Mike Minutes Mastermind 08/23/22

Hey everyone, hope you're doing super well. Let me just check my audio. Okay, we're good. Cool. We'll go ahead and do some questions. I saw two came in. I actually looked through them real quick. So I'll go through those and then I only have one page of notes today from Jim's mowing. So stuff that I learned, I really actually none of these things came today from the actual training. I don't think is Jim gave me a tour of their facility for about an hour, hour and a half and so there'll be a video up on probably their channel and my channel as well. I did a video of this, the kind of whole headquarters and things. So that's what most notes are from. But let's go ahead and answer the questions first. Jump into it.

Cool.

First question.

Chad from Valparaiso. Robert Kiyosaki versus Dave Ramsey. Would you recommend buying assets with credit or being more patient and saving to pay with cash?

I actually don't even think that Dave, I, I guess I don't really listen to all Dave's content, but I don't even think Dave really would really say to save and then pay for like a house with cash. I think he would be a proponent of buying and paying off the mortgage as fast as possible. But I'm based on limited knowledge I have. Dave Ramsey would recommend buying a house, paying that off as quickly as possible, accelerating the, the payments on it, getting a 15 year instead of a 30 year fixed. Kiyosaki would probably. Actually I don't, I just haven't listened to these guys in a long time. I would imagine based on what I know that he would say to like rent your house and then buy real estate like rentals or potentially maybe he says to buy a house, I don't know. But the overarching thing of buying assets with credit, like if it's an appreciating assets asset, in my opinion if you're trying to build a large amount of wealth, you probably want to use credit. If you look at every billionaire, they have massive amounts of debt.

Because of assets that they can leverage. Because ultimately they can leverage it and get 2, 3, 4% interest but then make 10, 15, 20% return on that money. Money. Why in the world would you not do that? Obviously it opens you up to risk, but the assets are there to, if you had to, you would sell them, right? Where I get worried is when people buy a leverage themselves against depreciating assets because you can never sell the asset and then get out from that debt. Whereas something that's going up in value, yes, you're leveraged, but you can sell that asset and pay off the debt and probably still have equity in it. And the equity as it goes up and up in value is not taxed. So.

In terms of Robert Keystalker versus Dave, I think they both have great points. There's different, different characters and opinions and you know, I've been getting project leads quite a bit outside of my service area through Google Local services. I don't want them for recurring services, but should I take them for projects to fill my schedule? I think to fill your schedule, yes, I would do that. I would travel out to your area, especially if you're solo because you don't have a much overhead of employees driving out that far. So once you've paid your fixed assets as a solo operator, you want to maximize capacity. That's why like we always talk about, like sell, sell, sell, all at all cost. Your close ratio needs to be above 70% if you need a filter capacity because otherwise that truck is just sitting in the driveway. Otherwise you're paying for insurance and not using it. So, so if you have fixed costs that are staying there, especially if you're a solo operator because you don't have the variable cost of labor, you want to make sure you're maximizing your capacity and working as much as possible because almost every dollar above your fixed expenses is going to be profit. Right? So how I look about at it, especially when it comes to solo operator, but you could do the exact same thing for all capacity. Stages of capacity based growth is if this is your fixed cost again, fixed cost insurance over here, insurance, your payments on your loans, truck, whatever it might be, franchise fees, all of that stuff will be your fixed expense doesn't change every single month. That's what it is, fixed expense. Okay, the goal then is, you know, if you can work 35 hours a week and do that, great, you're going to have like a 10 profit margin. Not great. Okay. Assuming that's covering your fixed expenses. There you go. This is so operated. There's not much variable expenses in this case. But if you can work to say 45 hours a week, now all of a sudden you have this happening and now you have a, you know, 35 profit margin. Okay? So when you, especially when you don't have variable cost of labor, you definitely want to fill the capacity as fast as possible again. That's why stage one and stage two, all I tell you is close, close, close, because you've got to fill the Capacity, it's the number one thing you got to focus on because being down here you're losing money. So why would I focus on profitability and higher prices when I'm down here losing money against my fixed cost? Anyways, get above this as quickly as possible, fill the capacity and then raise your prices and become even better margins. That's where you start. It starts to get really interesting. Right. So I would definitely take projects. If you are sitting on your hands and trying to fill up the schedule for work 100% make sure you're communicating that with Command center because they might turn down work if it's outside your service area. Remember, you can have your territory and then you can move your service area. You just gotta let Command center and we change it once a month because we have to, we have to upload the map on every single computer from Google Earth. So please just make sure that if you're going to, you want to accept the services outside what your current service areas, make sure you let Command center know. Otherwise you're not even going to hear about it. You won't even get the lead right. Because they're like oh, you're out of our service area, sorry. And I'll just gonna let it go. So keep that in mind.

But yeah, 100 like I can't overemphasize it enough. If you're under 10,000amonth in revenue, how important this is? This is why I just do not care if you literally did the work for 50% off, 80% off, go do work. Because this is the model you're fighting against. You're fighting against the fixed expenses. The only variable cost you really have as a solo operator is literally fuel.

And maybe like some debris costs. Like your insurance is fixed, your, your truck payments are fixed, your franchise fees are fixed. Everything is fixed. So the goal should be 110% to just fill the schedule. And then once you do that, once you fill the capacity, like you can't work anymore outside. Like you're working 35, 40 budget hours a week out in the field. That's when you start raising prices. That's when you start not worrying about your close ratio as much. But until that point, I do not care what the prices are.

You know when I talk about the other day charging $100 per hour that needs to go in one year and out the other because I made it very clear the first two stages of growth, that is super irregard, like I don't care fills a capacity, then you can start thinking about that Fill up your truck till you can't do it anymore, then get an employee. Okay, now you and the employee, now you don't have any, you know, now you're doing, you know, 18, $20,000 a month in revenue, both the two of you together in one truck, and you can't do any more hours. Hey, now decision. Do you raise your prices, maybe get to 22, $23,000 a month in revenue and be very, very profitable, by the way? Or two, do you go get another truck and keep growing, expanding? Right. So.

And as soon as you get that second truck, your capacity is now going to go to probably 31, 32,000amonth in revenue. Right. So.

What happens if a client passes away and they owe a significant amount of money and their family will not pay their bill? Is there a process to follow to get paid in some way? This is a tough one because every single scenario is gonna be different, right? And sometimes you do have compassion on the person. And we have just canceled bills in the past for some people when this has happened. But I'm assuming there's history behind this and this is significant amount of money. Yeah, significant amount. So I would recommend putting a lien on the property because what's going to happen is that family is likely going to try to sell the home if it's part of the estate. Now, I'm assuming that the person who passed away owned the house. If they owned the house, you have more leverage because you can go still do a lien on the property. They will not be able to sell it without paying you. So if they own the house, I would go, I would just tell them, hey, tomorrow I'm going to be filing a loan. If filing a lien against the property, if this is not paid in full, I'd just be very direct about very short, very straight. And I would deliver on that. If they don't pay it by a certain time. But I think that if you said that and this person, whoever it was, owned the house, their family will pay that immediately because they do not want you to block this transaction of a sale. And traditionally the house is going to be sold or at least the title transferred. So I would do this as soon as possible because just in case, they just do a quick claim deed over to the family member instead of selling it. If they sell it, you got like 60 days. But if they do a quick claim deed transfer across, like the family member, you potentially might not. The like, a lien is only really helpful when they're. When that lien, when that Title starts to be transferred or sold, et cetera. So I would do that as soon as possible. I'd literally give them one day notice. It's not paid. By this time I'm going to be putting a lien against the property and they will know what that means. You don't even need to explain how this could affect them. They will know because they, they're either trying to try to sell it or B, they're going to transfer title. If this person died a month ago and they haven't put up for sale, there's a good chance they might have quit claim deed it. You can look this up on the county assessor's office. So Nick, just look at Snohomish. Are you in? I think you're in Snohomish. Snohomish, county treasurer.

What's it called? Assessor's office. You look up your county assessor's office, put in their address and you'll see who, who the title holder is. And if it's the person who passed away, you got lots of leverage. Just make sure they didn't just, just, just quit claim data and just move it across to a family member. You have a little bit less leverage. But I'd still use the path of using a lien on the property even if they had transferred it already.

All right.

Man, this jet lag thing is real. Telling you what. Okay, let's go back. I'm gonna go over my one page notes is all I got today. And most of this was not, all of it was not from the training today. Today, the training, honestly it was just very, very basic stuff about, you know, bookkeeping.

A little bit about sales and marketing. But it wasn't like, you know. Yeah. Anyways, day three again, this is all mostly just based on my, my interview slash tour of the facility with, with the founder, which is Jim. They're setting up a call center in the Philippines for after hours calls mostly because just too expensive to be able to try to man the call center locally for around the clock. So they still do. They do about 10 to 12 hours a day right now in the office. They're trying, they want to do 24 hours. They're actually going to be next year trying to set up a call center in the Philippines. And he said basically the, the value having the phone call answered is, is greater than the slight downside of having an accident on the phone. And if you try to do it, the reason they haven't done it for so long is because it's hard to.

You can't make any money if you're requiring people to work overnight on the phone because they have to be trained so long before they can go solo and be on the phone. And so that's what they're trying to do, set that up. I have a connection in Bangladesh if that potentially down the road we could potentially do something like that. I have a contact there, but I'm not really entertaining that currently. So.

But if we did, it'd be like a matter of like, it could potentially be like where only calls that were like complete overflow would go there or just after hours, like all night long, which would help especially in the spring rush because when, when command center comes in the morning, they are already so overloaded with just voicemails and stuff that's coming overnight that they just start off every single day drowning. So that was a thought of mine down the road potentially have the after hours overnight potentially being something like that. But I don't know, I'd be, I'd be more inclined to try to try to do something virtually in the U.S. but they've tested it too and they just said like you can get PhD and Master degrees in Philippines and other countries and they're way better in terms of being self managed. And the challenging part though in my mind is the fact that they really just require their call center to just basically take the information for the lead and give it to the franchisee. The franchisee then calls the, the client. And so this is I think a year later. Yeah, no industry specific training to call center since there are so many services. So again, like it's kind of their kryptonite, I think. And that is like the fact that they have so many 45 different divisions of gyms. They. No one in the call center knows anything about mowing, anything about grass, anything about landscaping, anything about any of the services they offer. They are simply there to take information and then give that lead to the franchisee and the franchisee calls, which I feel like is a lot of waste, honestly. So I'm very surprised still by that that they, they've done that for so long. But I understand because this is my next point, this is my musings. Great margins for a call center since a 5 to 10 minute phone call leads to a 15 to $65 lead charge. Right? So at command center if someone gets a call in, you might pay, you know, five to ten bucks for a five to ten minute call of them getting, you know, estimate set up for you. Whereas for them, that five to ten minute call still doesn't set up the estimate. You still gotta like get it transferred to the franchisee. There's still a drop off of 20 to 50% of people who never actually even convert after like never pick up the phone from the franchisee. But you're still getting charged 15 to 65 bucks. So great margins. I can see, you know, obviously command center, our margins are squashed. I'm sure they do 40, 30 margins, honestly. And I, I kind of did some math. I'll share it later. I think I figured out how much they make and stuff. But so then they have this thing called Gyms plus, and that is where they sell unserviced leads. And that's basically where if no one, if a lead comes in and people are not, there's no franchisees available, take the lead, they actually take that lead and we'll sell it to the public. And they've created a pretty, pretty cool platform where like outside vendors, it's better for the customer because then like we actually have a solution for them. And then the, the they get money and then they take that money. They, they use some of that towards their software and like their annual conference and both of those things you lose money on. So they, that's where they put the money. So they made, they make like 80 to 100,000amonth in revenue from just their unserviced leads that they sell to outside vendors. So I went to the division of the day, you'll see in the tour where they actually have people that keep track of those vendors, make sure they're doing a good job. They still make sure that they're doing a good job to be part of the Gyms plus program.

Yeah. So I figured, like, I kind of used the high end of that. 1.2 million was what they would make in revenue a year. If they make eighty to a hundred thousand, a hundred thousand times twelve, that's 1.2 million. Then I ran the math backwards. I know that 38% of their leads go on service. So if 1.2 million goes for 38, 38%, that would impute about 3.2 million in total revenue for their call center based upon just leads. But I know I'm wrong because the other math, I'm just, I'm just taking data points of stuff I heard and then I'm trying to, like, I try to compute it later on. I also know that last year they said they had 700, 000 leads across all their divisions, which I think is like an average of what, a hundred per location, about 150 per location. But they said 38 of those are on service about 250 000. So that means 450000 leads were serviced by gyms. So if, if you, if you impute just an average of $20 per lead for those 450000 leads, that would be, that, that would mean $9 million in revenue for their call center. So somewhere between 3.2 million and $9 million is what they, they make at the call center here. And we don't make a single close lick of that at command center. And our margin is way less because of the way that they have it set up. And then you get, they can get people trained up and on the phone so quick because all they need to do is take information, insert it and it goes to the franchisee. They don't have to schedule, they don't have to look at a schedule. They don't look at any of that. So that's interesting. I just think it's a waste though. Like if, if 20 to 50% of the leads that come out of their call center to go to the franchisee never actually set up an estimate because the franchisee never gets a hold of them. That is huge loss. But again, they're not interested in growing, right? They aren't. I talked to so many of them. Two out of the 90 or so franchisees are getting trained this week, this year, this month. Two out of two out of 90 are planning to hire people. So it's just a very different mindset. It's not wrong. I'm not saying that at all. It's just different. So I also ran the math on what I think they get in franchise fees, system wide revenue. So based upon my calculations, I think that across all of their locations they make between 300 to 400,000. 400 million. I think across like total system wide revenue, I think is 300 to 400 million. And that was like probably the higher end. It could be below 300. But like me giving them a lot of credit, it's 300 to 400 million total system wide revenue. It's probably more like 250. But using my generous calculations, probably 300 to 400 million. Which would make them in the US.

If all of their locations were in the US because they're across four countries, but all they're in the US they'd be like the top four or top five company in terms of total system revenue in terms of landscaping and lawn care. Take that back. That's the thing Is that system wide revenue is for all of their industries in all their categories. So their actual lawn care revenue, okay, it's probably more like 150 million but it would still put them in like the top 10.

Based upon my, my calculations of little data points that I picked up throughout the week, I would guess, I would guess that the franchisor.

Is making.

About.

13 to 20 million is what I said.

13 to 20 million in the revenue for the franchisor, like, like head office. That's my guess. I could be way off. I just used a bunch of data points throughout the week looking at franchise fees with our franchisors and divisional franchisors get paid. Like I could be off. It could be a little bit lower than that, but I think it's between 13 and 20 million. I could be wrong. That's just me trying to think about taking a little notes and things. Throughout the last couple days I was in the finance department and I'm gonna go back in the video because there, I know there's one board that would have told me but I didn't want to like inspect the whiteboard. But I know there was the data on there that I would have needed to like fill in all the gaps. So if that of an if interest to you, cool. If not, don't worry about it. But that's all I got. I'm super tired. I'm gonna. Tomorrow I have a podcast they're doing with me and then Saturday they have a bunch of their top franchisees coming in to the head office, 80 to 100 of them. So I'm going to do a talk for them then.

But man, it just, it's just very different mentality here. I'm just being honest. Like it's, it's just very different talking to people and they're, they're just so happy to make 80, 90,000 in gross in gross revenue. And then after franchise fees and all the rest, they're hoping to take 50, 60 home like that. That's what they want to do and they're that. So it's just different, right? Um, I think it's, it's just interesting and I think that the solo operator model would accommodate that type of lifestyle of, you know, work by yourself, maybe with one employee, make 150 to 200,000 revenue. But I just don't know why you'd want to own your own business. Like this is just like in my head, why would you want to own your own business and not have like social programs and unemployment and Social Security.

If you're only going to do like 80, 90, 000 in annual revenue and that is the way you get. And even if you're really profitable, like you can make 60, 70, maybe 80, 000 in annual, in annual profits if you hone in over the course of five to 10 years. I don't understand that, to be honest with you. But I think part of it is the culture. Part of it is like they're not entrepreneurial, they are operators and all of them are coming from like, you know, checkout clerks, things like that. It's not like they're coming from any sort of business background really at all. So it's just interesting. I don't think it's wrong. I don't think it's different. It is different. It's not wrong. It's just very interesting for me to compare and contrast. Like for me, if someone gets into Augusta, I, I point blank tell people and I know Lee does on his calls for sale. It's like if you, if you only want to build a two hundred thousand dollar business, like you don't need me, right? You can use the solo operating model, be there for a few years, learn the systems, increase your prices and then scale up from there. But like you don't need to join Augusta if you only want to do like 80, 90, 100,000 in annual revenue. So I think that's why partly they let me come here is they just don't see me as a competition. And it's. They called me out yesterday and I showed my stuff on the screen. So they've all become very friendly with me. Obviously them see me talk with Jim, it kind of probably lowered their suspicions and things like that. And so yeah, it's just interesting. Lots of them know me. It's the weirdest thing ever. A lot of them got into gyms because of me. I shouldn't say a lot. There's like five or six of the lawn guys that did, they said like, hey, we followed your content. We wanted to start a lawn care business. We saw the franchise model, it's good to have systems. We found gyms. So I'm like, yeah, hey, I paid you back, Jim. That's kind of how I look at it. So anywho, I gotta go to dinner and then chat with their media team, get their con, get my SD card and hopefully get all the video tour from the day. So it's interesting. It's, it's definitely, it definitely has helped me realize that although I keep, I'm so mad at myself Like, I'll just be really honest, everyone. I hate the fact that you gotta build this stupid headquarters thing. It's taking my time, my mental energy. It just. I hate it. The short term, one to three, next one to three years. I would be thrilled in my mind if I didn't have to build that thing. I've already put over 700 grand into it. We still have 2.3, 2.4 million to go. I hate it. However, coming to this event has proven to me why it is so important that we do it.

So even as much as, like this, I'm going through bank stuff right now and it's just a pain in the neck. I hate the fact that I'm spending time and energy thinking on that when there's so many other things we need to be focused on in terms of software and, you know, staffing up and doing all these divisions at Command Center. Liz is working so hard on. I hate that. But becoming here, having everyone together is unmatched. They said that their success rate of franchisees that did the virtual training was less than half than the people who came here during COVID And just shows the power of getting people in person. But also just being here is so awesome because.

In training, you're around all the corporate people, you're around all of the franchisees that are coming in and out of the office. You're around the founder. You see the founder, like just walking around, going from place to place. Like it's such a better atmosphere. They bring food on catered here. You don't have to leave as much.

I don't think I ever want to have like a facility. Like they actually have hotel rooms that can house all the franchisees. I don't think I ever want to do that. It's totally, totally different business. But there's definitely something said to be having everyone in one place, them, us, seeing everyone. Like I'm seeing all these other divisions. I'm seeing the finance team, I'm seeing the command, the call center. I'm seeing the founder. I'm seeing how they all interact together. I'm seeing like them having to walk out of meetings with phone calls and they're having their own internal discussions and breakout sessions on grounds like there's definitely value to that that we have to tap into. And so as much as like, this headquarters thing is an absolute pain in my neck and I just hate it. And I know I'm going to hate it for the next 24 to 36 months because it's going to be a financial Burden on us. But I know, and this is what Jim said, because I talked to him a little bit about it. He said he bought it in 2020 or sorry, 2002, he bought this place, 20 acres. It was an old college building. They had to, you know, gut it out. And you'll see in the video, like, it's, it's old, but it's, it's like a really cool facility.

College dorms, college kind of theater for their training facility.

But he said, like, he said the first, like five to 10 years, he said he questioned and doubted buying the place. It was such a burden on them financially and like, sucked a lot of his time and energy into it. But he said now, looking back, not only from like, obviously the real estate has gone up in value, but he said, like, that is the reason he points back to like creating the culture, having franchisees, being able to come to a place of train. Because the first 15 years they didn't have in person training. It's like 15 or 20. It's only been the past 10 years. Yeah, it must have been like almost 20 years. They didn't do any training here.

And so when they got the facility, that's when they started doing in person training. Instead of the franchisors, like the department part, people are doing it locally in their market with like one or two people. So anywho, those are just my musings. Those are my thoughts. I am not looking forward to building this headquarters. I dread every single minute of it. I, I hate that it's taking my time and energy and it's going to lock up a lot of financial resources for us in the next 12 months. To be perfectly honest, I'm looking at a couple different options right now. We are, we still have the sba, a second bank that is working with us on the SBA loan. But I am actively thinking about several different alternative options in terms of selling things. Kind of like rewards, kind of almost like a. It's called fundable.com. you can check it out, but basically you can have rewards on there. So sell packages like a thousand dollars, $5,000, $10,000, and then up to like, where people can also do debt or equity stake. So I'm looking into that sort of thing because of just how fast we're gonna be able to turn around an SBA loan. With the complexity of my. Even if this bank, which we're working on now, is, is so much better than the last one that turned us down and took 14 months to turn us down, this one's a lot better. But even if they do it in five or six months, I can't wait that long. So anyways, just some of my thoughts, my musings, and you might. I'll let you all know if I actually launch that thing on Fundable, but it would be basically where people could pre buy things like landscape business. Course I basically try to sell out all the media stuff as much as possible to be able to get the capital. And then I'd also allow people to be able to buy with like if they wanted to get debt. And I'd be paying interest, obviously, and then.

Equity as well. So still figuring out all that stuff, it's a good learning process for me, but I just still hate the fact that I got to deal with it. So I apologize. Honestly, I, I perfect. Honestly, I apologize for the fact that so much of my time and energy is being spent on that. I feel bad about that. Um, there's been multiple times where I just want to cut the whole cord on the headquarters and just be like, hey, well, let's pay more rent. Who cares if I'm paying $20,000 a month in rent in five years? Like I. That kind of where I came to because just locking up so much time and energy. But I think after seeing it this week at gyms and talking to Jim specifically about it, he encouraged me to just like he's like, next 12 to 24 months, you're gonna hate every minute of it. You're gonna hate the building process, you're gonna hate the loan process, you're gonna hate buying it, you're gonna wish you didn't. You're gonna go into. It's gonna be financially really difficult for a few years. But he said it can five to ten years, you'll look back. And we grew so fast, so. And we're able to help the franchisees so much more and support them and have a culture and retention, he said just went through the roof when they did that. They couldn't hold anyone on for so long. But he's just like. When we brought everyone together, people got the vision. They could see it every day. They saw the founder around more. And so anyways, sorry, just me sharing because I'm probably tired. Take care everyone, and we'll see you tomorrow.