Mike Minutes Mastermind 10/10/22

Happy Monday, everybody. Hope you're doing fantastic. Quick thing I wanted to go over and that is when it comes to PvP and yellow slips, I actually noticed this at one of my locations and that's why I'm bringing it up. But I know this for several others and that is yellow slips is your only way to ensure quality. So the problem is if someone doesn't have to go back to fix something, it's hard to adjust for on P4P. What I mean by that is if someone leaves a bad online review, if someone quits service, there's really no repercussions on P4P. The only repercussions on people is things are broken. If someone has to go back to the property, if another team member has to go back to the property, etc. What I would highly recommend is if there are yellow slips that include unhappy customers that just cancel.

1 star reviews on Google that there's no real resolution to, but there is definitely error on someone's part. I would cut very, very heavily on P4P if your guys are crushing it on P4P. So you know the specific location I was looking at. You know, people are making $10 above base pay.

But there's online reviews and if there's a cancellation, there should be massive cuts on PvP. They should really, really feel that the only way for you to rectify quality on PvP is by cutting into performance pay. And if they're crushing it, if they're making so much more above base pay, you need to make sure that you utilize your yellow slip system as a way to remove a big chunk of their pay. So for example, someone.

Has a complaint and canceled their mowing service because the bush trimming was not done correctly, you're not just going to send someone back to fix the trimming of the bushes. You're going to penalize them massively for the time it took to answer the phone at command center for you to set up a visit to go back. All that time and energy and effort, it goes into them going back to the property, I would cut massively. Especially if you know you're losing customers or they're leaving bad reviews.

It'S your only recourse. It's your only way to rectify and bring that behavior back into alignment so they take time and do a quality job. So if your guys are making above $5 above base pay, I would really be looking at should we be cutting heavier in yellow subs? And for the vast majority of people, they should be because your only way for quality. And when the guys are making that high above base pay, you need to have a countermeasure and a counterbalance and that is to take money away from them if they are not doing a quality job. So make sure you do that. Any time that command center spends, any time that you spend and you're not going to charge it, I go, oh, well, okay, if another team member has to go back for 20 minutes, I'm gonna charge, you know, at base pay. So I'm gonna charge like 8 bucks or whatever it is. No, you're gonna charge it $80 an hour. So if it takes them an hour, charge that employee 80 bucks. All right, if you take command center time, like take 15, 20 off for that. Takes your time. Take 20 or $30 off for that. You've got to cut heavier in yellow slips. If you're still getting a bunch of complaints, bad reviews, cancellation of customers, and then guys are just crushing it. On P2P. That is your leverage on P4P is the ability to be able to take away from them if they don't do a good quality job.

It's not fair to all the guys who take extra time on the job and don't do yellow slips and don't have callbacks and don't have bad online reviews, etc. So let me switch my wi fi network. Give me one second.

All right. I think I switched over. I don't think it helps at all. Anyways, let's go ahead and switch over to questions.

Go ahead and present Share screen window.

Cool. Again, quick reminder. This Thursday is our roundtable. This Thursday evening, 5:00pm Pacific Standard Time, 8:00pm Eastern Standard Time. Got some cool announcements for everybody coming up then. Sure you all can see this. Good. You mentioned you're working putting together a system for a working GM model. However, it will be done in six to 12 months. No, it's not really for the working GMO that's in place. It's more for the regional GM to be managing working GMs. Is it possible going to minimum viable system for everyone setting up working GM models? I'm literally wanting something super rudimentary to get me started this next year with my working gm. Yep, there'll be more details coming up. This on this on Thursday. I've already uploaded some of the materials to the dashboard. There's more coming. Yeah, we already have a good working GM model. It's more a matter of having a regional manager over your GMs. That's the part we're still formalizing over the next six to 12 months as I get more locations and have Chuck be the regional manager. But we are going to be uploading checklists for GMs to be doing a daily weekly basis. The worker, the compensation and employee contract for working GMs whole bunch of other stuff from there I think we could get into full system and documentation is done. Yeah. So it's there, it's ready to go. More information will be coming on that on the round table on Thursday.

Is Brad available for tax planning and strategy calls or emails? Okay, everyone's dipping into my Thursday content. We'll talk more about this on the round table. But the short answer to that is yes, Thursday. There'll be announcements on this on the roundtable. Also, as the year's ending should we have something in the academy or videos that are easily updated yearly that can help the franchisees at all different levels to save on taxes monthly, quarterly, annually. I recently heard of tax trade that 100 of our cell phone plans for small business owners can be right off if we have a phone home phone line and it'll be helpful for the franchisee to have a file or a video with some strategies of what we can do to reduce the tax goal. Especially it's towards end of the year. I enjoy learning how to save money on taxes. Sorry. Lol. Yeah 100 more information will be coming on Thursday. It's very very difficult to just record tax advice. It is much more of a one on one game because it is so different for every level of business, every single state, every single type of entity etc so the one on one approach is far better. Oh, tax strategy is the one thing I I kind of cringe when people start recording videos or watching people online because like everybody's situation is different when it comes to taxes because you have not only the fact the size of business, then you have profitability of business, then you have age of business, then you have entity of business, then you have.

What income bracket the personal owner is, stuff like that. We only mow weekly when we start transitioning to winter services, should we start showing up on a bi weekly basis for the same price as weekly or to tell the customers it'll be 1.5 price of weekly mowing for biweekly winter services. This is a good question, really great question. We've always just if they've been on weekly we switch them to bi weekly, we charge them the their bi weekly price. Again this is the reason why we make sure that we have the bi weekly price in the quote for mowing even Though they only ask for weeklies, we want to give them the bi weekly price. So that way during the winter months they've already clicked accept to that. It's already been on their radar. And it's easy for command center. If someone calls in questioning, this is like, hey, here's why we do it. It's actually cheaper for you on a monthly basis and typically you don't need it weekly, you only need it bi weekly during the winter months.

So I would just make sure it's stated in that initial email, the opt out email saying that you're going to come on a bi weekly basis and you're going to be charged the same as you would for a bi weekly mowing service. And you're going to get a few customers questioning that because they're so used to weekly, say $40 and all of a sudden jumps to 60. The thing is, it's still 60 twice a month. It's still $120 compared to $40 four times a month, just 160. So it's still cheaper. And typically we just say, look, there's not enough for us to do typically on a weekly basis. So to save you money, we come bi weekly and get all those services done. And if you're only getting the first couple of the winter services done, that's when they need a actual cleanup to get them up to par. And then winter services maintains that level of service at their property.

You say to pay yourself a low salary, but give yourself more distribution for tax purposes. Is there a number you think we should be paying on salary? Then we can take whatever else we need, want to pay ourselves on a quarterly basis on distribution. Again, this is something you should be going up with the tax accountant cpa because everyone's situation is so different. But yeah, in terms of the number you think you should be on salary, honestly you want to do it as low as possible. It's just the bottom line. Um, you know, everyone's like wonders why these CEOs take a $1 salary. It's not because they're trying to be humble. It's because their tax bracket on their W2 income is like five times as much as if they just took in distributions and were able to take loans against their equity and were able to take loans against the business and all the rest of it. So.

You just want to be as low as possible. That's the bottom line. It should be, it should be a reasonable salary though. Like if you're showing up and working 50 hours a week, you should not be taking 15 grand a year home and pay. It's going to be very hard to convince the IRS on an audit that you should be only getting $15,000. If you're working 50 and 60 hours a week on your business and it's doing a million dollars in revenue like good luck trying to convince an auditor of that. So I always just, I always just break it down by hours, how many hours I work in the business. And fortunately the businesses that don't make a lot of money is where I spend most of my time. So the ones that make more money, I'm able to say, look, I only make X amount. I only work there an hour a week or hour and a half. And so I would multiply by 52 and here's my hourly rate. And so it's pretty easy if you are a little bit less, more passive in the business. If you're working like crazy either A, you're probably growing a lot and there's not a lot of profits to be had so you don't need to worry about salary too much or B, if you're working there a lot and it's really profitable, that's when you need to start thinking, okay, like what's a reasonable salary if I replace my position and you just want to go as low as possible typically because that income is going to be taxed at the highest rate compared to what you could otherwise. Again, if you're working like crazy hours at a location that's super profitable, making hundreds of thousand dollars a year, you should probably be using those profits in a more tax efficient way starting a second location real estate, doing something else with that money besides just you working so many hours at one location.

And honestly, it's not a bad thing like taxes are a good thing that the tax strategy and tax planning is a good thing because it.

Incentivizes someone to go expand and grow. And that's what the tax system does. It tried to help the economy grow by giving certain incentives for building houses, starting businesses, hiring people, etc.

In terms of paying off debt, I've always approached it as the debt snowball via Dave Ramsey where you pay the largest to smallest debt. However, could you recommend, would you recommend paying off revolving debt such as in house credit at your dealer six months as cash, credit card, line of credit, etc that are on terms on a fixed rate? Yeah, so I have a bit of different philosophy. I know I did. Ramsey said this. I think it's really good because it's more of a psychological like you Know, you get some momentum going by paying off accounts completely. I think it's very, very good for the average person. The same way I think that saving money is good for the average person. I think if you have a little bit higher level of discipline and you don't need psychological wins as much if you have 12 to 20% interest that you're paying on some loan and you're trying to pay down a 0%, same as cash from your dealer. I'm sorry, but that doesn't make any sense. All right, so I, I personally would be tackling the thing that has the highest interest rate or has the most, especially in this environment, the most variable interest rate. Right. So anything that's varying interest rate right now, anything like this is the thing. Keep in mind there's no reason to pay off debt in pieces if you pay on a fixed schedule. So a lot of times you like I'm paying off the debt on my equipment, it's like, okay, great, but your payments are going to be $350 a month regardless of what your principal is until it is the account is closed. So keep in mind the only thing I'm looking at too is like I would not be trying to tackle that debt slowly if I can be tackling slowly a debt that is paid, compounding interest based upon the principal every single month. So that way every single time I'm putting money into it, I'm saving interest versus this other fixed schedule of debt where if I'm paying off, it doesn't really matter because it's not changing my payment, it's not changing the amount of interest I'm paying. So anything variable, especially in this environment, I would be paying it off. The first things I'm paying off when I get these, this, these real estate deals closed is going to be my home equity line of credit. I think the first thing I'm going to close off because that is variable interest. It's the only variable variable interest loans I have.

And I want it gone because every single couple weeks I'm getting a new piece of paper stating that my interest rate has been going up, it's been going up, it's gone up from like 2.5% to seven and a half percent. It's a seven percent. Sorry, it's ridiculous. And home equity line of credits are usually like the lowest light types of credit types of interest you can get.

For snow removal budget hours, should we give the crew the same amount like we do for mowing, or should we do budget hours like aeration or overseeing we have always paid guys much better for snow as compared to promoting. But one of your thoughts. Yeah. So if you're wanting your guys to be paid more on any service, for example, like snow removal, then you definitely want to treat it more like aeration, overseeing, or treatments where.

Oh, I see what you're saying. It'd be the opposite because like you're saying if I take the amount of labor that I get now revenue and consider all labor revenue, or do I cut out some of it and consider it none labor revenue, I would gauge this based upon how much more you want them to be making. So if you make want them to be making four or five dollars more per hour, you're probably going to adjust what percentage of the snow revenue is considered labor revenue. That's what you're really. It's coming down to. And so.

Yeah, that's like for even us, just fertilization. And we control. Even though we take 50% of the revenue for, for labor and 50% of it for material expense and equipment, they still can make a lot of money. But we want them to make a lot of money on P4P because the downside of like burning a lawn or messing up a sprinkler head, et cetera, is a lot greater. So they have to take much more care. Same thing goes for snow removal. We want them to make more money. Back when we did snow removal, we wanted to make a lot more money. So if you're doing budget hours doing P4P for that, I would definitely be giving them lots of time so that they make a big mistake. There's a lot of P4P dollars to be taken away. So they kind of know. It's like, hey, if you do a great job, if you do a good quality job, you don't make mistakes, you don't damage anything. You're gonna make a crush. You're gonna crush it. If you don't, there's. You're gonna lose all those P4P dollars if you do something stupid on a snow snow route. The challenging part with snow is the fact that a damage case on snow could be like tens of thousands of dollars. You're talking about, like taking out curbs, you know, you're talking about, you know, driving into a pole or a car or a garage door. So that's where it's like you really want it to be where they feel the pain of losing P4P dollars if you're. If they're making a lot more. So that way they are more careful and conscientious. Of quality.

Is there a system for change orders or do I need to complete a whole new estimate if things keep changing on the original estimate? If things are completely changed, start a new estimate. But if they're tweaking things, you definitely want to be needing new line items that say work change, order with the date and then what changed.

Otherwise, if you keep changing the estimate and the customer eventually is like, oh, I want something else different. You don't want to be taking away anything from an estimate. You always want to be adding to. And if they're completely changing the scope of work, that's when I would start a new estimate altogether. I'm doing a planting job and the customer constantly changing the type of plant she wants. So I don't want to keep deleting the old estimate and redoing it. If there's a better system. And do not delete the old estimate. Never do that. Because what you'll have is a customer says, oh, actually, let's have the original. And then all of a sudden you're like, oh my word, that was three drafts ago. I have no idea what that even looked like. Right? So either a, start with an estimate and then add new line items as work change order comes in, or if it's completely different scope of work, not just changing type of plants, but completely different type of scope of work, that's when I'd start a new estimate altogether.

I would rethink the idea too of changing types of plants by to avoid that, give them the price for installation and pick up of the material of the plants and then simply say that they are responsible for purchasing the plants. You could do that, but they're responsible for purchasing the plants. Or B, you simply say, choose your plants, we will purchase them and we'll tack it with the receipt onto the final bill. You could do that too, but you do not want to get in this game of changing plants with people. By the way, if you're doing planting, highly recommend that you a the customer is responsible to purchase them and then you pick them up, or B, you simply say, hey, here's the cost for installation and delivery. You're responsible for picking them out. We will buy them and tack the receipt onto the final invoice. And typically they'll like that too, because you can say that, hey, we were able to get a wholesale discount or whatever it is. And yes, you lose out on material markup. You do lose out material markup. When you do that last scenario, however, you avoid this constant game of constantly changing the plants and that happens a lot, especially when you're talking about larger projects. So we've always just been much more a matter of like, hey, we will charge. You know, you, you choose the plants, you figure it out. You go to the nursery, you walk around for four hours, you change your mind a hundred times, you figure out what you want. We will be out there on this day to pick up whatever plants you purchase. If they want us to purchase them, we'll figure that out on the back end. But here's what is for delivery. Installation. Okay? That way every time you leave an estimate, you should be able to give the quote to the customer without waiting for any sort of other information. There should never be a time you're like, let's meet at the nursery. Let's, you know, I'm going to send you a couple options like pictures to see what kind of plants you want. Don't let that happen. Leave the estimate and the visit with that customer knowing exactly what needs to be done. And if there's any variables, wrap it up into them figuring it out and then remove that from the estimate. And that's the type of thing that plant installation always came into for us. And that's why we either A, don't do it or B, the customer's buying the plants. We will pick them up at the nursery once they figure it out because they otherwise they just flip flop and don't, can't decide, and they change five plants, they want to add a couple more in and all the rest of it. So simplification is the way of life. All right, guys, have a great day. Take care.