Mike Minute Mastermind 12/31/2024

Ladies and gentlemen, boys and girls, welcome to the final mike Minutes, mastermind of 2024. Let's go ahead and get this party started.

We'll jump right in. Oh, we got some more questions came in. There's only two, but now there are. Wait for it. Wait for it. 5. Let's go. Oh. 6. We've got inflation happening. All right, everyone's gonna pack it in before the end of 2024. Let's get started.

There we go. All right, we got seven. All right, Modesto, Tracy, as far as pay goes for a general manager, should they be on hourly or salary? What are the pros and cons of both? Can you summarize the new salary law and how that affects pay? How are you paying your GMs? Yep. So as of 10-1-1 tomorrow, for most salaried positions, you have to pay, I think it's like 58,000 something. Or rather they're doing this mostly because some people will pay someone like, say, 30 bucks, $30,000 salary and try to get around minimum wage. So this is why they do this minimum salary situation.

And so I actually don't think it's a horrible thing, honestly. It is. It is. It keeps people from misusing salary and then making some work 60 hours a week and making 10 bucks an hour. So it really isn't a bad thing. Now, in terms of paying a GM salary, the distinguishing factor for me is how much are they doing admin related tasks, how much are they doing operation related tasks, how much are they doing sales tasks, and then how much are they actually producing revenue in the field? So I'm opposed to doing hourly. And some people are moving to this, especially if they want more of their.

GM salary or compensation coming from commissions or profit sharing. So I'm not completely opposed to it. It's just very difficult to pay someone hourly or Some sort of P4P if you're also expecting them to do estimates. Lots of admin work, run meetings, hiring, firing, and management of the team. It's just difficult. And then it's also counterintuitive for them to have to clock in and out for every little thing. Like if they're at home and they're spending 10 minutes to address employee issue, I don't want them to have to think about clocking in and out. I just want them to do their job. So, like, I'm a bigger fan of salary, assuming they're doing anything more than working in the field. Now, if 95% of their day is working out in the field and you're still there as the owner. I first off probably wouldn't call them a general manager. I'd probably call them like a crew lead. But in that event that I'd probably be putting them on P4P with some sort of like maybe bonus for doing other tasks outside of the field. But, but generally I'm doing the.

I'm doing salary for general managers profit percentage for the Bellingham location. Yeah. So I start anywhere from 5 to 35% of profit sharing is going to a general manager. If you have a bunch of debt payments, you probably want to make your profit sharing based upon P and L. And if you are if you don't have a lot of debt payments, you probably want to do it based upon your distributions kind of as a rule of thumb. Because if you have a bunch of debt payments you then affecting your GM profit sharing. So just keep that in mind which you might have just talked to them like hey, like we took out a lot of payments and debts etc. And so the principal pay down is going to be coming out of the cash and therefore it's affecting distribution distributable cash. Because if you have a whole bunch of if you have a whole bunch of debts that are being paid on your P and L will look really good while distributable cash won't look great. And the reason for that is because the principal pay down on a.

Is not shown on a P and L of debt. So you can have a really good looking P and L with a little bit of interest expense when everything else in terms of payment on that loan is coming out of your cash position. So that's like where sometimes you, you will want to do you know P and L like profit sharing and other times you want to do profit sharing based upon distributable cash. And so the size of their profit sharing is hinges on my involvement and then also it hinges on the size of the business when they joined. So again this is on the there's a Google document that we use for our general managers and every $20,000 in revenue that they have joined at the rev, the percentage of profit sharing goes down. So it starts at 35% if they started the location from scratch, from zero if they if the location is already doing over 20,000amonth in revenue it drops down and drops down again at 40 and 60,000. If that location has already made that because they've already usually got into profit mode and there's less time lag. Now the reason I'm willing to give 35% to someone that that is starting a new location is because it's likely that for the first year, year and a half, there's not going to be a lot of profit sharing. And so if they're willing to hold their breath, they'll get a bigger chunk of it down the road. So.

But the location's already, if they come in, the location's doing 7, 800,000. It's super profitable. Like they're getting profit sharing essentially within the first quarter or two. Like I'm not going to be giving them 35% and also I leave that a little bit of chunk in there for your team and then your regional manager. But I'm very much okay giving 50, 55% of my profit sharing away to my team. Between my gm, regional manager and frontline team members, assuming I never ever show up, if I ever have to think about the location, that number is going to start coming down. So. David Willis. Morning, Mike. Has Augusta ever considered the idea of a job board? Seems this would be a great resource to most Augusta owners. I may have someone working for me that really wants to work in California, for example, and he or she is a great, great candidate to be a gm. And instead of having to reach out to every owner in California, if there was a job board, they could see possible opportunities. There'll be a lot of scenarios for this to be, to be benefit even for those outside of Augusta. It could become a recruiting tool for future entry level staff openings for our crew. Just a thought. Yeah, this is a good idea. I've thought about this. Typically when someone's moving, they.

They have a specific area in mind and so they, it's not like they're going to be like email every single person inside of California. Usually if they were like very open to moving anywhere, they'd probably just post on the Facebook group.

And so I've thought about this before. I think once we come much larger, like obviously as we get more and more people that want to move inside of Augusta, that would be potentially beneficial. In terms of people up on the outside wanting to join, I think the same thing is true. I think people know where they want to move and then they find a job. It is very rare, but it does happen where someone's like, I will join Augusta wherever I can find a job and then I will move there. It's just so rare that, you know, it's just very rare that that would happen for general managers that that potentially could happen. In which case I would say like run an indeed ad and just Encompass a larger territory like area on the ad, like the entire country for example, if you wanted to. And then, you know, give them a signing bonus or a moving bonus of, you know, three, four, five grand or whatever.

Mr. Anonymous, what are a few of the top tier franchisees doing? What you would attribute to what are a few of the top tier franchisees doing? What you would attribute to their success.

Lee has a presentation on the new owner training. He kind of goes over these and by the end of February we'll have the new. Every year we'll try to record a training. So that'll be up there by end of February. That'll be. That being said, I would say the thing that I have seen the most consistent in terms of like more tactical in terms of league is like more of the. These are the things they do in terms of like they participate in the community, they watch the masterminds. Like he goes over some of those things. I would say is like a more broader general rule of thumb is they follow closely to the Augusta model that we've now made more concrete this year of get to $500,000, throw it into profit mode, mostly simple services.

And don't keep adding more and more, just growing, growing, growing. They actually throw it into profit mode, raise prices and stay in profit mode until 7, 800,000. That's usually the ones we see being the most profitable from a percentage perspective as well as least amount of owner involvement. So that's like my definition of success is profit and least amount of owner involvement. That means it's scalable and profitable. You have a very profitable business. But if the owner is working there every single day and on the weekends and answering questions from their crew throughout the evening, it's very difficult to actually say that is a scalable business.

But that being said, this year only have we actually identified that as the model. And I came to that model as a result of just looking at all the best performing locations. And when I say best performing locations I've hinged on two factors. One, the the autonomy of the owner to step away from operations and two, the profit percentages.

Mr. Anonymous, if you were to do any other home service, what would it be? Are there any other reoccurring revenue services? Yeah, there's a bunch. Like I just, you know, in general I would be going for simple. I'd be going for reoccurring things like.

Window cleaning I like because it's hard for our target demographic to get on ladders. I also like the recurring nature of it. You can really upsell people into quarterly. I generally believe that that industry stinks at selling from one time jobs into recurring. I sampled a whole bunch a year ago and only one out of about 15 actually tried to get someone on a recurring basis. So I think they just do a horrible job in the industry of doing that. It's also something that you can do instant pricing. So I'd be looking at instant pricing. So things like window cleaning.

Dog poop removal is nice.

It's just a little bit small of a market in terms of total spend. But those would be some of the things I'd be looking at. Again, I think of it in terms like how could I scale something nationally?

And so I like that recurring nature of things. I really like softwash because you don't have to get up. You don't have to get up on the ladders. But it is a service that people do need and it's a little bit more demographically based, like regional I should say in terms of who needs it. So that's something I don't really like. I. If I was going more technical, I would probably get into hazard hazardous waste and storm cleanup if I was going more technical. But those are definitely like I still look at lawn care and think there's just so much opportunity.

So I'm not going into any of those. But those are like some of the ones that when I like look at all the different services I kind of like. I really like the idea of hazardous waste. If I was going really, really specific and I was like doing one location because you can charge so much money. And when I say hazardous waste I'm talking like when someone passes away who goes and cleans up the remains, etc.

Asbestos, anything like that. People get very price insensitive when things like that happen.

Lawrenceville, what are some of your wins from 2024? Oh, mercy, mercy. I usually don't like talking about these. So wins for 2024. Let me think for a second.

Some of these are personal. So let me talk about the business ones. Business wise it would be.

I feel much more confident in the scalability of Copilot. Kind of ties in with the losses though is that like we really didn't develop much since February 1st and so that kind of stinks. But I know what's happening in the back ends, like restructuring the team, getting really, really top grade engineers on the team and then restructuring the back end. So that's probably the biggest win from a business perspective.

Lee and I have been working a lot on like the sales process for Augusta nation for the first time ever. And that will be going into effect in 2025. So like, I really think we'll start scaling location count. Something we've really never done before is like really push that. So I think that'll be. It's been a big win. We've even seen the past two months of like really focusing on it and it's really dilating that process.

Other ones from 2024.

Command Center's, you know, crushing the rush. That was a big deal in terms of like not missing any phone calls and getting all estimates out within 24 hours and then making some really good pivots here towards the end of the year, which I'll be talking about at conference. So those are some of the ones off the top of my head that I can think of from a business perspective. On the personal side, there's, there's other things, health wise relationships, stuff like that. Anonymous if you were wanting to start our second location, would we, if we were wanting to start our second location, would we get to 500k on our first location and flip to profit mode for a year and then start the new location or start the location the same time you flip switch on profit mode depends on your cash position when you get to 500,000. So if you get to 500,000 and you've been holding on by the, you know, by your, by your, the skin of your skin of your teeth, my goodness, by your fingernails. There you go. You don't have a lot of profit in the bank. You've been sprinting to 500,000, but in doing so you do not have above one month of revenue in the bank, then you might want to take a year. Also it depends on like your risk sensitivity, your lifestyle. Are you increasing that if you're starting to have kids, like you might want to start a little more risk averse. And so it depends on a lot of those factors. But I think to say the major thing is like how much cash do you have when you get into profit mode? If I went into, if you're like, hey, I want to grow, well, then it's just a matter of, okay, I know as soon as I throw into profit Mode on a $500,000 location, assuming I raised prices at least 15%, which is always my recommendation, that's going to give me $75,000. Now again, I assume that when I do that I have enough lead flow coming in that's going to replace churn. That's a big deal. And the vast majority of people that go very quickly to 500,000. That's easy. So I usually don't even talk about that because people dramatically overestimate the impact of turning off their marketing will do because they're just the natural. So many of the leads come from Google anyways, they come from your trucks, et cetera. So I usually don't even talk about that. But we are making the assumption that when you turn off marketing and you go into profit mode, that you immediately do not have to spend money on ads and that enough leads are coming in from organic traffic flows to replace your churn.

And so I would just say you're usually. But when you flip into profit mode, you're going to generate $100,000 in extra profit generated based upon 15% price increase as well as the savings that you would otherwise spend in marketing. So usually between that 75,000 and 25,000, that's like an average I've seen. So you basically get 100 grand. That usually is going to pay for your general manager. Right? Because if you've been on the first location, how I think about is like, okay, that's, that takes care of my general manager, you know, to get 70, $80,000 all in, plus their taxes, boom, 100 grand. Now I can move on to a second location knowing that my first location is GM dependent and it's probably going to do 600,000 max next year in revenue. It's when that, when. Now remember, when I say switch into profit mode, you do that for three years into the second year you'd raise prices again. Third year you raise price again. And then when you're in that 7, $800,000 annual revenue range is when that location becomes very profitable. Remember that, that first flip to profitability, assuming you're going to get out of daily operations and hand it off to a gm, you're mostly that that flip to profitability basically covers the general manager. So just be careful with that. Sometimes people be like, I'm going to make an extra hundred grand. Yes, you are. But now you're not going to be there. So you're going to need a GM to manage the location. So that will cut into that hundred grand.

Mr. Anonymous, when do you think it'll be obvious that Copilot is a better option than service autopilot for most companies? Great question.

So I would say you'll see at conference some of the stuff we're releasing and it'll be the first time I actually say okay, I, I do believe Augusta is the obvious kind of like to what you're saying here. Like the obvious way to grow a long hair business in terms of this one.

I think it'll start looking this way at the end of 2024, 2025, and then I think it'll be obvious. Like to answer your question better, I would say 24 months from the day 12 months, it's going to look pretty obvious. Like it's going to be for most companies. But the part that we won't have nailed yet, I believe in 12 months is the chemical application side. So I would say within 24 months for, for all home service businesses it would be copilot would be my recommendation. Let me just make sure. Yeah, I think some people will say it in 12, but like to be more conservative, I would say 24 months. So.

Mr. Anonymous, after seeing a good profit from business and not taking much of a W2 income this year and no distributions planning next year, what is a good way to justify what to pay yourself on a W2 and then also paying distributions on profits quarterly. I know you definitely have a video somewhere, but any thoughts that come to mind? Thank you. Okay, focus on this one second.

Okay, so you saw a good profit from the business. You're not taking a lot of W2 income and you're not taking distributions. Okay, so you have a whole bunch of retained earnings. Okay, so a bunch of cash is in the business planning next year. And what is a good way to justify what to pay yourself on a W2 and then also paying distributions on of course. Okay, so I would take a W2. I would make sure you're, you know, you file a form 1120s so that you can file as an S corp if you're an LLC currently in doing so you'll have to take a W2 because you're now being taxes and S corp. I would keep that numbers pretty low. You know, 30, 40,000, whatever you want to you can justify to the IRS. And then the rest would be distributions quarterly and do it based upon what you would do with a gm. So it's like, okay, I need X amount to live 30, 40 grand. Sounds like you're not taking anything from the business now. So you probably only need to get that much out. You pay less on taxes and then again you got to do like what's normal for that salary range. But again, there's not a whole lot of cases of the IRS coming after people unless they pay themselves basically nothing. So you know, hash, you know, hashtag not financial advice. But yes. And then.

Yeah, I would, I would just do your distributions based upon distributable cash the same way you would do if you have a general manager. And that way you just get in the habit of every quarter you already know what that real cash amount is. You get in that habit of like, okay, the last average of the past three months. Anything above that, I am taking distributions Also. You'll get anyone else involved in that process, potentially spouse, kind of like invest in like, hey, what's the quarterly profit sharing this quarter? So, like you could revolve your personal budget around it too. And then you get some really good buy in from someone who wants the business to do well and is actively thinking about this quarter. What's the distribution amount going to be? You're tracking that together. I think that can be some good camaraderie. I've seen that with general managers and their spouses too. Kind of like, hey, what can we plan for this quarter? Because. And then there's some. There's some buy in there and kind of support. So anyways, that is it for 2024, folks. The Mike minutes mastermind 2024 is now wrapped. It's concluded. I appreciate you all tremendously. Hope you have a fantastic New Year's Eve and we will see you tomorrow. I'll be here tomorrow's the first New Year's. Yes, I'll be here tomorrow and. And finally get to record another episode of the C Suite unfiltered with Lee because we've been off for a couple weeks. But looking forward to it. Take care and we will see you tomorrow.