Mike Andes, founder of Augusta Lawn Care, argues that hoarding cash is a mistake. He breaks down where to put profits: reinvest in your business (a $10 marketing spend can generate $100 in revenue), then move profits into appreciating assets. Cash loses roughly 7% annually to inflation while savings accounts earn 0.005%.
Questions this video answers
Over 80 locations around North America.
January 27, 2022.
He states, 'Your cash is losing 7% per year in value.'
About 0.005% (mentioned as a typical savings interest).
Spending $10 on marketing generates $100 in revenue (a 10x multiple).
Chapters
Hey, everyone, it's Mike Andes.
I'm the founder of Augusta Lawn Care. We have over 80 locations around North America. And today I'm at Command center. But I also wanted to share this clip that's coming up, and it is a clip from actually Landscape Summit, where we just had a whole bunch of landscapers in town and we talked about where to spend your profits once you've made them in your business. This is where the media team, we all work in here. But once you've made a business, it's becoming profitable. It's starting to create cash flow. Where do you spend or invest that money? Or where do you save that money? There's four different options. Talk about the best way to spend that profit once you've made it in your lawn care and landscaping business.
You might be asking, where do I put the cash? Where do I put my money? I think about it in terms of a quadrant like this. We have depreciating assets here, we have cash here, we have your business here, and we have appreciating assets here. This is where you can spend your money. And unfortunately, in this industry, we for some reason have this massive affinity with buying depreciating assets. Oh, man, I gotta comment all that. You can't be a lawn care millionaire, okay?
The reason that has become the perception that you can't make money and become a millionaire mowing grass is simply due to the fact that most landscapers and lawn care business owners keep buying these stinking depreciating assets.
Building wealth. You must buy appreciating assets. You must buy things that go up in value as a goal. Right? The second step would be cash. It's better a. But you could just hold it in a cash account, right? Put in a savings account. Here's the problem. This depreciating asset might, let's just say, go down by 20% per year in value. Now, of course, the argument can be made that depreciating asset is going to create value for you in the form of more jobs, more income, et cetera. I'm not talking about that. I'm talking about profits that are, after all of that, your four options. Talk about depreciating assets. People buy more equipment. Guess what? We were told the other day, Your cash is losing 7% per year in value.
Oh, but you get to get interest on your savings account, a 0.005%. This is still negative 7% right now. If this kind of inflation persists for two or three years, you're gonna eat your cash very, very quickly. This is the tax of the middle class. Should never say cash. It's literally being burnt at 7% a year.
When anyone invests in a software, I can say, I guarantee you it's gonna go down at least 7% in the next year. Yes, let's do it. And by the way, it hasn't gone up in value for decades. That sounds like a great stock to buy. It's something a great asset. Just invest in cash. Just save money. If you want to become wealthy, you will focus on the right hand side of this equation, and that is that you will create businesses, invest in those businesses, and then you will take that money and you will invest in appreciating assets. I can invest in my business, in your business, if I can spend $10 on marketing and I generate $100 in revenue from those $10 of marketing, I have a 10x multiple on my marketing dollars, went from $10 to $100. If I'm 20% profitable in my lawn care business, that means I'm going to generate $20 of profit from that $100 of revenue. Why in the world would you go buy an $80,000 truck for your personal use that is a depreciating asset, when I could take that same $80,000, make that into $800,000, and turn that into $160,000 in profit and double my money? So that's why I'm so confused. When people spend money on depreciating assets and their business is struggling, ask yourself, if I spend this money on my business, what will my returns be in comparison to buying a depreciating asset? And that is the true cost of that item. People always ask, well, why do you live in a closet? Why do you drive a dumpy car? I'm taking every single penny I have and dumping it into this. And that's what you should be doing if you're in the growth phase of your and you're trying to get someplace.
And last thing I would encourage everyone to really start focusing on as you start to build a business that's extremely profitable. But an appreciating asset is where you should be putting that money. Appreciating assets can come in the form of stocks, real estate, and other things that as they go up in value, you will be taxed at a much, much lower tax rate called capital gains. We gotta stop thinking like landscapers now. We're dumb, we're stupid, and all this garbage. We start thinking ourselves as investors. The day you do that, for your time, for your money, for the relationship capital that you also have. Why are you investing in a relationship that slowly but surely is sapping you of life? Why would you not invest time and energy and emotion into the relationships? They're actually bringing you value. They're actually bringing value to the world.
