business to capacity. In other words, grow the business's top line revenue and get more customers to actually be able to use all of these bins and actually keep those trucks moving all day long. Because right now they're only using the big Freightliner once or twice a week. Now when I actually dug into this, what ended up happening is these five bins were all being used by one contractor and maybe one or two bins a month would be used by homeowners or small one off projects. And so instead of going business to consumer or B2C, I recommended that lightweight debris removal switch their whole business model to go to B2B which is business to business. I recommended that they go to contractors and try to get more people that are going to have four, five bins at the same time. Instead of their website and their branding being governed after debris removal for homeowners. Go after the big fish, go after the business to business. And here's what's crazy because they have massive amounts of debt because all of that debt is fixed expenses on assets like trucks and bins that you already purchased. You know what? I'm okay with you doing services basically for free. And what I recommended that they do is get rid of these extra 20 bins sitting around collecting dust and get them on job sites. I don't care if it's for free because you're already paying for the bin, you're already paying for the truck, and you're already in massive amounts of debt in order to make that happen. So why not go after these big fish, the B2B contractors get these bins out on their customer's property so they can fill them up, utilize their service and guess what they'll probably do? They'll probably reorder from them again at the regular prices. So I recommended that they go after business to business customers go after the big fish that are doing four or five projects at the same time and are gonna keep doing it month after month after month with more projects instead of one off jobs where they're spending so much in marketing. Check this out. $42,000 they're spending in marketing. More than 15% of revenue is going just to marketing and advertising. And that is going all after Google and Facebook ads which is all collecting the worst leads, which is B2C customers. Customers that are gonna do a one time deck removal, a one time cleanup of their garage. Those customers don't have a long life, they're gonna have one time projects. I'm going after these contractors. I'm willing to give them a bin for free for an entire month just to get my foot in the door and fill up to capacity and grow my way out of this cash crunch. If you want to actually see the entire breakdown and the turnaround where I went to their business and helped them turn around the company, watch this video here. I think you'll enjoy.