Mike Minutes Mastermind 01/03/2023

Hey everyone. Hope you're doing super well. Happy Tuesday. Let's get started. Just refresh this. Sorry for being a bit late. A bunch of meetings about conference and in the other room because they are still having other meetings. Let's paste this into the Facebook group. Quick.

Jump right in. I know quite a few are arriving today into Bellingham.

So definitely feel free on the Facebook group. Reach out and feel free to connect with other owners that have already come in town. Cool. All right, let's go ahead and started.

Present Share screen.

Oh, you know what? Here, let's try this.

This work. That's pretty cool. Okay, so first question. We got eight come in.

Kyle. After a project or mo gets done, are the crews automatically prompted to fill out a form to checklist everything on the property picture and attachments for clarity.

So we do not have this set up. If you want to make one, you can absolutely inside service autopilot. There's same thing in zooper. You can set up forms like this. If you. If you do it every single prop on every single property, especially for.

Mowing for projects or mowing like it just doesn't get done. It's the same thing like with. When it comes to putting. If you put the same note on every single job, it just becomes like white space to them. They just dismiss it like either someone's going to do it or they're not. If you're putting on every single job. So in my opinion, you'd only make a form if there's specific things that have to be done for a specific service. So for example, they have to take pictures of the property at the end and like 1 out of 100 of your clients require that then I would do that. Otherwise just make it standard. Where it's like if you want someone to do something the same way every single time, they just need to be told that. Because otherwise the checklist we found on on on forms up just don't get used. Same thing with like when people are like do you have checklists for your cruise in the morning for equipment? It's like, okay.

How often are the guys actually gonna pick up a checklist, walk through every single thing on a 30 or 40 point list and then erase it and put it back in the office. Like it just doesn't. Unfortunately doesn't happen. In theory it sounds great, but we just haven't seen uptake of the guys actually using it. So.

Not to say it's bad. I would love if we could use it. And people actually. She always forgets to talk. Absolutely Correct. Sometimes I worry about the cost of housing where I live and wonder if my service area is big enough to support the purchase. An average homeowner is over a million dollars. An average home is over $1 million. The minimum down payment on homes over 1 million in Canada is 20%. 200,000 home prices also rise by approximately 10% per year in this area. Having $200,000 cash to buy a home is pretty brutal. The monthly mortgage wouldn't be nearly as big a hurdle. My service area includes approximately 600,000 people, so I definitely think there's a lot of potential there. Do you think I could afford a home owning just this service area or would I need to purchase other ones? It really like in terms of, you know, whether or not your service area is big enough, it has nothing to do with that because you're in a great market. 600,000 people is huge. Some of our most successful locations have 30 to 50,000 in, in population. And when I'm starting my locations down in the south in North Carolina, like we have less than that because you can scale to a million the same way you would if you were in a much larger service area with more people inside of it. So 600000 people, that's no small territory. You don't need to make it bigger. It's going to come down at the size of the business and how profitable it is. But, but ultimately what I'd be thinking about too is like home prices in your area, for example in Vancouver, are down about 15 to 20% over the past six months and they're going to continue to go down because interest rates in Canada are so much higher. And variable interest rate loans are so much more prevalent in Canada. And so a lot of people's mortgages have literally gone up 50% in Canada because they don't have 30 year fixed rate mortgages. They're not as popular. And adjustable rate mortgages or ARMs, ARMs are much more prevalent. So I would just, you know, you're going to wait for a good time to probably buy and I think that's going to be the next 12 to 24 months. And in terms of, you know, having that type of cash, yes, that is brutal. But ultimately it's like, okay, well if you can profit 100 or even $80,000 that you can stack away over the next couple years per year, in three years you could afford something, right? And ideally you buy something that you can afford also uses like land or property for to have a shop space. And again, in the perfect world, in 2024, if we still have high interest rates, like what? The reason Canada is especially Vancouver's interest rate or housing has gone so berserk over the past 10 years is because their interest rates literally were going down to like one and a half, 2% etc and so when that goes now up to 4 and 5% even, which again, interest rates are a little bit slightly lower in Canada, but they're still higher than the US in terms of terms of mortgage rates or they're still cheaper than mortgage rates in the US comparatively. But when they double like they have and now people's mortgages are 50 higher. Like look at the number of homes on market in, in Vancouver and Surrey, for example, over the past six months it has like tripled. So there'll be a price correction. Be patient, don't have fomo, like, oh man, I gotta get in. Don't into that garbage.

Any real estate agent that tries to use FOMO and you like be faster, run 100 miles away from them. It's the worst time to buy is when there's fomo. The best time to buy like right now when like, it's like, take your time, put a few offers in low ball people like, this is, this is the time, type of time when you want to buy. And I think it's gonna get worse over the next 12 months. I've decided not to go to conference this year, so I'll be watching from afar. Is it possible to get all the past conference videos posted on the franchise Updates page? Page as I have time this time consuming all the Mastermind videos and conference videos.

I think I took them off. Did I take them off? Let me double check. I think I did take them off all the old ones because they weren't great quality in terms of like they're kind of zoomed out. They weren't their best quality. This year will be really, really nice because we're going to actually have someone manning the camera instead of being as automatic. Okay, I do have conference on here. So if you go to underneath the dashboard here, I'll share my screen. If you go to the dashboard, boom, boom, boom, share screen right here. Go to Franchise Updates. There's the Mastermind quality roundtables. This is last year's conference, so feel free to check that out. This is our Augusta Nation. And then this is the Summit right here. There's also this, the Southeast Conference. So plenty of material there. And yeah, probably in a week or two after this year's conference, I'll have the recordings for us to watch. As well. Present Share screen.

Okay.

Can you also post Yesterday's mastermind to YouTube? I just looked. It isn't there. I'm keeping a phone notes tab. All the mastermind.

I'm pretty sure I did. Let me check. Micro minutes is 0301.

Yesterday'S. So I have to, I do have to specifically put them in the playlist. Okay, so you're right, I missed it. So let me just put in the playlist. Mike. Minutes. Done. Save. All right, it's there now.

All right, next one.

Can you explain what is return on equity and how it relates on investing in our style of business? What return on equity number or metric should we be shooting for as we open up locations? How do you know what metric is healthy? I know you mentioned to start taking a regular draw 1k after the first year, 2 after the second. Etc for locations are GM managed. Yeah, so. So for the vast majority of when you're talking to someone in the street, return equity and return investment is relatively the same. The difference is return on investment is cash invested. Return on equity is any sort of thing on the balance sheet that is investment in the business. The reason for that is because if I take a loan and I have $100,000 of cash and $300,000 worth of debt, my return on investment is going to be greater because I have leverage, I only have $100,000 in. So if I turn that into say a million dollars, I'd have a 10x return on investment. I only put $100,000 of cash in. Whereas if you're talking about return on equity, all of that's considered equity. And so you'd have like a 2 1/2x return on equity. Right. So these are two numbers. The vast majority of people talking return on investment is the one everyone knows about. But it's just simply a matter of what is the return on the actual capital invested on the balance sheet, not just cash invested. Because if you look at return investment, you can simply make the numbers better by having more debt. Right? And that's why what's called leverage buyouts, LBOs. So a company will buy out companies, they'll leverage up, they'll get a whole bunch of debt. And when you get a whole bunch of debt, you're able to buy more and more assets. Therefore you're able to have a higher leverage, more debt and increase your return on investment because there's less cash involved. Right? So when I talk about equity, I'm looking at, okay, what's all the equity in the business? All the Money spent, everything, whether it's debt or cash. So return on investment is much more popular though. And that's like we're going to talk about conference first keynote. I'm kind of trying to bring everyone up to speed and I'm going to talk about return on investment and how debt changes that so much. So.

How do you know what metric is healthy.

Return on investment? Like you can kind of compare it against if you really want to be like, it looks like you're going to be technical. The average in like the stock market is 8 to 10 a year return on investment.

You know, real estate, you could say like 10 to 12, for example. So whether or not it's healthy is more a matter of what are you comparing it against. Because if you can only get 10 return on investment from a business after several years, it's not a good business. Right. You have more risk buying a business compared to owning a Fortune 500 stock or real estate. So correlative with risk should be the return. And so in my mind, you really want to have a 15 to 20 return, at least in your business over the course of time. So I'm going to tackle this at conference and show two different examples using debt, one without, one with and show how that changes things. But in my opinion, there's no reason to take any more risk than buying a very stable company that's been around for 70 years and has predictable cash flows. And you have liquidity, which means you can sell in the open market. There's no reason to not buy that if your business is only going to return 5 to 10% a year in terms of return on investment. So in terms of what's healthy, I would say at least 15 to 20%. And that's why we get into business for a higher return. And that compounds, right? So if someone has a 6 or 7% return, the stock market, someone else has a 15 to 20% return in their business that compounds and becomes massive over the course of 20 or 30 years.

Yesterday on the Mike Minutes mastermind, you said that for your first couple of locations, you won't really know how to pick a gm. Trying to hone my GM picking abilities through your experiences. The top three things you look for when picking a gm. Okay, so going into this cold, let me try to come up with these. What are the top three things you're looking for a GM management experience of some degree. They need to have managed people. They need to know how to have hard conversation around hiring and firing and not be afraid to call people out. Second Thing they need to be able to sell. They need to have no fear of walking up to someone's door and upselling them. And they should hopefully have already done that or at least be not where they're not having anxiety trying to upsell customers or feel like that's somehow wrong. They need to have experience doing that. And third thing I would say is like kind of gray on top of they have landscape experience and they kind of have a little bit of IQ around equipment maintenance. Are there any deal breakers for me? If they say anything negative about employees inside the interview, we nix them immediately. Actually happened to a franchisee the other day when on the call with, with Lee and I saw in the notes from the call that he specifically said this. Not a good fit. They said something very derogatory about a previous employee. So that'd be the number one thing. Because I like as a regional manager or someone, if you're having GMs underneath you, you can look at a spreadsheet, you know how well the business is doing. What you can't, you can't calculate with numbers and have a numerical value is how they're treating the team and what the culture is looking like. And so if they're going to say anything negative or derogatory in that interview, they just immediately out. So.

Three, what are some issues, potential problems we should be watching for when having a GM run location? Yeah, like the bottom line is the, the success of any location is going to hinge on the GM or operator, whether that be an owner operator or the GM as the operator. As a working GM, it will hinge 1, 110% on their abilities, their ability to sell and their ability to manage. That's it. Because if you have command center running the phones and the email and their payroll, they don't need to know how to run marketing campaigns. You should be doing that as the regional manager. They don't need to know how to organize things on the computer and take care of payroll and submit taxes. They didn't have to do any of that. They need to be able to sell and they need to manage people effectively. And so the success of any location is directly correlated with the skills and the abilities of the GM or operator. So you know, and when, you know, we have Office 110 locations now, but when I own a lot of them, like when there's dozens, I'll be able to literally say, like have a graph, okay, here's the amount of management experience, here's the performance of the location. After three years, right here's how much sales experience they had. Here's. Here's the performance over the course of the next three years. Right. First year is always tough. Every GM is gonna have a rough go at the first year, especially if they don't have sales and management experience. But after year one, it's like you gotta. You gotta show in the numbers and so. Yeah. Can you do more P and L reviews for your locations every month or two? Yeah, I could do that.

Yeah. It helps it find. I find it helpful. It helps looking at the same some of the numbers and getting commentary on where we should be and what good PNL looks like. Yeah, totally. I can try to pull my application. I don't honestly at the PNLs as much now as much as just I get a report of top line and bottom line revenue from Chuck in my regional. I'll have eight locations here pretty soon. So it'll be kind of tough to keep track of everything myself. But I'll try to pull one up occasionally for sure. And.

If you want to submit yours, I'm happy to look over it again. This is something you should be doing with your coach every single month, in my opinion, going over those things. But feel free to hop it on here and I can take a look at it publicly. That's fine. Hey, for new franchisees, our coaching calls to be scheduled every week for the first six weeks after our call with Lonnie, correct? Yes. Then following those six weeks every month. Just want to make sure I understood the time frame correctly. Yep. So as of this recent cohort, everyone that came to training after your call with Lonnie and you are set up inside of command center and your CRM, you're going to book six calls, one per week. There's your shorter calls just to check in with your coach, make sure you're on the right track, make sure you're going the right direction, you're not deviating off the systems early on. And then if you are a growth model, every single month thereafter and every two months thereafter for solo. For those first six weeks, we consistently see being the most problems because people start slowly going off systems and then we get on their first or second coaching call for eight weeks later and they're way off. And there's a whole bunch of corrective action needed. And they've wasted their spring rush away doing dumb stuff and spending money where they shouldn't be. And so that's why we're doing that for new owners. Just keep everyone in the systems. So awesome. I will likely not have Masterminds the rest this week. So feel free to put questions in if you're not coming to conference, whatever. Happy to answer them, but probably won't be till next Monday, to be honest. And then if you are showing up in town today early tomorrow, definitely reach out the Facebook group. I'm sure people will want to get together for dinners and all the rest of it. It. So it would be great. If you are at the hotel tomorrow.

Feel free to ask any of the team if they need help. But we pretty much have it nailed down and adding too many more people will actually make it a little more difficult. So if you want to be out the hallways, I think they have some registration stuff that you guys set up, some banners. A lot of you have texted like, hey, can I help? Absolutely. I appreciate it a lot, but we do want to make it as smooth as possible and just not have 50 people standing around while we're putting stuff together. So just come in, stay out of the conference room because we got to set up a lot of AE stuff. And then feel free, though, to ask any team if they need help. I really appreciate it. I really do. It's just a matter. We want to stay organized and we kind of have everyone on the team designated what they need to be doing. So really appreciate it. Make sure you do connect with owners if you're here. I know Wednesday evening, the main reason I wanted that dinner is just to break the ice and for those of you who have not met anyone besides the people from your training group and your trade cohort, to actually get around, meet other people, start to talk to other people, it's gonna be a great event. I'm really looking forward to it. And I just like the fact that we're gonna be having the hotel at the conference center, so you can just meet as many people as possible.

And, you know, maybe for you it was a tough year. Maybe you're just getting started. Maybe it's ups and downs personally. Maybe there was stuff with family or finances or the business itself, like there's no reason to be ashamed of that should come and just connect with other owners. We all know what we're all going through, what everyone else is going through, the same struggles across the board. Guarantee there's someone else inside of Augusta Nation that went through something like you did, whether it be personal or financial or employees or whatever it might be. So please, what you get out of these events is exactly what you put into them. And so the more you come prepared to connect with other people, give help and provide value to others, you'll get the most in return. So that's just my two cents. I found a lot of conferences, and I truly believe you get what you get what you put into it. And so I really want Wednesday evening to be a time where you break the ice, get to meet a lot of people inside of Augusta Nation. So that way, Thursday, Friday, and Saturday, you can just really, really absorb and soak in the opportunity to get together and recharge for the upcoming year. So, all right, guys, we'll see you in. What is it? We'll see tomorrow night. Let's go. It's Wednesday. Tomorrow night. Let's go. All right, looking forward to see you guys.

Here we come.