Mike Minutes Mastermind 09/16/2022

Happy Friday everyone. Let's go ahead and jump in. Make sure I got my audio set up. I do not.

Cool. All right, a few questions popped in this weekend. I will have the alp. I have two or three new one click estimate emails set up for you, Corporation, Winter or sorry, snow.

They're the third one I forget. There'll be three one click estimate emails for you for service, AUTPOT and especially Zooper. I know the winter ones for Zooper are not in there still from last year. So we'll get those all updated this weekend and I'll make another video in terms of how to send out those in case you need it. Okay, I had a few questions I quickly glanced over this morning.

Let me zoom in for you.

Okay, in your mind, what are the pros and cons of paying a working GM salary versus hourly? Are there situations that dictate whether or not you pay one type of the type of way over the other? Does the winter affect their pay at all or their dues within the company? So for working GMs, I do like to still have a salary.

You could try to do hourly. It just really depends. So.

If you're having them do everything in the business and I mean they are fully responsible for the full operation of that company and you are not there ever, that's when I do salary, if I'm there at all, I like to be an hourly because ideally I would like everyone to be on hourly because it's the harder you work, the more money you're making. If you're working crazy hours, you make more money. I like hourly way more. But if I'm not there, there is like, there's, there's a lot of things that are going to be required of them that are outside of working hours. In terms of insurance stuff, texting the guys like all these other things because they are fully 100% responsible. So.

In terms of pros and cons, the cons of salary are the fact that one someone can SAP the clock, accept, you know, hey, I'm on salary, I don't have to work very much. And they just basically build a business that they don't work very much, it's less profitable, etc. That's why you want to incentivize them more with the profit sharing. Like a good gm, I want within three years for their salary to be matched by profit sharing. So three, four years max. So if they're, if they're happy with space salary, like, sorry, but that number's not going to change very much. Unless profits are there. I'm sorry. So the thing is, I like hourly more though. If you're churning through GMs more often or you are involved in the business to where you can make sure that they're not just turning a timer on for their clocked hours and whatever, right? Like if they're submitting their own payroll and stuff like that, that's when it's like okay, like should just be on salary. So. But yeah, there's pros and cons of both. I think the more hands on you are, I'd be more inclined to go hourly just because I want them to be able to make more. When they're making if they're working 50, 60 hours, I want them to make more money. If they're working 30, I want them to make less. It's just hard to measure it sometimes with salary, hard to measure it sometimes hourly because there's other things that they need to do outside the business. Especially if they're complete operationally independent of myself. So that's kind of how I look at it. Does the winter affect their pay at all their duties during the company? Yeah, like winter will slow, like they'll probably work less. But on the flip side, I expect them to still be working full time even though they might let reduce the cruise hours. I want them, my, my general manager required to be working full time because if they are, the business will be will at least break even or maybe even be profitable during the winter months if the general manager is actually doing the work right. So if they're getting less hours for their crew, I still want them working 40 hours a week at least. Because if they are out in the field working more, they can actually be profitable. And that's again a downside of salary during the winter. If you don't have some good GM that isn't going to be hustling, you will lose a lot of money because they'll just work 15, 20 hours a week. They'll have the guys do 30 or 35 and you won't make a single penny because you're paying someone for 40 on salary. So if they move their hours from more operational like sales and stuff like that and move it as a working GM to actually be in the field for four or five days a week, you could be actually profitable during the winter.

I see a laundromat near me is for sale. I've been interested in this because the low level of employees need to operate it. The asking price is 210,000. It is a coin operated location that has a drop wash and fold service. I would drop the wash and fold service because I want to simplify the business. The sales are listed at 140,000 and the net is listed at 97. I looked up the business and was able to see that it was owned by an older couple that has been operating it by themselves. I'm assuming that is why they have the listed price of 70% profit margin. The Google reviews are sitting at 4 to 5 stars. People are saying that it used to be better kept and that it could be more comfortable. This all seems like an opportunity to capitalize on the need of a boomer aged owner that is looking for liquidity. How should I go about analyzing this opportunity? How should I value the business? I heard Cody Sanchez from Conventional Acquisition say that these valuations are really mostly made up. Meaning that it really comes down to what people think. I would like to do this with either a SBA loan or 90% finance or owner financing or a combination of two. What do you think? Okay, so several things I have go through my head. I don't know who this is which changes everything. So I have to give general advice here. I don't know where you're at financially. So that's the biggest thing. It depends. Like if you have multiple locations, it's very different what I'd be saying. But let me try to give advice without knowing that because that is the determining factor. But first and foremost ask yourself, what's the difference? What advantage do you have over the market in this industry? This is where Cody. I think Cody's amazing by the way. But you have to remember the only reason you do a good you can make a great deal in boring businesses that don't require employees. And it's just they run by themselves. The only way to make a good deal work is you get a good buying. You get a good buy. It is not on the the. Because if there's nothing you can do to make the business more profitable by growing it and there's nothing, no employees required, there's no operational efficiencies, then you know, vending machines, things like that, there's no real improvements you can make on the business, it becomes commoditized in terms of valuation. So the only way to really crush it in a business like that is the sale price needs to be incredibly good. If you could get this business for 50,000 now it becomes interesting, right? Because now you're able to make your money back within a year. So my first thing is do you have any sort of edge on any other buyer when it comes to laundromats. This is why I've stayed very narrow to lawn care and only recently started going to real estate. Right. All of my businesses are around lawn care, like the gym. Okay, that's, I did that beforehand to figure out the franchise model. But even that is within franchising. Right? So it's like lawn care, franchising, real estate, like that's very narrow.

And every single time I've ventured outside of that, I either stop question myself or I've started it and then just had to abandon it like keto ketosis cups. I was not a food expert. What was I doing? Why do I think I'm going to beat. People have spent years and decades of their life dedicated to that industry. So first and foremost I'd be looking at, do you actually have a, an operational advantage over anyone else buying secondarily? If you don't, the asking price is the only thing that matters, what you can buy it for. Because then you're simply looking at numbers. Third thing I would look for is 141,000 revenue. I would imagine that 30 to 40% of that is from the folding service and the Washington service, if not more. I could be wrong. You're not giving me the numbers here, but I would imagine 30 to 40% of that is the wash and fold. So let's go ahead and say a hundred thousand of it is from the coin operated side of things. So now we're looking at.

About 50 to 60,000 in annual annual profit if you take those numbers. Because that their, their, their, their expenses are fixed rent, utilities, Those are the two big ones when it comes to laundromat. Because you have rent of the facilities, you have all the water, electricity to operate the machines, and then you have maintenance. Right now if they were doing all the maintenance themselves, they're doing all the labor themselves. Now you gotta look at that 50 to 60,000 and ask yourself, okay, how much is it actually coming to me? Let's just say it's 30 to 40 grand. After you take, you hire someone else to do the maintenance, cleaning, because they were doing all of that, you're looking at 30, $40,000. Let's just say $50,000 to be generous. Okay. That you're actually profiting on this business. If you've cut out the fold, wash and fold service. So you reduce labor, but then you need someone else to the maintenance. Fixing equipment, repairing equipment, changing it out. I promise you one thing, they're not fixing asset capitalization in terms of replacement costs for those machines. So max you're making this is 50,000 a year. Now you're asking, okay, 50,000 a year on 210,000 in in asking price. That is going to take you four years to recoup your costs. Okay, secondly, more from a cash flow perspective, we're now cash flowing about on 50,000amonth or 50,000 a year in profit, or cash flowing $4,000 a year in profits on $210,000 of a loan. You are going to be looking at about 2 to $3,000 a month in your loan if you're doing a 10% down on 90% finance SBA. So you're literally looking at about $1500 a month in profit. That's the reality of this situation. Now, if you can get the asking price down to 50 to 60,000, because they're just done with it and they do not, they can't sell the machines by themselves, which is very possible. Now we're talking about something more interesting where you're doing three, $4,000 a month in profit. Then the question is, is this going to take so much of your time? Or if you just put this time, money and energy and that same SB alone into your lawn care business, would you make more than three to $4,000 a month in profit? That is the question. Okay, if you spent the amount of time, energy and money that you're spending on this Laundromat, if you spent $210,000 on your business, would you make $80,000 a month in revenue? Would that make 10 to $15,000 a month in profit? That is the question. Right. So again, this is really depends on where you're at in business. We are in terms of financially.

If you had $200,000 sitting in a bank account, that's a different conversation than if you have $10,000 in your bank account. You just got your business started for lawn care. I truly believe $210,000 on your lawn care business is going to net more than three to four thousand dollars a month. And after the cost of financing, fifteen hundred dollars a month. I truly believe that.

So, okay.

You talk about looking at business investment properties, sorry, business investment opportunities for their return on investment. How do you go about calculating return investment as on a brand new business or business model? I'm sure some of the equation is guessing, but would like to take your. Yeah, so great question. Anything less than a year is very, very difficult to return. To calculate your ROI because you don't know your attrition and because you don't know your attrition, you don't know your lifetime value of a customer. All right? So you need to know, you need to know what the lifetime value of a customer is to really determine the ROI of customer acquisition cost. Right? So if I'm spending $10 on customers, but I don't know how long they stay with me, I might be able to determine what my ROI is in year one. And you can do that. But until you see a couple years under your belt, you don't know how long those customers stay with you. Right? So if you have, if you have a 33% attrition rate, so one third of your customers leave every year, that would mean that you have an average three year lifespan of a customer. Therefore, I'm able to, okay, I make fifteen hundred dollars per year on average per customer. And I have an average year average lifespan of three years. That's 4, $500 is the lifetime value of that customer. If I'm averaging say 20% in profits, that's going to put me up 900 in.

Profit per customer lifespan 900 in profit. Therefore the question is, what do I spend on customer acquisition cost? Let's say it's a hundred dollars. Customer acquisition cost is $100. I know the lifetime value of the customer is going to be $900 in profit. Then you have a 900% ROI over the course of three years. So that's 3x or 300% per year return on investment. Assuming you have a 20% profit margin, you have a three year lifespan of the customer, which assumes a 30% attrition rate and we assume $1500 per customer. I think I already said that. So that's how you can run the math. But you kind of need to know that attrition number. You could, you could guess. And I think if you were trying to be conservative, you'd use 33% like I just did. If you're trying to be like pretty aggressive, you'd use 20% in terms of like average attrition.

That's all we got for those questions. See it here. We had one more here. I'm wanting to convert as many fall clamps into mowing for next spring. Do you recommend giving them a quote for mowing estimate with this fall clean spring up or just sending the one click email to the next spring? I would do both. So if you're doing a fall cleanup now, you might as well put the price in there because if you do, you don't have to do the price next spring. Just keep that in mind though, because if you're trying to raise price like prices next spring, just know that you might want to pad your pricing this fall a bit if that's the strategy you're using. But I would recommend put it put the price with your current estimate for fall cleanups and then you'll have it to be able to send out in spring rush. But then you'll do the one click estimate email then, right? So.

Awesome. That's all I got. One, two, three. We're good. Awesome. You guys have a great weekend. If not tomorrow, on Sunday I will get the one click estimate emails updated. I'll make a video on how to send those out and I'll email it to everybody. So have a fantastic weekend and we'll see you on Monday.