Mike Minutes Mastermind 05/22/2023

Hey everyone, hope you're doing well. Let's go and get things kicked off. Just copy this into the Facebook group real quick.

I had a few questions coming to me on the weekend.

And do not be offended if I just do not reply and I just talk about on the Mastermind simply due to the fact that there's other people that have the question. So if it's not like personal or anything to your business, I'm probably going to just answer on the Mastermind. I'm just starting to get kind of not overwhelmed, but I'm getting a lot of questions directed to me where it's like this could definitely be talked publicly on the Mastermind so I'll just address them here. It's just the only way I can possibly save my schedule is to be able to make sure I do that. So do not be offended. I don't have anything against you asking a question, but if it's not personal, it's just about like something like a business tip type thing. I'm just gonna answer on the on the Mastermind. So I had one about time management. I didn't really have any details on it though.

So if you ask a question about time management, feel free to ask me directly. I had another question about capacity. So if the individual that contacted me they said hey, like last year we did $29,000 in April, this year we did like $53,000 in April. We're on track for like 60 or 70 and now we're kind of hitting capacity like trucks and equipment and of it because like the past year has just been growing into the shoes of having way too much equipment or trucks and etc and now we're kind of at that capacity limit. What is the delineation between pushing yourself and continue to expand versus turning it into profit mode instead of being growth mode. And I would say it really comes down to your what you want, what you want the business to look like, right? When you start growing beyond 60 or $70,000 a month, you're going to start either a be pretty tied into daily operations all the time just because the amount of estimates you need to keep your crew busy during the tc the non spring rush season is substantial or you're going to go hire a general manager in addition to you being there and so.

Or you can be at that fifty, sixty thousand dollar level, get a general manager and then go start another location or do whatever else you want to do, right? So there's no right or wrong answer here. A lot of people that are in a franchise would probably just continue to scale up that one location and make it into a million, million and a half, 2 million, etc. And there's nothing wrong with that. It just comes down to do you want that or do you want to have the ability to move guys up inside the organization, make general managers? You know, if you have a really spread out market, you know, would you want to start a second location just so that way you can keep it separated, not have as long a drive time. It comes down to what kind of guys you have. Is there someone that really needs to be a general manager otherw otherwise you're going to lose them. There's a lot of factors that play into it, but really it should come down to what do you want the business to look like. Do you want to run a million dollar business or do you want it to be 5, 600,000? You take $100,000 home in profit and you have a general manager running it. And that's possible, especially once you've already done the growth part, right, the hardest part, because you're going against inertia and that is growing it. Once you've grown to say 60 or 70,000, it is way easier to then say, okay, we're going to turn on the profit knob, go to 50,000, 60,000amonth in revenue. We're going to have a lower close ratio. I'm going to hire a general manager, but at 50, 60,000amonth in revenue, you're doing about $500,000 a year. You should be able to, if you've turned the profit knob on, take 100 grand out of the business and have a general manager. It just comes down to have you actually, actually grown that six, you know, done the initial. And I'd be really looking at the amount of recurring revenue that you have before you bank on that, because outside of spring rush, you might then struggle to keep the crew busy. And so dealing with demand in a seasonal business like ours is like we talked about last week. You're going to have a certain capacity when it comes to trucks, equipment that might get eclipsed for like a month or two in spring rush. But you don't want to try to, you don't necessarily want to maximize your truck and equipment capacity to the top of spring rush because that means you have a lot of excess supply. You have a lot of capacity the rest of the year. Really you're going to be for a month or two. Typically we are kind of stretching labor capacity or stretching your equipment capacity, because if you, you don't want to expand your capacity by buying more trucks, equipment, hiring, getting a bigger shop space and then for nine months out of the year you don't really need all that excess capacity, so. Or that additional capacity, I should say. So. It's a balancing act, but it really comes down to what size of business do you want to build and what kind of business are you most satisfied and happy with? And it's different for everyone. So there's no really right or wrong answer on that one. In terms of time management, I don't think it was a complete question. I think I copied this into my notes. One second.

About time management. Yeah. No, I didn't have enough details. Yeah. Feel free to submit a question on the mastermind. On questions like that, like about time management, it's helpful for everyone to hear it. I'm not going to respond with a 10 minute phone call or anything like that, so. All right. And it's nothing against you, I promise you. It's just a matter of. Is the only way I can possibly stay focused on what needs to be accomplished. Okay, so number one, Kyle Tarvin. If I was to open a solo operator model, could I put someone in there as an operator and tell them to run it while I run another location? I didn't know it was an option. Or if the operator had to be the owner, why not just open up a bunch of solo operating models and play with them? Play them. GM salary, I guess there just might not be enough meat on the bone, so to say. Yeah, the second part is what you're talking about. Under $20,000 a month in revenue and it's gonna be very difficult to grow a business and make any profit. So that's why like I try to get all our gen. Gen, our my locations up above 20 to 30,000 very quickly.

And the reason we do that is because like under 20,000, by the time you take an owner's salary or sorry a GM salary, then you take at least, you'll need at least one employee for that. The trucks, equipment, there's just not enough meat on the bone. So I would never recommend this. I would. I don't think we've ever allowed this to happen because it's just, it's, it's an unprofitable model and that is having a GM run a solo operator model. There's just not enough meat on the bone. In order to have a GM, you need to be above $30,000 a month in revenue to, to sustainably make money and profit in addition to paying the general manager. Now if they were running it by themselves. The general manager. Yeah, they're, they would be making profit, but that would be going to them and, and that would basically be what is now their salary. You're paying someone 50, $60,000 a year as a GM plus taxes and all the rest of it on $20,000 a month in revenue. Let's call it 15. Right. Times 10. So 150,000. If you're literally taking 40% of that to owner salary, then you got an employee, they got trucks, equipment, insurance and advertising. There's not, there's not even. Just not enough. There is no meat on the bone. You will lose money. So we've never allowed it. Devin from Red Deer. Hey two customers aren't haven't paid their spring cleanups yet and it's been a month and they are saying they will, but they won't. One's for 600, others for 200. We were really busy at the time and we're kind of rushing but still got the jobs done. Should I just eat the cost or try calling them again or figure out this collections things. This was my first year of spring clamps and I was taking everything. Thanks. Also over the phone the guy was questioning everything and his wife agreed on the price but didn't pay. Yeah. So yeah Devin, just wait until you come for training. I know you're eager, but a lot of this stuff will kind of get sorted out because for example there'll be a process and a system for collections. Phone calls are are recorded at command center. So we have a lot more evidence to push against these sort of things in terms of the dollar value. You know like Ryan did a big lean on someone's property because it was like 30,000. You're not gonna do that. Probably over 200. It's just more of a headache than anything. But a lot of this can be solved. But good automations.

What are edgers essentials? Do I need an edger attachment? Never use one.

We like stick edgers just because it's easiest for the guys not to mess up. When it comes to edging along hard surfaces you can do straight edgers though they're usually last longer than the attachments because the attachments the connecting points sometimes break quite often after time over time. Kyle Tarvin kind of a long multi part question. If you could stop at each line item and discuss that would be really great. Really looking for in depth discussion on how you make this work as it seems to have worked great for you so far. On one of the podcasts you mentioned that you and Lee had a 50:50 profit split on podcast revenue. Since he is basically doing everything for the pod. Is there a reason you chose 50 50? Oh, you want in depth answers. Okay, 50 50. It's easy. He provides probably the. He does all editing, bringing the topic, etc. I probably bring at the beginning the majority audience. So that's kind of the reason for that. We're kind of following the model that he sees in the Iced Coffee Hour, which is another podcast which is a similar an influencer person who worked for them wanted to do a podcast and they split everything 50 50.

So that's why.

Number two, I'm just now realizing it is a smart move to use other people's mental passing and labor to help you build businesses while giving them a piece of the pie. Large profit shar. Sure you've done that with Home Service epa, your new fitness program. I was also always in the mindset that the business owner was the one who had to do the down and dirty work to get the company off the ground. Are there scenarios in which it wouldn't be a good idea to give someone a large profit share to incentivize them to grow that new business you don't want to focus on or don't have time for?

Yes. So profit sharing is only effective when you're profitable. So there's a difference between revenue sharing and profit sharing, right? So for example, like the health thing had nothing to do with making money. It had everything to do with retaining a good team member and someone that I wanted to work with for a long time. The same thing is home. Same thing is true for Home Service epa. So it really has nothing to do with the actual profit. So when in that case you have your revenue share because then they're incentivized by growth and then I'm incentivized to promote it. And so profit sharing is different because typically if you're doing profit sharing, you're more interested in the enterprise value than giving away a piece of the revenue. Right? So I would never do a revenue share at like a a business that has a high.

Variable expense like my actual lawn care businesses. Like that's mowing because labor so high you have variable cost like cost of goods sold with, with product cost and labor, et cetera. Whereas when you're talking about like informational products, if you're talking about like a podcast, it could be down the road your advertisers. By the way, there's $0 earned by the CSP unfiltered. So 5050 is at this point? No, not, not really relevant. But when it comes to things that are less tied to.

Variable expense, that's when I'm more inclined to give someone a percentage of revenue.

And yeah, the vast majority of the time when I've done that, it has nothing to do with making money. Like I literally, I've not made anything on the health thing. I won't for probably at least a year. And then home service cpa.

I think I took my first distribution ever like last month and it was like $12,000 or something. So it's much more about retaining people when I do those, those plays. And so even with like the media side, it's highly high margin, but it's mostly just so I can pay the guys on the media team and grow the media team. So you asked for in depth answer, so here you go. Number three, are there any other incentives you give Lee or other people that you can disclose regarding the podcast or other business? You can't. Okay, I already talked about this one. Yeah, I would never. And by the way, I would never tie anyone's.

Profit sharing or revenue share to anything that they cannot control directly. If it just basically falls on me. There's no reason to give them a piece of the pie if they do not have a direct impact. Like without their changing their performance, it doesn't affect the business. There's no way I'm giving revenue or profit sharing because that's just stupid. Not, not because I'm greedy, but because then I'm giving someone incentive based on something they cannot control. And so it makes them feel like, well, you should go promote this more. Like it's like, well, no, like what about you're getting more money because you do something different in your behavior? And so I only give revenue or profit sharing if someone it base is based upon things that they can control. And that's why I like with the general managers, they get 25% of profit sharing if they start a new location. But the reason I'm willing to give that is because the first year they're probably not going to see any of that. It's in the second and third year that starts to become very meaningful if they don't. If they've really put a lot of work in.

On in a third, let's just say someone that starts a location from scratch. First year, let's just say they make no profit sharing, they're working like crazy hours all the rest of it. Second year, let's just say they're a hundred thousand dollars from profit. That's $25,000 on top of their paycheck. They're probably pulling in 75 to 80k for that year. In year three, if they're like, okay, now they're hitting 6, 650 a year in revenue, very, very profitable. They can easily hit 100k.

Without any of the downside risk of having to start from scratch. And then if they stay in that, stay at that location, they keep optimizing for profit and it's incrementally making more money. But it comes down to the fact that the success of a location hinges 100% on a general manager. And that's the only reason why I'd give them 25% of profit. I'm not giving 25 of profit to someone who like chops up videos for me because it has very little to do with how they chop up the video and much more at the content of the video and whether or not I do a good job. So, you know, someone's not going to like it if they get a pay cut simply due to the fact that I'm off, right? So if someone doesn't have a direct impact on the business or the KPI, then they're not going to get a piece of it. So Devin from Red Deer, can you make 250k? One truck, one employee? I'm on track to gross 35k this month with that setup. Obviously a big month, but realistically could do 25 to 30k a month for 6, then 8 to 15 for other 6. I think, you know, during spring rush you could potentially hit this, but usually it's going to be.

During spring rush. You can do this working a lot of hours. Unless you're doing hardscaping or you're doing spring, then your, your revenue per hour is much higher. Spraying being obviously more in terms of margin and then landscaping being the fact that your cost of goods sold is wrapped up into your revenue. Kyle Tarvin, what are your thoughts on Cody Sanchez telling people to buy businesses outside of one industry? Landscaping, pool cleaning, H Vac, etc. It sounds great in theory, but when you have have to not only learn the business but also find a good operator for the business, succeed. Oh man, I should. I'm not a huge fan. Like it's absolutely horrible advice. Absolutely horrible advice. The people she interviews, notice what they're doing. They're all capitalizing on one industry. They'll do like one thing very well. She on the other hand, has to like, I would love to hear her to break down her revenue. She makes all of her Money from information products. She makes millions of dollars from her courses and from her masterminds. And so she has to be that wide variety of different industries and promote that as well as her fund, she has a fund that buy all these different land, you know, different home services and boring businesses.

I think it's very bad advice. And that's, I'm just.

She'S taking it from a capital allocators point of view and she's buying business that are million, $2 million, that are very established, have management in place. And so it is more, it's a capital play.

So she's looking at from the point of diversification.

But if you're starting new businesses and you're getting them off the ground and you're getting the managers and you're finding like you're building the systems for the business, it's a horrible idea, absolutely atrocious.

And I think she.

She knows that. She knows that like she's buying businesses that are like she, she literally sent out an email asking people if they want, if they, if they wanted to sell their business. And she had certain parameters, et cetera. And like the parameters are basically, you have everything in place. We're going to basically take capital and pour it on it. And because she has $60 million, whatever she has to deploy from her fund, but she's not starting them. And for the actual individual operator that doesn't have capital as a lever and you don't, you're not buying businesses that are 20, 25% profitable, been in business for 10, 15, 20 years, simply needs to be reorganized or rebr. Branded. That's a different game. She's in the game of.

Using leverage as well as.

Revamping businesses. But that takes a lot of money. For the vast majority of small business owners that are starting, et cetera, they should not have multiple industries. It's.