Mike Minutes Mastermind 10/27/22

Hey, everyone. I hope you're doing super well. Let's go ahead and get started. I just checked and there was no question that came in. But there's a couple things I want to go over.

Quite a few people have been or will be thinking about potentially buying out other people, etc in terms of in their market that are going out of business. So there was one that actually came into Chuck the other day and I want to actually look through all the financials and I haven't looked at these yet. So you can kind of see how I what I look for first and what I'm jumping to when I see these documents. So I'm gonna open them all up and let's go through them one at a time. Actually, let's just do one at a time. Let's present this. Yeah. And let's roll here.

One second. Let me just restart this app.

Okay, so let's go over the balance sheet. Realize this summary sell sheet. So when you get a potential someone trying to sell, you're going to have information literally all over the place. You just never know what you're going to get.

Okay, I'm just going to share my whole screen. Bear with me. It's going to be a little bit messy.

Share screen.

Okay. Browser can't access your screen. Try capturing a different screen to see if this continues. What in the world?

What is going on? I wonder if I have to reset my device. That's horrible. Give me a second here. I don't know why it's doing this. See if I can't move this.

Into a tab. Chrome. And then I will share a Chrome tab.

Sorry, guys. Give me a second.

Ha. Tricked it. That's what you get for being stubborn. Okay, here we go. So this is a document they gave. Please don't email this person. This is down in Mooresville.

So it looks like this person didn't want to give us their addresses. I know that for a fact. Chuck had told me that he didn't want to give us addresses of the customers. But it looks like they're giving us monthly financial, like how much money they're getting for each of these contracts, slash customers. These are the streets, I guess. Looks like what they've made in the last 12 months. 2024, 2020. Okay, so amount of residential versus commercial in 2021 versus 2020. Okay. Where it is in terms of zip code. Okay, that's interesting. Most of that is in one zip code. Very cool.

Okay. It's very general information. Looks like. Let's go ahead and pull up the next piece of data. So let me share this again. When you do any sort of acquisition, the information that they give you is going to be so all over the place, it's ridiculous. So let me just close this one out. Share this one. So I'm just going through this live with you in terms of this is what exactly I got and have not seen you before. So again, looks like they gave us.

A list of which customers they have. The number of customers it looks like. So you could count these up and kind of figure out how many residential customers. Looks like somewhere in the neighborhood of probably 70 to 80 customers, maybe 90 residential. And a lot of mowing, it looks like. And they do other kind of services for these people. Okay, that's fine. The challenging part here is understanding their pricing thing I'd be looking for and trying to hopefully get is addresses of say 10 people. Try to figure out what their pricing, what their hourly rate is to make sure it's actually something that I could accommodate or at least keep for a year prior to raising prices. Here's another document. Let me share this one. There's four of these that they gave us. Chuck, I should say, charts revenues. Okay. So they basically grow up to revenues around 300,000. It's kind of plateaued for the past seven, eight years.

Annual revenue by account.

Okay. They're just showing. Oh, residential versus commercial. I don't think this is super helpful.

Basically shows growth. I see what they're doing. There's basically growth.

Of revenue per commercial and residential. That's fine. Okay.

And one more document here. Equipment. See here, Share this.

Okay, so this one is obviously we're not super.

Keen on. This is where they're going to be showing their values. Looks like they're pretty fair in their assessment.

Of valuations. Honestly, in terms of mowers, again, we're not usually record. We're not going to be trying to get them their equipment. Typically.

$23,000 for a truck with 200,000 miles. Oh, it's a diesel. Okay. Okay. So, yeah, you could kind of break this down if you wanted to. Just. I don't. Even though I'm not interested in the equipment, I like to see where their headspace is at in terms of valuation. If they're overvaluing their equipment, there's a good chance they're going to overvalue their client list too. So it's a good data point. Again, you're just looking for data points here. Again, I'm not interested in the equipment. They said they had $61,000 worth of equipment. So first gut reaction on this one is looks like they have like 100 mowing customers. Looks like they've been in business for quite a while. So these customers are pretty established. My next question would be to the the owner is like, how often were you on the property at 300,000 revenue, he's probably has a personal relationship with almost all these customers. So I take that into consideration in the calculus of when they're not going to be buying these. The cheapest way to acquire this person specifically, they reached out to command center and asked multiple times for us to buy them. So taking that is an important data point because they're not like listing this. They're not showing everyone they're wanting them to sell. They're specifically contacting us.

And this is going to happen more when next month we we put up lawn care businessforsale.com we're going to get people calling lawn care Augusta lawn care locations, knowing that that's kind of what we do and that they're going to contact you. And that's great because you get first dibs before it goes public. So before they go out and try to sell it, they're going to reach out to you. And that's what happened with this specific one. So knowing that we have a big advantage, knowing that they can't really sell it, too many people because the owner is probably very involved is also another thing that you're bringing the calculus of this whole equation. The cheapest way to get an acquisition when you're just going after the client list is to break down the number of customers that they have that are recurring basis and just tell them, hey, you know, I don't see. I'm not interested in buying your equipment. You can sell that for $61,000. Great. Let's say they came to you and like, hey, I want 150 grand for this, this business. I don't even know what the asking price is. I don't think they've given us one. Let's say they asked for 150 grand. Like, hey look, you know, looks like you can sell all of your equipment in your trucks for 62 grand. Okay. While you go do that.

And then if you can try to find someone that wants to buy the whole business, great, that'd be awesome. They'd probably be willing to pay you more. As an Augusta Longer franchisee. I'm not interested in your brand. I'm not interested in your phone number site. I'm simply trying to hit client list. Therefore I'd Recommend you go sell your truck and equipment for 62 grand and then I'm willing to give you X amount on top of that for your client list. Now in this case, let's just say they have 100 customers. Let's assume that I keep 80% of them.

So let's just run the math on this. So if I am willing to pay $120.

Let'S do this right. So I say, hey, look, I'm willing to give you 10 grand, all right? 10 grand. I'm willing to give you to the client list and no strings attached. Just give me the client list with the prices and help me with the introduction email to all your client list and we're good to go. Okay, so that would assume $100 customer acquisition cost. That's just $10,000 divided by 100 customers. The alternative is that we go spend $100 for customer acquisition cost and we'll get the customers ourselves. Now let's say that 20% is, are going to leave us. Well, now the customer equity cost just got bumped up at $120. Okay, so the question is, when you're buying by the client list like this, is what is your customer acquitting cost versus the premium you are willing to pay in order to have the customers in one big chunk? So if we're willing to pay, say we pay 70 or $80 for your customer acquisition cost, am I willing to pay 120 in order to have all the customers tomorrow? I would say yes, just because again, there's cost in you doing the estimate, setting them up, getting all the information, getting them through the first few kinks of the first few services. So it really comes down to can you retain 80% of them and is that going to make then the acquisition cost of those that client list around $120. And are you willing to pay that premium versus 70 or $80 if you were to go out and spend the ads yourself? Okay, again, you're saving yourself time. You're probably buying yourself three to four months worth of, of growth, like jumping one spring rush by making this acquisition. So Is it worth $10,000? Potentially, yeah. If I get 80 customers and they're assuming they're all good paying. And so part of your due diligence once you make the offer is like part of my offer is I need these 20 customers randomly on this list. I need their address and I need their pricing. And that would be like a five day, you could do a five day.

Five day due diligence on the deal and you could pull out based upon the pricing of those customers if it didn't fall within certain requirements. I'd do that all in my offer.

The same way that when you go to a you do a purchase on a house, you have like contingencies for inspection or financing, you need the same thing. You can do a financing contingency or even a pricing contingency on a deal offer. And again, these deals with owners like this are not any fancy. You're going to just do an LOI letter of intent. You can literally do one off a rocket lawyer. It's just a letter of intent is basically the intent to buy something based upon certain parameters. And it outlines like what the purchase price will be and all the rest of it based upon again, certain things checking out. And when you do an LOI for real estate, it's typically an inspection clause and it's typically a financing clause for when you're acquiring a business. You can put basically whatever clause you want. You can inspect the equipment, you could check the pricing like I just mentioned, et cetera. So I would be doing that. And again, if the, if the cost per customer was say $300 and my customer acquisition cost is 70 or 80, I'm not willing to pay that premium in order to just buy the customers right now. I'd rather just take a few months, spend money on marketing. And even if I spend it poorly and I get $100 customer acquisition cost on advertising, it's still a better move than paying $300 to buy the customers. So customer acquisition cost versus cost per customer, when you're talking about recurring customer lists, is really all you're looking at. And then the way you sell this to this owner would be, hey, here's what I'm willing to pay. This is based upon, here's the numbers behind like the last thing we do is give an insulting offer without numbers to back up what you're doing. So even whenever you're doing any sort of negotiation, even like when you are buying real estate, it's like if you're going to do a low ball offer, give them the logic and the numbers as to how you came up with that number. So for example, I'm selling three of the duplexes. Just accept the offer. A couple nights ago they made a mistake by coming in with a $1.8 million offer with no logic. And so I immediately declined it. They're now buying it for $250,000 above that initial offer because I had all the negotiation power. They didn't give me Any numbers. They didn't come in and say like, hey, this is what I need for my 1031. And this is all stuff I found out later, but I already negotiated them all the way up. So the reason that they, what they should have done is come in with 1.8, but they should have given me all the numbers and the math behind what they're, how they came up with that calculus. So if you're going to do a low ball offer on someone's business, and again, in their mind, this is a low, low ball offer is you need to come up with the math of how. What you're, you know, how they're, you're coming to this conclusion. Because then what they start doing is they start synthesizing that against, okay, is every other owner going to see the same math? And, and I'm not going to get any better of a deal. Right. So they start negotiating themselves. And so you come with a low offer. What you would be wanting to do is say, hey, look, here's my customer acquisition cost. It is, let's just say 80 bucks. I am willing to pay a 50% premium or $120 for these customers. And again, you'd probably want to bake in some sort of attrition there based upon the not all customers staying with you. So you can bake that number higher and say, I'm willing to pay 50% premium compared to what I would pay if I went out and bought these customers, quote, unquote, use my advertising. I'm confident I can do that. And your level of confidence in that is important when you walk into the conversation with this, okay, I know I can go get customers for 70, $80 per. I'll even show you the numbers. I'm willing to pay a premium of 50% to get this client list for you so I can get them faster. And I'm going to assume a 10, 20% attrition. Here's the number. It might be 150 by the time you actually accumulate account for attrition. Right. Use that as your method. It will always be. The cheapest way to buy a client list is using customer action costs versus cost per customer, always 110%. If they start trying to pull out like multiples of profitability and revenue per customer and all this other garbage, you're just going to bid yourself up. So always use that if you're trying to get just someone's client list. So that was a long explanation.

I had a customer who was on the schedule for today for a bush trimming job. The customer called this morning to verify they're on the schedule and I notified them that they were and we would be there shortly. When I arrived at the property about an hour later, the customer then told me that we were unreliable because we did not show exactly 8am on the dot. We then informed me that we was going to find someone else to do the job and asked us to leave. How would you handle this? First and foremost, I would say.

When you send your thank you and welcome email that should give a date, but with a range of. We say 8 to 9am, that's what we give and sometimes we won't even get a date range. If we're on the phone, we'll say the morning of because you just don't know how long, you don't know how long it's going to take to get to the job material, pickup guys, being late, equipment issues, etc. So never guarantee an exact time. I think that's the first thing you can learn from it. If you actually, you know, if you're looking internally, externally obvious, this customer might not be someone you want to work with. If you literally show up at like five minutes after 8 o' clock and you said you're going to be there the next day, you know, but again, you got to set the expectations correctly and I think that's where you could learn. I don't know who this is, sorry. As where we can learn from it is don't give the expectation of 8 o' clock, even though in your mind you're like, ah, somewhere around 8 o'. Clock, you can't say that. You've got to literally say we'll see you tomorrow morning or we'll see you between 8 and 9 or we'll see you between 8 and 10. Like be more general because the expectation of the customer is always going to be exactly what you said and they'll take you very little. Some people will take you very literally. So. And you just don't know, you just don't know if they potentially move their start time for their work, for example, or an appointment to start at 8:15, it's so that they can be there at 8:00 clock and they're not mad at you necessarily for showing up 15 minutes after. They're mad at the fact that now they missed another appointment that they had rearranged for to meet you. So keep that sort of stuff in mind. That's what's happening. That's probably where they're frustrated.

So why is service all plat doing Sales or discounts all of a sudden. They also lowered their onboarding costs by almost $750 on Pro Plus.

Some of this will become clear next year.

They're not going to be lowering price. That's all I can, I can say they are gearing up for something next year and it's not like rocket science the fact that they have all these. Field Edge is now part of Explore. Explore has Clearance, which is a credit card processing company. Typically prior to.

When you see a whole bunch of mergers and acquisitions, they're gearing up to packages and sell it to Wall Street. I'll just say that not much you can do if they didn't have a deposit. You guarantee a day, you don't promise a tide of day.

Yeah, exactly. This is a follow up question on the Augusta Facebook. I did a mechanics lien on a property that owes over $202,800. My question is should I have done something different and will this work? Yeah. So a lien is only going to really work when that title becomes in question. Right. So if you put a lien on property and they try to sell the property, the.

The title insurance and like the title company is going to pick up on the fact that there is a lien on the property. But until that time, honestly, liens can just stay on properties for years. When you buy a property, sometimes you'll see a lien from like a utility company from like 10 years ago because the property has been held by the Same owner for 25 years. Right. So don't think that putting a lien on the property somehow immediately is going to get the money unlocked to you. That's not how it works. Collections is going to be the thing that affects them the most because then they can get their credit score dinged and that will have immediate impacts on whenever they try to get credit. So I, you know, that's, you know, it stinks that you lose 30% when you send it to collections. However.

That'S going to their immediate effects on the customer is going to be a lot greater than doing a lien. The only reason we have ever threatened using a lien is when we know that the property is for sale. Because if you put a lien on the property that's for sale immediately, that transaction will get canceled. And that's why you have a title company between a buyer and a seller when you're doing real estate, is basically to make sure that the title is quote unquote free and clear. That means there's no liens on the Property.

Got it? Yeah. So if you're told in the morning and somehow they heard 8:00am, you'd have to just ask, where did you hear 8:00am? I don't want to set you up for false expectations of what when we're coming. We don't have any recollection of saying 8am you can just be honest with. Honest with them like that. And then two, even sometimes when you say 8 to 9am, people will hear 8am because they will hear what they want to hear. So keep that in mind as well. Even if you gave them a range or you said morning and they might have said, well, when do you typically start? You say, well, you typically get, you get the office around 8:00'. Clock. Well, in their mind, they just said you showed up. You saying you showed up at 8. Right. So again, if the customer is that crazy anal about times and you haven't given a time, there's a good chance that that project and that customer is not something you want to be working with because they're going to be finagling over every little detail and according to you, making up stuff. So cool. I think that's all I had.

Hopefully that was a little bit helpful with the acquisition stuff. I know a lot of you are going to be. Because people watch the content, they'll come to us first because they feel safe. Like I said yesterday, most owners do not want to put their location up for sale publicly. And even like lawn care businessforsale.com when we have that up, it's gonna be free for everyone to use. But like, people will not want to post on there because their local competition will see. So the best deals will come if you create connections to your local market. And furthermore, what we're getting now is because of the content, a lot of landscapers listening to it, they feel comfortable enough contacting us because they know they're contacting command center and just passing along. And then they'll only hear from you if you're interested. So I think we're going to get a lot of these as time goes on, honestly, which is great. We get first dibs on really good deals and those are the best deals. When they go in the market, you're going to be paying three to four times as much for a customer. All right, guys, hope you all have a great day and we'll see you tomorrow, which is Friday. Take care.