Mike Minutes Mastermind 01/08/2025

Ladies and gentlemen, boys and girls, welcome. Make sure my audio is working. There you go.

To another mic Minutes Mastermind. Happy Wednesday. Quick announcement. Liz sent out on Facebook yesterday, but.

On the service change form for Command center, they made it a little more clear. So in the past it was like, hey, you got to check everything that you want, even if you're not changing anything. Now it's a matter of services you want to add, services you want removed or sorry, services you want and services you don't want. So makes it a little more simple and then also has a link there to be able to book a call with Command center right on that form. So highly recommend if you need to make that change, it is a little simpler and easier. So thank you all for that feedback. It stinks when you accidentally forget to not select one and then all of a sudden something's not being done for a day or two and you're like, what's going on? It's like you didn't select the one for the checkbox. So now that should be a little clear. All right, let's jump into questions. If you haven't, we do need you to. I know it's like last minute situation. If you have not signed up for a conference or you have someone that's coming last minute, we need to know about it. So again.

If you have more than two tickets you do need to buy or two people coming per location, you do need to have a public ticket Purchase from blue collarsummit.com but even still, we need you to register from the dashboard augustafranchise.com Go to conference. Make sure you sign up there so we can have our full count for all the Augusta Nation events. So for food, etc.

All right, let's get this party started.

First up is from Mr. Anonymous. What can we, as Augusta franchises do to assist you in your 250 location goal in general? Want us to do anything special at conference? Yeah, this is probably the first year, actually, I have an answer to this. At conference, there will be some stuff I need done and everyone's really helping this year a lot, whether it be the, the morning runs, the Bible studies, the. The. The workshop stuff in the morning. These are all owners of Augusta Nation. So awesome. I think like I'll be integrating owners into Augusta or into like the public stuff much, much more as time goes on just to solidify the brand. So I appreciate everyone's efforts in that regard.

And then, yeah, at conference I do have something specific because there's something that we're going to be using all the, the funds for new locations from this conference. There's something that everyone's been asking for that I'm working on and we need those funds. So I will be asking of something kind of like showing kind of a way to be able to make that location goal hit and count. So.

Yeah, so I'll talk about more of this on next Thursday. So basically the, the Augusta conference on the Thursday I will talk more about this.

But.

Yeah, by hitting the 250 locations too, I think we're going to start hitting brand penetration where people start to actually know us before they just look up for lawn care services. The same way that you think about Mr. Rooter, you think about Mr. Electric, these different types of brands, most of them have right around 250 to 300, sometimes 400 locations. So I think we're going to start hitting that too once we hit that location count. But what I'm actually more focused on because locations and selling franchises in general is a downstream effect of having good, you know, economics and great metrics. And so I'm much more focused on the Augusta business model and you know, solidifying that in the past year and then really seeing that rolled out. Well, I'm much more focused on like same store, same store sales growth. So I'll be starting sharing what those numbers were in 2024, but going to 25. Like the goal is yes, 250 locations. But like that's a downstream effect of having.

25% year over year sales growth per location. So if you were open the year before on average moving up 25%. I know if we move up to that 25, that's going to get the majority of our locations into profit mode. And so that's when the Augusta business model starts to actually do its thing, which is hit 500,000.

And then stay in profit mode until you're at 700,000 to 800,000 in revenue. So that's really what I'm looking forward to. The location count will take care of itself if we just focus on that. Mr. Anonymous, what are your thoughts on using smaller trucks like a Colorado S10 Ranger type truck for mowing route trucks? Yeah, big fan. Assuming you don't have to bag clippings or you don't use the trucks for landscaping jobs to haul a trailer, for example. So in our market we have to bag clippings and it only really is for maybe about two months of the year where those become significant amounts of weight and loads on the truck. But because of that I can't really use a smaller truck because I need the volume capacity of the larger truck and the weight capacity because if you get a wet a day, when you're mowing on a wet day, you can have, you know, easily seven, 800 pounds easily of clippings. So in a smaller truck with that alongside the mowers and everything else, you start to overweight the trucks too, the smaller ones. So if I didn't have, if I didn't have to bag clippings, I would probably be using the smaller trucks. And then if I also didn't have to haul trailers. As soon as you start hauling a trailer and you put like mulch or gravel in it, you're gonna have to have a much smaller size and load limits. If you're using a smaller truck so not opposed to it. If you're doing really simple surfaces. If you're not having a bag clippings, I'd be, I'd be all over those type of trucks and vans honestly. Vans would be also in the cards for me. Matt Slakey from Salem, Oregon. What do you. Have you. Have you thought about doing another start a location from scratch project like North Carolina, but doing it all remotely, not necessarily in a different state or buy an existing out of state business and converting it to Augusta remotely. I have also. I also have the thought that a person similar familiar with Augusta Systems could be the on site general manager or regional manager. The day to day footage would be of them with a weekly check in with you. Maybe this isn't that this is in the distraction category for you. No, it's beneficial. It's more a matter of I did this in 2023 and I think the difference between that content and then what I'd be creating the content in the future is, is not negligible but it isn't big enough for me to make this time investment. And so.

When I think about these sort of projects that we did in 2023, I have to stay focused on like how many people would this help inside of a destination? How many people would help outside of a Gusta Nation? And then if I spent my time otherwise just focusing on the core systems that we're already building and like the core things that we're focused on, would that help 80, 90% of the owners versus something like this would be very beneficial for people that are like doing secondary and tertiary locations. But still the majority of our owners in August Nation are still have single locations. So making that super solid is my focus. And then this what you're talking about here will likely happen in the next few years as the majority of our owners start to become multi unit operators. We have.

Executive models joining. They're going to be wanting to see how that kind of interaction works with having a regional manager and a general manager. That's what I might make a content piece and commit time to it. But right now the vast majority of Augusta Nation is better served by getting from 0 to 500,000 as fast as possible. And so like my resources right now my like everything is like zeroed in on that because if we do that and everyone gets into profit mode and then they'll start thinking about like okay, now I want to get a general manager now I need a multiple locations. So we will attack that and then also until that point and even you know, for now like I'm in contact with the multi unit operators a little bit more. So we, we've had a zoom call together. We, I'm in their, their WhatsApp group chat and so that sort of interaction is helpful to grow the systems. But like I'll be talking a little bit at conference too taking kind of like all the different inputs that I've had of general managers, regional managers, what, what to look for, when to hire certain types of people. I'm going to kind of have a matrix of like who you're looking for when and then how to pay them, stuff like that. So that might be helpful. But this is, this is probably something that will happen out of necessity in a matter of two to three years when the majority of locations based upon our projections are like the majority of locations will start to be multi unit operators simply because like people coming around to their five years and wanting to get a secondary location and et cetera. So.

But for now, no at conference again I'll be sharing now when we speak on Thursday at the end of each year I'll try to be giving the three main things I'm focused on for the upcoming 2025 for example this year and so that that's not in it but down the road that would be, this would probably be more beneficial to more owners and I would definitely consider it. Dylan Wirtz I haven't worked with a property manager in the past, but one currently working on getting us on board to start working with them. They requested us to add them as additionally insured and send them a waiver of subrogation. Talked with my insurance agent and sounds this will add about $150 per year to the policy. Obviously not very expensive but curious if this is something we should do or if we want to avoid adding other companies to our policy. It's actually pretty common practice for.

Commercial or property managers to actually want this to be listed as additionally insured. It's relatively common. Now if this is a property management company for distressed properties, I'm usually not a huge fan, but there are property management companies that are legit that have commercial properties that they do ask for additionally insured. And usually I haven't seen people add a whole lot of premium. I'm actually surprised that even at $150, to be honest with you. Usually you don't have to unless you're starting to add like 10, 20, 30 people. So a little funny that it adds premium, but I get where they're coming from. Like if you're having a bunch of additionally insured, it doesn't increase the insurance liability of the insurer. So that makes sense. But I usually have not seen insurance companies charge extra premium when you add additionally.

Additional insured. This is Mr. Anonymous. How much is the ideal location worth? Say 800k profit, 20% profit profit margin, sorry, say 800,000 revenue to 20% profit margin. GM running location and owner's absentee. Let's also say it's one location by itself.

This. Well yeah. So the biggest part here is like your, your multiple will be more than double just by you being absentee if you're hitting those numbers. So it's one thing to say, hey, I'm hitting 800,000 revenue, 20% profit. Great, you're probably going to be able to sell that business for again, I'm assuming that you're getting paid as an owner before that 20% profit margin and then you're probably sharing some of it with your team. But like a big, most of that is actually distribution. So I would say you might get somebody got some equipment in there, you might get 6 to $800,000 for that business. Now if this is owner is absentee, like I mean actually absentee and you're hitting those numbers, you'd get over a million dollars easily for that business. Because now it's a function of okay, 20% margin on 800,000.

We'Re now looking at around 180,000, $170,000 in net free cash flow. And then we look at say a million dollars, that's a 17 return that's going to beat the market. So you know, 17% is better than real estate too typically. So which usually like 12 to 15% depending on what who you're talking to. So.

So yeah, that's when usually you get the million dollar marker in terms of valuation is if this is absentee, it's going to be 500,000 to 800,000. If you're kind of scamming someone, if that's greater or sorry, if your owner operator in the business all the time, you might be lucky actually at 5, 600,000, 800,000 would say extremely rich if an owner is involved.

Just more importantly though, the reason the valuation goes up because you open the amount of people that can buy the business. So by increasing competition you increase the price. So it's not really like the value of the business goes up. What happens is more people can buy the business because you just took it from, okay, you have to be within 10, 15 miles of my area to if you, if you have money in the country, you could buy my business. And so that's when like biz buy sell actually becomes super useful because people are looking from around the country, they're just looking for cash flowing businesses. They want to, they're looking for a 12, 15, 20% return on their money instead of throwing it into the stock market. Especially when they think that it's.

Volatile or if they're looking at bonds and they're looking at 3, 4% return, they're like, okay, yeah, we'll just, let's go ahead and dump money into some businesses that produce cash flow. They aren't fancy, they aren't growing super fast, but they're profitable and they don't need require our management and they'd rather get, let's just call it even 15% return on their money compared to a few percentage points if they bought bonds or treasuries from the US Government?

Mr. Anonymous, regarding previous question about the ideal location, how much is it worth if it's six of those ideal locations next to each other with GM at each location and regional on top and again, owners absent. Okay, so this is you starting to add layers here, right? So this would also depend on something. For example, if you have six locations, you also have the, the fact that now if anyone ever wants to join Augusta Lawn Care in your area, they will have to buy you out. So this, this will almost double the valuation. This is like I haven't talked about this a lot because it won't really start happening until you're around four to 500 locations. But this is what I've seen it at any time fitness and that is like the value that I bought the location for. I've basically kept the member count the same. I've increased Prices like, we're more profitable, obviously, but, like, valuation has more than doubled. People offer me money probably every six months to buy out Anytime Fitness, but it's because they can't buy any location from Vancouver, British Columbia, down to Olympia unless you go, like, east into the mountains, which there's just not enough people there. And I don't even know if they allow territories out there anyways.

So because of that, anyone that's between basically where I'm at in Seattle, if they want to buy a location like join Anytime Fitness or own a gym at any time, they have to buy one of us out. And all of us owners are together and we're like, okay, let's just artificially make sure no one sells, because it just drives up our prices. And so I could easily get a million dollars now for the gym if I sold it. When I bought it for 500,000, it was 550, and then he gave me $50,000 cash. So. But I could easily get a million dollars for it now, which is about a 1.4x on revenue and a.

I guess, to be conservative, a 5x on profit. So that's pretty good multiples. But it was half of those just five years ago when there was more territories available. But even in my county, there was. There was two. There's been two locations added in the past five years, and that's what saturated the market. And it was. Those were the last couple of few territories. And immediately all of our prices, like, people started offering us more money because the only way to join was to buy out someone. So in this case, what you're going to do, you're going to create a miniature monopoly, right? So six locations, you're probably governing almost, you know, between half a million and a million people in terms of. In your territory. So anyone in that county, in that city, if they want to join Augusta, they have to buy you out. We've only had this happen one time now, inside of Augusta, where this became like a actual thing, but this will continue to become more of a thing where when someone wants to join, they will just start to offer people more money to join because they have to buy you out. They have a. Let's say they have a $500,000 business. You have an $800,000 business. All of a sudden, for them to join Augusta, they like, I gotta join Augusta. It's 500. I'm at 500,000. I can't scale whatever. They've been doing the same thing for 10, 15 years. The only way for them to join is to buy you out. So that's when the valuations go up. So that's what you're asking here about valuations. So I don't usually talk about that. Cause that's significantly down the road, but it is certainly the advantage of having a chain is you start to create a local monopoly. And then as the brand equity goes up and then someone wanting to join, they have to buy people out. The other part of it is when you start getting above six locations. So like I'm now thinking about 10, 20, 30 locations.

This is when private equity starts to get interested. Because private equity loves franchises. Because they want again, they're looking for solid returns. They usually have. You have different funds. So private equity, you could have like very risk investing in technology companies, Bitcoin, et cetera. But they have to pay the bills, they have to pay a return to their investors. They have to make sure that they're covering their basis. They have to make sure they cover their management fees. And so many times they will buy these more boring businesses. And they love, they love buying franchises. And they don't necessarily buy the franchisors all the time. They'll just buy chains of franchisees. And they don't like to go in and start them, they like to buy them out. And so.

If you look at a lot of private equity, even the tech ones, you look at who actually owns franchisees of mature brands. So we're talking like the Cinnabons and the Taco Bells and McDonald's and the burger Kings. It's not like Joe Schmo owns that. It is many times a chain of 100, 150, 50 that they've purchased and then made a chain out of. And it's owned by a big business which is simply owns usually dozens, if not hundreds of franchise locations. And the reason private equity likes that is because you have some sort of core management and systems and philosophy that backs up the operator. So they don't have to create all of that. So they don't want to get in the game of doing marketing. They don't want to get in the game of teaching and training and managing people. They don't want to get in the game that they want to deploy capital. And so that's why franchises, as they mature, many times the big chains will get purchased out. They'll become, they'll be companies of multiple locations. And so the valuation that's going to be higher if you start creating an asset that is 10, 15, 20 locations that is producing 10, $20 million in revenue. And hitting those kind of metrics, that's when it will get interesting for a buyer. And now your valuation will probably double again. In terms of your multiples, I should say so. Yeah.

Boom. That is all the questions for today, folks. All right, everyone, I hope you have a fantastic Wednesday. I'm looking forward to seeing everyone in exactly eight days at Blue Collar Summit. Again, thinking about everyone out in the storm out Indiana, Kentucky, all throughout that area. There's tons of snow. And so looks like the worst is mine special still people in out of power. And so thoughts and prayers for Connor Stead, other people out in the storm and looking forward to see you guys safely next week. All right, Take care. Have a good one.