Mike Minute Mastermind 11/14/2022

Okay, let's try this again. That was a miserable mess. Stream yard, which I use for these live streams. They.

Change their thing where I have to change it in twice, where it's instead of public, it's an unlisted video. So I apologize for that. Really good questions that came in on the weekend. Logan actually text me. He was like, hey, just an FYI, there's some really long questions. You might want to look at them before. So I did.

So they're really good.

So let's jump into those. A quick update. Last weekend was really good. Went down to Brian Lawn Maintenance's event down in Novi, Michigan. Just really fast in and out. Got in there at like, what was it, two, three o' clock on Saturday morning and then left Sunday. So went good. Was able to meet up a bunch with Corey Ballard and his wife, which was fantastic. And she's gonna be speaking. She agreed to speak at the our conference for the first time ever to the support track. So I think it's been really good. What a lot of people don't know is that Corey's wife actually really ran Ballard Products when it first got started years ago, because at the time CORE was still involved with Perfect Cut. So it's gonna be really, really great to have her on with the support track. Liz is gonna do a panel with her. So again, feel free to bring your spouse's significant others, etc. Be a really good event to bring them to and get everyone on the same page. So I apologize for the bags and the eyes. It was not a weekend full of sleep. Let's jump into questions.

Some good ones this morning. Here we go. Present.

Okie Dokie Mastermind. Boom. Okay.

Eric, I was considering applying for SBA loan for going into next year. Purchasing the second rig for next season will likely drain most of the current cash reserves, depending on winter. But assuming I mostly be breaking even, it would be great to have some extra powder, be aggressive with marketing, and comfortably add another employee when needed. Do you have some tips or pointers on having my ducks in a row to begin the application process, as well as the type of loan I should be looking at or the straightforward process? Yeah. So if you're doing a micro loan under $50,000, the SBA, it's a little bit easier of a process. So this sounds like that's. That would be what you'd be looking at. I'd be talking to your local credit union or bank that you currently do business with and see if they have an SBA department or, you know, an agent that can help you, a loan officer that can help you with the SBA process. Microloan is what you're probably going to look at. It's going to be easier to apply for. It's not going to be a 7A or a 504, which are much more complicated in terms of their underwriting processes, and just the timeline is very, very much longer. That being said, I'm not a huge fan of getting a loan when you don't even know if you're going to use it or if you're going to just barely tap into it. For all you know, you might only need 10 or 15,000 of this if you just need it for marketing next year. So I would just be careful with getting, say, $50,000 or $40,000. And then you don't even use it for a couple months, or you don't use the majority of it, but you have to pay interest on the whole thing. And it's not like it's a revolving line of credit where you can pay it off and use it again. Pay it off. So potentially, you try to go see if you can't get a line of credit, and even if you back it against a house or a car or vehicle or whatever, your current equipment, potentially that might be a better option because then you can pay it off as you can, and then when you need it, you can tap into it and it's revolving. So, just a thought. I'm not saying that's what you should do, but it's definitely something I would be looking at just as an alternative to an SBA loan, which is fixed and is not revolving. Once it's paid off, it's done. And if you have a bunch of cash, it's not like you really want to pay it off soon because you don't really want to, like next winter. Now you're thinking about, right? So I always like revolving lines of credit, even though they have variable interest rates, which stink, but it means demand. Or I can pay it off when I don't need it, and I can use it when I do need it. And I'm not set. I don't have a whole bunch of cash in my bank account. And paying interest on a loan, like that's never fun, right? So if you get a $40,000 loan, you get the $40,000 in your account today. Well, you don't use it for a few months, you're paying interest on that 40,000, then you're burning 5, 600 bucks a month, Right?

So.

All right.

In terms of My thoughts on that, though. Sorry. I think it'd be fine to have that. I think when you're thinking about creating some comfort and having. Being able to be aggressive marketing, I don't think you need an SBA loan. I would be looking more in the direction of a line of credit or revolving one that you can use as needed. Tap in five grand, ten grand next year for marketing, etc. Also, keep in mind you're going into your next spring rush. It's likely that's when you take off. It's just very consistent in terms of who we see.

In their second spring rush. Really take off.

Man, that's trippy. Either a bunch of people are showing up this morning or there's people that are getting in from somehow. Okay. And that's a different link. Okay, we're good. All right, Meridian. Hey, Mike, I would love to hear your feedback on how to build business credit. Is it important? What are some ways to legitimately build business credit? There's a lot of YouTubes, YouTube videos on this topic, but they all kind of seem iffy. They all talk about opening trade lines with companies like Uline, which I would never actually need. Hoping to get some accurate information. Yeah, so it's a very fun, sexy and TikTok like thing. And that is like build your credit. Business credit. This is how the rich people do it, is they never actually take credit in their own name. They take it to their businesses. They open up LLC and they do like these trade lines and like, they're never liable. Here's the thing, the only reason that's ever helpful is if you go bankrupt. Like, yeah, if you go bankrupt and you've gotten all of your credit through your. Through your businesses. Oh, my AirPods are dying.

That's bad news. One second, guys. Audio.

Okay, well, my AirPods are going to die at some point.

Very exciting. One second. Let me see if I can't charge these.

Okay.

At some point my AirPods are going to crack out.

It's very, very cool thing to say this. It makes great for a, for a great TikTok.

But ultimately the deal is the only way this is going to protect you, quote, unquote, is if you go bankrupt. And it would protect your personal assets potentially if you have not pierced the corporate veil.

And what that means is like using the business truck, personal use, things like that. So I'm going to bounce.

Give me a second, guys.

Right.

Take this.

So I think it's more overly used than it really is. It deserves credit for. And it's mostly Just because it's a good social media post. The majority of loans are going to require personal guarantee, so you're going to have to sign on it no matter what. And typically loans that don't require personal guarantee are going to be very high interest rates because these banks know what people are trying to do if they're trying to get business run loans to their businesses and they know that they can't go after their personal assets, which again makes a loan less secure. So you're, you're typically going to yes, you can build your business credit. Here's a little thing. I have no idea what my credit scores are for my businesses, but I do know in my personal and if I sign on a loan and I use my personal assets as a backing, as a personal guarantee, my, my rates are so much better, my terms are so much better, I get debt way easier. So personally I think this is overblown, especially for businesses that are doing under a few million dollars in revenue. When you start getting a 5, 10, $15 million business, that's massive. Yeah, there's definitely some, some legitimacy behind building business credit. There is, but until that point I would not worry about it at all. The time you spend on trying to figure that out, if we just spent on the business, you'd probably do better. I can with confidence say that anything above anything below $3 million in revenue just don't even spend the time of day on it.

Can you talk about population size versus growth ceiling? Columbus and its immediate areas have a population of 28,000. We stick to just mo cleanups and simple services. I believe we will have a difficult time scaling past 500k per year. This is assuming a GM can rely on basic marketing and established customer base and a high recurring service percentage in a town of this size. Is a town of this size too small to have an August location that is 800k per year with a GM while sticking to simple services? I'm planning to open a second location in the spring in Fremont, Nebraska. Population about $30,000. 30,000 people. Very similar to Columbus. I want multiple locations that can each have a GM and be consistently profitable. Nebraska has lots of towns that are 3025 to 35,000 people.

That's my favorite by the way.

Lincoln is 350 and Omaha is 1.3 million are the two biggest towns but they have lots of established competition. Do you think it's a better use of resources to go straight into a larger town? I obviously haven't tried to grow a location in a bigger town than Columbus. Yet. And if we continue opening locations, I know Lincoln and Omaha will be in my future. Smaller populations take longer to grow and establish, but the market is not nearly as penetrated. Larger populations have plenty of people, and marketing to them isn't as difficult because more people see the ads. But the market is very dominated by established businesses and larger businesses, by the way, that are willing to leave money. Lots of stuff here, but what are your thoughts about the growth maxims in medium towns with simple services? Yeah, so I really prefer 20 to 50,000 in terms of population.

For all the reasons that you outlined here. The bottom line is if you take your population, 28,000 people, right, you divide that out of $800,000 per year and you assume that you do about $2,000 per year on average per customer, which is very common. If you just mow their lawn, do a property cleanup or mulch thing, one per customer, you'll hit, you'll hit that 800, you'll hit that $2,000 per year per customer marker. So if we assume those things, you literally need to do what, like one out of every 80 people need to, you need to have a job with them. So if you can get one out of 80 people in your small town to do business with you, you can easily do that.

And how you come up with that number is 800,000.

Divide that by 2,000, right? So that's 400 customers you're going to need. So you need 400 customers. You take 28,000 divided by 400, that is like 70 or so. 70 or 70, 80, something like that. So you would need like one out of 70 or 80 people to be able to do business with them in order to hit this mark if you're doing simple services. Now, again, the reason people get tempted and it's easy to go do projects is because if you do $10,000 projects, well, then you only need 80 people. So you don't need as many people, right? So that's why it's alluring to go into bigger projects. You'll need 400 people though, if you're just doing simple services. So the question is, can I get 400 people? That leads to an 800,000 per year business. And what I have found is that's very possible. It's actually easier to do. And the fact of the matter people forget is that when you stop doing other services, your time, attention, marketing, resources, and your brand gets focused on one thing. It gets focused on one type of services and that penetration is way better. Your customer acquisition costs will go down simply Due to the fact that you're not trying to market for this service and that service and this type of installation. So that's typically what I've seen. And in these smaller markets, you don't have the big, big players that are willing to run away with a 3 to 5% profit margin. We need and want at least 10%, ideally 15% and really shooting for 20% profit margin. The CEO of LMN talked on Saturday and he said the average dollar per hour in maintenance is $55 per hour. We're higher than that. He also said.

What did he say? Sick.

I forgot my train of thought.

But he had some really good statistics and one of the things that he was that I was thinking about is the competition in these larger markets like Lincoln, Omaha, etc. Oh yeah, this is what I was thinking. What skewed that number is the fact that he used all maintenance, including commercial, which means that average probably 40 or 45. When you go. When you go into residential and you go more premium like we do in smaller sized lawns, that dollar amount can go up. Right? So that's why, like I've said, $60 per hour is like the base you can make. You should charge in order to make any money. Right. But when you charge 80, $90 per hour, I think that these type of markets are ideal. Again, we grew the first location of Augusta in the first five years just under $1 million was like 970. No, that was in year four. So we were at 1.1 million before we moved out of Blaine and Blaine has 6,000 people. Now we service parts of Ferndale and Ferndale has about.

15,000 people maybe.

So let's just say call it 20,000. Even though we didn't do very many customers in Fernando, we did service parts of it, but the majority of our revenue at 1.1 million was in a city that did has 6 to 7,000 people in terms of population. But again, everyone knows our name. Everyone knew who I was and when I did a marketing campaign, I could hit every single house for less than $1,000. So that's pretty powerful. That's why I like it. I'd rather go deep and narrow than broad but shallow.

Okay, this is a long question. Okay. But it's good. I've already read this to somewhat continue my last question. I've attacked a file for reference.

Let me make sure I can pull this up.

Very good.

Cool.

For context, we had the driest winter ever and should have billed at least 30 to 40k in snow between January April, it was a rough winter because of the lack of moisture. We didn't start mowing until May. We started a month earlier. Property clearance and other spring services also took a massive hit and delay, further reducing revenue. Next year I will be eliminating fertilizing from our service list. Many reasons, but licensing, customer expectations and more led to this decision. We can slash the $15,000 from revenue. I'll show you guys the graph in just a second. He breaks down the revenue from last year.

It's pretty cool.

Additionally, without me showing the. Without me running the show as the GM landscaping would be a bit more difficult. So Hypothetically, let's slash 115,000 from the revenue too. That leaves us with about $215,000 in revenue from services we will definitely offer next year. Mowing making up 2/3 of that. My goal is to do at least 450k next year. Between mowing, property clamps, aerations, other simple services, winter services and snow removal, I would much prefer to stick with the simple services ran by one working gm. And we can continue to aggressively grow as much as possible possible. My big worry is that I'm going to find it difficult to pass the 500 to 600k mark by only offering these simple services. If we keep the ratios, we could realistically, realistically do 250,000 in landscape work next year, adding massively to our revenue. As you know, that would come with many headaches, complicated estimates, more liability, highly skilled crew, let alone the skill Brandon working GM needs to manage the jobs. I'm working now to put together P and L. So here's the deal. Like think about this too real quick. $250,000 gets ate up very quickly when you now do increase the wages for all of your employees because they have a higher skill. You have to increase base pay on P4P. You have material costs. All your trucks and equipment now need to get upgraded and your working GM is going to have to be. You're going to have to pay them more because their level of skills have to be so much higher. Just keep that in mind when you're thinking about like a location that's doing 5, 6, 700,000 in revenue and what chunk of that is landscaping, and then realize the requirements on the entire business by having in that 250,000 in revenue. Right? I'm working now to put together P and L projections for next year with both ideas in mind. And I'm planning to discuss this in length with Brandon before making any moves. Either way. Regardless, I really don't want I really want to open another location, Fremont next year. And I think it would be a great challenge for me to run one business while coaching a gm. And aggressive. Both aggressive growth and management. I am willing to do whatever it takes to keep growing in the most effective way possible. I would like your input on our situation and what recommendations you'd make for the sustainable growth of multiple locations. All right, excellent questions. Let me go ahead and change my.

Screen because his, his attachments are fantastic. One second. All right, let me stop this screen. Let me present this one. Share screen, chrome tab.

See this one first.

So this is the. The breakdown of his revenue.

Let me guys see this.

From last year or from this year to date. This year to date we got mostly mowing so good. Two thirds of it. Okay. That includes property cleanups, etc. Landscaping is 115. You got fertilizing in there.

Snow removal.

Whoa. Snow really did take a hit.

Mercy, that's.

That's rough. Sorry, man. Okay, now let me show you.

This.

Other one that he had is here as well.

Was good.

This is why I like the mastermind, because people don't mind sharing this stuff.

Okay, this is beautiful. This is a real breakdown year to date, showing all the numbers we just.

Talked about in the last screen.

Okay, so basically, basically proof of what he just shared.

I love it.

Feel free to screenshot this. Look at it. This is something that is very, very cool. And this is why. This is why I really recommend inside of service. Autopilot or super. You reduce the amount of services that you have. Okay, this is not so bad. This is like, what is it, 15 or 20 line items. I've seen some people with a hundred plus different types of services and it makes doing this calculation very, very difficult. Whereas you can see here, he immediately has 15,000 for fertilizer because it's super basic landscaping. There's his number. Very basic, right? When you start getting into all different types of snow removal, different types of, you know, different types of property maintenance, like when you start adding too many services to your back end of your CRM, you mess these numbers up to where it just gets very convoluted. This is the number one reason why I like to keep the number of services in your CRM low so that you can really make sure that you get these numbers very clean. Clean data. This is what you want. Okay. All right, beautiful. Keep in mind he did property cleanup separately there.

I. I deleted that. Anyways, not a big deal. Okay, here's the thing. This is what I would personally do. I believe more that your revenue and capacity is more important than the services you're cutting out. Because, remember, growth to capacities, we are maximally profitable. So I would personally recommend is determine your monthly revenue that you are most profitable at for that. That location. Because when you do multiple locations, you want them profitable. You can't have them losing money. So what you want to do is say, we're going to be shooting for. Let's just say you said 450,000 next year. Let's call it anything above $30,000 per month in revenue, we can start to reduce services. So what I'm saying is keep all of your services for now, but as your number of recurring customers goes up, as you're more getting more and more recurring revenue, allow that to give you the permission to start cutting out the top services that you don't really want. So I'd recommend doing this. All of your landscaping services, from the ones that are most simple, the ones that are most complicated. And complicated could be like paver patios, retaining walls, whatever. Like, very complicated is for you. List them all out. It's probably like 15 things that you actually think about. Like, everything from like, edging. I create block edging for flower beds to paver stones, like the big blocks, like stepping stones, installing gravel, putting in landscape fabric. All of the services that you have planting, waltz, install gravel, install all these.

Different services you can do in landscaping.

Okay? And then what you do is your revenue starts bumping up against 500, 600,000 annual revenue. Let's just call it 30, 40,000amonth in revenue. As that's bumping up, that's when you start cutting away the more complicated services as you're that way. That way you stay at capacity. So I don't want you to do Logan is like, oh, we're going to cut everything out. And then by doing that, you remove 30% of your revenue. And remember, that last 30 of your revenue is your most profitable revenue, even if you're not super efficient at it because your guys don't have the skills, whatever it might be you were, that's.

Oh, man, my part is going to die in a second. Guys probably just didn't know. Okay, you guys can still hear me, though.

All right.

If it gets really convoluted because you're.

Other people, let me know and I'll.

Hop out of this room.

But, yeah, that would be my recommendation. That's what we've always done, is cut the services down. Use capacity as the main driver of when you do that. So.

All right, next one. Present.

All right.

Kyle.

Can you look at this fourplex deal? What are your thoughts? I think we get 800 to a thousand dollars for rent. Tenants would pay electric and water on their own. How would you break this down to where it does or what makes financial sense? I'm uploading attachments. Okay, great. Let's go and open up the attachments. I'm going to do this question because it's a house related one, like outside of lawn care. Let me see what the next one is.

Just to see if I can do that.

Okay. Vlad asked, do you think it's a good investment to send holiday cards out to recurring mowing clients? I think it's a good one. Especially if you have under 100 mowing customers. If you have hundreds, it just gets to the point where it's just not worth it because you're spending literally thousands of dollars by the time you take your time, effort, et cetera. Like my very first year when I had like 30 customers, I think I sent them all a gift. A coffee gift card as well as a card personally written out by me. And I literally did, all by hand. But when you start getting over 100, it just starts to become where it's.

Just not worth it.

Okay, let me stop that screen. Let's go back to breaking down this.

Job, this.

Thing here, this real estate deal.

See here, this is the first one.

Okay. Eight beds, four baths. I'm guessing there's a fourplex. Yeah, fourplex in okc. There's. The address is on Craigslist. Oh, it's Facebook Marketplace. Looks like an old hotel.

Honestly.

Let me just look this up. 7:25.

725 North Rockwell, Oklahoma City.

All right, this is much better. It's on Zillow. Much better.

Okay, let me make sure you guys can see this.

All right.

This will be fun.

I have not looked at this one yet. Okay.

Cello is so much better.

Okay, if I can hop back on this screen.

Okay.

There'S an old building. What year? 1983.

Ooh, that's good tile, though. That lasts forever. Need some new carpet. Those are old doors. Got siding.

Oh, yeah, this needs a lot of work. That window needs replaced, likely. At least the screen and the.

Okay, this looks pretty good. Soffit.

It's the back.

Brick is nice. Siding is in horrible condition, honestly.

Okay, Wonderful. Fully occupied. Four Plex, centrally located. Everything new. Central Heat and AC newly paid. Inside out. Generates at current condition, $2,600 a month. $650 per unit. Two bed, one half bath condos with balcony on second floor, spacious living room that could have a formal dining table and still plenty of room for living area, washer and dryer hookups, lots of privacy, 16 parking spots.

Okay, we're back. One second.

Okay, let's see here.

So let's see. Okay, so easy.

Ready to update your liking close AKC.

Outlet malls closed 40.

Okay, cool.

All right, so we basically got a fourplex bringing in currently $2,600 a month. So I'm assuming that the reason you see there's the value on this deal is the fact that 650 per unit and you think you can get 800 to a thousand. Personally, I feel like if you're going to 800 to a thousand, you're probably going to need to update it. So I don't really like to look at deals in terms of like if I value add, then the deal pencils in. I'd rather look at the current deal and see if it pencils in. So let's just assume they're slightly under market rent and you probably get 700 or 750 for these units without having.

To do any repairs.

So if you do 700 times 4, that's $2,800 per month. All right, let's, let's assume these are actually under market rent. Even more, 750 is what we could get without doing any improvements. Just literally buying the property and playing on the market like they're under market value. Okay, let's assume that I haven't even looked around this property because I already know that I'm not going to do this deal. However, I would also be looking around the property, looking at this other unit over here. Can you guys even see what I'm looking at?

Okay, cool.

I'd be looking at this, for example. I'd be looking at these other units here. This is a residential, so it's a little funky.

This is a.

Is this the main road? If it is, it's not a good thing. We do have some fencing. That's awesome. Lots of parking, not much yard space.

In the back here.

I'd be looking at all that stuff.

In tier two number one.

It needs to pencil in. And this one doesn't pencil in for me.

For me.

I already know that. Here's why, if these get, if these are under market value, rents at 650 and I increase the rents by 15 or 20% just because I bought it and because I spit on the property like, ah, I can get more money for this. 750 times 4, that's $3,000.

Okay.

Let's go ahead and get a property manager.

We're going to pay 10% on.

So our $3,000 just went down to $2,700 and our estimated payment is 23.71. That's a really good interest rate. This is more likely that you're going to get around a 2500, 24, 2500. Because what they give you estimated payment here is always far below what you're.

Actually going to get.

Especially this is like your first house, you're gonna, you're putting less down than 25 down. Your estimated payments probably 2500 easily. So I am basically making $2700 per month. I my mortgage is $2500 month. I am literally going to profit 200 like cash flow 200. And that assumes nothing goes wrong on.

The property News alert.

You will at least spend a few hundred dollars per month on just maintenance of this facility. Because we haven't talked about landscaping, we haven't talked about the fact that a water heater breaks down.

We haven't talked about one of those.

The railing on this house needs to be fixed, the carpet needs to be cleaned, all these little things. More than a couple hundred dollars a month. If you buy this property and you rent it as is without fixing up and then trying to get $1,000 per month, which again is a completely different conversation. But as it currently stands, I wouldn't spend 390 if this was more like 280. 290, that becomes a conversation because now your estimated payment is more like 17, $800 per month, 19 hundred dollars a month. And I'm able to rent it out for that same amount. So I really like to make sure that the existing deal works and then if I do value add, then I make it a slam dunk. But currently as this stands, unless you do all the work yourself and manage the property all yourself, this doesn't pencil in. And again, the reason people get distracted with things like real estate is they try to chase after these $200 per month and they take that time away from their business. That could potentially make them five or ten thousand dollars per month. Okay, so take the highest leverage thing that you have when you're small, which is as a small business, then focus on more passive things like real estate as time goes on. That'd just be my personal recommendation.

So that's just very much like high level view numbers is what I look at first. And then I dive into all the specifics of where it's at, looking at the property all the rest, that one wouldn't even pass stage one for me unless I was. It was 25% less in terms of that price. Hey, Mike, question for you in New York. When is the best time to send out the winter services? One click estimate. How did you guys do last season? Also, is there a contract template I can use? I realize a lot of landscapers in New York literally sit down with customers and lock them in for a full year contract with everything included. So I don't want to lose the allocate service that's currently offered with Augusta. However, I definitely want to try to swoop. Sorry, Facebook cuts off these questions. I'm assuming, one, you're looking for some sort of contract template and you're wondering if you should do contract versus lcart. Just you can offer both if you want. Ultimately, the question is, are you actually gonna take someone to court over a contract.

Whether they sign it? And all the rest of it's like, we're literally talking about a contract that's probably worth fifteen hundred dollars in an annual basis. Just hiring an attorney is gonna cost you more.

Fifteen hundred dollars.

So like, are you really gonna take someone to court over it? And then it's a matter of like, well, if you're not, why put that barrier on the front end of the sale? Just let them go into the service and pay for it as needed. Right now, if some people require contracts or like, they. They're just used to them, that's when it's like, okay, great, we'll do it and then just sign it. Just make sure you do your estimate the same way with using budgeted hours.

So you can do P4P.

That's the main thing a lot of times. The reason I'm also against a lot of contracts is people just get lazy and they don't do it by budgeted hours. They just do it by a number base. And then they just lose the ability.

To be able to run P4P on.

Those jobs because now it's just by.

The contract and the crew gets a.

Whole list of services instead of like.

Here'S what you do. You got four budgeted hours, and it's.

Part of a larger contract that the customer pays a level billing for over.

The course of the year.

All right, that's all I got for today. Hope that was helpful and we'll see you guys tomorrow. Thanks so much.