It doesn't mean anything... - Episode 054

The amount of work required to get inertia in business cannot be understated and most people will never get through it.

Good morning. Well, evening, afternoon, whatever we're recording in the morning. And I'll also say happy March, Happy Spring.

You're going to release it?

Yes, yes. Yeah. Happy March. We are going into spring. So we're excited.

We're off our political agenda from the last.

We're off the political agenda? Yes. Connor Hutchinson, you don't like politics. I get it. Yeah. Off the political stuff, you know, we'll see. All right, well, I had some questions for you. We'll just jump right in. You have been releasing kind of little mini educational videos, if you will, on your secondary channel, which is, what is it called now?

Home Service Millionaire.

Home Service Millionaire. It's a good rebrand. I know. That's why I didn't say it. I was like, good rebrand. Home Service Millionaire. So this is the new channel that you are posting content on and we can get another rebranding and all that later if we want to. But you did a recent little mini 10 minute video that I thought was very interesting and you said like, this is the scorecard you need for your business. Now obviously we have a scorecard internal for Augusta and like the owners know what to expect, you know, if they hop on a coaching call with myself or one of our coaches that there will be certain numbers we are going to want to go over or certain numbers that we feel they should know as the business owner. So I'll quickly list the ones that you mentioned and, and I'll have kind of specific questions. I'll list what you mentioned and then tell me like the brief of why you rank those higher than other KPIs you could track. Okay, so you said tracking your distributable cash amounts, tracking your close ratio, percentage of revenue going to labor, percentage of revenue going to office labor. So field versus office labor, hourly labor rate and then the debt to income ratio. So why did you choose those over, you know, various other numbers and KPIs that can be tracked in a business?

Yeah. Like ultimately you're the goal of running a business is make it profitable. Right. It's a matter of like how you define profit too. And so instead of getting this long debate about defining profit, it's like how much money can you take out of the business? And that's distributable cash. So like that's why I think the number one metric of a business really, because even if you have some debt and you have other obligations or if you just, if this, if, if this business is like, you're able to siphon cash out of it, that's a good thing. That's a profitable business. And so distributable cash is so important. And really you could take that one and just all the other ones are gone. Because if you have a lot of good distributable cash and like, that percentage is healthy, like 15 to 20%, for example, it's very, very likely that all those other, other ones are just fine. And if that one's really bad, like, you're not taking any distributions, that there's other things that are problematic in the business. But then, so then that's why I do the other ones. And so I can drill into stuff because it was like, oh, there's not much distributable cash. Why. Okay, here's these other five metrics. And by the way, you're spending 55% of your revenue on direct labor out in the field. You're never going to make money, and that's why it's inefficient or you need to raise prices. Right. So, yeah, the scorecard I gave at conference and then I just, I made the quick video so I have a very summarized version of it just so that people, I just remember starting out and having no bench, benchmarks whatsoever, like, what's good, what's bad? And some people, like, I, I get to name five owners in Augusta Nation that are one way, like, and there's like, they're like, how do you know that that was good or bad? Right. And then I have other, I can the five or ten in my brain right now. Like, they want to know is this good and is this bad? And they will send me number and be like, tell me good or bad. Don't give me any gray answer. Just tell me good or bad. Yeah, I lean more in that direction. So when I got started, I didn't have any sort of like, is this good profit margin? Is this, like, am I spending too much on labor? Is that efficient? So I just wanted to give some sort of ranges. And yes, the ranges, it's depending a lot on, like, what type of services and if you have materials, it's going to skew off your revenue and stuff like that. But it was like, generic enough hopefully to give someone some definition on those.

Yeah. And I think as a, you know, home service business coach, if you will, and I get to coach a lot of the owners, I try to zoom out, too, when I'm Doing coaching calls is like, well, what are your goals? Because I can also give the objective. Is it good or bad? Yes or no, based on these metrics and the size of the business. But the element that comes into play that when you own a business, you have the freedom to decide is what are your goals? Right. And some owners in Augusta and just in general business will take the smallest amount of money out to pay themselves and live on, you know, rice and beans. And then others are like, you know, hey, I have responsibilities. Like, I don't want to live on rice and beans. I want to enjoy the fruits of my labor. That's fine. You're probably going to have very different profit margins if you look at it from that objective perspective, which is why I like distributable cash. It's kind of like cash in, cash out. How much cash is acquired in the bank account and how much can I take out in terms of the percentage of labor in the field versus percentage of, or excuse me, percentage of revenue going to labor in the field versus percentage percentage of revenue going to the office. Why did you feel the need to break those apart?

Because a lot of times people will just do labor versus revenue and then it'll hide a fundamental problem as they have too many office staff.

Gotcha.

I see that a lot of times happening when people get to like 800,000 to 2 to 3 million is they have like way too many office staff. Because there's a point where you actually need like a lot of office after spring rush, but then they hire them for the whole year and now their overhead structure gets messed up, especially if they're salaried or just even in general. Really a lot of times people just keep them even if they're hourly throughout the winter time.

Yeah.

And so even like the place we went to a couple weeks ago on the turnaround show Attaboy. Like there's the estimator, two people in the office and their general manager and the owner. Like that's a lot of people on a million dollar business to be non revenue producing, all the highest skilled and probably highest paid. And so if you have five people there and only 10 people out in the field, one to two ratio in lawn care is not great. I've seen H vac companies, garage door companies do like some of them 1 to 1 or 1 to 1.2 or 1.3 in terms of people in the field to the people in the office. But in most home services where you're charging under $150 an hour, you can't have a one to two or less ratio. And so that's just kind of a benchmark, I'd say.

Okay, gotcha. No, that makes sense.

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All right, tell hourly labor. Hourly labor rate. I think that's pretty self explanatory. Don't feel like we need to go into that debt to income ratio now. I think this one is very subjective to some people because it comes down to risk tolerance.

And I change this one.

Okay.

So if you look at how I define it in the scorecards different. It's payments versus income.

Okay.

It's not how much total debt do you have?

Okay.

Because I'm looking at from a cash flow like survivability and it's not how much, how much debt you have, it's what is your cash flow look like. So this is more of a cash flow thing.

Okay.

It's not what typically it's debt to income ratio is like how much debt do you have? What's your total annual income? Like that's what like you.

So you're saying how does that debt affect the cash flow? I. E. What is the term and what are the monthly payments?

I'm looking at, will they drown in debt payments during the off season?

Right.

And if, if you have $90,000 of debt but you're paying $1,000 a month, that's not bad. But if you have $90,000 of Debt but you're paying $6,000 a month, there's a good likelihood that you're going to lose three to four grand a month in like, like you're going to burn money during the off season and that's like a recipe for disaster. And why a lot of home service businesses fail.

Gotcha. Okay, good. So the one I wanted to dive deep on. And then there's close ratio which we kind of skipped over. Pretty straightforward I think. You know, if you're in growth mode, higher close ratio, we tell Augusta 60, 70% if you're in profit mode, you know, somewhere around like 40%. That's kind of the safe zone though. 40 to 70 we feel like is pretty standard and then should fluctuate based on demand curve and the goals of.

The business and the capacity.

And the capacity. Yep, exactly. Yeah. Asset or labor capacity. Cool. So what I wanted to dive in most deeply to is the distributable cash. You already kind of briefly explained it, but for those who maybe don't know what it is or how it should function properly, do you want to kind of explain, like, just the math behind it, like, and feel free to go a little bit longer. I know in those educational videos you're pretty snappy, but in this case, like, assume I know nothing about distributable cash. Explain to me how to run it.

Yeah, yeah. I'll just say real quick because. Because as we talk about a lot of this stuff, like, this is the stuff that's going in the book. And so, yeah, the book is going to be super repetitive, I think for a lot of the owners of Augusta Nation and people, like, watch this because it's going to be a compilation of, like, everything I've ever talked about, but in a much more recipe kind of style. And it's like, what's it called? Where your book, you read part of it and they go to another part.

Your own adventure.

Yeah. Choose your. It's kind of that style. And it's like, okay, so you, you have no money in the bank. Okay. All your employees have left. You start here. Right. And so it's not gonna be anything new. Yeah, but like, even what we just talked about there, like, I, I, I give guidelines, like, 40 to 70%. Okay. Now, are you at capacity? If yes, go here. If no, like, so if anyone's like, looking forward to the book, it's probably not gonna be like, anything new for you. But what it will do. And like, this is like, when I talk to Dr. Cash, I'm like, he's like, why do you wanna write the book? I'm like, I don't really care about, like, the, the current business owners that watch me getting this book. I care about the person that has no idea how to fix their business. And they're like, they're really, they need a turnaround.

Yeah.

And they're afraid to come have me come video them. I would like that. Just.

Yeah, totally.

I don't know how people do it. Like, they need, they need to know what to do when they read this book.

Yeah.

So.

So, like, for, yeah, just I guess add on to that or kind of throw my opinion out would be. For the people that have followed you for a long time, the, the hope is that they are implementing what you're talking about. They are already using these strategies. They're already using these frameworks. Is kind of a term. I like to define it, but for the people that don't or they don't want to have the turnaround, or they just don't know where to start, it should be like an unlock for them. Is that what you're going for?

Simplify the things that I've talked about for a long time and like, the owners in Augusta, they've heard me started to get like more refined with like, for example, during the spring rush, you should, you should be scheduling recurring and time sensitive jobs. Yes. During the off season, I either eight, nine months of the year, you should be scheduling one time projects and time insensitive jobs and like, that's it.

Yeah.

Like, and in the past I would have been like, well, you should be keeping consideration the fact that there's gonna be one time mows or initial mows. You should keep some time, you know, a little bit alleviated during the spring rush. Not as many budget hours to accommodate those. Like, and I would have gotten the weeds when just like, it's really simple. And so that's why I'm thankful I have Dr. Kashi. And then like, that's what the book is for is like, so when someone hits a problem, it's not like, oh man, like I have all these variables. Like, no, like very white. Like black and white. Yeah. And like every, like that's the. For example that that chapter is called Mismanaging the Spring Rush. Cool. And then there's another one like Mismanaging the off season. And that ties into what we just talked about. And that is like the fact that your overhead structure doesn't facilitate you allowing to know you're burning money throughout the winter. And the fact that like, instead of thinking yourself as like the off season and the spring rush, think of it as two different rushes and figure out what can I do in the off season that could actually be my primary service. And then think of it in terms like, that's why H Vac crushes it because they have heating and air cooling and it works perfectly and that's why they can charge and they have higher rate margins typically. And they're much more profitable in a lot of ways. And it's harder for skilled labor that get that, that part. But that's what we got to do in most of our industries. Like, okay, what are we doing in spring rush? Everything else needs to be scheduled outside of that. That'll help with the demand curve. And then we need to figure out a secondary rush. Anyways, that's what the book is all about.

Good. All right, back to distributable. Cash. That was a good rabbit trail there.

Okay, you want me to.

If I knew nothing about distributable cash, and if you need to ask me numbers, I can, you know, fake it, right? If I knew nothing, give me, like, the A to Z. How do I get from A to Z? And let's say I do have bonuses for my employees and my managers, but I have no idea how distributed cash should work.

The notion comes from what in the stock market is called distributions, right? And you would get a dividend, right? So I almost called it dividends, but, like, it actually skews. Like, the actual meaning of a dividend is so, like. But when I think about dividends, it's like, how much cash can the stock. Let's call it Apple, right? They have 37% net profit margins, right? But they don't distribute 37% of their revenue to investors. They have a small dividend that they pay out to investors. So I would not say that a distributable cash is 37%. It's not. It's probably like 3 or 4 or 5% that they pay out in the form of distributions to their investors. Now, in your small business, we don't have the stock market, and we don't have this equity that we can, you know, do bonds against and do a bunch of garbage. So it's simply this distributable cash is. Once I pay myself a salary, that's normal for me as the owner, how much money can I distribute to me as the owner in the form of owner's distributions? And that's all that really matters because that's what I consider profit is like, after an owner's been paid, what can be taken out of the business. That's like the cash flow from the company, the free cash flow. And so instead of calling it free cash flow, it gets people like. Like a little bit, like, on edge because you can define that differently. And like, profit and all this, it's how much money do you take out of the business after you've paid yourself as the owner?

So let me push back as the person who, you know, is trying to figure this out. How is this different than. I just look at my P. L. There's the bottom line, okay? Now I can give people a percent.

Of that because as you grow the business, you need to increase your working capital, right? So you might have $40,000 in the bank, but if you've doubled the size of your business, now you need 80,000 in the bank. So you're being profitable. But you're not having any distributable cash because you need more working capital. And so that's why, you know, growth sucks cash, but it also has greater capital requirements. And you'll have to keep more money in your bank account just to float. And so that's why people like, I'm profitable, but, like, I haven't taken any money out of the business. Yeah, because you've doubled the business and now you need more money in the bank just to hit payroll. And you used to float it with 10 or 15,000amonth in your bank. Now you need 40 or 50,000. And so that's the frustration people have. And so that's why, again, think about, like, Apple, like, they're super profitable. Why are they, like, freaking out? Like, why am I not getting 37% back on my yield on my, on my stock? They're not distributing that much cash. That's their profit distributions or their dividends are different.

Yeah, it'd be irresponsible to distribute all that, oh, 100%.

And that's why in most businesses, I wanted to delineate between the two. It's irresponsible. Say the bottom line is what is distributions? Because it's. The business is growing and healthy and making sure that they put money aside for future investments. You got it. You got to keep that separated. Profit versus.

So let's use nice round numbers. All right? I'm the business owner. I say, okay, Mike, I want to do distributable cash.

On average, we want to do distribute.

Like, if I'm the owner, I want to do distributable cash for my managers.

You want to do profit sharing based upon distribution?

Yeah, profit sharing based on distributable cash. Yeah. So I, on average. Thank you for clarifying that. I, on average, make 50k a month, top line revenue of 10% margin. Okay, so how do I distribute that cash? What does that look like?

And so we assume we have 50,000 in revenue. We have $5,000 in profits after the owner has been paid. And then it's a matter of defining, when do you distribute the cash? And so I like to be able to say, okay, as the business grows, I'm going to need working capital. So if the business last month at 40,000 and the month before that it did 60,000, our average over the past three months would have been $50,000 per month in revenue. So I'm going to look at the average of the past three months of revenue, and that's going to be how much working Capital I need in the bank. Anything above that number, I would consider distributed cash. So at the end of this quarter, there's $65,000 in the bank, and we have an average revenue over the past few months of $50,000 revenue. I would say there's now $15,000 of distributable cash. And then that is the percentage I would be giving as a profit sharing to my general managers. Like, hey, you get 10% of that. Great. They just made an extra 1500 bucks because they got 10% of distributable cash. And distributable cash is defined as the average of the last three months in revenue. Anything above that is distributable.

Okay, so why did you come up with that as the baseline, the average of the last three months?

Because as the revenue of the business grows, the amount of working capital that needs to be retained in the business and increases, I. E. Retained earnings. So there's retained earnings. Like, you can be profitable, but if you need more retained earnings to stay in the business, that's why, like, I'm profitable, But I don't see any money in my bank account, like my personal bank account. I don't take any money. It's because you have retained earnings, which is that profit needs to stay in the business, Retained. In order to be able to fund working capital, Buying more trucks and equipment, and just overall risk, you need more cash in the bank. And so that makes sense.

Yeah, yeah, 100%. And so I think what you're saying. I'm just trying to, like, really simplify it down for folks to understand. And even for me, as, like, a reference would be like, as the business gets bigger, the floor needs to be raised in your bank account.

Yeah. The working capital requirements are much greater because your payroll is more, you have greater risk, etc. And I think, like, one month of revenue is kind of like the minimum. Some people would say, hey, you need more cash in the bank, and they'd go higher than that. But the thing that you also. We do, for example, in ours, if you have massive fluctuations in revenue, you'll want to make sure you can say, this quarter, we do not do distributable cash. Because if you have a month where you. 250,000amonth in revenue, but then you also have a quarter that you average 10,000amonth in revenue, you don't want to be doing distributable cash on that low quarter because you're gonna give all your cash away. And the next quarter, you're not Gonna have enough cash and you have to put it back in. So a lot of times if you have massive swings in revenue, you don't want to do distributable cash in your worst quarter because otherwise you'll just be like, oh, actually we're gonna be borrowing money now from ourselves and putting it back into the business. Right. So that's why typically Q1, for a lot of home service business owners, I just say, hey, don't do cash because your revenues are lower. And now all of a sudden you're going into spring rush with less cash and you're going to have to just put it back in the business anyways. So that's one thing to keep in mind. But it's also like to. The book's point is like, this is like Dr. Cash's words, like, off seasons make you poor. Don't have off seasons. So like, his whole point is like, figure out whatever you need to be able to increase revenue during this off seasons by figuring out other services, doing winter services, whatever. So anyways, no, that's good.

That's good. I think that's.

Sorry, I wanted to write that down because I added the second line. That's not his words and I like it. Yeah.

What was it again?

Off seasons keep you poor.

Yep.

Off seasons keep you poor. Don't have off seasons. Let's go.

Good. I like that.

This is like the simple. It's so stupidly simple, dude. But sometimes that's like what is needed for people. Like, yeah, that makes sense. It's like, why do we have off seasons? Oh, because like this one service decreases. Yeah. There's other services that increase during that time. So figure that out.

Yeah. Anyways, somebody asked in a mastermind. This is total tangent. Somebody asked in a mastermind in the last couple weeks there. They said, you know, Mike, I know what I need to do to. To have success, but I don't want to do it. Why is that? And I think it's interesting when you.

That's a good question.

Well, I don't want to say who it was.

Did they put their name?

I think, yeah, they did. Yeah. I can tell you after. I'm not going to say that, but I think it's interesting when you look at that kind of mentality, like so many of us do that.

Right.

Where we get like crippled by the amount of work or the stress or this, that or the other. And then when you step back and you know, you. You're making a comment for your book and it's like, it's so simple. But why is there such a disconnect for anyone? It's not even just like an owner, manager, entrepreneur problem. It's just people. Why do you think there's such a disconnect from like, when we know what we need to do but we don't do it? And usually the answer is simple, like, what happens there? What's your honest opinion on that?

Do you remember what I actually said?

Not off the top of my head. Oh, you said people default to the lowest level of resistance. That is how we've evolved as people effectively.

And that's not a bad thing.

No, like we're always going to default to like, what is easiest, what will sustain us long term. So we will just keep defaulting to that lowest level.

Right. What I would say is like, for example, let's just use me as an example since I'm the scapegoat at the moment, copilot. Like, what do I need to fix that? Like, it is very simple. Fix the stinking bugs, right? There's technical strategies or technical hurdles to that that I can't actually solve them myself. So sometimes there's limitations in terms of actually solving the problem. So it's one thing to recognize it, understand the solution, and then you might be technically incapable to actually fix it. Right. So there are, there are times like that, right. It is a matter of patience. And you know, again, to use a hermosian type situation is like, what do you do in the meantime? That's what patience is. And that's like my killer for the past two months. Like, okay, I know the problem, I know the solution. It is a matter of patience for the outcome to happen. But like, what do I stinking do in the middle? Because I don't, like, I don't, I can't actually jump in. And so I think for, for, for the vast majority of us, when it's when there is something we recognize we need to do and then we simply don't do it. It is simply the fact that there's not enough pain. Like, if you start were starving, you would make sure you did whatever it took. Yeah, right. And so that's why like, when things like copilot happen, I always question myself in terms of like, okay, is it because I'm soft? Because like, I'm okay? Like, you know, I have revenues of other businesses and like, it's not crushing me. I like poor, I'm on the streets. Like, if it was bankrupting me and I was on the streets, would I be reacting differently? And so that's where I always like, try to. Like, if I feel like I might be not reacting appropriately, I immediately suck it out to like. Like, if I was actually destitute because of this, would I be reacting differently? And if you take it to that extreme, like, oh, I would. Okay, then just do that and you'll probably solve the thing faster. Yeah, right. So like when I took it to that extreme for copilot, I was like, hey, would I be firing certain people? Would I be investing way more money? What would I be doing, like to just make this happen if this was actually going to sink me and completely put me out of business? And so like that's when it's like, okay, so I don't know if I should say this public, but like it was like I went to the engineering team, I said, okay, like literally there's an unlimited budget, like I do not care. I said, every dollar I have in my bank account I would give to solve this problem. I said, that is not the bottleneck here and I need that removed from everyone's brain. So I don't care what it is. We must fix this. And so once you've done that though, like, there's only so much you can do. Right?

You can't just throw cash at problems.

Right. And so at a certain point, yeah, and so, but, but that was like, I think most people wouldn't get to that point because the easier route and like we just default to whatever is the easiest for us. And again, I don't think it's a negative thing because we, we evolve to having better lives. Like, it's like, do you really want to walk to Seattle? No, I'm going to drive my car. Yeah, right. It's a good thing. Like take the path of least resistance is a good thing in a lot of cases now anyways. That doesn't.

I like that. No, I mean you keep going. Your mentality with copilot is very 2000 Elon.

Like when everything was falling apart. SpaceX, you know, was trying to get government contracts, had three rockets blow up in a row. Tesla was on its last dollar. Well, was negative. And they were starting to take money from down payments. You know, people were putting down payments to reserve a car off the production line that wasn't even on the production line. So not sure the ethics of that. But they were down to everything. And he just said, it's not about the money. Like I will go to zero to make sure Tesla and Space X succeed.

And this is the thing, the thing that I wish I could do is like, he spent three years on the shop floor. I can't go on the shop floor.

Yeah.

Like, it's so annoying, like, because, like, they were building a physical product. So he just, like, he. I'm sure he got to the point, like, I can't do anything else. Like, I know this is a matter of time. And he just, like, literally just went on the shop floor to be able to, like, be like, morale and like, let's just all, like, try get this done. I can't get in and fix code. Yeah, right. And if I tried to, I would be inefficient and probably make more mistakes than anything. And so that's really frustrating because I can't do that. So, like, it's just a matter of being, like, making sure there's all blockers for the team have been removed and everything goes slower than you hope and cost 10 times as much more than you hoped. But it stinks, dude. Yeah. So here. I saw something the other day on a positive note here.

Yeah, okay. Yeah, good.

Elon's net worth. Guess what it was at 28.

Oh, 28. So how old is he now?

49.

Okay.

Or 48, 49, something like that. Maybe he's 50 now. Maybe he might be 50.

Okay. So like 20 years ago. Yeah. Should have been like early 2000s.

Would he have already done PayPal in there? Did he already exit PayPal in the early 2000s?

No, I think he just done the one mapping thing. I forget that.

Oh, yeah, Whatever that map software was.

Yeah, yeah.

If it's pre PayPal. I don't know. Let's do 2 million.

Well, 22 million.

Oh, geez.

Okay. 22 million was his net worth. And then it took him until he was 41 or 42 to become have a billion dollar net worth. And then from 41 to 42, he went from 1 billion to 189 billion. Yeah. So again, exponential, exponential growth, baby.

Yeah.

So I'm on track. Let's go. I'm on 28, so I'm still. I have the claim to fame of beating Elon's.

There you go. It's a beautiful thing. You were on the Yard Dogs. They had you on their podcast and I had them on here. Great, guys. Good, good content. They basically asked you for evaluation of Gusta and you said you would take 50 million for 49. 49.

If I had 90% voting shares.

I'm just going to go out on a limb and say that in an objective world, we're not valuing Augusta at 100 million. I value it at 100 million.

Okay.

Because people want to know the number. People definitely want to know.

Okay.

I had, I had my friend who has a marketing company. He asked me on the weekend. Candidly, he was like, what's the valuation?

Okay.

And so I have a realistic number in my head.

Okay. I'll get what I actually think it's worth. And what some people have told me, typically revenue multiples for franchise brands are between three and six. Okay. And they go as high as 10.

Okay.

So let's be conservative. Let's do like three to six.

Okay.

Okay. So now I'm going to give my revenue numbers away. I don't want to do that.

Well, I mean, okay, let's not give the specific numbers, but let's just give like, let's give the total number, the.

Big number, like what's worth.

Yeah. Just evaluation.

Okay.

You can do all these calculations on your phone. We're not going to share them.

Okay.

And people can just, you know, make their guesses.

I would say, I would say this is the thing, this is why I hate giving this number away, which we don't have to. And if people are like, oh, he's stacked. Like, dude, if you saw my bank account, I'm always redlining everything, man. Okay. So to do this. So if we did that and then we multiplied it.

Sometimes it's nice to.

Sit back and smell the roses.

I would say it's. It's like a PE firm would value it anywhere between 25 and 40.

Nice.

Would you, what were you gonna guess? Yeah.

30, 35.

That's a good guess. Yeah. Like I, I think if I was actually trying to sell, that's what the range would be right now. I wouldn't sell it for 100 million. Like, there's nothing else I want to do. Right. I also, I also think that.

I would be betraying all the owners because I know what a PE firm would do immediately. They'd immediately get rid of the flat fee. They'd immediately put an escalation on the 10 years. So it'd be like 1200-1250-1300-1350. Because that's like what you should be doing. Because like the 1200 that I charged four years ago is now worth only like 900. So. And we're not going to increase that on people at the 10 year mark. We have no plans to do that. Like, they would despise that because there's. You're not improving your inflation.

Yeah.

So like, sorry, average revenue per user. So.

All of those Things I would. I would say, yeah, probably between that range and then Copilot, your revenues on a SaaS product is more like 10 to 20 times revenue. So, you know, that could be valued anywhere from.

I also had a number for that, but that's harder for me because, I.

Don'T know, the software world, it's growing so well. It was before this past month. It was growing so fast. So that's why I said on the podcast when they asked me, I said I could probably make up and come up with a number like $100 million that I'm worth. But it's on. It's all on paper. Yeah. Right. And I'm not gonna sell. Right. Like, there's nothing inside me wants to sell anything about Copilot or anything to do with Augusta. I haven't entertained it. I've not taken any PE calls, anything like that. And so the fact is, like, if someone, Yes, I could probably make a good case to someone should buy me for $100 million.

Like, when you say that, people think you're stacked. Yeah. And. And so the bottom line is every dollar that comes in, like, guard it with my life, and I make sure it's preserved because, like, such a small percentage of that is actually cash. And when you're having as many employees we have now, like, it's over 150. Your payroll alone is millions of dollars. Yeah. And every dollar is going back into business. We don't have any debt. We don't have any investors. There's no backstop besides Michael's paycheck. And so.

I think that'll change in like a few years. And. But like, right now, everything's still redlined. Like, everything. Like a lot of, like, if you look at those numbers like that we were talking about, like, I would fail some of those. Those categories because, like, everything goes back into the business.

Yeah.

All right, well, what was the point of that?

I was intrigued.

Just poking the bear.

Yeah. I might as well. I think the people like to hear it. All right, completely different topic. Let's talk about one of your recent turnarounds. So I know we have. We haven't done a, you know, behind the scenes turnaround conversation. I know we did a few in the past, but this one was very intriguing because Mike Andy, CEO, founder of Augusta lawn care franchise, decided to go do a turnaround for a grounds guys franchisee. So he applied, I'm assuming, like anyone else didn't get any special treatment. He really seemed like he over indexed on equipment. And your basic advice was like, Sell off equipment that's paid for, scale back down. Focus. Focus on what? Actually you can produce consistent revenue with do, I guess. What were some of your takeaways from that? I don't have, like, specific questions. I think it was a great episode because Aaron was extremely transparent and really let you in and let you see a lot of the numbers. So what was some takeaways that you had, I guess from that. That turnaround?

Yeah, like the fact that that loader was like $150,000 and their total revenue for last year was 600,000, including all their services, is alarming. But again, they were on this ramp of like a million plus and going very grow, grow, grow. And that's where like, not to throw any shit at grounds guys, but, like, that's why Augusta doesn't do royalties. Because the, like, the thing we didn't show in the episode is how much he's paying in royals. It's over $60,000. And, like, I just don't see enough value from what he's getting. And like, again, no shade on them. They have a business model. Great.

Yeah. We're just looking at the numbers and that's. I want to make sure that it's very clear. This line of questioning is strictly to show your experience.

Incentives of the franc are not in line with that of the franchisee. And that's what I despise about franchising that have royalties is. There is no incentive for him to be more profitable. It is simply revenue growth. And that's why he grew so quickly is because I know what they teach, and it is get a salesperson fund, like, get big contracts, go immediately into the big commercial stuff because they're getting cut of it all.

Y.

And so that's where I just. We didn't want to expose them. That was not the goal. Um, if you look at the episode, you know, it is strategic. Like, I'll be perfectly honest. And it was like, okay, do we cash shaded like our only really competitor in residential lawn care. Like, we have 150 locations. They like to 20. Right. So, like, it's the most comparable US lawns is much more commercial. And then a lot of the other franchises are spraying only. So, you know, that was a temptation. And it definitely would have been more clickbaity, like me going to my competitor.

Quote, unquote, fixing my competitor.

Yeah. So I didn't want to do that. So I strategically did it for this reason. All right. I figured, hey, if we make franchising look good and we don't throw People under the bus. Because we could have on a few things. If we don't do that and someone's watching this episode and we make franchising in a positive light, which I think in general franchising, extremely positive thing. If we do that, they will come into Augusta because they're watching my videos. So it's like, why murky the water to say all these horrible things about someone else when it's like, if they're watching my videos, they're probably not going to join ground guys. They're going to come join Augusta. So that's why, like, strategically, we made that choice because there was material. There was material, but we didn't want to show.

Totally.

And also, this is petty. Like, I just don't want to be known for the guy that, like, punches across up or down.

Right.

It's just like, we don't need cashier on anyone. Let's just fix the business. And ultimately, like, why I would go to a competitor, quote unquote, is because, like, the whole goal of Augusta is to change the level of professionalism in the industry. He would not have listened to me if I didn't have Augusta behind me. Right, Right. He's just been this other guy making videos on YouTube. But because I have Augusta, someone like him is willing to reach out and listen to what I'm talking about. Right. And so people sometimes just. They fail to remember, like, the goal of Augusta is not to, like, do anything but change the level of professionalism. So the question is, will me going to a quote unquote competitor increase the level of professionalism? I believe it will, because people will see that and they'll be like, oh, he literally went and helped his competitor. I should do the same thing in my market. And that's like, what I'm trying to make happen. And like, if. If people did that in their market, they'd be much more profitable. They figure out their demand curve much faster. They'd be able to, like, do so much more synergies, and you wouldn't even need a franchise to get the synergies. Like, the reason you need a franchise is to get people to talk and share and communicate and share their wins and share their loss and say what's working and say what's not working. And unfortunately, no one does that with their competition. So, like, if I can't do that as the leader of what we're trying to do, then, like, that shows a really bad reflection of anyone following. And I would hope that anyone that watches my content or is a quote Unquote, follower sees that and like, okay, I should do the same thing in my market, because he literally went to someone else is in direct competition of what I'm trying to do.

No, it's great advice. I want to go back to kind of the point you made about, you know, we aren't. Because I just want to hammer this home. We aren't talking negatively about Grounds Guys. Obviously, they're successful. They wouldn't get to this many locations without having something that was working for them. I think to give just kind of my perspective, not being the CEO, obviously I work for you. We've been talking with a lot of our new employees. We're doing. We're hiring for spring rush. Right, of course. So lots of frontline employees are coming into your businesses. And one thing that we talk about a lot with them is you should know what the goals of the owner are. You should know what the goals of the business are. So that way you can, as you like to say, know what the rules of the game are. Right. What are our goals? Where are we heading? And I think someone's goals, personal goals, might align slightly more with grounds guys, and someone's personal goals might align more with Augusta. And it's just kind of looking into yourself if you are going to join a franchise. Okay, what are the goals that this one offers? What are the goals that. That this one has set? And where do I most align with and where do I see my success in that goal set? Does that make sense? So I think it's just important for people to digest that. I thought it was a great episode. And even if you. You could have said, he is not a part of Grounds Guys, and it still would have been a very well put together episode. I think it's just that extra level of transparency that, you know, he reached out and showing that, hey, we can work together. Like, his success does not impact my success. We can both be successful. Right.

Well, originally I was thinking we just strip out any mention of the franchisor relationship. And so it's just like I was just going to meet a lawn care long landscape guy. But most people know that they're a franchise. And I felt like if I just removed it completely, people would be like, oh, he's hiding something. So I just left all the positive things in there. And he has a lot of really good things about them.

Totally.

And so we left it all that in.

Yeah. Doubt. Let me, Let me. Let me push on you a little bit, if I will. Now, if I may.

I wouldn't say this. Others might. No, no, no.

Others might.

I would never.

Now, that's the classic line. When someone wants to, like, bring some shade is like, hey, hey, I'm just like, you know, I'm just the messenger.

Now, you obviously went. Donated your time. You know, the turnarounds are free. You tell them, like, I will expense everything. I will fly to you. I will have the cameras. I will pay for the media guy.

Is an exchange of value.

Is an exchange of value.

You get free my time. I get views.

Yes, exactly. And it's fair. It's very fair. More than fair. However, if I were an owner inside of Augusta, how would. How. How do you react if I felt negative about you spending your time with. With a. Would be competitor? Right. They technically, by technical definition, in a free market, they are competitor to us. So I'm an owner of Augusta. There's issues with copilot. There's issues with, you know, other things. Then they see you spend three hours, and it's not much, but three hours with someone that is not in Augusta, and maybe it leaves a bad taste in their mouth.

Yeah.

What. What is your.

So these are two different. These are two different questions. Okay, so let's first off, strip the part about Copilot having issues right now.

Okay. Yeah, fair enough.

Because. Because the answer. I'll address that one first. So that part, I've already identified the fact because I did withdraw for about four weeks.

Yes.

And, like, did a bunch of stuff.

Yeah.

As like an executive for that company, like, I need to focus on certain things. And, like, you didn't see me. I didn't post very much. You saw, like, the. The amount of stuff on social media was basically zero for four weeks. And it was because, like, I had stuff I had to do, like operationally setting up engineering teams, bringing in fractional C CTOs, like, all sorts of stuff. And then it gets to this point. I was like, okay, now we have a strategy. This is going to take four. Four weeks to four months. We're not 100% sure. And it's like, sick. Okay, go. And then I need to, like, Then it's a matter of, like, okay, I can't do anything more there. And so that's like the. The copilot situation. Then the next question is like, why would I go to a competitor instead of, say, an Augusta location? Twofold, number one, what we just talked about, and that is like, I knew this would share a message of like, you go talk to your competitors and you help them. And if you look at Augusta, the goal is not to necessarily. Our mission statement is not maximize profit from for Mike Andy's or the owners even. I look at the decisions I make inside the business to do that, because I think it'll allow us to then eventually hit the ultimate goal, which is change the level of professionalism in the industry. So the question is, me going to one location of Augusta and helping their one location, is that going to change the level of professionalism more than me going and shooting and filming at one of our competitors? To break this ideology that you should not talk to your competition? Because if I go and I make a video with an Augusta Long here and it makes perfect sense, I'm helping my. My franchisee. I'm helping someone that is essentially my partner in business and using my brand name, that makes perfect sense to every viewer. But when I break the wall of like, don't talk to competition and don't talk to everyone around you and don't share information and don't help them, that's going to help the industry probably 10 to 20 times more. And so if people actually digest, I think like a few years down from now, like, what we're doing at the turnaround show is I am literally helping people that are competing directly with me. Me, including the markets that I have my personal locations in. Like, I go out and I help them and I get more customers. I the customers that would come to me. And so I think that proves a point to the whole industry and, like, what we're trying to do. And then secondly, we have done episodes with owners of Augusta Long. The problem is all of their team look to me as they're part of their team. And so it's very, very difficult to video and actually share information because I now need to work with them for the rest of their career, whether it be owners, managers, employees, and they. A lot of times I'll give my phone number to all of them. So, like, I get a lot of feedback from the video from frontline team members that didn't feel like they weren't felt, you know, shown in a good light or they want this taken out or these other things like, look, we're coming here to show a turnaround. We're going to have to define the low moments. And we're going to. When in your interview said something negative, we're going to show it. And if you cry, we're going to show it. Because that's the definition of what we're trying to show is like a turnaround means there's a low moment and then there's a comeback. And I, like, I can't wait for the year to come by and I show the comeback. I can't wait for that. But I am going to define the low moment.

Yeah.

And some people don't like that. Yes. And I get it. I get it. It's clearer when it is coming from me as an outsider and they have asked me to come in versus I am a partner, and I'm going to come pick apart all of your negative stuff. And we saw a lot of kickback from that, and I'm just not going to do that right now. I think down the road, maybe, especially as we get a lot of locations and I'm less connected with the Frontline team, etcetera, I could go in and kind of do, like, the Undercover Boss thing. The Undercover Boss thing does not work if when you leave, you have the phone number every person and they can contact you, and they're offended by how they were portrayed and they didn't want. They want this one line cut out of the other interview. That's just not going to work. And so from a video perspective, it doesn't work. And it doesn't work from, like, our mission of, like, being able to change the level of professionalism. I just think there's a greater return on what we're trying to do for the industry by me going to our competition and, like, them opening up and feeling okay, and then me actually just giving everything in terms of value. There's nothing we're cutting out that I'm not, like, sharing with them and helping them and trying to get them ahead. There's an episode coming out probably the same day this comes out Friday that literally I go in, I help this guy, like, revamp his business from services to, like, subcontracting model young kid directly in competition. And actually, one of the subs is an owner of Augusta. So, like, I just. The thing has a greater impact on the industry than me going helping one of my own, quote, unquote, people will just make. Oh, that makes total sense. He makes royalties from that person. That's how they think.

Right.

Versus he's going to a competitor of his business and trying to help them. And I think that does more for the industry. And I think there'll be. There'll be people that disagree with that. And.

If they're. If they're internal to Augusta, I would just say I make it very clear why Augusta exists. The first thing I talk about in training, it's all over. It's everything I talk about. And it doesn't it so happens that maximizing profit for the franchise or the franchisee is not the ultimate goal. It is the interim goal. And I do believe that we me going out and getting all this information from our competition also helps Augusta Nation because I get frameworks that I would not otherwise see if I didn't see broken systems. Like, if I went to every Augusta location, I already know. Like, I can just look at their, like, what's going on in the morning and okay, they're looking at P4P. Okay. They're probably connected with command center right now. Oh, I see copilot. I see all of these things. I know exactly how things should be working. If I go into a competitor, their system, like, that's broken. Why is that broken? They're using some weird system. Okay, why? And then they can I refine what we're doing over here? So, like, you know, indirectly, there's so much information I'm able to take and like, bring over to Augusta and even things that they do really good. I'm like, hey, this is a really good thing. Let's highlight in the video. And then I think there's something I could use in Augusta. So anyways, that's like a long answer. Sounds. Seems like I'm giving excuse, but like, ultimately I've thought about these things a lot because I understand the criticisms. But the ultimate goal of Augusta is a change level professionals in the industry. And anything that makes me do that faster, I'll default to that over just like helping me.

Yeah, And I think too, it's. It's hard for folks that work with you maybe, and I don't want to be speaking on a turn and I'm not thinking of any. Any specific conversations I've had. But I think sometimes, like, you are a multifaceted CEO that has multiple different businesses. So sometimes I like to think about it, you know, like, you have your Augusta hat on most days, like theoretical hat. But then like, sometimes you take it off. You put the media hat on. Will the media help Augusta? Yes, of course. We don't advertise for people to join Augusta. Why do they join? Because they see your content on YouTube, they come to a conference, whatever. Right. But it's a different frame of mind for you. Like, okay, I'm taking off Augusta and like the media hat says I should go help that guy. Because my goals are to raise the level of professionalism in the industry and this content will help other business owners. Right.

The amount of money that I have spent on the infrastructure stuff of Augusta is only possible because of the media and other things. There's no way that I could have built what we've done over the past four years without getting massive amounts of private equity. And that's why no one else has done this without private equity or debt, without using the media, because we would not have been able to afford 10 to $15,000 per franchise to be able to go market. We would not be able to afford a flat fee model if we had to go do that. And the only reason we get leads is from the media. And furthermore, the money that comes from the media and all the other stuff that I do is the thing that has funded millions of dollars worth of losses on building, command center, building AI, all the instant quote stuff that we've been building on the back end, all that stuff costs hundreds of thousands of dollars. And so that's what makes it possible. And you know, down the road, when everyone's writing about how great we've done, I'll actually show like, what, what's happened and then, then be like, so obvious. Like, that was such a great investment. But it's not easy when you're living in, in a closet and you're spending four or five hundred thousand dollars a year to float something that no one appreciates in the short term. And the only thing I can look to is the things that the people have gone on the other side of the chasm. Like Amazon did the same thing. Like, Jeff Bezos was the butt of a lot of jokes during 2000, 2001, 2002, spending tons of money on servers and data centers and all the rest. And like, what in the world are you doing? You're losing all sorts of money, you're not making any sort of profit. And then all of a sudden, he's a genius. Yeah, but that's the only thing I can look to because, like, I know it's like to be in that moment and just feeling like, seriously, I'm spending all this money, like, this makes no financial sense. I'm getting $14,000 a year from each location. That's ridiculous. And I go to a location like his, and they're getting five times the revenue on a smaller location like that. That the thing that, like, when I get mad, that's where I go. And I'm a human, I have emotions. And like, I will think negative thoughts. Yeah.

And numbers can explain away emotions or can't not explain away. I would say emphasize emotions because, you know, the numbers. You're like, well, if I charge this or we move this Money here, like it would fix all these problems and then I wouldn't have to be as mad. Right. Like you can, you can make sense of your emotions from a mathematical standpoint. Like I wouldn't be mad if X and not saying money solves problems, but it's just because you've created such a different model. It can be frustrating when like the results on paper going back to like the net worth stuff or the valuation, it's like it's not real. It's just on paper.

Right.

And once it's real, then it's like, oh, that guy made so many smart decisions. Oh, that makes sense now. Hindsight's 20 20, but when you're in the chasm, like the hindsight isn't there.

Yeah, yeah. Like the, I think in, in a few years people look at it more and like I'll, I'll share a little bit more about like the financials for the franchise over the first few years. But like.

The. We burnt $3 for every dollar earned for the first like year and a half and then we be. We got above zero last year and what did I do? Like go take on multiple hundreds of thousands of dollars project to build the AI. But because we redline so hard, within four years we get 150 locations. We built command center with 75 agents. We have max AI that answers phone calls 24 7. We now have the command center open seven days a week starting in a week and a half. We have instant quotes on, on the website. We're making massive investments into Copilot. So that way in a year we'll connect all of these things. Like again. That's why I think in like a year, year and a half is like, oh, this is so obvious. It's like, dude, it's, it's been like literally tearing out your eyelashes. Like that's literally what it feels like every single day.

Yeah. Yeah. It's a lot. I'm excited for when the, when the inevitable book Journey biography book comes out and I get to be in the credits for all the notes I take.

For all the notes I take on the off sites. Oh yeah, because we're having an off site. We're having an off site dinner. Here you go. Here's my not financial advice. Have an off site dinner.

This is really a tough off site because I don't know anyone.

Yeah, yeah.

I think I know four or five of the 25 people.

Yeah. Yeah. So my not financial advice is have an off site dinner with your team before spring hit. Yes. Yeah. And then I'll come back to what I was going to say, but my non financial advice is have an off site dinner with your team before spring. Get them energized, inspire them, share your goals, give them a nice meal, spend a couple hundred dollars. I like to think about like the emotional roi. They're inspired, they're happy. You bought them a nice dinner and they're going to hopefully work harder for you. So spend the money, do your team off site. We are having a team off site coming up tomorrow night at time of recording and you don't know most of the people, so I was like, you know what, we need to just go back to our roots. So I scrolled back in my notes to three years ago and I screenshotted the off site we had three years ago and I was like, just redo this one. And it's not bad to say that like, if, if it's a good piece of content, like, do it. And no one was there except for me and Liz. Do it again. So. So yeah, I think like, you know, you can inspire your team just based on like being motivated towards like your goal and where you're headed. And so what you said in that 2021 off site, you know, really inspired me. And like, I kind of live by some of the tenants you laid out of. Like, this is what Augusta will stand for and this is what Augusta will always fight. I think having a team of people that you don't know, you know, defining the goals or the rules of the game, like, hey, this is how you have success at Augusta. Embrace these things. And this is how you make sure you avoid failure at Augusta. Fight these things. And I think that's really important to just get everyone on the same page. So.

Which by the way, while I'm thinking about it, I might be a minute or two late to the off site because I have the franchise advisor council meeting.

I'll be on that too.

Yeah, but you can go. Go mobile or something.

Yeah, that's fair. Yeah, that's true.

Was that your off non financial.

Yeah, that was my non financial advice.

All right. My nine on financial advice. Do you. You were going to follow up on something?

Well, no, I was just saying, like, I'll get credits in the book for all the notes I take.

Yeah, you're really good.

Like I think about that. All your off site meetings or leadership dinners and things of that nature. I take notes. So you'll have everything dated and like categorized. So when the book gets written, I'll just be like, just take it. It's all in there.

My non financial advice I share with on the franchise Facebook group the other day. Procrastination and as the alarm clock that lights up your room. Yeah, yeah, yeah, it's pretty cool. It's a nice way to wake up is, you know, room's lit up. Let's go.

That's good. It's good.

Now I need to put a caveat because I we said some things in here. Okay, so let me be clear on one thing. The thing.

The things that I say are not, should not be taken as excuses as to why I should not be judged based on my performance. So like the things that happen with Copilot for example, right now and things and issues that happen with Augusta should not be the judging factor, should be the judging factor and not the long term result. I understand when people have concerns or questions about like the media and things like that and I'm not thinking of anything specifically but like a lot of times people that are concerned or have questions, they don't come out in the open and say things to me. And so if that person is listening to this, the things that I mentioned in terms like the long term vision and like where we're going is not an excuse as for today's performance, however, and the, they are lagging indicators, right? The success that we will have in a year, two years down the road, once a lot of these things converge are lagging indicators. The leading indicators of today might look dismal and those things are what I'm judged on. And so these are not excuses. The same way that Elon or Jeff or whatever would have been like judged on there that quarter. That's how a CEO, that's how an owner should be judged. And so I know there's faults and failures and I try to improve every day.

Yeah. And I would say to, to add, I guess from my perspective, me, me joking or potentially, you know, intentionally ruffling your feathers for the sake of content does not dismiss struggles owners might be going through.

It's good. I think it's really good. This, this podcast is good because.

I've said it before, like Agustination is like the best people. And so when they have disagreements or they might not, you know, see eye to eye with me, they usually won't come to me because they do understand like the long term vision. But when they're short term pain, I understand the frustrations and whether it be Copilot stuff or things that people might think about, like with the media for example, I understand that, um, and I should be judged based upon those things. And like the track record is the only thing you can use to judge someone's performance. And the track record is not great. Who cares about the future? And so I'll just, you know, the leading indicators of success, I'll just keep working on those to where one day it's like, okay, now it makes sense. It's just difficult in the interim.

Yeah.

So.

So end on a nice positive.

Yeah. All our disclaimer at the end of your podcast. But I was saying, like the podcast is good because it allows me to be able to just like share.

Yep.

And give. Give vent to the negativity of things that I do make mistakes. And I'm like a lot of nature. Every time I make a big step, like in terms of the software or whatever, like I have now come to know, like, I gotta, I gotta plan them out a little bit. Like spread them out a little bit because it's like, hey, you're gonna lose sleep, you're gonna lose it. Like work too many hours and you know, so it's.

The amount of work required to get inertia in business is. Cannot be understated. And most people will never get through it. And that's not a matter to pat myself on the back. It is a matter of I empathize with anyone that wants to quit during the first three to five years. It's very painful. And I don't wish it on anyone that should not be doing it. And that's why I'm very hesitant to make it pause. So awesome and flash. And I don't like putting $100 million on things because people like, oh, I should do that. It's like, like franchising is like extremely, extremely difficult. And software is like, extremely. And I wouldn't wish it on most people because how painful it is. And so that's why I'm very careful to say about money and things like that. So anyways, that was my soapbox.

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