Mike Minutes Mastermind 07.19.22

Hey, everyone. I hope you're doing super well. We'll go ahead and get started. Oh, man. Sorry, one second. Let me go ahead and drop the YouTube link in here for anyone that can't see well on Facebook.

Boom, boom. Okay, so I had a couple announcements and then we'll jump into questions. There's a couple that came in. So one thing is I've said, and I believe in a lot in that is this, this coming winter, we're going to see a lot of lawn care companies go up for sale. Just people that have been disappointed. This year's been extremely hard. It's going to be very hard the next couple years. So we're going to see a lot of people put their locations up for sale, especially the ones that had two, three, four, five employees. That's a tough spot in this environment. And I think we're going to see a lot of companies going for sale. That being said, two things. Number one, easiest location to buy is an Augusta lawn care location. Because you don't, you literally don't have to do anything. You can transfer all their information over and you don't have to tell them that you're changing the brand because it's the same. The same exact truck show up. And as long as your pricing is the same, it's really easy to take over because you don't have to tell the customers anything different. So when I've taken over locations, it's like, look, we don't even tell the customers anything. We might tell them there's a new ownership, but we don't need to change their pricing. All their data is still the same, everything exactly the same. So that's really nice. But if you're not buying one, because there's only ones out of state that are for sale, buying your local markets can be super valuable. And that is buying locations in your market that are smaller than you, that you just can absorb into yourself, buy for pennies on the dollar if they're in distress and make something of value out of their client list. So that being said, something we are working on with the media team and that is, by the way, media team isn't paid by the franchise. They're code completely separate. But the media team is going to build a site for us probably. I have a couple URLs. One of them is lawn care businessforsale.com and my goal is to where people would post on there and then we would wait three, like at least, at least one day, maybe up to three days before it would be live. And in that time period, only Augusta Lawn care owners would see it. So you all would see, like, have first dibs basically, on every lawn care business, hopefully, knock on wood, and in the country that when it goes up for sale. And so I would use my kind of the media arm of things to get people to list their location for sale. There'd be a waiting period while we were going through approval, and that would be really a time where all of us get access to them first. It'd be a free service. I think it'd be really, really well, it'd be better fit for lawn care businesses compared to like, bizbuysell.com or craigslist or anything like that. So something we're working on. I'm hoping to have it up late fall, and it'd be a way for us to be able to get the best deals inside of Augusta Nation first. So during the approval process, it would be visible to all of us. I will have more information on that in probably a month or two. But it's something that we've been thinking about. We already have the URLs, and it is something that we are that way, if you saw someone local in your market went for sale, you had the first dibs on, you could literally contact them before anyone else even saw it. So that will be good. Which, by the way, I think there's two locations for sale right now inside of Augusta Nation. Let me go ahead and pull it up. Slash.

Here. Let me just pull this up. Give me one second. Franchise. So if you go to augustafranchise.com Let me share this with you. There are two locations for sale, and there's one of them that I might actually take over next spring if no one buys it in the winter share screen window. There it is. Boom. All right, let's see here. So from here we can go to. Sorry, I'm not. I don't need this one. I need Augusta along hereservices.com boom.

Slash franchise.

Scroll all the way to the bottom here. Come on. There it is. So there's two available now, one in Michigan, one in Idaho. And so feel free to look at these. Obviously, in terms of what you could get in these locations. But obviously the most ideal when you're doing an acquisition is if they are close to you already and you just merge them into one. So feel free to look at these. But that is something that is in the works in terms of trying to get us the best deals prior to them even going on the public market.

So working on that what else we got? That's all I got for announcements. Let's jump into some questions.

Boom. Cool. Couple questions. One that came to me was good.

When will new franchisees be allowed to start again and how many are going to. So what we're doing this winter is we are starting in September, September, October, November, and December. And then February, there is training events. One thing we really honestly wrecked this past spring was the fact that we allowed people in March, April to. To join. Like, to. To get training, I should say. People joined all throughout the winter, but then they came for training, and then we have to onboard them in during the spring rush. That was miserable, bad mistake. So what we're going to do is we're only going to allow people in September, October, November, and December for four trainings, and then one in February. Uh, and then that way when we hit March, which is the spring rush, like, March, April, May, and June is the spring rush for all of us at Command center and all of our locations. And so that massive influx that all of us see is compounded massively at Command Center. So what we did this past spring, where we allowed two onboardings during that time with a wreck, we try to onboard, like, 15 locations during that. And when you onboard, you have a lot of our resources being deployed towards just getting someone up and running, getting them used to things, all the rest of it. And we're adding a lot of training. So starting in September, it's. It's now four days of training instead of three. As well as the onboarding process is now gonna have multiple calls instead of just one. With Lonnie, you have to do multiple calls. Because we're seeing, like, if someone goes off just a little bit at the beginning, even four or five months later, even three months later, they're way off track if they haven't been like, hey, we're gonna set up a call for our next call, and then we're gonna make sure you set up a call with Lee, and then you're gonna make sure. If you have any questions, like, so we're gonna have a much more structured and rigid approach to it because we're seeing so many people the first few months needing a lot of handholding, which is good, which is we expect. It's just a matter of making sure they get that support when they need it. So that'll be starting in September, October, November, December, and February. So 5. And we're going to allow a max of 10 locations at each one. So basically a max of 50 will be added in this year. Like in this, this season, I should say, because fall and spring, so that'll be the max. So I expect 130 to 140 going next year. We'll be onboarding less franchisees this coming year than we did last year. So we'll fill those up and then we'll just basically cap it. And we've improved the onboarding system. How many people are on that team now? It's not just a couple people. There's multiple people involved in terms of onboarding and layers of onboarding. So it'll be much smoother, which will help us down the road to be able to open up more than 50 locations in one season. All right.

Questions, let's go here. We got one comment here and then I will jump into.

The mastermind questions. Seems like most guys expectations on what their business is worth isn't even close to what I had in mind. This is 100% true. But think about it like if you were selling a house, you want the highest price, so what do you do? You just go really high. The thing with that's different, buying businesses versus real estate is when you're buying a business, there's very. It's very hard to find comps. Like the other day when we were looking at Zillow and it was like, okay, three bedroom, two bath, approximate square footage, same neighborhood. We like 10 comps within half a mile. When you're buying a business, you don't have comps. You have loosely structured valuation mechanisms based upon cost per lead, based upon number of customers on your list, number of leads on your list. Like, there's so many metrics. You can't do comps. That's why you see numbers all over the place. However, what you can do is know who's going for sale and be able to be like, hey, this is always the approach you take because everyone always puts their price too high. What you do is say, look, I know you're trying to get 200,000. Got it. If you can't sell by spring rush and you need to offload on someone, I can only offer 50 because I know I'm not taking a brand. I'm not taking your website, I'm not taking your phone number. I just want your clients and your client list. And so I'm willing to do 50. And if you want to, then give that to me and then sell your trucks and everything else, you'll probably still make out with 100,000, not 200,000 though. So, hey, why don't you try to sell it over the winter, try to figure things out. But if you can't sell it, I'm here for you. I'll give you 50 grand for the client list and you go sell all the equipment and everything else by yourself. That works really well. Because guess what? No one wants to buy their business. Their business doesn't have any systems, it doesn't have any infrastructure, doesn't have a general manager, doesn't have any sort of leadership. And if it did, it'd be worth millions of dollars. It wouldn't be worth 50, 60, 100, $200,000. Anything under $500,000 in terms of acquisition. Never. Basically never. I guess you could find one maybe. Basically never has to. What I've seen management in place and it's like a passive thing. You buy, you're always buying active income. And so therefore the valuation should be way lower than what people think. So that's how I always structure my deals as a bailout offer. Like, and you can people take it really well because, like, hey, I want you to get the best price. I understand you need 200. I can't do that. Here's what I can offer. If you can't sell it by X date, because you need to offload it. And typically they don't want to get in the start of the next spring rush. If someone puts their location for sale, they have mentally checked out and they do not want to start next spring rush. So what you can do is say, hey, you know, as long as I know before February 15th, I'll take it over. Here's what I can offer. Hopefully between. And you can say this, hopefully between now and then you can find a buyer that buys the whole thing. Because that's going to be where your maximum value is. Someone who wants the website and your brand and your phone number and all the rest of it, they're going to be willing to pay more. That's what you tell them. No one is willing to pay more. But you tell them that sounds good. And then you give them the offer for just the client list and the data, which is where the value is, and then just tell them, hey, you can make up for it by selling the rest of the equipment to, you know, on Craigslist or whatever it is. That's how I bought for $75,000 a location. I bought their contacts and their contact list. They had done $1.6 million a year before, mostly hardscaping, landscaping, etc. I bought their client list, which was like 3,000 people, and then about 150 million customers for $75,000. That was the most expensive I've ever paid. I've also done where I paid 18,000 for someone that had.

How many? There's probably 60 or 70 regular mowing customers and then about 600 clients in that list. Then I bought a really small guy out. He had 25 lawns every single week, had been doing it for years, and I paid three grand. That was my best deal ever. So size of a deal is not what I'm super worried about. It's really. Is the pricing correct? Can I make it work from the numbers perspective? And so, yeah, that is how you buy a location for pennies on the dollar is you see them go for sale at a crazy price. Hey, look, I'm not buying all the brand and all the goodwill that you built up and your website and your phone number. I don't. I'm not interested in that. I'm not interested in your equipment. I just want your client list and all of your contacts and the list of the pricing for your mowing customers that you currently have on track. And I'm willing to pay X amount for that. Have a deadline, so scarcity deadline for them. And just tell them, hey, I want you to go find a better offer. They're not going to find one. In this market, no one is buying a lawn care business for $300,000. No one. Or 50,000 if they have 100 customers. Like, no one's doing that. So I think there's a great opportunity this coming winter. How do you determine exactly how much a business is worth? I had a local guy ask me about buying. Yeah. So.

If you go on to YouTube, you can just search Mike Andy's acquisitions, and there's a good video. It's like an hour and a half long. Goes through like five or six different mechanisms of how to value a lawn care business everywhere. From what could you name the replacement price, the replacement cost? Like, how much would it cost you to go get those customers? Right. So if they have, you know, 100 mowing customers. Okay, well, if I know I can spend $150 on marketing and get a customer, that would imply that I would have to spend, what is it, $15,000 in order to get those hundred customers. So if they're selling it for 50 grand, probably not worth it. That's $500 per one. So there's different ways to calculate that, though, because you could also do it by lead. You could value. How do you value the contacts? Like that contact list of 3,000 people was where the real value of that $75,000 I spent on that company back in the day, it wasn't really even the 100 something million customers. You probably lost a lot of them because of pricing. But if I can get 3,000 more emails in our area, like that's why we have probably almost 10,000 now client emails inside of Bellingham's database. And why they. If they send a one click estimate, it's just. They just get bombarded with 70, 80 estimates. Is because that client list, that client list is the gift that keeps on giving. Because when we send a one click estimate email, it just gets bombarded. So which we have not been able to one click estimate emails out in the Bellingham shop because they're so far booked out, which stinks. I hate it. But it's just a matter of finding enough people and burning through a two month backlog. We just keep getting leads like crazy. Usually it slows down this time of year, but anyways. All right, questions, questions, questions, questions. I'm going to hop over to the form. Give me one second here. Boom boom. Share.

All right, let me zoom in a bit.

Question, Max Harwood. Oh, yeah, this is the one I supposedly skipped over yesterday. I apologize. I think I know the answer. But why doesn't the purchase of assets show up on the pnl? Sometimes the net profit is misleading because we purchased trucks and other tools that are classified as assets. I'm assuming assets don't show up on the P and L because they have a longer life expectancy and retain some value, whereas expenses don't. Please comment or. Correct. Yeah. So this is. You could take this in a bunch of different directions and have a long explanation of this.

But how I would look at it is.

Profit and loss as cash coming in and out of the business. It is not a statement of cash flows. That is going to show the $7,000 going out for the truck or piece of equipment or whatever it is. Statement of cash flows is different. People think statement of cash flows is your P and L. It's not. Okay. P and L. If you're amortizing an expense like a truck for $10,000 and you're. You're amortizing that over the course of five years, that would mean that you have a $2,000 expense or a write off or expense on your taxes for those five years. Okay. Now.

When you buy a piece of equipment, it is not a loss. You are simply taking cash on the balance sheet and moving it from cash into being a piece of equipment. So it's Just a transfer. There is no change in actually the value of the business. You're simply taking an asset cash and moving it into another asset, which is equipment. So it's the exact same side of the balance sheet. There is no transfer. You don't have any liability. Now, if you take on debt, you're going to have a liability of debt, and that's going to infuse cash onto the asset side. And that cash from that loan is going to be turned into an asset. Okay? So the balance sheet always has to stay tried and true. And that is, if I affect the liabilities, I'm going to have to affect the assets. So, for example, you get a loan. Here, let me go this way real quick. If you get a loan, this is the best way to make balance sheets make sense. You get a loan, you have liabilities and you have assets. Okay, Liability. I have a loan that is a liability. However, by my liabilities going up, my assets must also, in proportion, go up. Now what's going to happen is I got a $5,000 loan. It becomes $5,000 cash. So you take that loan out, then I spend that $5,000 on a piece of equipment. It's still inside the asset column. So that purchase does nothing to the liability side. Okay? Now you can also take out a loan, a liability, and simply convert it directly into an asset, which is going to be a truck, a piece of equipment, whatever it might be. So sometimes people get confused on it because the balance sheet is, oh, if I get a loan, my liabilities, like that, a number, everything should be going like my assets should be coming down. It's like, no, if your liabilities, that is a loan, goes up, your assets need to go up as well in proportion. It must always be balance out. Okay? And then now, if you're talking about interest, interest is now a cash payment. So it is outside of that initial, you know, $5,000 spent for a mower. Okay, great. That's going to be a piece of a loan, and that's a liability. I buy myself an asset. $5,000 on both sides of the balance sheet. Great. What happens to interest? It's an expense. That's why you're able to write off interest on a loan, because it is considered a cash expense. So there's probably people that. There's 100% people better than me at balance sheets and financial statements, but definitely check out the MBA for entrepreneurs. Course, it kind of walks through that a little bit better. Shows it in a very simplistic manner, which is a lemonade Stand in terms of inventory, how inventory works, for example. And this is where the mental, the financial fraud happens is. You can put like things like inventory.

Cash or a stock based compensation. Where you put that on a balance sheet can be somewhat misleading. And that's where typically fraud is brought into the case is where people move things around the balance sheet that really shouldn't happen. That's what GAAP is, Generally Accepted Accounting Principles. G, A, A, P. And that's why you have to abide by GAAP in order to. That's what the IRS uses. It's like, look, you have to abide by Generally Accepted Accounting principles in order for your accounting to be on spec. If you're outside of those rules, that's where you get in trouble. And that's where people like okay, well I'm going to rent this to myself but I'm not going to put the balance sheet because I don't want to have to amortize that because I'm not having a good, I don't have a lot of profit. Like we start doing weird stuff and not correctly balancing those two things out, that's when you get in trouble. Once you get audited, everyone is fine and dandy on playing mental or financial gymnastics on their balance sheet until they get audited. Right. And honestly, like, let's just be perfectly honest, most people won't get audited in their lifetime, just statistically. After talking with some owners this weekend, it appears many of us, myself especially, are interested in the model that Chuck is running around 500,000. Would there be a way to create some sort of a master course or training that would explain how the operations work? Expected profits GM 100%. Great idea. Connor. Give me one second. Making a note. GM.

Infield master class.

Yes, I can do this. I know we talked about it in person. I did with Justin or Dustin quite a bit on the weekend. So I will make like a 15, 20 minute video specifically about this. And it is basically where you stay at 500,000 and you put a manager that's in the field three to four days a week and you're able to run it more profitably and not have to find the caliber of someone runs a million dollar operation. I kind of look at the locations as most profitable, around 500 or about 800 to a million. Those are like, those are my two sweet spots in terms of finding a general manager to replace me. If I'm going to grow it and make it really big, I can absolutely. 1.22 million, 3 million. You just keep growing Myself. But if I'm wanting to copy and paste, finding leadership to run those size of locations is difficult. And so it's something that we are really trying to perfect. And that is the infield manager model. Where you take a manager, they don't have to have all the financial hiring experience, estimating experience, complicated projects. Absolutely not. It's like, find someone, get a location as 450 to 550, 600,000 in revenue, three to four employees, a few trucks, and have the manager be out in the field most of the day and actually producing revenue. And instead of once you get to 800,000amillion, you need someone full time just managing the crew, doing estimates, shop work, et cetera. And that's a lot of overhead. So, yeah, I can do that. I will try to make one this weekend, within a week. Connor, hold me to it. I will have that out. But let me. I don't know if this will disappear once I finish my stream. So let me take a picture. Sorry. Let me take a picture of this. Boom. Because you listed several things specifically. Thank you. Thank you. All right, let's go ahead and jump back into. I think there's a couple other questions.

Boom. All right, we talked about balance sheets. Let's go.

What are the details on Landscape Summit in January? Just want to start working on booking plane tickets, rental car, Airbnb, et cetera. Cool. Yeah. So those are going to be. It's gonna be January 5th, 6th and 7th. They're giving us really good rates because we locked them in last January or February. So I'm hoping they let us still abide by these. I have a feeling that in a few months, they're gonna be like, hey, we all. Our rates have doubled. We're gonna have to. So I would book your tickets now if they're still at the same prices. Go to Landscape Summit. Just go to mikeandys.com and you'll see Landscape Summit. You can click on there, you'll get the link to the actual hotel. But I will make a banner on the Augusta franchise.com that will be for us. And that's going to be January 5th, 6th and 7th. That's Thursday, Friday and Saturday. All of Thursday will just be us. In the evening, the public joins us. I'll probably organize a dinner on the Wednesday night because since we're. We're starting Thursday morning, most of us in Augusta Nation are going to be arriving the afternoon of Wednesday. So I'll probably organize something for Wednesday evening. Just dinner for everybody. Just especially for those that haven't been to one of the annual events yet or even last weekend. It's just an awesome time to get together like and connect and talk about your problems with other owners and get bounce things off and get feedback. So I'm going to try to organize that on Wednesday evening. I don't know if I'll be able to do it at the event because everything's going to be getting prepared for Thursday, but I'll work on that. But for now, 100% be there for all Thursday, Friday and Saturday. But because most of us will be coming in Wednesday afternoon, I'll probably be trying to set up something.

For Wednesday evening. Aren't we going to need more than one day to fully switch softwares? Yes. So on the Thursday we'll spend a couple hours switching over to Zooper. We're going to have a step by step in terms of system to convert out of service autopilot. That being said, on Friday and Saturday we're going to have a separate room just for us. We're going to where reps from command center will be to help in that transition process. Because I honestly feel like most of us could switch over in a couple hours. It's just a matter of actually now learning the software. Right. You'd still have your own old service autopilot available though for I'm going to guess until the end of February. I would recommend holding your account open maybe even in March when you start mowing, just in case nothing transfers over. But you can actually get office notes outside of service autopilot to be converted into Zooper. So this is a good thing. Lonnie is working right now though on the entire system in terms of like how the export from service autopilot comes out, how it goes into super etc. The biggest thing you're going to be losing is the payment details. That's something you are going to want to need to address when you come to the mowing season, which I would recommend being just like hey, we're starting mowing. Click here to get your credit card on file for this year. Here's your pricing and it's a good time to raise your prices. Get the new card on file and just roll it to where now you own the data in stripe. So I only feel like it's going to happen in a couple hours, honestly. But we're going to have a separate room available just for all of us as owners to be able to go in there and you know, if there's a talk during Friday, Saturday, like I don't really need to be in there. Don't really want to be in there. Great. Go in that room, bring a laptop and they can help you transfer over things, answer any questions, etc. Literally this morning like command center, the WI fi went down locally. I think it's up, I don't know. I haven't checked in since the beginning of this call. So before this call is still down, but they are down. So what they are actually doing is doing zooper training for those the half of the friend of the command center that hasn't done super. So they're doing a bunch of super training. The goal for us is to us to all be really, really good at it so that come come time for conference, all of you can, you know, switch over on Thursday, but then Friday or Saturday if you have any questions, get those answered. And so I know for some of you that will be a longer process and you can absolutely go in there and get help and kind of have a breakaway room for that. So.

Share this one. Boom. So yeah, January 5th, 6th and 7th to Thursday, Friday, Saturday and probably Wednesday evening we'll do some sort of event just for Augusta Nation for dinner.

My employee is hoping, he hoping he can go on unemployment this winter. What should I tell him and how should I feel about this? So first and foremost, if someone tries to go on to unemployment and they haven't worked for you for more than three months, I wouldn't worry about it too much. It's usually not even gonna affect you.

I've somewhat become numb over the past two years since the beginning of COVID to unemployment. I'm like, look, it's gonna happen. Cause like stuff was, everything was getting approved back in the day. And even to this day, people, you'll fire someone and they'll still get unemployment. So like I don't even fight anymore. I realize it's gonna be a cost, it's gonna be a percentage. I'm not going to lose sleep over a couple extra percentage points on my payroll. I'm just not. I'm going to raise my prices. Account for the fact that that's part of my raising costs is the fact that unemployment agencies in most states are just blindly accepting stuff. It happens in Washington state all the time. We fire someone, they still get unemployment or they quit. They literally will quit and they'll still get unemployment. So I have, I won't want to say give up, but I, I honestly like, look, I'm going to fill out the information that they require me. I'm going to send it back. I'M not going to fight it. It's not worth a hundred dollars, two hundred dollars, a couple thousand dollars a year, a few, even a large location like ours probably, probably pay an extra five or ten grand a year because just stupidity of unemployment agencies that allow everything to be passed. I'm not going to fight it. It's not worth my time. And in terms of dealing with an employee, be very careful about telling them not to file for unemployment. We fired someone the other day at command center and they emailed back immediately basically threatening by saying if you don't give me a letter of recommendation I'm going to file unemployment. I'm like go file unemployment. So I didn't even respond. Anywho.

Is there any kind of question? Let's see here. Was that number three? That was number three. Cool. Awesome. Thank you all. Hope you have a fantastic Tuesday and we'll see you tomorrow.