Mike Minutes Mastermind 05/16/2023

Hey everyone, opening super. Well, let's go get started. Just drop this link in if not today, within the next couple days I will have another video on follow estimate, follow up calls. I'll have that available and it will be addressing specific.

Stalls or.

Pushback that customers might have like price or I'm waiting for other estimates or I need to talk to my spouse or other stuff like that. So common objections. I will try to tackle those head on another video. I know the one from last week was mostly generic in terms of what to say if you hit a voicemail or if you hit someone on the actual phone and using this scarcity tactic of booking there, you know, putting something on the, reserving their spot in the schedule, things like that. So, so I think it was helpful and I will try to get.

I'll try to get the more in depth one with specific objections with the next couple days. All right, cool. Link is up. Okay, let's go ahead and jump into some questions present.

All right, what do we got? Devin from Sheridan, Red Deer, Alberta. Hey Mike, what if it's a franchise worth if it's built up to 800k in your yearly revenue but 400k that is from one time projects or even my location If I hit 200k this year. Just want to know how important it is to build a profitable business. Thank you, have a great day. Yeah, I'm starting to make a bunch of shorts about this and that's just like overall business valuation. You guys might like it. I'll do different industries and different businesses but like you'll start to see common things that I'm looking for because it's. Sorry, it's not, it's not, it's not one dimensional. You can't really just like oh, it's X amount times profit. You can't do that. You got to take into account the reliability of the revenue. And so like company people are always like, well why is, let's say just, you know, software is valued at, you know, 40 times earnings versus.

A retailer is worth maybe 1 times earnings or 2 times earnings. Why is that? Because I have no guarantee tomorrow that someone's going to come, need milk and buy eggs at my store. I have with higher certainty that someone who has is buying a subscription to software like Spotify and has been that way for two years is not going to cancel next month. So the dependability of those earnings as well as what is the gross profit of the next unit sold is important when it comes to valuation. So in the store I might be at a 1 or 2% profit margin. So my.

Expenses are substantially higher for every unit dollar I increase in terms of scalability. And then when it comes to software, it literally might cost me 1 or 2% or 5% as a cost for a new user to join compared to the revenue they bring in. So the scalability as well as the unit metrics is extremely important. That's why profitability, if you can be above 10% in a million dollar business, usually much, it's much better. Ideally you're of 20%. That typically takes five years if you're building from scratch to get there to a million plus with 20% margin simply because it takes a lot more operational efficiency and leadership and like honing that in a while to get it to that point. But it is kind of a.

Hockey stick curve of what your valuation is once you start becoming more profitable. Like a 10 to 12% profit margin business in this industry might get a and a half to 2x multiple on their rev on their profit. Whereas a business that does say 25% profit margin on recurring services and has steady income for the past three months or three years.

And profit margins have been stable that whole time might be valued at like 3x. What's the difference there? Probably like a double of the valuation, right? So I would not be concerned about valuation at all, to be perfectly honest with you. The only reason I would be considered a valuation is the fact that whatever that number is.

You are able to save that wealth from being taxed, right? You are not taxed on goodwill, you're not taxed on equity in the business. And so that's really the benefit of having a small business. But I would very much recommend everyone decouple yourself from the enterprise value of your small business. The reason being is the amount of people who think about it is absorbent compared to the amount of people actually sell their business. And the amount of energy people deploy towards the thinking about their valuation and what they could do if they sold it is if that was just deployed towards making a better business and keeping their customers happier and keeping their team more involved, their business would be much, much more successful and the valuation would be much better if they just spent time on that.

I've talked about before. But actual selling your business is usually pretty tax inefficient and.

Usually the best method of of a small business is to get it to run to a point where it's profitable enough to be able to afford management to where you're not there on a daily basis. That's usually the most tax efficient way of doing it. So you can continue to write things off. The equity continues to grow without being taxed and you can then as the company becomes more stable like 5 in years 5 to 10, you can usually get. You can get debt against that equity and be extremely tax efficient from a bank's perspective.

Kyle Tarbin what thought process do you go through when deciding to let go of an employee to switch out for someone else that they that may have the potential to do more or turn into more of a leader? I've hired a guy, I have a guy I just hired last week that has been working out well. But I found another guy that is ex military that seems to he could take on more of a leadership role down the road. I like to switch these guys out but don't want to let one go. Then this guy not work out. Yeah. So I again kind of like we talked about yesterday, I would not cross bridges before you get to them. You're crossing the bridge that this person potentially could be like a leadership that sort of thing. When we're literally a weekend and then you have burned in the hand like a good team member, it sounds like that you just hired. So I would only kind of think about this this as you should if you really want to go after this the second person go and sell enough jobs to be or you could have both of them working for you. And again knowing that the likelihood of both of them sticking around for more than three to four months is probably pretty low. So that would be my recommendation is like put all the energy you have in into this into going and getting more work and whether that be too like maybe the ex military guy like hey you got to go do door hangers for property cleanups. You've got to create the work because otherwise you're gonna have 15 to 20 hours a week. But hey, here's door hangers. Here's how to do the pricing. Let me show you how to do this. If you go out and sell property cleanups, you got work, right? You could absolutely do that. So it also show like if he's GM quality like a GM better be able to do some pricing and be able to do some, you know, basic math and be able to do some selling too. That's doing door hangers. Not be afraid of it. Landon Smith Tallahassee, Florida how do I keep track of my customer acquisition cost for each individual part of marketing such as Facebook versus Google? I think.

Door hangers and every door may be a little easier to track. But just wondering how you all figured this. Yeah, you're 100% right. We've talked about this a lot. And that is even, even when it comes to Facebook and Google, if someone goes on to Google and clicks on your ad, they, is it that they actually clicked on your ad or is it the fact that they saw your truck or they actually heard a referral at the dentist, they went on their phone and typed in Augusta Lawn Care, saw your ad, clicked on the ad and then went through your estimate sequence and you're giving all the attribute to Google. In reality, that was a referral or that was someone who saw your truck or that's a friend of one of your employees that needs service and they just searched it and they clicked on the ad. So I think personally, Facebook and Gate and Google get a lot of attribution. Especially Google gets a lot of credit where credit is not due, simply due to the fact that they show up. When you search for Augusta Lawn Care in any, any business, so it's difficult. I'd be looking. That's why I'm a big fan of yes on door hangers, every door to make mail. It's much easier to track that, that strategy. But when it comes like online, I want to track the overall customer acquisition cost. I want to be talking to my customers. Especially when you're in person with a customer, asking where they saw you is like probably the most valuable piece of information. Because even if we do it over the phone, a lot of times they're like, oh, like I, I looked you up online. But when you actually talk to them in person, like during a drive by, you spent five or ten minutes with them like, well, actually like I so and so down the street, they talked to me. I saw your trucks in here all the time. And then I went on Google. Right? So those, those in person customer interactions are probably the most beneficial to just getting like ear to the ground, figuring out what's working online. Because so so much of what goes on Google, like, I really wish we could break this out. It's very difficult to. And Google will never give you this data. And that is like, you could technically break it down. Like, for example, you can see how many people search Augusta Lawn Care and then click on your ad like, so you can see which keywords are searched when they click on your ad. And the question is, if they didn't, if they typed in Augusta Lawn Care in the search term and you know, say four out of eight clicks came from someone typing the word Augusta Lawn Care, I would venture to believe that three out of those, four would have found our site anyways without clicking on the ad. Well now your customer, your, your cost per Click just went up 30, 40% on Google and so it's tough to track. I'm much more a fan of listening to the customers, tracking your overall customer acquisition cost online. And yes, door hangers and every door direct Mills is super simple to be able to track it. And that's why I do enjoy that if you have time, when you don't have time and you just have money, it's going to be somewhat inefficient due to the fact that you're going to probably pay for leads coming, especially on Google's perspective that would otherwise be coming to your site anyways. Especially if you have are allowing the search term of Augusta lawn care. And yes, you could do a negative search term which means it blocks your ad from showing up. If they search for Augusta lawn care, you could do that and that's not a bad thing to do. But again, even if they put in like lawn care near me, you want to show up there. But again, they might have literally just seen your truck. Right. So there's just so many different angles. It's kind of tough sometimes to track it. So it's a matter of globally tracking it and then yeah, using door hangers and every door direct mail is a little bit more of a precise measure. But even that, it's just like, well, you know, did you know every door direct mail get it or did they then go on to Facebook, see the ad, go down that rabbit hole and do the estimate versus like they just simply didn't want to look at like scan the QR code or go on, type it in on from the door hanger. Right.

Garrett from Glendale sounds like command was dealing with sickness and a little behind recently. Are we here to send free estimate estimate in 24 hours one click estimate email or is 24 hours unreasonable right now? Totally fine. If so I can just say 40 hours instead of 24 hours. No, you should be, you should be good. Go ahead.

We have like using Mondays is when we're mostly backed up because we're catching up from the weekend. So like we don't do full service on Saturday or Sunday obviously. And on, on Sundays there's everything that goes to voicemail. And, and so the downside of that is like Monday is usually a slog and then we catch up Tuesday and Wednesday to where it's like we're right behind everyone when they're as they're sending out estimates. I Think this will resolve as we get like AI to answer the phone after hours and other things like that.

But for now you should be fine to send this out. Honestly now, it's not really the sickness, it's just a matter of having to create estimates three and four times for them to stick in service autopilot. But I don't know what the status of that is.

But yeah, no, you're good, you're good to send that out and say that that's fine.

So in terms of valuation when buying another small business, say 60 loans account, how many should you expect to lose over 12 months? How would we account for that risk in our offer? Yep. So I would. It comes down to like several things. Like if you're going to raise price, you probably increase the percentage that you expect to lose. Right. If you are, are not changing price and you're change and you're, you're sending out your email to those customers during a busy season when it's hard to get another contractor, you're probably also more likely to keep them. If you're able to do a video and email with the owner and like kind of show a peaceful transition of power and like all the notes are coming over and all the rest, it increases even more. Right. So I've seen where 90, 95% of customers in an acquisition do stay if it's all done right. And that's why talking to your coach is important, because they'll make sure, okay, don't raise your prices. Curing your welcome email to new the people you're acquiring. Try to get the video or picture with the owner to show that, okay, this is a peaceful transfer. This isn't like a hostile takeover, no one's dying, anything like that. Convince them that like there's nothing but upside for them in terms of command center, better automations, more professional service, phones being answered 80 hours a week, all that stuff. Right. So doing all of that is going to help a lot with losing out customers during an acquisition.

In terms of valuing the mowing accounts, like that sort of thing. I'd just be looking at your customer acquisition cost potentially how much do you want to pay on top of that? Maybe you'd pay double your customer acquisition cost in order to be able to. Again, we'll get 60 lawn accounts. But then let's say, okay, now it's not 60, let's say it's 50 because you're going to lose some of them just because they don't like the change they wanted, that other owner, etc. Well now you might not be willing to do 2x multiple on 60, but maybe you do it on 45 or 50.

I'm having a hard time being back at the shop at the end of the day to see the guys off for the day. Between estimates, fieldwork, everyone getting off at a different time. How do you manage doing this and how important is it? I would only say this is important as you get above like 8 to 10 employees and you typically are going to need someone full time in the office.

And doing, you know, scheduling, dispatching the billing side of things and allowing command center just handle basic service only. So that's usually when I, I think it's most important that you're at the end today with the guys. When you have one, two, three employees. Especially when you get like two or three trucks and you're out in the field for the majority of the day, you're not going to be able to. I would personally, in that case, just making sure you're, you're always checking in with the crew. So I would say, hey guys, before you wrap up your, your jobs for the day, when you have two jobs left on your route, send me a text message and do it two jobs before. So that way if I'm finishing up my job, I'll be able to touch base with you before you're finished for the day. Touching base with them is important. The last thing is you want them is going back to the shop and they think in their mind you're out in the boat in the middle of a lake or playing golf and that's the narrative they can start to buy into. And so staying in touch with them is important. Sending them pictures. I know Lee does this and that. He'll like, he'll like send a picture of him out doing an estimate or something like that. Staying in touch with them, knowing so they know that you're working if you're not at the shop when they get back is important. Right. And so just staying in touch with them is probably the most important.

It's Nick from Marysville. I had a guy who left on bad terms. He spent one day training a guy and gave him, and gave him a 16 bonus for that day. Well, when he quit, I told CC to put him at base pay since it was on bad terms. Now he's coming after me for the $16. Not to mention he was in a tight spot and I gave him a hundred dollars cash and told him not to pay it back. Trying to be a good guy. I just ignore him. I can't believe people sometimes. Just depends. 16 might be worth it for the peace of mind, if that's really a big deal. He's actually, like, threatening stuff.

So. Yeah. Is 16 worth him damaging or slashing your tires? Probably not, but yeah, like, ultimately, the 16 is a bonus based upon performance. I think it's pretty clear his performance wasn't high enough, and so I'd stick to that. I wouldn't even. Yeah, it just depends. This becomes a personal thing, right? Like, do you want to just give him 16 and have him done with and have the peace of mind to, like, clear that space out of your brain? Or do you from the moral high ground of, like, I don't want to do this. That's really just a personal thing. Right. All right, everyone, have a fantastic Tuesday. See you tomorrow. Take care.