Mike Minutes Mastermind 06/14/2024

Good morning, Augusta Nation.

Let's get this party started. Happy Friday.

We'll jump right in to some questions here.

Boom.

All right.

Numero uno.

Okay, Mr. Anonymous, as long as an employee's base wage is 25% or less of your hourly rate, is the customer to the customer, that is okay, right? I know you'd want that percentage to be as low as possible for the crew to get more ppp, but just curious if that would still be okay even in the winter months. $18 per hour base rate pay, $20 per hour rate to customer. Yes, typically, like, as a very broad stroke, because it all comes down to estimate accuracy. As a very broad stroke, I see the 25% rule holding up to where about 70 to 80% of your crew typically will be above base pay. If you're at the 25 rule, and you need it to be at least that percentage of your team, Otherwise people think P4P is a scam. The lower that number is, the more of their pay becomes P4P bonuses, and the better it is in terms of having yellow slips affect them more and just more incentive around speed and quality. But yes, like, for example, $18 out of 80 is like 23%.

Of it passes the 25% rule. I was, I originally was going to make it a 20% rule, but that is very difficult, especially for the first two years in business, to be able to hit that number. Just know that, yes, the lower that number is, you're not paying your. Your team members less. You're simply. The floor is lowered. And so it's only affecting your lowest performers. If you move base pay, the only people that are affected is your lowest performers. If you increase the percentage or you raise prices, you're giving a bonus to your highest performers. That's how P4P works. And so that's why I like raising prices, and that's why I like increasing the percentage going to the team instead of moving base pay. Because base pay only affects your lowest performers. But yeah, as a very broad rule of thumb for P4 fee, I'm looking at the 25% rule, and that's what I call it.

That usually gives enough. Enough people to be able to hit paper P to where the culture shifts. If you're above 25%, I just don't see enough people making above base pay for it and make a meaningful change in the culture. Dusting from Bloomington, we got an attachment. Let's see, we got here.

Oh, it looks like a P and L. Okay, one second. Let's read the question Michael, not good ahead of ourselves. Submit question. All right, I'd love to know what your takeaway from this P and L. I ran this location for the last two weeks of May to get it back on track. We bill monthly. So this is technically April's recurring revenue with May's projects and expenses. May's revenue, I believe was $63,000. Total price increased. Happened last week in April. Got it. So this revenue, you basically are not going to. You're not going to see the increase in price since you bill monthly. Got it. After running the location for two weeks, we fired an extremely inefficient guy and are getting the same amount of work done with fewer guys, less overtime, and getting fewer yellow slips. Also, the marketing spend on Facebook. Also the marketing spend was Facebook testing. As well as indeed. Okay. As well as indeed. The first couple of weeks in May, we are now spending zero on marketing. Got it. Anything you would address, keep an eye on are major issues you would see other than just growing revenue and decreasing expenses. Leave labor is high because the team was extremely inefficient. And this is an understatement. It appears that is fixed now based on the fact that all team members efficiencies up and everyone is making P for P. Now can we get a hallelujah? All right, very good. Okay, so I'm. I'm gonna look at the P and L. You're basically saying that this is not going to show the price increase. This has inefficient team members, and the first two weeks it was ran inefficiently. So you're. I'm guessing you're bracing me for a bad P and L. Let's just take a look though.

Okay, so the very first thing I do. So I'll just walk you through, like how I look at a P L. Maybe it's helpful, you know, maybe it'll help the coaches too. Okay, this is the most weird thing. How Google does this. It's very hard to zoom in. Okay, here, step right there. The first thing I do, top line revenue. See, I can't scroll. Let me see if I can go up and down. Okay. I use my cursor.

This is so annoying. Sorry. Give me one second. See, scrolling up and down with my fingers actually goes like, zooms in and out. So it's very funky and I gotta use. Okay, there we go. We're back in business. Okay, so first thing, top line revenue, bottom line revenue. So immediately we're like, okay, we're hitting like a 3 to 4% profit. Margin in this month. Great. Then the second thing I'm gonna look for is payroll expenses. 18,000 out of 39,000. So running around 46. 47% of wages are a. 40. 45. Sorry, 40. Almost 50%. Like 47% or so of revenue is going to wages. Not horrible. Like I wouldn't like disqualify. I just want under 50% to like give someone a, a pass. Ideally the lower that number the better. But if you get under 50% you can be profitable in home in a, in a labor business. So not bad. All right.

So first thing I'm looking at also is so again I'm guessing this is a working GM model. One second, let me scroll over the yellow slips. I'm going to, just going to guess really killed you this month. Here's why I know that. Because I'm going to take.

30. There it is. Okay, so 57. 85,781.

Divided by. Nope, nope minus yo and then divide that by. It's not horrible. It's still within range. Okay. So basically 12% of your revenue right now is being spent on command Center. I want that, it's 11.5. I want that between 8 and 12%. So you're a little bit on the high end. That's probably caused by all the yellow slips. So I would expect this to go dramatically down in this coming month. I would just guess Dustin, based upon the efficiencies gained the. Yes, less yellow slips and the increase in price, this will go down to 8% and that's great. As soon as I see numbers above 12% I look at is the GM making like tons of requests to command center that are like illogical like every little thing. And they're not handling things themselves. They're not doing follow up calls, stuff like that. Also yellow slips. So if you had massive amounts of. And I know we did early in May, that's a huge like direct correlation with the cost of command center. Because a call, an unhappy customer calling command center that like is mad and you're way behind. They almost, they just keep calling. They just like they will become the squeaky wheel and it racks up the bill fast and so. Oh man, this is so annoying. Sorry. Okay, so that so labor. Not horrible. 47, 48%. Okay. I think the Bellingham shop the other day, they are 42%. So that's just comparison. Less than 12% going for admin. Not horrible either. I want that more around 8 to 9% if possible. And so that's usually fixed by decreasing Yellow slips, you're in profit mode now, prices are increased, etc. So great. Also raising prices that last week of April, usually you get a little uptick in admin because the increased amount of emails and phone calls that will come into command center because people are canceling, they're unhappy, they have questions, questions about their bill, their invoice, etc, so expect that. So for example, the Bellingham shop yesterday increased prices across the board. And command center is going through that today and yesterday and today to get those all processed. I expect my bill to not be around the usual like 8%. It might go up to like 9%. I'm expecting for June simply because they're processing all of those and customers call in, they email a lot more often. They ask, they call and ask about their bill at the end of the month because. Especially because we raised it in the middle of the month. So things like that will happen. Okay, so that's not bad. It's not bad. Okay, so I'm looking at now.

Yeah. So really across the board, the reason you're having like a 3 to 4% profit margin is everything is like decent on the high end, right. Like I don't want labor around like 50% or under. Good. So you're like a 47% not great. You could cut 5% off that pretty easily. There's 5% more margin you could take then just the cost of Command center and all these yellow subs, etc. Cut out from 12% down to 8% immediately you lock on another 4%. So all of a sudden now this business is doing more like 15% profit margin. Then you now increase prices. I believe that in June you'll probably be 20% profitable just by adding all those things up. Probably more than 20% profitable. Simply because of the price increase is like the biggest lever. Because immediately if you raised prices, you probably gained 10% immediately. So all the changes you've made will take this location, I believe 20% profitable in June based upon just those change. Sorry, just based on reducing yellow slips, making the team more efficient, getting them above base pay and then raising prices. If you do all those three things like you did in May, you did it in the middle of the month. It'll take this location from 3%. I can, I would bet my life on this. Like it'll be 20% profitable next month. Plus like would not be surprised if it hit 30% because you made those three levels. Those are three massive levers efficiency like reduction of admin cost. And at the same time you increase Prices. I'm an excited man. Let's go.

All right, there's just two today, which is totally fine. I know everyone's busy. Cool. Very happy about the fact that we have massive amounts of projects being submitted to command center for increasing prices. The most happy, warm and fuzzy feeling I have is to know that we are just smashed with people raising prices.

Let's go. Makes me so happy and still, like, across the board, if you've done good service, you take care of your customers, you answer the phone, the brand is strong. People don't want to leave, they don't want to go look for another service or an extra 10 bucks that they're going to spend on your service. So I know especially the ones that I have seen the most apprehensive to raise their prices is they had their own brand or they were outside of Augusta for a very long time. And so a big chunk of having a national brand is there is brand awareness and equity that customers now attribute to. And they don't want to go from that to Billy Bob down the street. Yes, Billy Bob is going to be 10, $15 less cheaper, but they have confidence now in a brand like brand holds so much power. That's the reason why you pay $200 for a pair of Nikes and $50 for a very comparable pair of knockoff sneakers. It's the brand you literally are willing to pay four times as much. Because when you put the things on, you think about your Michael Jordan, you can run faster. And all this other stuff, it's brand new. And so.

As we grow more locations, as people see the trucks, as you wrap your trucks in the new brand, as the. As you get, everyone changed over in terms like switching over to uniforms. And like every single time they call command center, someone's answering the phone, even if it's Max. In the middle of the night, they call four of your competitors after your price increase, and every single one goes to voicemail. Guess what? They're like, you know what? I'm willing to pay an extra $10 a week for them to just pick up the phone when I call. So I still remember like three or four years ago when this happened, before we even had Max. It was actually when Liz was still in the office. It might have been actually longer. It was probably six years ago then because Liz was still answering the phone. And when we raised prices, I would talk to one of the customers. They said, when you sent the email, I called three or four other people to ask for an estimate, and none of them picked up. Their phone. So I just hung up the phone and took the price increase. I was like, let's go. So these things matter to customers. And the right customer cares. The right customer cares and that we pick up the phone. The right customer cares that you show up in a nice truck. The right customer cares that all your team is uniformed and looks sharp. And that's the type of people you want to serve. Sticky products, sticky pricing. All right, everyone, have a fantastic weekend. We'll see you on Monday. Take care.