Mike Minutes Mastermind 07/31/2024

Hey, everyone, I hope you're doing good. Let's go ahead and jump right in.

Jump right into questions this morning.

Yesterday, the cut over to the new dashboard went live. So augustafranchise.com will go to the new dashboard design.

They also got everything switched over for coach.augustafranchise.com so the coaching site is up and running. There's a couple forms they're working on, making sure those are still connected, but everything else is good to go.

All right, let's jump into questions. Looks like we have six of them today.

All right, make sure my audio is fine. Cool.

Kyle Freeze from Bloomington, Illinois. Should we upgrade a truck, buy a truck, or neither?

Details. Dustin has a buddy with a truck for sale. 2016 F150 single cab, long bed with 37000 miles, super clean and is only wanting at 15k. We are currently in profit mode. Raised prices in June and do not need the truck, but plan on adding a third mowing truck in the spring. We have three mowing trucks and one project swing truck. We could pay cash after end of July or finance. Our guys are now mega efficient.

Usually over 100%. So we are technically over capacity on budget hours, but on weeks with no weather constraints, they're getting done with half days on Friday. We're averaging 140 budget hours per week with three and myself 115 budget hours, average recurring and rest projects. With that said, if we bought this truck, we would basically have one sitting till spring. So horrible asset utilization. If we use this truck to upgrade one of our existing trucks 2007 and older and sold off an older truck, we would still need to purchase another in the spring but already have most mowing equipment to fill a third truck, including ramp rack. We know we need. But we will have to upgrade all three trucks in the next two to three years. Or should we continue in profit mode and not get shiny object syndrome? Thank you for your input. It's a great deal, I would say, you know, what's the time value of money, right? So 15 grand now versus what you'd spend in eight or nine months to buy the truck. You know, that's what you're. That's really the question here is like do you buy it now or do you buy it then? You don't need it now. If you're gonna have to add to your insurance to use it somewhat over the next eight, nine months. That also adds the cost of your fixed expenses, which I don't like. So that's probably another, you know, thousand or whatever. In insurance. So this is just simply a time value of money question. Like the 15 grand, is it burning a hole in your pocket? Is it going to save you five grand on taxes? Like there's a lot of questions that will need to go into this but when you're upgrading trucks like from old ones to new ones, all you're really doing is increasing brand awareness and increasing or decreasing the risk of breakdowns. So that's also like a non tangible kind of benefit. It's tough to quantify that. Dusting From Bloomington Champaign, IL Hope following up to question Kyle's question about the truck. I bought it but didn't inform him lol. Hopefully that was your recommendation. Yeah, like if it's a really good deal, like and you're saying okay, well I'm going to save five grand. Okay great. Let's say we spend $1,000 on insurance during that period of time, the next eight to nine months.

Then you know, you say 4,000 and it just, so it's just time value of money. That's all it is.

Which basically means like because of inflation, because of interest, etc. Because you could put money elsewhere, like you could put it in the second most beneficial place.

There's value to that. So if you already buy it, great. It's just a matter of you probably figured, hey, I'm saying five, six, seven grand and I'm willing to forego having that money for the next eight or nine months.

Kyle Tarvin, I'm going to be a little nosy here, but what does the process of getting kicked out of a guest nation look like? Is it just a sudden cutoff on command? Facebook group must return, remove decals, et cetera. To be clear, I have no desire to be kicked out and I am not doing anything to where I would even be brought up to get kicked out more. Just so curious the process due to the recent events. Yeah, trust me. You will get so much warning and updates and you will directly hear from me. You'll have written updates and warnings of behavior that's crossed the line and then you will be on probationary. Like it's, it's pretty extensive.

It's not like we just out of the blue, you're not going to know anything's going on.

So that's, that's why the FAC voted the way they did. It wasn't like oh you did something bad, we're kicking you out. It's like you did something bad. We warned you multiple times, we gave you multiple chances, we told you what corrective Action need to be taken. And it wasn't. And it got worse. So, Travis from Jonesboro. Hey, Mike. Between a rock and a hard place here, trying to solve this current situation. Three trucks, two trailers, one ramp rack. Three employees plus myself and another one starting next week. $15,000 cash on hand, 15 left to draw on a line of credit. Have not done price increase this year as we are desperately trying to get to 100 budget hours per week. Currently at 7 to 80. Now the question. We bought P3 earliest year in the spring. I use a business line of credit. So far, have not started paying on that. P3 has been giving us a lot of problems in and out of the shop half a dozen times trying to fix an electrical issue that puts the truck into limp mode. Every time they think they have found the issue. And sometimes it runs a month before it acts up. The next time, it'll just be a few days. Paid 6500 for the truck. So far we have about 1500 in mechanic bills. 1700 rapid, 500 of paint. Do I cut my losses and try to sell it for what I can? If so, what should my strategy be? It will be five of us next week. We have a decent lead flow. So I'm usually out of the field for two or three days a week with admin and estimating. Okay.

So the problem is you have four employees. Like, you have three employees plus yourself. And another one starts, you have four employees and yourself. You need three trucks. That's the bottom line here. Like, you're using it a lot.

So, like, it depends on, like, if you. What I would probably do if I was you is probably switch to profit mode. Get. Take the $15,000 line of credit and upgrade the truck. So I'd probably sell the truck. Just get rid of it. It's causing you too much headache. You're so close to capacity with four employees and yourself, like, five people that you need. The third truck, like, that going down could really hurt you. So I would probably upgrade the truck. Use your line of credit. Even if you got five, six grand out of the current truck. Fine. Put that towards a nicer truck that's more stable. Now you're gonna have three dependable trucks. And. And then in order to compensate for that extra line of credit, I would raise your prices. So, like, it sounds like you're just been growing crazy. Great. Awesome for getting another employee next week. Let's go. I would probably rate, you know, upgrade the truck so you stop worrying about things breaking down every single month. That can be a huge Draw on your attention, which is more important than the fifteen hundred dollars in cost of mechanic stuff.

I'd upgraded the truck. I would then raise your prices, which if you do that, you're probably going to draw an extra three to five grand to the bottom line, which will pay down that line of credit by the end of the year. That would be my goal. Again, I don't know your revenue. Like there's a lot of things that go into that. So I definitely have a coaching call about this. But that would be like off the cuff. I'd probably do that. I'd go for dependability, the truck, because that's going to distract you right now. And then I would make up for the sense of going into that line of credit by raising prices and immediately on 70, 80 budget hours a week. I know you can draw three to five grand straight profit in a price increase. It's going to reduce your growth but allow you to the rest of this year be much more profitable.

Yeah, that'd be my two cents.

Brian Connor from Augusta, Georgia. Will you show me how to find the link for 3M question form on the new dashboard?

It's in the description of every single video down below. In the description it says submit questions and it's right there. 2. Do you include payroll tax when calculating the percentage of labor spend? I typically do when I'm just looking at a P and L because I can just wrap it up in the same line item. Full disclosure. When I'm thinking like it's 25% rule, for example, I don't include that. So yes. Is it technically like the 26.5% rule? Probably. But for the sake of just easing the math, I use the 25% rule. And I don't. I just take into account gross wages and I don't include that. Typically payroll tax is like, you know, 10 to 15% depending on your state. So yes, you could move it up slightly, but I typically just look at the P and L and everything that goes into wages. I look at that as like a percentage of revenue. So which also usually if you're like collect sales tax, for example, it's also included in your revenue, so that artificially inflates that number too. So it kind of balances out. 3. Do you think it would add value to include both the percentage labor spend using A, the revenue collected and B, the revenue build out? For example, our North Augusta, South Carolina locations labor spend tax included for the month of June was $15,000. Percentage of revenue collected, 52% Percentage of revenue billed out 49%. I realize this difference is a small difference. If the delta was higher, I believe we would be able to more clearly identify collections issues versus efficiency issues directly from the scorecard. Think these are conflating two different issues you can hide. Like ultimately you care about money in the bank. That's why I like doing it based upon collected and I look at the profit and loss statement for that. In terms of the build out part.

I would just as an easier function, instead of conflating this issue and confusing a general manager, Brian, I would just keep separate. Like what is your accounts receivable? Like that would be just another metric I would track as separate from this because otherwise this will like you're conflating labor and efficiency with collections, two very different topics. Right. So I would keep those separated. Instead of trying to conflate them, I just keep it separated. Just know that like you're correct, like collections is going to impact this percentage. But I'm not going to burden down my GM with that in terms of like the differences because then they just choose whichever number they want. Like whenever you give the two numbers like this, it just, I just stick with one. Like literally flip a coin on which one you want to use and use that because you just want to stay consistent. You don't want people to be able to be like, well it's 52% I'm above. Like we're. Or no, bad. 52% bad. Oh well if I look revenue build out 49% under 50. Good, good, good. Like you don't want that, that, that delta. You just want to stick. This is the number we're tracking and needs to be under 50% for example. And then have a separate metric for like accounts receivable. And this number needs to be under this dollar amount or, or this percentage of revenue. That would be my recommendation. Just, just, just choose one when you have two. Cause like if you start doing that for say percentage of wages, you can start doing that for a lot of things. Like well, percentage of admin. Well then it's like okay, well what about profit sharing? Is it based on collected? Is it versus versus a build out? You start having all these two different like standards. And I just like money in the bank is what I'm getting profit sharing on. Therefore collected is like the standard. I know that collections will affect that. And so it's another thing that I'm going to keep an eye on. But I would try to keep those separate even though they have a little bit of crossover to your point. Really good Question.

But if you want to do based upon build, I just stay consistent with it then, like I do build for profit sharing, I do it based upon, like when I look at my percentage of my cost that goes to admin, like I'm looking at that number. Just keep it consistent would be my recommendation.

What is a good monthly and yearly churn rate? This is really tough because seasonality really plays in this as well as your growth rate. So the faster you're growing, your churn rates higher because you're getting new more. A as a function of percentage of customer base, a higher percentage of your customers are new. And so newer customers churn out faster. And so if you're growing fast, you have more new customers and more new customers higher churn rate. And so if you go into profit mode, you'll flush out your worst customers and then your churn rate will usually go down. So one thing we don't talk a lot about when it comes to price increases is although you have that initial drop, it actually usually decreases your churn within like two to three months. Now tracking that's difficult, but there's so many things that go into this. So for example, like when 2020 happened, churn rate just like blew up. They were like across the industry I was seeing like 80 to 90%, which basically meant like you weren't keeping customers for an entire year because people were moving so much. There's so much movement happening. And so. But then, you know, economy stuff go really plays deeply into it.

So like I would say in general, if your churn rate is over 50% for the year, I get concerned. Tracking it monthly is so fickle. I used to track this and it was just like there's just no rhyme or reason to it because it's like you have weather, you have economics, you have whether there's four or five weeks of billing in a month. Like there's so many little weird things that go into it. Whether or not I raised prices recently or not can completely skew this because if I raise prices recently, I'll have a massive spike and then my churn will go way down after that. So I just look at annual usually. And usually if it's over 50%, I get worried. If you're under 30%, it usually means you're in profit mode and you're not getting a lot of new customers because people are sticking around with you. That assumes like literally a four plus year average customer retention, which is phenomenal. What kills you is when people leave after two or three weeks because that Skews the results massively. So I think if most of us just took off our bottom 20% of people that leave within a matter of a couple cuts, if you took that away, you'd have a really, really good lifetime value. But those one and two month people are the ones that skew your churn way down because they stay around for like all of three weeks. Well, they're bringing down the person that's been with you for six years and all of a sudden your average is only two and a half, three years for the annual or the how long you keep people your lifetime value. And so if you can just, that's like the first 30, 60 days is like stay in touch with people. That's why it's like you're thinking, welcome email. You want to make sure it says like, hey, please communicate with like, embrace the feedback at the beginning. Especially if you're doing instant quotes, especially if you're doing over the phone estimates, you're not going to be able to get all the little details. Encourage the feedback coming from the customer because you want that instead of I'm mad and I want to change, like I'm canceling you instead, like, oh wait, we can just change the job notes and make it part of the process. That's why the thank you and welcome email focuses on like, please communicate. It takes us a couple visits to like dial things in exactly the way you want. So please let us know we can change the job notes. It's very important that they understand that because otherwise let's cancel versus oh, I just need to, you know, modify my preferences and then we can, you know, change their job notes. So that's an important part of the thank you and welcome email. Because otherwise churn in your first couple visits is like the highest. And doing having a person drop off there instead of even three or four months dramatically skews your lifetime value.

Like if you could just take off all the customers you lose within a month, your lifetime value would almost double. Just like, if you actually just look at the math of it. Because the one and two month people just crush the people that are staying with you super happy with you for four or five, six years. If you can just get all the people that usually stay for say two or three weeks and if you can just make them happier and keep them around for two or three months, two or three weeks, they stay with you and you can keep them for two or three months, you almost double. Like I was looking at math on this, you can almost double your lifetime value.

So I know we don't talk a lot, a lot about the thank you welcome, but that's why we. I would recommend. I know some people have taken this part out because they don't want to make it as wordy. Like, I really recommend highlighting the part about like, you know, please let us know on the first visit. Is there anything that you would like. We can change the visit notes. We want to dial in the service and it takes a few, like, set the expectation that it will take a few visits to dial things in. That way they don't have a bad service or something. Forget a strip of the lawn or whatever and then I cancel. Like, set the expectation that it's going to take a few services to dial things in and adjust the job notes. It's going to increase the cost of admin to you, but it will increase the lifetime value dramatically of the customer. What I mean by increasing admin time is like, people will call in almost every single first visit. They'll be like, it was good. But like, this, this, this and this and this. Great. I would rather have that than like, eh, it wasn't great. Please cancel my service. And like, whoa, why just want to find someone else. Like, it's like, what in the world you would rather be getting feedback so you can just change the job notes. A lot of people just don't know that they can even do that. So make it really clear that thank you and welcome email is like, in my opinion, very, very important. Like, if I had to go, if as a broad assumption, I would bold or underline that one line in a thank you and welcome email. And it's like you can even change it to something like this. Like, we expect it to take a few visits to dial into exactly your preferences and we want to make sure we customize our service exactly the way you would prefer. Something like that highlighted on that thank you and welcome email would be my recommendation. Just throwing it out there. It's a thank you and welcome parentheses. It would be recurring or mowing or whatever it says that email template.

All right, everyone, I hope you have a fantastic day. Day two of training here in the Pacific Northwest. Love you all and we will see you tomorrow. Take care.