Mike Minutes Mastermind 06/23/2022 (Accounts Receivable)

Good morning, destination. Hope you're all doing super well. I'm getting elderly, and I forgot my laptop at my apartment in a rush this morning, so I apologize. I am on Zach's computer, so I will be pulling up the questions on my phone. But I did have a few things I wanted to go over, and that is in relation to accounts receivable. Specifically, if you are in really, really low cash. Typically after the end of June is when cash flow in our industry gets a lot better as well as we're just more efficient, etc. We found our rhythm in terms of hiring, et cetera, so that's great. But whether it be now or whether it be in the spring rush, etc. When you get to a point where you're in really bad cash flow or there's an unexpected expense that pops up, I want to go over some of the immediate things you can do to get cash.

Specifically, Connor Stead, one of our owners, he had reached out to me yesterday, and because he had a truck, needed engine, new engine, $7,300. Over 7,300 bucks, you know, and literally a few years ago, I would say, hey, go buy a new truck. $7,300. Not worth it now, though, to replace that truck's probably looking at 20, 25 grand. So you're going to pay seven grand for the new engine. I text him back, I said, I feel your pain, because down at the location we just took over, we just had to spend $6,400 on a new engine. So just strange times. There is not an ounce in my body that would have ever imagined a few years ago that I would spend $6,000 on any repair. Even if it was 2,000, back in the day, I would just scrap the truck because I could get new trucks for three, four, or five grand. So that is no longer the case. So basically what happened, Connor, he said I could share his name and numbers, so I did ask him for permission. And so the first thing you want to look at is accounts receivable. How much money do people owe you? So he went and looked. He said that there were. There was $3,700 that were overdue past 30 days and $4,000 past 15 days. Obviously, at the end of this month, the end of this month of June, he will get a cash injection by ending the month off and be able to invoice people. However, the. The engine required, the mechanic required 50% down and another 50% when the project was done. So he immediately, you know, three, $4,000, and he could do it on credit card. But obviously it's not ideal to max out your credit card and get that done. So we were looking at, first thing, accounts receivable. Right off the bat, we were looking at about $8,000, 3,700 past 30 days, 4,200 past 15 days. So around $8,000. Then also he had job landscape jobs he's working on right now that they still owe him $4,700. So the first thing I said is, okay, let's go after the accounts receivable. Those, especially Those ones are 30 days, 15 days. But also the job, the landscaping jobs that you're currently, you know, halfway through your, your. The status would be incomplete on those you're working on. Get those jobs in as soon as possible, and then literally stay on the job and get the check for the last 50%. And that was $4,700. So what we, what we're doing is we're going to, first of all, we're going to get the truck to the mechanic so that as soon as we pay the 50% down, they can get started. But then we're going to try to collect on overdues that 30 days, 15 days, and then finish the landscaping jobs that were kind of wrapping up in progress. We've kind of been pushing off, you know, kind of working on, on the side. Get those done. And when you're. Make sure you're on site and get that check for the last 50% down, that's another 4,700. And then what we really went after is the fact that he had a bunch of projects on the schedule because he's booked out, but they hadn't paid their 50% down yet. Now, in zooper, this will be impossible because someone will not be able to accept an estimate without paying their 50% down. However, on service autopilot, someone click accept, and then theoretically, you could put them on the schedule without collecting a 50% down. I don't recommend that, but I know in the multitude of business, sometimes that happens. So what we did is, hey, look, go contact those people that have already sold the job and tell them, hey, look, our schedule is booking out pretty fast here, and I need that 50% down right now in order to secure your date that I've given you, because you need to give that 50% down. And so that was another 5,200. All right, so in all accounts receivable, that was between 15 and 30 days incomplete jobs that just need to be wrapped up and collected on and then people that had accepted a Job, but had not paid their 50% deposit and they were on the schedule. Between all of that was almost $18,000. So a lot of times when we get into a cash crunch, it's very easy to be like, man, I don't have the seven grand to fix the engine. No one wants to, no one wants to fix an engine for seven grand. I understand, it's horrible. However, you got to realize that accounts receivable, deposits outstanding, incomplete jobs, that's where all of your cash is sitting. So if you're cash strapped, look at those things. A lot of us, it's very easy to look at your accounts receivable, but realize that cat accounts receivable, it also comes the form of people who owe you the last 50%. The people who you're wrapping up the job now, collecting them right away. Do not just finish the job and say, we'll send you an invoice, go to the job and collect the check if you need cash really bad. And then the last thing is people who are on the schedule, they've clicked accept and they've, they've accepted the fact that they got to put 50% down and you just haven't collected the money. So again, that's where all of your cash is probably sitting. If you look at all of those things, you know, in this case for Connor was 18,000. For some of you, it's 50, 60, 70 plus people that are overdue, people that have accepted jobs and you haven't got their deposit, and people that you are, the status of the job is incomplete. Like you're, you're kind of wrapping up the last few pieces of the job and as soon as you finish, you get 50% of the job in cash. So that's where all of your cash is sitting. And if you actually solve that problem, like if I told someone today, hey, I'll give you 30 grand, they'd be like, oh, that'd be great. That just helped me so much my business, I'd be able to keep growing and stuff that the cash is there. It's just, you gotta go collect it. Collections, deposits, initial and deposits, wrapping up a job, that's where all the cash of your business is sitting. And that's why so many people feel really like they have a lot of cash, they're wealthy and they have a lot of money in their business. In October, November, December. Because we start collecting on those things before the end of the year and we start wrapping up the job, we start finishing up everything that we actually like send people to collections so staying on that is very important for, for your cash flow. So very, very important. If you actually ran those numbers, you would immediately like. Connor immediately got on the calls, he immediately started collecting. So kudos to him taking action and already getting more than the 50% he needed for that engine. So shout out to him and just taking execution, taking action and executing on that. Let's go ahead and go jump into some of these questions. I will show them here on my device so you can see, Sorry, Chrome. Here we go. All right, I'll read them off of here. About five of them it looks like. I have not read through all of these. Oh, look, I can actually do it from here. Look. So this says, hey, Mike, our team wants to start soliciting Google reviews. And they have come up with an idea of leaving a signed note in the door with a short message and our Google link. You think this is a good idea? Would you be willing and able to get a small postcard template set up on vistaprint? So the first thing is you got to ask yourself, you know that link that they give you on Google is not the greatest because it's a bunch of random text. It doesn't say google.com it says like goo.gle.com and a bunch of random letters. So what I would recommend is really two things. One, really leaning on the automation and that email to get the reviews that automatically do it. Secondly, if you're going to incentivize your employees to get reviews, honestly, if I was an employee, I would literally open up my Google app. I would go up to the employee and say, hey, could you write us a review? Because like we give our guys $50 if they mention the name of the customer and name of the employee in their five star review. I think we give them $10 if it's nothing, I think it's five. It's $5 to get a five star review from a customer that they worked on and it's $50 if they mention their name. I would personally go up as an employee and be like, hey, here's Google. Write me a review here and mention my name because I get 50 bucks. I would do that. But I don't think putting on print is super useful because by the time they like look at the thing, type it in, they could have either Googled you, Google your name and then just click writer review on the right hand side or just go to our website. Right? Because now all of us on augustalongerservices.com have that schema for writing review and There's a button that says write a review. So it's honestly faster for them to literally search Google or ask Siri to take them to Augusta Lawn Care and then go to their homepage and click write a review or just go to Google search and then click it from there. So that would be, that would be my recommendation. It's honestly still faster just for them to find us on our website. And your driving traffic to your website, which is always a good thing. Next question, let's see here.

Would you recommend sending an email to mowing customers to let us know 24 hours before service that they would like to be skipped? Had a lot of customers come out and tell the crew not to mow this week and had it been a killer for scheduling? Yeah. So we give, we have one grace period, one grace visit where someone does this. We basically email them and say, hey, we have a 24 hour cancellation policy. You need to let us know within 24 hours we're going to cancel service or we do charge you. So what we tell the crew out in the field, if someone comes out to do that, try to say, hey, we're gonna mow today because we're already here. Just so you know, in the future there is a 24 hour notice cancellation, but why don't we go ahead and put you on bi weekly service and then they just got to put the notes that the crew does because ultimately the crew, they don't make money on P4P if there's no money being earned. So spin it in the direction of, hey, we don't want you guys going, like I mentioned this morning on one of our team meetings, hey, look, we don't want you driving 10 minutes to a property, them canceling you guys 10 minutes back.

And you don't make any money on pvp. It's a waste of 30 minutes for you. So by the time you talk to the customer and everything. So that's what I would recommend is have one grace period and when that happens, if they do come and say, no, I don't want you to mow today, email the customer, let them know of the policy and then just let them go for that one time. But then going forward you're going to charge them. So I'd make an office note. If you actually did notify them via emails telling them that there's a 24 hour notice cancellation, we're going to start putting it in the estimates and next month command center work on putting on everyone's estimates that There is a 24 hour notice. Of cancellation. Again, even if you put it there. Customers do not read that. They just don't. And they don't remember it because it's six months ago. They accepted the estimate and now you're telling them they can't cancel. Right. So I don't think it's actually going to move the needle. But you need something in writing. So if you don't have something in writing, you're going to need to, in my opinion, give them one grace period. Give them one time. It's like, hey, just FYI, you can't cancel right before you just give us 24, 24 hour heads up, if you'd like, we could switch you to bi weekly service for the summer period. And then once we hit back into, you know, September, October, whenever we can switch it back to weekly.

Next question. Should we be worried about clients losing their job where they won't be able to pay for lawn care anymore? Um, a lot of our customers are either working professionals or retirees that are affluent. The retire affluent person physically cannot do the job and they're usually insulated from these type of, you know, micro recessions. And so I'm not too concerned. Unless you're living in a more suburban area where 50, 60, 70% of your customers are working professionals, that's going to be hit a little bit harder. But honestly, I just don't believe that any working professional right now is going to go spend $800 minimum to buy a push mower, plus a couple hundred dollars for a weed whacker and a blower to go mow their lawn. I just don't see that happening because a lot of these people, even working professionals that are kind of our second tier customer, have 100, $200,000 worth of equity in their house and they don't feel like they are quote, unquote poor. So them losing their job right now, they're going to find another job. But let's just say the recession is really bad. It hits them really hard. I feel like the goal is to, number one, diversify away from that, that class of person. But also they would literally have to put down 1,000 to $1,500 just to get the equipment to be mowing. And the fact if they're a millennial and they're a tech worker or whatever, they don't want to be mowing their lawn. Like that's the last thing they want to be doing. They would much rather like literally not go out to eat than not have service. I really believe that. So.

All right, next one up here my closing rate is around 20 to 30%. Should I drop my hourly to 60 from 70 so I can close more then next year jump back up. As a solo operator, I don't think it's a bad idea. Since you're trying to grow obviously looking at on a coaching call with Lee, other areas besides your close ratio would be really important things like your notes making sure they're really detailed and there's providing value to the customer on your estimate notes. But if all things are held equal and all those things check out, I would lower your price as a solo operator because your fixed expenses are so low you just need to increase revenue. Right.

I had a graph I would show you but basically when you're first getting started, the reason I say like grow at all expenses and don't worry about about your profitability is because your fixed expenses are so low, any revenue becomes highly profitable even if it's at a lower dollar per hour rate. So I would do that again after making sure that there's not other variables besides price that need to be addressed. And the first one I always see is estimate notes not being thorough. And that adds value to the customer massively. And your follow up process, are you calling them the next day? If you're, if your close ratio is under 30% and you're trying to grow, you should be calling your estimates the day after 100%. You as the estimator should be doing that. Hey, this is Mike over Augusta Lawn Care. Just giving you a call. I met you yesterday. Just make sure you got the estimate. If you have any questions whatsoever like just dive right into it. Make the sale, have a, have a date that you want to get them on the schedule and use that as a means of creating scarcity. That's what I would do. But before you do the price, definitely check in with Lee on a coaching call and make sure that you're not. There's not other, there's multiple things. Are you pushing all your estimates to Friday? Because if they're coming in Saturday and Sunday and Monday and then you're not meeting them till Friday and then the estimate goes out Saturday, like now we're a week already passed. Right. So little things like that I, I would check on before doing your price.

All right, let's see what this says. What would be your recommendation on percentage of profit to hold back for growth and marketing for next year? I want as much as possible, but I'm still spending marketing money this year to grow again. If you're trying to grow a lot. And you're kind of like, obviously Dustin, you're growing and you're kind of invest, you're in that mode of invest back into the business. The next six months is where we all see our profit. Like again, landscapers feel rich in October, November and December. And so.

I would say as much as possible, your spring rush is going to have your, your best customer acquisition cost. So every dollar that you spend right now in marketing is probably worth $2 next spring rush to you. Because two things, number one, it's spring rush demand is higher, therefore your customer acquisition cost is going to be lower. Okay. Second.

Supply is going to be lower next spring if we go into recession because there's not going to be as many landscaping companies, big ones, advertising, because Chuck in a Truck does not do Google Ads, he does not do Facebook ads, he does Craigslist ads and flyers. So it's going to be a cheaper cpm, cheaper cost per click as well in terms of advertising rates next spring if we go into recession. So if your question is, do I save money in the hopes that there's a recession? I would say as much as possibly can. If the next question is, well, what about just marketing now versus next spring? I would still be saving as much as you can for next spring. I think that everyone for the remainder of this year, unless you are in massive growth mode still, I would be saying, okay, what do we do to lock in the current number of team members, number of trucks, lock those in, keep them busy. You might do a little bit of marketing to keep them busy. If you've been skewing most of your percentage of revenue towards projects and not recurring revenue, that's usually when people have to start continuing marketing. The rest of the year is when they have a lot of projects. Now if you have mostly recurring revenue, this is golden money opportunity. The next six months is where you make all your money because you stop marketing and you just keep playing those recurring revenues throughout the rest of the year. Now, if you have more projects, you're going to need to market to keep your guys busy. But don't try to keep growing. Put as much money as you can away for next spring rush, alright? And unfortunately, landscapers are just not very good at keeping money for six months in their bank account. They're just not, they're gonna see the next shiny thing in December and like, oh, for tax purposes, I'm go buy a truck, I'm gonna buy this or that. Like, look, that $5,000 spent next spring rush will literally bring in an extra 50 customers if you just do it right. So I would just be saving everything I possibly can. I am personally doing this. I am looking. Last night I canceled general liability for the Bellingham shop because I'm saving $600 a month using a different policy on Next Insurance, which by the way is now a preferred vendor. And you can save 15%. Go to Augusta franchise dot com. Go to the deals. Go down to the bottom click on the link we use Next insurance. I say $600 a month. Let's go. All right. And I look really forward, look forward a lot to when I get to cut their $550 a month Internet bill from that shop too. It's ridiculous five year contract garbage. So I'd be looking for all of those things right now. I'd be looking at your subscriptions. I'd be looking at every little thing trying to save every single dollar you can. I'd go get. You'll get on next insurance in 10 to 15 minutes. You can do it in a quote. I almost guarantee they're cheaper. Like they're great if you can save $100, $200 a month and stack that away in the next spring. Let's go. I'm thoroughly impressed with Next Insurance. They haven't. They have approached me about being an ambassador for them. I'm not going to be an affiliate or anything like that or like do sponsors. But I did do a commercial for them because it's a great program. Like it's fantastic. You can do general liability on their site in literally 10 to 15 minutes. And I have yet to see anyone be not save money using them. And I'm really looking forward to the fact that they're hoping to add auto insurance here soon. Soon to them could be a year or two. But when they do that, I'm super happy about that. They're great to work with. So I highly recommend Next Insurance. They're in preferred vendor now. You can save 15%. So save $600 a month. Let's go. I'd be looking at everything. Cell phones, you know, canceling cell phone. If you have extra cell phones for the business, cancel those. Every little thing I'd be looking at right now trying to save money because as we go into a recession, that dollar will be an extra. That'll be two to three dollars of buying power. Awesome. Hope you all have a fantastic rest of your Thursday. I'll see you tomorrow. Oh, wait, there's a question. Nope. Do you recommend the FHA loans over conventional for your home? For a house? Yeah. Here's the slam dunk, okay? If you're able to find a house that you can also run your shop out of, like, there's some land and maybe a shop space, you can get an FHA loan if you live there, put 5, 10% down, and now put the rent, what you're paying in storage and rent for your shop, put that towards your mortgage, and that'd be excellent. That'd be, like, prime. If you're able to get an FHA loan 5 to 10% down on a property, you can also double up at your shop space and dump there and save 5, 6, $700 a month in terms of what you would be otherwise spending at storage or, you know, another 500,000 on dumping fees. Let's go. You could literally have your dumping fees if you've grown the business a little bit to cover the cost of the mortgage, so you basically can live for free.

Know, I would definitely be trying to do, like, that's the slam dunk of the FSJ is if you can get a shop space and run your business out of that location. Oh, that'd be a dream. All right, everyone, take care. I'll see you tomorrow.