Mike Minutes Mastermind 08/31/2022

Hello gustonation. I apologize for being late this morning. Yeah long about snow and winter services at command center. So I just finished that up. Next week I will be sending out an email. I'll make sure it's in the email for everybody really walking through how winter services roll, what you might need to be making changes to as we head into the fall, etc. I know we're still a couple months away from even most of you thinking about winter services, but making sure that your services verbiage is updated correctly, your opt out email is updated correctly. I'm going to walk through all of that next week for winter services and then for snow as well. We were going through a lot of different things this morning at command center making sure that snow is going to roll smoothly and there'll be a form that you'll fill out if you want to activate snow next week. So again keep, keep your eyes out for next week email and I'll make sure I let everyone know inside of the mastermind when that is going to be sent out. But that will be really good just to make sure you have everything. All the ducks in a row for winter services and for snow services. So keep your eyes out for next week on that. All right, let's go ahead and jump into questions. I have not looked at any of these. Let's go ahead and jump into them now.

Okay.

See here. Wesley Chapel following up about the even billing. On the billing, it sounds like just charging by the cut would be the best solution. But since it is norm in here, Florida, how do we handle the pushback and potential customer loss? Is there a way we can spin it to the customer to make it seem like a positive? Yeah. So first and foremost, like I talked about yesterday, sometimes in the customer acquisition side of things it is going to be tough if they're really, really used of monthly billing and they're comparing, trying to compare apples to apples with other bids. And so you might even though from a cash flow standpoint might not be as good, you might take that cash flow hit in order to be able to help with the acquisition side and getting more customers. That's fine. If you really want to stick to per cut pricing. How you would potentially pitch to a customer is like we don't have signed contracts. You can cancel at any time. So if you're not happy with the service, you don't have any skin off your back. There's no cancellation fees, you don't have to sign anything. Like that's what you're going to really push to them as well as during the winter months when we only come once or twice, your bill is going to be way less. That's how you really want to pitch it. And just in general you're trying to focus on, okay, this is $40 per cut versus 200 per month. It's a lower ticket figure. You can get a higher price for it typically. Um, and so that's how you want to kind of spin as a positive, really focus on like, there's no contract. You cancel at any time. During the winter months when we don't come as much, your bill is less and you know, focusing on that. In terms of the positive side of focusing on again, though, I am not opposed to using it. Just know you're going to have a cash flow hole you dig yourself into and you'll need to make sure you have like a line of credit or good cash reserves to get through the spring and summer months. That's the main thing. I'm not opposed to it at all. It's just a matter of make sure you have that reserve. And I'd only be doing it if it's so customary in your area. You just like everyone has a massive, like, it's just they can't understand percut or something like that. I think that most of the time though, you can sell them if you just like you said, convince them that, hey, this is better for the customer and that is no contracts. You don't have to worry about breaking a contract and then paying up an extra fee. There's no cancellation fees. And simply put, during the winter months you pay less because we come less.

Quick note on that. As I think about that, during the winter months, what's really great in Florida, for example, you still do need a couple cuts, but that's also time when a lot of people are disillusioned by the fact that they are paying so much for someone to come twice a month to property. If I was you, I potentially that'd be a time I start marketing and saying, we don't do level billing. We don't. Or we don't stop paying high prices during the winter when people aren't coming, are tired of. Tired of paying full price when no one comes to do your service in the winter and really going after like, hey, based upon how much services we offer, that's how much you're getting billed for. Because there's going to be people that are unhappy of paying 200, 250amonth. And someone comes to their property once or twice during January, right? So Potential flat there. All right, Tyler from North Bend, in the past you've mentioned us going to a labor market more like Europe. Could you explain more what this looks like? Are there, are there any macro trends that should shift and soft relay the market over the next few years? The only real thing that will soften the labor market, in my opinion, is going to be a recession. Right. So right now what's happened is we have a lot of layoffs and a lot of things, but you don't see that in the numbers yet for a few more months. Like, you've seen the unemployment rate kind of start to not go up, but it started to level off because there's still so many job openings that the layoffs are being absorbed. So if you actually go into a recession, though, and not just a technical recession like we are currently in, we are in a technical recession. Well, when I say recession, I mean like unemployment starts to go up, housing goes down by 30 to 40%.

When and GDP continues like a third, a fourth, a fifth quarter is, is down. That's when it starts to really hit home. And unemployment is the number, right? So unemployment rate is the number to watch. If that starts going to 5, 6, 7%, that's when you'd see a softening in terms of people wanting to come on board. I was talking to someone in Bangladesh the other day, and when their unemployment is at 30, 40%, if someone gets a job with you, they are literally willing to do whatever it takes to keep that job. They don't have turnover because people like, they get a job and they dedicate their life to it because there's. They do not want to be unemployed. And so when you have the flip of that happening where it's 3% of unemployment in the U.S. people have options and they have 10,000 other jobs that are willing to take them tomorrow. So they don't really care if they show up on time so that that whole perception would change. Now politically in the US that will never happen. It'll never happen where it goes above 7, 8% unemployment, because politically it's an absolute nightmare. So what they do is they just stimulate the economy to bolster up unemployment when needs be. So that will never happen. That's why I'm very confident saying, like, we will never have it where it's easy to find employees, because we will, the government will make sure we never get above 78% unemployment. And you saw what they did when it happened in 2020. They just immediately dumped money on the situation to prop it all up and that's what that will happen every single time.

So in terms of going towards more like Europe, it's going to be where the, the regulation is much higher, the taxes are higher to support the social system that we're creating. Ultimately when you start paying people's student debt, I'm sorry, that's not free, that's not forgiven, someone's paying for that. It just happens to be the taxpayer. So as our taxes go up, as regulation goes up to fund all of these type of programs, you're going to see more and more the cost of labor going. So up to the point where more people just go become more mercenaries and working for themselves and solo operators because they can't afford to have employees and at the same time the employees don't want to work. So that's why I have such a big push like you got to raise your prices to where you're charging a hundred plus over the next few years and there needs to be that so that you could afford 25 plus dollars per hour to an entry level employee. Because anything below that in my mind is going to get wiped out. And that's why like you're going to see in Mark, in markets like fast food, entry level positions around like manufacturing, those massive companies will wipe out all the smaller competitors simply because they'll be the ones that can afford the technology to replace frontline employees. Whereas the small manufacturers, the small restaurant mom and pop will get wiped out due to the fact they cannot afford the machinery and the infrastructure and the technology to replace their frontline staff. And as that cost of labor goes up, they'll get wiped out. So that's why on our level there's two things we have to do. Number one, we have to achieve scale. And number two, we also have to achieve the scale in order to be able to afford the technology that will eventually replace frontline staff. And not in our case, not necessarily replace them, but optimize them to the point where we can charge 100, 120, $150 per hour over the next five years.

And make it work. It has to be done that way.

In the past couple of years, when I get to this time of year, I used to coast into the end of the year. Any recommendation how to get past this and continue to grow as we get into the fall and winter seasons. This is a great point.

Gary Vee used to talk about this a lot. He called August like the month of the worst month of the year because people have passed the half year mark and they literally start to coast from now to end the year, especially September, October, you still have four more months. We're not even 66% of the way through. Like right now we're at 65% of the way through the year. Like, there's a lot left to go. And so the fact that you're going to cut a third of the year and it's like, ah, no, no problem. This is the most profitable months. You've paid your equipment, you've got the hiring. A lot of you have the team that you need in terms of hiring. You've got a good core group. This is the time to go expand. This is the time to drop pedal to the metal. This is the time to grow to capacity. This is the number one everyone thing everyone should be doing. And that is what's my capacity? If you don't know what I'm even talking about, you get a coaching call. What do I, what's my capacity in terms of revenue, in terms of having enough trucks and my employees, what's my revenue max that I can grow to without having to buy more trucks and hiring more people? Everyone should be gunning for that number right now. If you have two employees and two trucks, you should easily be gunning for $30,000 easily. That should be like the number one preoccupation. Fall cleanups. You're going to be going into a period where you can start selling, mowing more as like the rain comes, grass starts growing, taking off, fall rush, leaf cleanup. This is the time to go for it. You need to know what that capacity is and gun towards that because then what you can do is get to the capacity and the next spring rush, you'll break through the next stage of growth because you're already at capacity now. Otherwise, what's going to happen? You're going to be at, let's just use that 30,000 level. You're at 15, 18, whatever right now. Next spring you're going to hit capacity and you'll get to 30 and then you'll probably stop because you're worried about buying another truck during the spring rush. All the rest of it. Why not focus 100% of your time on close ratio, get more jobs, upsell, get to 30 now, hit that threshold now, be profitable there without having to buy more trucks, more equipment, more employees. And then next spring you'll jump to the next level of growth. So you'll save yourself an entire year of growing your business. If in the next four months you can just be very diligent about growing to capacity.

I think there's another question or is that the last one? That was the last one. There was one that popped in here. Some of our MOS need to be raised 10 to 15 per cut and I'm finding we are not hitting our 60 man per rate. Is there a good way to raise them incrementally or should you just bite the bullet and do it all in one string Rush? I'm very confident now in saying if you're not making $60 per man hour rate, you need to raise prices immediately. This is far too low. I'm changing the training now for initial franchisees. If you're not making $60 an hour, it is too low. It's unsustainable. Even, even if you're trying to grow quickly. $60 per man hour rate should be like the base. Obviously you can bring down prices to sell individual jobs, but as a rule of thumb, $60 is your man hour rate. That's like minimum, minimum, minimum right now, right. We're pushing for a hundred at a location, locations that are trying to hit profitability. I would say 80 is like you're kind of mediocre, you're kind of growing slowly. 60, you're probably going to be growing very quickly, which is fine. But keep in mind, you're probably running, you're going to run into a lot of profitability issues and cash flow problems and things like that. At 50, $60 per hour. My personal belief, you're not going to be able to afford the employees without having very thin margins. So if you're under 60 right now, I would pull the band aid off. I'd be raising prices because you're probably losing money on those clients, to be perfectly honest.

Awesome. That's all I got. Well, here we go. Wouldn't a higher rate slow down growth though if you raise the rate to the final customer? What I'm talking about for you, Kyle, though, is if you have people that are under 60, like 45, $50 per hour because they're just under bid, you need to pull that that you are losing money on them. There's a difference between losing money and then having a low margin for growth. Right. And I'm okay with it. Cutting out E fees, cutting out dump fees, reducing the price on jobs to get to scale, like grow and close ratio. But that's fine. But if you're having profitability issues, if you're having trouble with cash flow and you're under $60 per hour, you should be cutting those clients immediately. So just depend on which stage of growth you're in. If you're interested in growth and you have cash, that's fine. Keep your rates low, keep growing the capacity, you're fine. But if you're in the point of I'm at capacity, I have too many customers and I need to cut out the my lowest 10% that are under $60 per hour, rip the band aid off, raise them immediately, 10, 15 bucks. So again, you have to always ask yourself, is this for a growth? Is this for someone who's trying to grow really quickly, or is this for someone in profitability mode? Someone in profitability mode. You better make sure you're tearing the band aid off and raising prices on under $60 per hour, especially if you're at capacity. Right. Once you get capacity, that's where immediately you have the option, do I keep growing and keeping my and keep scaling to the next level of growth, or do I raise prices, become more profitable, etc. So the number one preoccupation is get to capacity. Everyone should just get to capacity and then you have the great decision. It's a very good problem to have. I can't grow any more without buying more trucks, equipment, or hiring more people. Great. That's where you want to be at because you're either going to raise prices and become very profitable or. Or b, you have the option of continue to grow to the next stage of growth and breaking through that barrier.

We are still waiting to grow. I will wait to wait, guys, next week. Great. Yep. If you have the cash reserves and you're fine in terms of profitability to keep going and you want to keep growing, that is your preoccupation. Just keep growing. There's going to come a point where you. You'll hit capacity and you'll have that decision. And if you still want to keep growing, keep going. But it's a matter of know that at capacity is a great time to pull band aids off, raise prices, et cetera, because you don't care now if you lose customers. All right, guys, have a great Wednesday. We'll.