Losing Money on a Job, Overhead Recovery, Industry Secrets

Welcome back to the Mike Andes Podcast, where we discuss the ins and outs of owning a small business. If you're new here, the Mike Andes Podcast is all about taking your business to the next level. What do we got for you today? First off, when you see a breakdown of a landscaping job on YouTube, take a close look and see if they show you the numbers. Mike has reason to believe that this landscaping company actually lost money on this job. Next up, Mike talks about overhead recovery. If you're a home service business owner, you need to be aware of this yesterday. Lastly, there are hidden secrets to this industry that can put you leagues above your competition, and Mike is gonna spill it. As always, you can find all this and more over at the Mike Andes YouTube channel. But let's get right into it. Here's Mike with why you should pay attention to the numbers.

Hey, everyone, my name is Mike Andes. Today I'm gonna be reacting to a.

Video that Tigrin Gertz made.

He did a $250,000 landscape job, and he did a phenomenal job at it, but he said that he made $50,000 in profit, and today I'm gonna debunk that because I actually believe that he.

Lost money in this job. Okay, well, maybe for you, It'd be a $30,000 job.

Now, at the beginning of this video, he said that this was a.

This job was a winner, and he crushed it. And he nailed it.

He made $50,000 in profit on a $250,000 job, implying that he made a 20% profit margin.

However, he shared the numbers of his.

Spreadsheet, and he said that later in the video, he was going to share all the numbers and go over that spreadsheet with us.

Here it is. We'll go over this in detail in a little bit. He never did.

So I'm gonna do it for you.

The spreadsheet.

You'll realize he not only did not make $50,000 in profit, he likely lost.

Money in this job. I'm glad we're on the same page.

Now, before we jump into the nitty gritty, let's just be very clear. They did a fantastic job on this project. I would never be able to do the patios and the irrigation and everything they did on this project. I am definitely not trying to hit on their workmanship or how good of a project. Phenomenal. Absolutely. Awesome. But what I'm the reason I'm making this video, because so many people in lawn care and any home service industry always think they need to do some other service, and usually it's bigger do bigger jobs, bigger projects, more equipment, bigger trucks, more employees. And they think that by doing that they're somehow making a better business. And this type of video solidifies and reinforces that ideology by thinking that if you can do $250,000 jobs, you're gonna make $50,000 on just one project. When in reality, he lost money in.

This job and I can prove it. Now that we got all the haters out of the way, let's jump into how I closed this deal.

Furthermore, if someone was just making this video online and sharing with the community, I'd be cool with it. However, Tigran says that he has the secret sauce and encourages on every one of his videos to join something called goat gang for $100 a month.

Join Goat Gang for more information on how to do jobs like this. And the more you join, the better your life will be.

There's over 900 people in Goat Gang, which means he has $90,000 a month coming in to be able to fund like this and be able to afford pieces of equipment, excavators, skid loaders, massive semi trucks that are not needed. And for the average person that would go ahead and try to follow in his footsteps, they will absolutely lose money. I have had people from Goat Gang contact me directly because they are hundreds of thousands of dollars in debt falling, their business is falling apart, they're on the verge or in bankruptcy courts. And they followed the advice that was.

Given by Goat gang.

There's about 20 or 30 really good power users in the Goat Gang group that share information that's very valuable and.

They run massive companies, five $10 million companies.

However, 90% of people in that group don't have big businesses. And they're simply trying to replicate what these other users are doing. But they aren't going to ever get there following this recipe of disaster. Because guess what?

The numbers don't lie.

And what is happening is massive amounts of debt, buying equipment they can't afford and running their businesses into the ground.

A lot of you might be like, well t, that's pretty good. I know. And I'm going to show you the breakdown of the everything.

And the numbers don't lie.

So let's jump into the math the.

Numbers and look what's going on now.

Over on the left hand side we.

See all the material costs.

Now I don't really understand why he does zeros on all the gas and all the fuel because those they're not cheap to fill up his F350s, etc. I can guarantee you over the course of the six week project, driving to and from the job, all the excavators and equipment being used. There's at least a couple thousand dollars.

Worth of just fuel.

But for some reason he put zero.

On all of those.

Let me also be clear. I don't think you should keep track of expenses inside of an Excel document. I think you should use QuickBooks to be able to keep things categorized and run an actual profit and loss statement correctly for taxes. But let's jump into the labor. So what he does is he has a crew size of between four and seven people on the job site and from February 10th through March 29th.

So what is that about?

Yeah, six weeks for this project to get completed.

He had a crew on site throughout the entire time.

Now, one thing that's not accounted for.

In this late these labor hours is overhead.

And one part of overhead is the time it takes to sell the job as well as all the admin work behind the scenes. Because Tigran also has a couple of people in the office taking calls, communicating with customers, taking payments, sending invoices, etc. And that's not being accounted for in this direct labor.

There are other people that are in charge of things than me. There's people in the office, there's people in the field, there's people project managing.

Direct labor includes all the work on the project, but it doesn't include all the overhead labor because not only do you have admin in the office, you also have sales. Because if you look in the top right hand corner, he also gives a commission to his salespeople. And in the video, Tigran said that it was like six or eight months prior to them starting the job that this actually process of selling the project took place. I guarantee 30 to 40 hours at least were spent on selling this job by the time you meet the customer. You go over several revisions, you show them different designs, and I don't even see the cost of the architect or the landscape designer cost baked into this at all. So on the right hand side, we're.

Going to see the material and Labor.

They budgeted $57,000 in material and they.

Ended up spending $89,000.

If you ever go 50% over on your material budget, I don't know how you can classify that as a win.

Or a massive great job.

I don't think that's ever true if you're just going 50% over budget for labor. They accounted for $85,000 as the estimated budget for labor and they spent 110,000, again, almost 30% over budget on their labor. I don't think that's a win for a job. You can see his target Profit percentage is 20% and what he said is 20.25%. But this is the problem. He's calculating gross profit. And gross profit means that you take your revenue and you subtract out your cost of goods sold or your cogs, and your cost of goods sold is your materials and your direct labor. And that's all he took out here. So really, what he's running is a 20% gross profit business. And honestly, that's extremely bad for any home service business. But because I mow lawns, I also know how to do math. And if I was to take the same approach that Tigran uses here in this spreadsheet, I would be able to say that for lawn care, I have about a 60 to 65% profit margin because I don't take into my account fuel, and I do pay for performance and I pay my crew 33% of.

All the labor revenue.

Therefore, I would be able to say that I make 67% profit margins in my lawn care business.

Guess what?

There's no one running 67% profit margins.

In their lawn care business. Why?

Because there's other costs involved. It's called overhead. There's a whole bunch of other expenses like your office rent, your office labor, all of the utilities at your office, your insurance. Oh, and by the way, he also has loans and debt on a lot of these pieces of equipment. And since they're there for six weeks, that's literally several thousand dollars worth of just payments in terms of loans on.

These big fancy pieces of equipment.

All of that is overhead. And even though it doesn't show up on the direct cost for the job or the cost of goods sold, it is absolutely a cost of doing business. And it must be accounted for because I guarantee you, guarantee you, if you actually would take all the overhead out, the fuel cost, the insurance cost, all this equipment that was being used, he made zero, if, if any dollars, probably nothing, probably negative on this project. And yet he's selling the idea that doing big projects and big jobs is somehow so much better than doing recur. I'm not knocking Tigran. I like him. I've met him in person several times, and I think he's a good guy. But I do not want people to perpetrate the idea that a new service and bigger jobs is somehow gonna fix your problems and fix your business. If you don't Know the math. And you don't know your cost of goods sold and you don't know your profit margins, you're going to go out of business. Regardless of what service you have, regardless of what big fancy piece of equipment you buy, and regardless of what work ethic or how great your projects looks and how well your catalog is laid out, it will not move the needle for your business, your profit margins or for the money in your bank account. And that's why small business owners in this industry go bankrupt is because they constantly are following the next shiny thing and the next big project and the next huge commercial job that they want to get. When in reality, if you don't know the difference between gross profit and net profit, probably not a good idea to start adding zeros to the size of.

Projects you're taking on.

Now, if you want to see all the math, all the numbers from top to bottom in a long form video, watch this video right here where I walk through the entire process of going.

From zero to a million dollars and I share the math, the numbers and everything. You not just top line revenue, check this video out right here.

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Everyone, it's Mike Andes.

And today we're going to be going.

Over something called overhead recovery. This is a very deep and complex topic that most people don't talk about.

But I'm going to bring up the.

Subject today and I'm going to breach the fact that I don't believe this is something 99% of home service business owners should be spending their time thinking about.

And I'm going to present a new.

Form of multiple overhead recovery system, also known as mors. I think there's a replacement. I'm going to share that at the very end of the video. Now, these videos on YouTube and Facebook.

Don'T do well at all. They don't get a lot of views.

But I'm going to share this video specifically. But I would usually share this on landscapebusinesscourse.com or MBA for entrepreneurs. This is the type of really in depth teaching that I do on the courses. So if you really enjoy this, that would be a good sign that you'd probably enjoy the courses because they don't get a lot of views and the media team doesn't like when this happens because this bombs the channel for the next couple weeks. But I think this is important because I made a video recently breaking down the margins of another landscaper and he specifically uses number two, the third, the second out of the three different types of overhead recovery mechanisms that we're going to talk about today. So let's go ahead. I'm going to pull up the whiteboard I. E. On my remarkable tablet right here, and we're going to go ahead and go through the three different types of overhead recovery. Now, before we jump into it, we really need to establish what exactly overhead is in the business. So let's go ahead, pull this up and I'm going to make it a little bit bigger so you all can see. But when we look at overhead, we're talking about everything from rent on your office, we're talking about office salaries, you know, wages, we're talking about. Some people would put fuel in overhead. Fuel is not considered overhead, it's considered direct cost. We'll talk about that later. But there's other things that go into overhead. We've got insurance, we have your account. So you, any sort of accountant costs, you're doing your taxes, any sort of payroll or a bookkeeper that you have, all of this stuff doesn't have direct costs. These are indirect costs. And overhead, that's what OH stands for overhead. Okay, let's go over the first mechanism for determining your overhead recovery. Because guess what? If we just charge for labor and the materials, these things down here, also known as cogs. Cost of good sold goods sold. Cogs. That's what a cog is, is cost of goods sold. Oh, I forgot to share it. There it is, cogs right there. Cost of goods sold. That's your labor cost, your equipment costs, your material costs, and your subcontractors. That's what's considered your cost of goods sold. These are the things that we're going to be bringing to co pilot CRM when we do job costing. Because those are the job costs, the direct labor, the direct cost of the actual job is your labor, equipment, material, and your subcontractors. Now, let's go ahead and look at the number one, the first way to do overhead recovery, and that is called the single overhead recovery mechanism. What we're going to do is we're going to forecast the amount of overhead costs for, like the whole year. For example, you could do it by month or quarterly, but typically people do this for the whole year. Then you divide that by the forecasted total amount of cost of goods sold. So what people will do is they'll simply look at last year and say, okay, what do we spend in rent? What do we spend in office wages? What do we spend in utilities? What did we spend in, let's call it, phones for the guys? What did we spend in all these other indirect costs? Our overhead? What was the total for last year? And then we divide that by the total amount of cost of goods sold for last year. So we'd go in and we say, okay, what was the labor for last year? Was the equipment cost for. Labor was the material cost for was the sub cost for last year. And that would give us our forecasted total cogs going forward. That would then give us our overhead material markup. Now, let's go ahead and assume that we're taking a business that's doing $540,000 in total forecasted overhead costs. All right, Again, overhead right here at the top. All these other things that go into running a business that are extremely expensive and most people don't take into account. And you know, this could even be like your equipment costs, your loans and all the other stuff, all this indirect cost, okay, divided that by 900,000, which is our total cost of goods sold expected for the upcoming year. If we do that 540,000 divided by 900,000, we 60%, that is going to be our overhead markup, the percentage that we are going to mark up all of these cogs in order to be able to recoup the overhead, recoup all those extra costs of the rent and everything else that goes into running the office and the admin and all the rest of it. So then what we're going to do is we look at one specific job. And this specific job in COGS is $9,000, 4,000 in labor, 1,000 in equipment, 2,000 in material, and 2,000 and sub cost. But what we're going to do is just make sure that we times that by 1.6. So we have 60% increase, a 60% markup due to overhead costs. That would Mean that our total cost plus overhead, other words, our break even, that's what BE stands for right there. Our break even is going to be $14,400. Now, this is not what you're going to charge on the estimate for the customer. This is simply your break even point. Your total cost, your cost of goods sold, plus your overhead recovery. So this is the first way to do it, your single overhead recovery. It's simply coming with a percentage based upon your overhead divided by your total cost of goods sold. Okay, so this is the equation you're thinking about when it comes to the force formula. Let's move on to number two, because this is the formula that Tigrin Gertz used and the video I made about him yesterday, we broke down one of his spreadsheets. This is the method he uses. First and foremost, you're going to forecast, just like we did before, your overhead costs. Again, usually you want to use historical data. And this is the tricky part, I feel is most people mess up on determining what is considered overhead. I see a lot of people not including fuel, not including other things that they're writing off as expenses for the business, but they don't ever account for them as overhead. And so they end up not charging enough on overhead recovery to actually make a profit. So let's go ahead and look at this though. Forecaster overhead, overhead costs for the year. You can look at last year, for example, and use those numbers and you divide it by the forecasted number of field labor hours. Because remember, we are charging in the home service industry, typically for the, the amount of labor that we impart, the labor that we give to the customer. And we need to make up for all of the costs associated with selling the job, advertising for the job, all the office and admin, all that stuff needs to be accounted for in the labor hours in this case. So let's just say, for example, that we assume that our overhead cost for this fictitious business is $540,000 for the year. Okay, that's right here. And we're going to assume that we have 15,000 hours that are going to be out in the field for the crew that is working. That could be what, like seven, eight, nine employees potentially. So if you take the math, 540,000 divided by 15,000 hours in the year. Just using the year, you could do monthly, you could do quarterly, etc. And this is really where a lot of these I feel overhead recovery mechanisms break apart is different types of services within the business, different timing of the year. All of these are going to have a massive impact on these percentages. And that's why I feel like you should probably take annual. And I honestly feel like you got to do this annually for each type of service because snow plowing versus pulling weeds is going to have a very different overhead structure, the amount of admin time that's required. So we're not going to get into that because I'm going to explain why. At the end of this video, I'll explain why I don't think that most people should actually be looking at overhead recovery to this extent. Let me go ahead and explain. But for number two, field labor hours, we got $36 per hour as the amount of overhead recovery per hour out in the field that we need to charge the customer in order to be able to recoup our overhead. So now if we look at our cost of goods sold down here, this $9,000 job, again, a fictitious job, same $9,000 of cost of goods sold, but now we're going to add $36 per hour. And in this case, we are assuming the labor hours right here, 100 labor hours on this job. So if you take 100 labor hours, multiply that by $36 per hour, we come up with an additional $3,600 of overhead recovery using the labor hours method. And now the total cost for this job, the break even, I should say is the. Is $12,600. Again, this is not what you're gonna charge the customer. This is simply the break even point, which is your total costs, direct costs, cost of goods sold, plus your overhead recovery. And that's going to give you an actual break even. And what I see a lot of people doing is they're like, oh, well, I, I'm only, my, my cogs are $9,000. I'm going to go ahead and charge $12,000. I made $3,000 in profit. I made a 33, 33 profit. No, you didn't. You did not take into account the fact that you had $3,600 worth of overhead. That's why overhead recovery is important. And be able to make sure that you know the difference between gross profit and net profit. Because gross profit doesn't take into account your overhead. It's looking just at your cost of goods sold. And that's why someone potentially on this job would charge $12,000. They would have a cost of goods sold of 9,000. And they'd be like, man, I was 25% profitable. I charged 12,000. I got $9,000 in cost. I profited 3,025% profit. Right? No, you're actually losing money. All right, so let's go ahead and move on to the third type of overhead recovery system, which is called mors, which is the multiple overhead recovery system. This is the most accurate. It's also the most complicated to calculate accurately. And I feel like most companies under a couple million dollars in revenue when they try to do this themselves without, you know, getting a consultant involved, that really digs into all the numbers, usually messes this up. Up. I'll just be perfectly honest. That's why I don't talk about this a lot. That's why you've never seen me make a video about this, is because the vast majority of smaller lawn care, landscaping and home service businesses mess this up massively when they start trying to do this themselves. Let's go ahead and look at it, how it kind of works. What you're going to do is you're going to take every single one of your cost of goods sold, the four different buckets, labor, equipment, material and subs, and you're going to do a certain percentage markup for overhead recovery. Now, I'm going to use 50% markup for labor, 25% markup for equipment, 10% for material, and 5% for your subs. Now, some people might be wondering, why do you have a 5% markup on subs and then you have 50% markup on labor? And it's pretty straightforward. Think about it.

How much more overhead is it going.

To take you for sales and admin of doing the work yourself versus just subbing it out to a subcontractor and then taking over? So that's why the MORG system is the most accurate, because. Because not all revenue is created equal when it comes to overhead. If I'm buying a piece of equipment, my overhead on that piece of equipment is not as much like, I gotta store it. Yes, I have to warehouse it, do maintenance on it, fuel, et cetera. But there's way more overhead involved in the actual labor of the job. If I'm doing the work and my crew's out there, have project managers, and I have a salesperson selling the job. And I've got to make sure everything is the billing and the admin is all taken care of, way more overhead. And so mores is the most accurate form of overhead recovery. It's also the most complicated because most people, these numbers are kind of like the standards for the industry that I gave you here, but they aren't accurate for everyone. And again, your labor costs like the percentage of overhead on every single service might be different. For example, fertilization, weed control might not take hardly any sort of overhead from the office because you just send them on a year long package. You pre sell at the beginning of the year. You never have complaints. You don't have to manage anyone. You sit the person out There, they have 300 clients and they just go for it versus mowing where you got to start and stop at the beginning, end the season. You have to build them every single month and you have more churn, more training, there's more complaints, more, more customers saying more things back like so there's just total differences. But let's just assume 50% markup on labor. I'm gonna make an in depth lecture on determining your labor cost and what you should do to markup when it comes to overhead on landscapebusinesscourse.com and mbaforantrepreneurs.com so again, again, more's most accurate, most complicated. So in using this method, if I take my labor cost again we're down here at our cogs. If we're taking that, we can do 4,000 in labor costs times 1.5 or 50% markup is going to be $6,000 I'm actually going to charge on this job. I'm going to do bring these percentages down markup for every single one of my cogs. All right, so for equipment, for materials and for my subs. And when I do that now I have my total costs plus my overhead recovery is now I'm gonna My breakeven's $11,550. Okay, now I made up these numbers. It's not necessarily to stay. I did not try to make it where 1, 2 and 3. It got cheaper every single time I think I did that. But you can see there's substantial differences of cost based upon the methodology that you're doing overhead recovery. Whether it be the single overhead recovery, just taking a set amount and I boom. We're going to do this certain 60% markup immediately to overhead to recover the cost of overhead. In our second one, we use the amount of labor hours to determine that there was $3,600 worth of overhead that we need to recover inside the cost. And then finally when we use the multiple overhead recovery system here, you can see here that because of 30% so you got late right here the Labor we're doing 4,000 and then we have 2,000. A third of this job is being done by subs. So, so that was the massive Drop in overhead recovery that I needed to sustain. Now, although Moore's is definitely the most accurate, I just see people consistently making mistakes and pulling these numbers up top here out of thin air. And really the only way to accurately get those numbers is to really have a consultant go through your numbers and really dig deep on every service and every single aspect of the business. That's why you don't hear me talk about it now. This is the new Morse. Now, I don't call it Morse. Right. Is actually gonna call Mads. Mads M A D S. All right, we got Mads. It's mics, admin, delivery and sales. And technically it should be backwards, but MSDA doesn't really sound that very good. So I call it Mads. It's Mics, Admin, Delivery and sales. Because in every single transaction, every single business, you have three different departments in general, you have the selling of the job, you have the delivery or the actual fulfillment of the job. Call it delivery, fulfillment, whatever. And then admin, the back end required. The office side of things is required in every single job. This is what I like to look at, Mads. And these are all part of Mads. Okay, I'm going to go through some real quick KPIs that I believe is much more important than overhead recovery. Because I believe that if you're doing under $2 million in annual revenue, you would be much better off spending your time figuring out these numbers, then trying to figure out percentages on each service and what markup you should have on materials and your equipment versus your labor versus your subs. I just don't. I don't see the return on that investment in time, money, energy, or hiring a consultant to actually get more information. So this is my recommendation. Although I'm going to do a whole lecture on this inside of MBA for Entrepreneurs and Landscape Business course. I still don't believe that the vast majority of people should spend their time focusing on overhead recovery. These numbers here, if you've knocked all these out of the park and these come like, you can wake up at two in the morning and know these like the back of your hand, I would then give you permission to go figure out mores. I'd then go ahead give you permission to figure out your recovery, your overhead recovery on all of your cogs, labor, equipment, material, subs, dig really deep into it. But the vast majority of people should be focusing on these things. I would venture that 99% of my audience listening to this video right now should be focused on these metrics. And this Is again, why you have never heard me talk about overhead recovery in depth and go really deep. Because I truly believe that 99% of people should focus on this close ratio. What percentage of your estimates are getting closed being accepted? Your labor rate, like what are you charging per hour? It boggles my brain that still to this day I go to conferences and ask people, what do you charge per hour? And the vast majority of people don't know what they're actually charging per hour. Attrition. What percentage of your customers, your recurring customers are leaving every single month, Every single year? That's a number you should know. The profit percentage after the owner salary. So after the salary of the owner has been paid, what is the profit percentage of the business? Again, blows my mind that people don't know that. They don't know what they're getting paid on their salary and they don't know what the profit percentage is of the business after their salary. Blows my mind. Fixed expenses every single month. What are the fixed expenses? How much do you need to make in revenue just to be able to cover the fixed expenses? Fixed expenses are things like debt and your rent and your insurance. Those things don't change. They're fixed. They're not variable costs. They go up and down based upon the time of the year, seasonality. They are fixed costs. Very important to know this number because when you go below that number of revenue, you are burning money. And that is why a lot of businesses in the home service industries go go bankrupt is because they go through winter, they go through seasons when it's slow and they don't know what their breakeven is and they lose a bunch of money. Labor efficiency. Budgeted hours versus actual. How efficient and accurate are you against budget hours?

Project completion percentage.

If you're doing a massive project, 2, 3, 400 budget hours, a thousand budgeted hours, you should be knowing throughout the entire project what, where are you at? Are you 40% done? Are you 30% done? Are you 80%? Are you 120% done? I. E. Over budget. This is something you should be tracking throughout the entire time. We do that on p4psoftware.com it's extremely important. Growth rate versus profit percentage. Very important. How fast are you growing? And then versus what is your profitability rate? Again, back up to this one up here. The profit after owner salary. What is that number against your growth rate? Because I guarantee you, if you're growing fast, your profit percentage will be lower. But you want to know that when your growth rate slows down, that Your profit percentage goes up. And when you have this kind of data, it's very encouraging. So if you are growing, you understand that you're not probably going to be as profitable and that when you start, when you slow down growth, you typically become more profitable. Last one, Recurring versus project revenue. Okay, so these are all part of the Mads mics admin delivery and sales. This is the mechanism that I think 99% of people should use and they should leave overhead recovery to the people that like to make things really complicated. Because even some what I see all the time is people doing 3, 4, $500,000 in annual revenue, spending hours, days, weeks on trying to figure out mores and trying to figure out all their markup and all the rest of it. And I'm like, if you just spent that time training your team, developing your marketing and your sales ability, taking a course on Facebook ads, you would dramatically change your business to a much higher level than knowing. Hey, I love knowing numbers. This is like my, my oxygen, right? I probably made some mistakes, but like, I breed this stuff and I don't have any notes. I'm literally looking at myself right here. This is what I do. However, I still believe that most people should not focus on that. They should focus on these numbers. These are the numbers I need you to know at least. At the very least what you can do is just track how much overhead you have every single month. I. E. This is part of the MADs and that is what are your fixed expenses? Okay, right here, fixed expenses per month. You want that number as low as possible. And that's part. Most fixed expenses are going to be overhead. Okay, so that's just my two cents. Maybe it makes you mad, maybe it makes you glad. Maybe you now don't have to have fear of missing out because like, oh man, I know this overhead recovery thing. If you're like a $200,000 business per year, trust me, know these numbers. Don't worry about overhead recovery. So there, there you have it. Check this video out here for four secrets that I wish I knew when I started my lawn care landscape business that might be just as revealing as overhead recovery. Check them out right here.

If you're new to running a lawn care business. First off, welcome to the industry. It can be tough to get your business off the ground, but don't fret. Mike created Lawn Care Business Course specifically for you. This is Mike's personal lawn care oriented course directly from his experience growing Augusta into the successful business it is today. It's a step by step resource showing you how to grow your monthly revenue to over $100,000 in just three years, including over 30 plus lectures and tons of bonuses to dive into. These aren't the same lessons that Mike puts up on YouTube. If you want a full picture on how to run a growing lawn care business, this is the perfect place to start. You can find out more@landscapebusinesscourse.com finally, here are some hidden secrets of the landscaping industry that can change your entire business.

Everyone likes to talk about how fast they're growing. We had 50% growth year over year. What was your revenue last year? Hey everyone, Mike Annis here. Today we're going to be talking about the four different secrets you must know to grow a lawn care landscaping business. These things are not talked about most anywhere else because these are the actual keys to growing a successful business. Now these are the top four out of the 10 that I made on a video on landscapebusinesscourse.com and a lecture last week for all of our members. Now currently, Augusta Long hair has over 120 locations. But when it had one, and I was just getting started, I didn't run my business using a lot of these keys and I had to learn these the hard way. Rewind all the way back to 2007, 2018, I had one location and it was doing about 1.4, $1.5 million in annual revenue. I was there every single single day. And if anything went bad in the field, I'd be jumping out there. But most of my day was spent doing estimates, 15, 20 estimates a day, just cranking those bad boys out. I was working a lot inside of the business. I was probably making about $100,000 a year in profit at the best. If you go back a couple more years, I wasn't making any money. Even though we were doing 1.2, $1.3 million in revenue. I wasn't making any profit, honestly. And I didn't have any systems, didn't have a lot of procedures, and I was not using the things I'm going to talk about today. And if you fast forward just a few years to 2021, I took home in distributions from the business, over $300,000 in profits. Okay, there was over $300,000 in profits. I took home, like away from the business distributions after my salary, I was already paid $300,000. And what's crazy is in 2021 I worked there probably 30 to 40 minutes a week. I would go there for a meeting. Actually, in 2021, I was still going There twice a week, so probably an hour a week I was working there. I'd go there for a couple meetings and that was it. I didn't do any hiring, I didn't do any sort of the sales or estimates at all. And yet I was making multiples more in terms of profit and distributions to myself. So what changed? The 10 things I share in this video is exactly what led to me turning that business around in just a matter of a few years and creating the systems and procedures. And I'm not even going to talk about pay for performance today, which is completely revolutionized in that period of time. That's what happened in those few years. But these are the keys that you need to know, number one, when it comes to buying new equipment. Because everyone loves buying new equipment in this industry. But what you have to figure out is the price multiplied by the profit percentage equals the revenue you need to make from that piece of equipment or that truck in order to break even. So if the price of that piece of equipment is $50,000 and my profit percentage is 20%, guess what? I've got to make $250,000 in revenue just to break even on that purchase of that asset. So you're like, well, I need to go buy another truck. Great. If it's $50,000 and you have a 10% profit margin, you now need to make $500,000 thousand dollars in revenue from that piece of equipment in order to just break even on the acquisition. So you might want to think about twice before you need the new fancy shiny sprayer or new fancy shiny aerator or brand new electric zero turn. That's 30, $40,000. Before you think about doing that, run this equation to determine how much in revenue do I actually need to make just to cover the cost of that acquisition. The second thing I had to learn in order to build a successful business was that redundancy at each position on the org chart was extremely important. Because if one thing happened to one person in my organization, everything got wiped out. Bad news. So from the office and the admin side of things, to the sales or the estimators position, and all the way out to the production team and those working out in the field, I didn't want to have any one person, including myself, if they get hit by a bus, if I get hit by a bus and I'm the salesperson and all sales come through me, and no one else knows how to do my job, guess what? The business falls apart. People lose their jobs. People can't provide for their family. If I get hit by a bus. The same thing is true if my office person gets hit by a bus. If they have all the information and the only person knows how to run the software. If the only person that knows how everything in the office works and they get hit by a bus, guess what? The business is in a really bad spot. So you've got to create redundancy at the end the admin level. That's your office position. That means that they're going to make tutorials on everything that they're doing. You potentially outsource some of this to a call center so you don't have to even worry about the fact that one person's gone for the week for a vacation, that the phone still gets answered. This is admin and office side of things should be completely delegated and redundancy, not necessarily even delegated. You might still be doing this if you're a smaller business. But redundancy means that other people know how to do it. Maybe one of your, your key employees or your spouse also knows how to open up the email or respond to estimate request forms, whatever it might be, make sure that those things are covered and there's redundancy, which means there's backup to each one of these stages. Admins 1.

Sales.

Are you the only person that knows how to sell? Are you the only person that knows how to do the pricing? You're the only person that can meet the customer and talk to the customer and do the estimate proposal. Bad news, because if you get hit by a bus like I did back in the day, until in 2018, I was underneath a dump truck, got caught in the PTO and it wiped me out for a couple weeks. I couldn't do any work. Guess what happened to sales? Almost came to a screeching halt. I was literally videoing people from the hospital bed, making sure that things got done correctly on projects. Why? Because the sales part of my business had not been created. Redundancy at every single stage of the org chart. Admin Sales and production. Production is out in the field. The crew, the workers. If one person in your organization is the only person that knows how to do a specific service, guess what? If they get hit by a bus or they leave or they go get hired by somebody else, you're in a really bad spot. And this happened to me too, because back in 2017, 2018, guess what we were doing.

Don't tell anyone.

We were doing artificial turf. Big dump trucks. We have massive rolls of turf, massive projects and putting greens. All the rest of it Guess what? One person in my company, I kind of made the manager for that division. They moved away, they left. And guess what I'm now stuck with a bunch of turf. A bunch of people that aren't really super confident knowing how to do it. I don't know how to price it. I haven't done a lot of these jobs. I don't have a lot of experience. So guess what I have to do. Close down the division after a bunch of losses and just eat the expense of all the turf we had purchased and all the materials. And so bad news. I should have had someone else be trained on how to do the turf. I should have made sure that it wasn't just him and a couple helpers, but rather him and maybe one of his helpers. He trained up all the way to be able to do the sales side for the artificial turf, create redundancy at every single stage of the organizational chart, as well as every single aspect of the business. For admin sales and production, number three is that diversification is for idiots. That is a quote stolen from Mark Cuban. Diversification is for idiots. Which means he's talking about the stock market. Like, you don't need to get a thousand stocks, just get, like, the top five, 10 winners. That's what his he's saying, diversification for idiots. People don't know what they're doing is. They diversify because they don't know what they're doing. So therefore, they just like, oh, well, not all of these can fail. And that's what I feel like a lot of people in lawn care and landscaping do. It's like, I'm gonna do all these different services and all these different pricing methods and all these different types of packages. They don't know which one. They should be able to put all the eggs into that basket and like, oh, that's not safe. Well, if that basket's the one that's going to. To absolutely perform the best, you put all your eggs in that basket. Diversification is for idiots. What should we be doing instead of diversification? What you should be doing is focusing on simplification and specialization. Now, when I say simplification, everyone always thinks that that means you should only mow grass and pull weeds and nothing else. That's not what I'm saying. Simplification means instead of doing 20 services, you do four. And that means that you might just standardize the paver patio or the retaining wall blocks and make sure the designs and the shapes and the sizes of what you do install is standardized. Okay, I Didn't talk about standardization though. I talk about specialization. I know it's a lot of S's, but specialization means if I'm going to a doctor and I'm going to someone who does general practice or a family doctor and they do kind of a little bit of everything, you're not going to pay them as much, maybe $150 per hour. But you go to a specialist, someone that only does neurology, only does heart surgery, for example, you might be 5, 6, $700 per hour to meet that person. Was their time worth more? Yes, because they're specialized in something. So instead of being a jack of all trades, master of none for 20 different services, maybe you just take a few of those services and it doesn't mean they have to be basic. It could be complicated services, but get rid of all the other ones. Because when you specialize and you become the go to person for XYZ service in your market, the price gets jacked up. You might just do pawns, but if you just do pawns and not every other service in the green industry, you can become very specialized and make a lot of money. Or you can simplify everything, simplify the 20 services down to the top four. And I guarantee you, by the way, those top four services are making up 80% of your revenue anyway. So just focus on those focus instead of trying to be diversified. So focus on the services that are making the most money. Simplify them and make sure you're specialized in them. Do not try to be jack of all trades, master of none. Diversification is number four. But before we get there, before we get there, the gentleman's agreement is still intact because I make these videos for free in the middle of the night to make sure that you push the subscribe button. And it's like when you go to the store and you go, there's a little jar there, it has the pennies inside. It says, give a penny, take a penny. Now that completely operates on trust. And you notice most of the time it's not empty like people. Come steal the pennies. If you need an extra penny when you're checking out, just grab one. But if you have extra change, you should throw it inside. I make these videos completely for free. I put pennies into the jar with the only expectation that as you take pennies out of the jar in the form of taking this content for free, that you also put a penny, penny back in the jar by simply tapping the subscribe button. The gentleman's agreement has been signed. Number four, focus on profit percentage, not growth percentage. Everyone likes to talk about how fast they're growing. We had 50% growth year over year. What was your revenue last year? $80,000.

Great.

That means you made went from $80,000 per year to $120,000. Don't worry so much about your growth percentage as your profit percentage. Why? Because everyone's so focused on growth. The only reason to grow is so that way, as you become profitable, that number is bigger. That's the only reason to grow. The reason for that is because in our industry and landscape and lawn care, people are not going to value your business based on growth percentage. Everyone gets wrapped up into that because that has been like sensationalized in the media when it comes to startups. But these startups are high tech, which means they can scale from like 1 to 5 million, 5 million to 80 million, 80 million to 300 million. You can't do that in lawn care and landscaping and be profitable. And so we in our industry are going to be valued based on profits. A multiple of your profits, not a multiple of your growth rate. No one cares about your growth rate when it comes to lawn care and landscaping.

Okay?

So focus on your profit percentage. And if you do this, guess what? You're going to sleep better at night. Because if you have profits in the bank and you have money stacking up is a whole lot better to be doing that.

It's a whole lot better for your.

Blood pressure and your heart rate and your life expectancy and your relationships and your physical health and your mental health and a whole lot of other things by having a higher profit percentage versus growth percentage. Because growth percentage causes stress and growth sucks cash. And no cash in the bank means I run out of oxygen and I die. And you don't want that. So focus more on your profit percentage than your growth percentage. I would be so happy if in this industry we started bragging more about our profit margins than our growth rate. Because everyone always comes up to conferences like Mike, we grew 300% last year. We grew 80% last year. We grew 10% last year. I think I don't care about your growth rate. I care about your profit margin. Don't focus on your growth percentage as much as your profit percentage. Now you might be asking, well, what should my profit margin be based upon the size of business that. Watch this video here, it's going to answer and tell you exactly what your profit margin should be based upon the growth rate and the amount of revenue that you're making every single year in lawn care. Landscaping. Click this button right here.

This has been the Mike Gandies podcast. Now you have some ideas on how to take your business to the next level. And if you like what what you heard, we have tons of lectures, interviews, and more over at the Mike Andy's YouTube channel. That'll be right up your alley. That's all we have time for today. We'll see you next time.

Sam.