Mike Minutes Mastermind 04/03/2024

And we're back. All right, this is late at night. This is not important. This is just me catching up after not getting all the questions done. And I don't like going to sleep with things halfway done. So we're going to knock this out. Just got to the hotel. Let's kick it off. So we finished. I believe it was six out of eight or nine questions. There's a few left. Let's knock them out. I'm going to put this as April 3rd. So this is a replace tomorrow morning, Mastermind, because I don't think there'll be any more questions coming next four hours before I wake up. So let us kick it off.

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Number one, from Dustin from Champagne. Hey, Mike, I think I heard you say somewhere a week ago, two ago, that a HELOC was a good form of debt. I have been preached for years by people that don't own their own business that this is a terrible move. And I think Ramsey also disagrees, obviously, because there is debt. That said, I really considered exploring the option as I think we kind of have things somewhat dialed in here in Illinois for some big growth this year. That's good here. I'm interested in why you feel this is a safe bet. Would you take this debt over taking a car loan, trailer loan, mower loan, etc. As long as it is being used wisely for growth? Look, any debt, you are increasing your leverage, therefore you're increasing your risk. So the safest thing to do is always not take debt.

If you live life completely safe, you wouldn't do anything. You wouldn't drive, you wouldn't marry, you would not get in relationships. You wouldn't do a lot of things. So there's.

An amount of risk that you take on no matter what you do to make progress. And in order to step or run, you have to fall forward. Like, you literally have to be out of balance in order to walk or run. So, like, you're taking a risk by doing that. No one ever gets hurt by sitting around doing nothing. So you are taking a risk by walking. You are taking a risk by running. You are taking a risk by flying. You're taking a risk by driving. So, yes, you are increasing your risk by having debt. And Dave Ramsey has built his whole brand around not having debt, which is genius. On his behalf. And that's why he's. People don't call him like a influencer. They don't call him like he's never been convicted. Like, like being a scammy type person is because he has very, very conventional ways of thinking of business, which is correct if you are being ultra conservative. So it is simply a matter of managing your risk. In, in his case, he would recommend you walk for exercise. And there are other people that say you should run for exercise. And if you run, you are taking a greater risk of being injured. If you take on debt, you are taking a greater level of risk and you will also achieve faster results the same way that you would achieve results faster by running compared to walking, you have a greater amount of risk, but you have a greater outcome if things go well.

And then when it comes to the type of debt, I'm a big fan of HELOCs, because if you have a HELOC, and that means that you have at least usually a 25% cushion on equity in your house. So it's not. You're going to lose your house.

And it's usually really, really good debt in terms of your terms, in terms of your percentage. And it's revolving, which means you can pay it off, you can use it, you can pay it off, you can use it. Is it supposed to be used for your business? No, you're supposed to get a business line of credit. But when you're just getting started, the vast majority of people have better access to a HELOC if they've lived in the house for a few years compared to getting a business line of credit that you need a few years of experience, a few years of tax returns underneath your belt, typically, or assets sufficient to be able to back it up.

I would say in general, if I was talking to people that had lots and lots of money, I would not recommend using your HELOC for your business. And this is something I talked about our last training for Augusta Nation is the thing that makes Augusta unique is the fact that we allow people to join without a huge amount of money in their bank account. Look at any other franchise, they're going to require between 500,000 or guess some are probably low level or it's like somewhere between 200,000 and $800,000 in liquid cash and they're going to want you to collateralize a lot more in terms of debt because usually an average like, like to start anytime fitness right now in Washington state, you need about $800,000. So like I could never make sense of Starting a new anytime fitness, it's just too expensive.

Because like if, even if you make a good location, that's $150,000 a year in profit would be a really good location. It could literally take me five years to pay off my, my initial investment, like to get my money back. The unique thing about home services is we don't have as much capital investment. We do not have as much barrier to entry. And the, the upside of that is that you can literally get all your money back within 12 to 24 months usually. So if you put 6, 60, 70, 80 grand in getting a location started, you can get that money back within a year or two. That's unheard of in most franchises because you're putting in. Because between 500 to a million, if you're doing a Taco Bell, you're gonna get $2 million. And they're less profitable than you might think. They're more of a real estate play depending on anyways. All of that being said.

The reason I talk about the heat lock is because for the vast majority of people, they could grow their business slowly and build it over the course of five years, get it to 300, 400,000 annual revenue. I think they could cut that in half if they are willing to take more risk. And I think that a HELOC is going to be more accessible of debt. Does that mean that it is higher risk? Yes, because if you're not eligible to have business debt and you're taking personal debt, I. E. Your home equity line of credit, you're going to have like, that's a higher level risk. However, a personal loan without a heloc, I. E. Collateral is going to be higher interest and it's usually not going to be revolving. So it's hard to get a revolving line of credit that's personal, where you, okay, I want $10,000, you use it and then you pay it off. You use it and you paid off. That's a revolving line of credit. And use your credit card, your best friend, because it's a revolving line of credit. But it's only 30 days. So if you need more than 30 days term, and for most of us we need 90 of 90, 90 to 100 to get through spring rush and be able to grow and scale. That's where I say HELOC is pretty good. But again I am talking, I am using that for the person that is willing to take on the extra risk to be able to go take something from five, six years down to two or three. And whether or not that Risk is manageable for them is an individual, individual case by case basis. But I don't recommend anyone getting the debt. Like I don't have any debt. Like just, just be clear. So outside of like mortgages and then I took some Eidl loans backed against my real estate also because I knew that interest rates go up and I could just. That 3.75% is fantastic. It's really what allowed us to 2020, 2021, et cetera with franchise was still losing hundreds of thousands of dollars. So it was a. It allowed us to float that and then I put that money into Treasuries to be able to keep the, keep the lights on during COVID Travis Clayton from North Carolina. Hey Mike, have you had experience with doing seller financing? I have someone who wants to buy my location and I think would be a good fit for Augusta. Says he has cash but wants to save money to have. Have to update equipment and marketing. I prefer to have cash to pay down some debt. Pros vs. Cons of seller financing So I would recommend to do two different offers. I would say this if you were the buyer, if you're the, if you're also the seller, though, I would propose the same thing. And it's like, hey, look, here's the cash. Here's what the price would be with debt. And then let it, let them have it, right? So if you pay up front, I'm going to. I'm willing to give you less, it's going to cost you less. And then if I'm going to do seller financing, I'm taking on risk that you walk away from the deal. Therefore, I am going to.

Have a higher asking price. I would also make it part of the deal that if you're going to do seller financing that you get a lien on the equipment so you can get this done pretty easily. Make sure it's done legitimately where you can get a lien on the equipment. So if something goes south, you still can collateralize the debt. So what I would recommend if you're going to do the seller financing is make sure that whatever the salvage value of the equipment that you're collateralizing is, that plus the cash that he pays you at sale is what you want the business to sell for. So either a, give me this, you know, let's just make up some numbers. Okay, 50 grand. If you give me 50 grand, you got the business boom. I want 65,000 if you want me to sell or finance it. And I want 30 of that to be in cash. And the other 35, you can pay me back over the course of 24 months. And then you know that that 35,000 is going to be collateralized by the trucks or equipment that you know would easily cover the 35 in the event that he defaults. So that'd be my recommendation.

Ken from Fenton, Michigan, can you speak more about what you said recently about coaching calls? Specifically about how you have eight months of things to do before your next coaching. Then translate that to us. Like how I need to follow the rule of 100 for six weeks. How does that look for you and how does that look for us? Great. So just for reference for everyone, I just left Michigan two days ago, was it or.

Used to be yesterday with Ken. So basically my. My marching orders for him was to six weeks of doing 100 door hangers every single day or 100 calls or 100 direct emails to customers. Not bulk email, direct.

And so I said, like, that's the only thing he needs to do. Like nothing else matters. Because we can go down the road of equipment, we can go down the road of, like, inventions that he wants to build. We can go down the road of, like, what people have said on social media is, like, look, none of that matters. The only thing that you should be doing is one thing.

So let me just pull up the post you had posted on the Facebook group, Ken, and I'll reference what I said directly here. So what he was saying is, can we have another coaching call in addition? And although I understand the need for that in a crisis, I actually believe that having there is such thing as over coaching. And I can't find the post, of course, on the Facebook group. Sorry. Anyways, that was the essence of the. Of the post, though, was Ken was saying, hey, can we get another coaching call? Like, if a coach is willing to talk to you. Yes. No, I don't.

And so for me, like, after going to acquisition.com after going to the conference with.

A bunch of the tech people, I had like, the rest of the year of stuff. I know I need to get done. I have the people I need to hire that do not live in Bellingham, and I need to hire them in. I've already started on several initiatives in terms of media buyer, cto. I have a couple other positions I need to fill that people would have to come to the office and I would have to pay them enough to come get them to move in. And it's not going to be a position that I can train up. It'd be a position they have to have a Ton of experience. So there's. There's stuff I want to do for revamping the franchise training. There's stuff that I want to do in terms of the conference and create more of a workshop style instead of just a bunch of keynotes.

All of you know, I got to finish the book. So all of that to say the next eight months, like, I. I have what I needed to do next at each level. So, like, last week, it was like several things, and, like, in a week or two, you'll hear about one of them. A big hire that I made, so that was important. It's like, hit that thing and then you move on the next thing. It's just one after the other after the other after the other. And I'm not trying to do all at the same time. I'm just focused on the one directly in front of me. And so when someone has too much coaching, I find it creates five or six different varied opinions. If they're talking to different people or even if they're talking to the same person, they start trying to fight too many battles. And.

It is true as entrepreneurs that we are constantly just fighting multiple battles, and it's just a matter of allocating time and attention. That's really all our job is as CEOs. However.

The more attention you can put on the next step in front of you, I think that you'll execute better on it. And.

The greatest gains are wrought through.

Execution. Not on coaching, because the plan is not. Where money is made is the execution of the plan and how well you actually execute. And so I see time and time again, as people get advice, they do not execute on it, and they go get more advice. That is. That is, like, it boggles my brain that people do that. Like, there's nothing more infuriating to me. When anyone gets coaching, they pay for it, they sacrifice for it. They join a franchise, they take other people's time, and they get the advice they need from someone that is credible and has the source of knowledge, and they do not take it, take action. That infuriates me so much, to the point that when I get advice and.

I know it's the right thing for the business, and I've made the plan, like, it's one thing to get advice, and you're like, hey, whatever, water off my back. Who cares? Trust me, everyone's going to hand you advice in life. But when you, like, that's the correct advice. Here's my plan, and you have it. You have marching orders. Why do we need more coaching? Why? And again, Ken, this is not attack on you, by the way. This is me. This is me just more ranting in general.

Like, the next thing should be executed on, like, so with Dr. Kashi, like, I know that the relationship I have with him now is because for six months, every single time that we would talk about doing something, the next call, my very first thing is, I did this and I did this, and I never missed a single thing. Not a single time did he ever say, did we agree by the end of the call, I would push back on things. We'd come to an agreement. But when we. We came to a conclusion of this was the plan, it always happened and usually within 24 hours. And so I believe that garners a lot of respect from people. And there are a few times that I will, like, just go out on someone's advice because I'm just trusting them. I usually like to battle it and hash it out with them if I'm getting coaching. But once, once I have established this is the plan that I am taking, like, there's no other coaching I need. I need to go execute on this. And until I have fully executed, I don't need more advice. And so.

Yeah, like, for the next eight months, like, there's nothing new happening with my, like, what is going to happen. I just need to execute on the plan. And so that's not usually fun and exciting. It's like, I literally know exactly what the next eight to 12 months is going to look like and what needs to happen every single stage. And so Dr. Cash knows, like, we're not talking about anything else but, like, the things on this list, because this is the plan we're executing against it. And so for the next three months, I'm not even probably three to six months, I'm not having any coaching calls because I know I needed to get done. And it's going to take me that long to catch up to where I'm like, okay, now I need more marching orders. So that's where I was coming from. Ken, again, that was not directed at you. I just think in general, I just find it laughable that people go to conferences, people have coaches, people talk about business.

They spend a lot of money doing it, and then they don't take action. It just boggles my brain. I hate it so much that, like, when I get coaching and I trigger a plan, it is relentless action towards making it happen. It's on the notes. I will not sleep until action has been taken on that plan. And so.

I have just seen that Those individuals that take that sort of level of discipline towards the execution are the ones that succeed, not the ones that have the best plan. The best plan doesn't win. The best execution wins. And so.

There'S something to be said for getting one piece of advice and knowing the next six to 12 months exactly what needs to happen, and knowing that it's only a matter of reps and a matter of execution in order to see that goal to its entirety.

That is the.

Risk of reading books, listening to podcasts, watching YouTube videos. Even these masterminds can like. It's so many areas of our entrepreneurial mind that we just go in a hundred different directions when reality is like, I know what I need to do. And usually for most of us, it's one thing. It is one thing. And the rule of 100 is great. If you're doing, like, in stage one and two, read what I say at the end every single time. Sell, sell, sell. The only thing you should be doing is selling. And so if you're doing under 200,000 in annual revenue, like, the only thing you should be focused on is getting more customers. And if the question. If the answer to that is, well, I don't have money to advertise or advertising isn't working, it is a matter of what? Like, it's not a matter of if, Mark, if marketing works, it is.

To what degree does it work? And then are you willing to put in the actual raw math to make it make sense financially? Because if you're doing under 200,000 in annual revenue, I know there's time that you can spend like, well, I'm working like crazy. Okay? That's during spring rush. Like, there's time there. And if that means go hire someone and then you spend like I was spending today. It was another same thing. It was the rule of 100. They're doing 150,000. They just got a massive contract. Whack down to 75,000, second year. Like, they're still doing okay, but, like, they're spending $3,500 a month between an agency and Facebook ads, and they're getting a couple leads a week. But when you run the math on the agency and the cost of all the ads, they're looking around 250 to $300 customer acquisition cost. I said, look, you should hire someone to do all of the work for you, and then you go out and do door hangers, because we know that produces about one customer every 250, which means if you can do, like, you can literally get one and a half new customers a day. And that's going to be a better return than the Facebook ads right now. And you have more time than you have money. And so we figured out the math. It's like, okay, we can hire someone for $158 per day or whatever it was to do all of the work. Great. And in that time we get 1.5 customers. What does that mean? Essentially you have a hundred dollar customer acquisition cost. Because now the cost, real cost, is having someone else go do the work so you can go do marketing. And that, that's a growth mindset. Like you're definitely in growth mode if you're doing that. But if you just broke down the math of like, okay, if I just spent my entire day selling the rule of 100, why not make it rule of 500 and get violent with it? I just so happen to believe if you get results from 100 door hangers, regardless of whether that be 150, 200, 250 it takes to get one customer. I happen to believe that you will get five times the results if you put 500 out per day. That is the nice thing about door hangers. It takes time and not a lot of money. And so I believe that if you can use 3, 400 a day and get two or three customers, it'd be better serving to you to go hire someone to go do the work and then you focus on that. And so when I talk about getting one piece of advice and then running with it, it is literally that if your bottleneck is that you can't find employees is with relentless attention towards that goal that you should be focused on. Nothing else matters.

So that was my little rant for the day.

Mental boost from the coaching conference. It gets addicting. Who is this? I just want to know. I'm just, just curious.

Nick. Nick, I will disagree with you on this, Nick. I think you do great job of execution. In the past six months, 12 months, you've implemented pay for performance. Like there's so many things you've done. I, I would actually disagree with you, Nick. I think you enjoyed and it's okay to have the enjoyment of stimulation. Like it's, it's great to talk to people that are like way above your league and get ideas. It gets fun. It's exciting. That's why I still listen to books and podcasts. I like it. It's st. That's what we like as entrepreneurs. But when it comes to our businesses, it's like, I must execute on these things. And there are Usually only a couple things to execute on that will yield the greatest results. The other 80 things that can be done in your business don't really move the needle. And I'm always amazed when people throw the baby out with a dishwater.

Because they're looking at all these fine things that are causing little cuts in their business. But it's like the 30, 40% increase. Your business. What was that caused by? It's like, well, this. This little thing. And this little thing, like, okay, like, zoom out for a second. Like, look at the macro.

And I would say, Nick, you do a great job of that. I really do believe that. So don't, don't be too hard on yourself. But. But the coaching and conferences and stuff, it is great. It's just awesome to talk to other people that, like, understand you connect with people to get someone's other set of eyes on your business. It's good. And there's one. There's something to be said for getting a general practitioner, like, do a health checkup. That's where I see the value of coaching. Even at a regular process, while you're executing against one or two things, it's like checkups, right? The thing is this. You don't go to a general practitioner or like a general physician and them start digging your brain. They don't. They give you general advice for, like, your temperature, your weight, your diet. And so if you're going to get brain surgery, you're going to have like, one of those a year. You're not going to have brain surgery every single month. And I think some people go into coaching calls, whether it be in Augusta or just in general. I'm talking more generalized. Or they go into a conference and, like, I'm going to blow up my whole business. And if you. That's fine. But you do that occasionally. You take that one massive thing that you're going to change, and you do it in the course of 12 months. Like, if you do that every couple weeks, every single month, you're like, I'm going to change this. I'm going to do this. Like, you're, You're. You're not going to retain people.

And especially the organization grows. Like, it's just. It's destabilizing for everybody, everybody involved. All right, everyone, I hope you're doing fantastic on this Tuesday night, almost midnight, so almost Wednesday.

I think we got to the questions, so thank you for putting up with my ocd. I don't like having questions sitting overnight. And sorry I had to cut off early, but we made the flight, baby, and we will connect on Thursday. All right, Love you all and have a fantastic rest of your week.