Mike Minutes Mastermind 11/06/22

Hey everyone, hope you're doing super well.

AirPods and let's rock and roll. Some questions that came in.

Cool. Next week, Thursday, a week from today, 5:00pm Pacific Standard Time, 8:00pm Eastern Standard Time. There will be a roundtable. That is when we get all on Zoom and you can see everyone's faces and go over some announcements. Their last one of the year as we are wrapping up Q3 as of last month. So looking forward to that. And.

See here, what's that? Wednesday or Thursday? What did I say? You just said Thursday now. Yes, it's Thursday. Oh no, it's Thursday. Sorry, my bad. It's Thursday. Next week, a week from today, Thursday, 5:00pm Pacific Standard Time. I will send that out via email as an invite for the Zoom link and all that good stuff. All right, let's go ahead and present.

Jump into some questions.

Cool. Oh, zoom in.

Okay, going back to my question from yesterday about setting up the Norman location next year. Would you say it was it would be better to set up the normal location this winter so next year we are ready to rock with a website and put a GM in that location. I was going to be running that location part time, but now you have me thinking to just spend the money and get it going this winter instead. I'm just trying to figure out what I should do be doing if I have two locations that already have full time GMs in them.

Yeah, if you have two different gyms that's going to be you're going to need to grow them pretty quickly just to suffice that much that overhead. I would be more inclined to keep one GM at your current location and you go start the new one. That would be much more efficient.

In terms of doing two GMs immediately. You're going to need to grow them very quickly. So unless you have a good amount of capital to spend on marketing and really ramping them up fast, I would be more inclined to do one GM in your first location and then build up that that second location at least for the first year and then have that second GM then take that one over. Right. So for most of us, we like starting things and then you can find a GM that replace it and ultimately that first location because now you've said okay, we're going to stop growing at 5, 600,000. You raise prices dramatically and that increases your profits to where you can afford that GM and there's still money to be made in terms of profitability. So there's like what we'll be doing in Mount Vernon next year is raising prices. Once they hit that 5, 600,000 per per year revenue marker. And Mooresville, we did that. Started doing that this year, we'll do again next year, et cetera. So it's when you can. When you can hit that 5 to 600,000 plateau and then raise prices, that's when you really are able to start really becoming profitable. But I would be, unless someone has a good amount of capital, which, again, Kyle, this is really your decision because, like, I'm doing this exact thing. I'm starting two to four of these next spring. Right. It comes down to just finding the GMs. You sound. If you have the GMs. I would just be cognizant of the fact that if you're starting a new location with a GM and you're putting a GM in your other location, that in of itself is like 100 to $120,000. A minimum of just overhead. Right. From day one. Right. So you got to be immediately growing that second location to at least 3, 400,000 just to make up for that overhead expense. We are Profit sharing at 5% this last quarter for one person comes out to $1,200. Only one person is getting it. We had 10% at Bellingham, and it was never close to that much. My experience may be limited because I got it for one quarter, but we also had more people, so more revenue being generated, more profits, and 10% as opposed to 5%. But then it's being divided by how many people we have there. Is this too much for one person? It will go down as we gain employees, but I don't want this person to be bummed when the next one is slower. The last one he got was around 400. I guess all I'm asking is how do I keep this consistent over time? I'm excited to pay the money out, but I want to make sure I don't. Make sure I'm not doing it too much right now. And as we continue to grow, they become unhappy because they get less and less profit sharing. Yeah. So I would not be concerned about this. As you grow, yes, you are going to have the profit sharing divided out by more people, but your profit should be a lot more as well. Right. So like last year, the profit sharing was, I want to say 800, 1200.

And 900. Don't quote me on that. I forget. Exactly. But typically Q3 is your best month. Our best profit sharing quarter. Q3 is almost always your best profit sharing quarter, especially if you only have one person. And then Q4 can be your best quarter if there's just not many people that are eligible. And that's possible a lot of times in Q4. So like last year we had profit sharing. As long as someone showed up, they were making 1200 bucks was because there was not a lot of people that were eligible for the, for the profit sharing. So I would just be making it very clear to them like, hey.

Honestly if you have one employee and the only one is eligible for it, you depend on them a lot compared to if you have 15 employees and you're. I would be, you'd be okay to be paying them more at when there's only one of them and just be really honest with them. Like look, the reason it goes up and down every single quarter is because we are a seasonal business. You know, during the spring we are spending money on trucks and equipment and marketing and we're investing back in the business. And here's why I can afford to pay more this time of year because we've done really good. We've been crushing budgeted hours and so they start to understand the seasonality of the business. And ultimately with P4P and profit sharing, it's like if the business can afford it, we can pay it and that's the goal. If the business can't afford it, there's no profit being made. If we're not hitting above budget, below budget hours, there is no more money to be had. Right. So I would just explain it. Just strict, like strict open book management and sharing, all of that, the details and what you're thinking, just tell them like I don't. You didn't just tell them your fears. Like I'm afraid that one down, down the road there's going to be less. But this is what it is and I just be really open and honest about that. Do you have a profit sharing with your GMs or is that something to do and pay themselves on without your involvement? Profit sharing is always dictated by someone above the gm. So like my regional manager will do this now. They just did this for Q3, sent the profit sharing into command center for the payroll and got that all taken care of and ran the reports, etc. They did run it by me. In the future that probably would not happen just because we're just new with our regional manager. But for you, if you have a few locations, yes, you would definitely you would run the reports. You would share a report with the GM of what the breakdown was. And again I am formalizing all of this and we'll start Next week uploading documents of things just like this. Like the reports that we give for profit sharing for our GMs the checklist that we have for our GMs for a weekly and monthly basis. What they need to be doing all of that stuff starting next week. I'll be starting to trickle that in. But expect by next spring for us to have a pretty good system of what that GM role looks like in terms of management and systems from a regional manager's perspective. So.

A lot of we already have it's a matter of systematizing and that's what Chuck's main role is is to make sure that all is Thomas has to just rub it in with 001. Let's go. Interested in your thoughts on sending a separate version of the winter service option email to the non recurring clients in our email database? Yeah, I think there's a great idea. This is a great idea. I think we've done this one time before and that is you send a winter services opt out email to your existing mowing customers and then you send another winter service option winter service option email with an opt in to all your non recurring clients. Just make sure that you do the right filters. That's the biggest thing because the la and make sure you change your email slightly in terms of obviously it's not an opt out. Obviously they're opting in. You potentially might have to be giving you. You would actually need to be giving them a price. This is not a matter of them already have a mowing price. Therefore you can assume that you already they already know the pricing. So I definitely think you could do this. It'd be like a one click estimate email almost for winter services. That's really what it would be. So I would really go more that direction. It's like really pitching the service. One click estimate email. They click on the button they get a quote because for most of those people that don't have the recurring service already set up you will need to give them a quote an estimate for it. So I would just make sure you just switch your focus from this is not a winter services opt out email. This is a one click estimate email pitching winter services. That's how you're I'd be thinking about it and make sure your filters are correct. An 18 year old work here for about three weeks and he didn't last I went to cancel his insurance on the autopilot and notice it said they didn't approve him after I added over the phone and they said he alone would increase the Prema over a thousand dollars. I guess he didn't pass the underwriting process. They told me that they have. They must have a clean record and over five years of driving experience. That means I can't hire anyone under 21. And that's only if they get their license the day they turn 16. Have you ever had a problem with this? It's the first time I'm hearing about it. He. I even had a 19 year old working with us in the spring and he was fine. I'll be shopping around for new business and auto insurance this winter. Yeah, so age is definitely a big part of auto insurance. Honestly, especially you get more and more employees. We actually in the past at the Bellingham shop were such a young average age that my insurance agent asked if we could not put one or two of the employees. Actually, I think he didn't put me on it because I was. It brought down the age to too low.

And so, yeah, it's gonna affect your premiums massively. And here, here's the thing that every insurance agent wants to tell you but can't tell you legally. All right? And I know this because I work for State Farm. I know exactly what they want to say, but they can't. And this is, this is what they want to tell you as an insurance agent, but they cannot. And that is that when you drive any vehicle that has a commercial policy on it, regardless of whether or not there are drivers that have been put on it, you are covered. Okay? So if you hired someone and they have signed up all their employment documents and they can work for you and they're 21, even if you have not reported them to your insurance, they will still cover your policy. Because the auto insurance covers the vehicle, it does not cover the driver. Right. So it covers the vehicle. So anyone driving that vehicle is covered once you have a policy on it. So you do not hear it from me, but theoretically, you're still covered in even if that person is not on the policy. That being said, do I recommend you do that long term? No. But if you want to hire someone and see if they work out for three months before you go and take on the extra thousand dollars for the policy, that might be an option. Okay? So that's what your insurance agent wants to tell you, and that's what they can't tell you because legally you can't say that. But that is what the true case of the matter is. And that is when you get a commercial auto liability insurance. Anyone driving that truck, anybody driving that truck is that vehicle is covered.

But that's also why commercial policies can dramatically jump up so much when you add in drivers that have bad records or lower ages.

Again, talk to an insurance professional. I have a question regarding marketing strategies. Who this from for my current marketing strategy is shown in picture A. The red dot is where our shop is located. When it comes to marketing on Google, we post one ad and select all zip codes that we service, which selects what circled as shown. Would it be better to run multiple individual ads and target a specific zip code or town for each ad like I have shown in picture B, I need more customers in Riverbank, Escalant and Oakdale. What is the best way to achieve this? All right, let's take a look at the pictures. I don't think you guys can see that. Give me a second. Boom, boom, boom, boom.

Pictures. Okay, so a, this is where you're at. Okay. So you're wanting to try to get. Okay, let's go to the next one.

Let's see here.

All right, now I'm not sure that one. I'm gonna have to remove this. Stop that. Screen Share. Present. Present. Window. Window. Chrome. Tab. Other picture.

Okay. Yeah. So I would not worry about this in terms of Google Ads. It's not. I would not make a separate one for every single one of these city names. What you can do is when you're making your performance max Google Ad is you can use these names of all these cities in your descriptions and then it will filter which one is best based upon where they're searching from. So you could do that. I just generally don't believe it's going to make a massive impact in your Google Ad by putting these names in there. If you're targeting this whole area, I would simply put in all those different descriptive and titles. You can put in Esklon, Oakdale, whatever, Modesto. And then Google filters out which ones are going to be the best performing for that area. So I would personally probably not make a separate ad for every single one of these. It just not it. You could like it's going to be slightly better, but I don't think it's gonna be like twice as better. I don't think it's gonna be 20 better. It's gonna be marginally different. So it's my two cents.

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You know Google, Google is is intent based marketing, right? So someone's coming looking for lawn care. They don't really care if your. If your ad has the name of their city in it. It's like they already are looking for lawn care, they're already looking for landscape. It's keyword based. Right. So I wouldn't worry too much about that.

Kyle Tarvin, is it a bad idea not to send a GM to training right away? Are you going to do any training January through March next year? Yeah, we're doing one in February next year. That one's going to fill up massively. It's the most coveted time of the year. So if you're doing this, you want to save your spot. I'll just say that with February, it's going to be a massive training group because everyone wants, everyone wants February. Um, I don't like this idea. Honestly. We, we did it. We have to do it with. Not Vernon. We, we, we purchased it and then two months later send a gm. I do not like this. It's very bad. I would not recommend having a GM start and then sending the training couple months later. You're going to run into so many issues prior to them coming to training that could be just alleviated by them just being at training. So that just be my 2 cents. I wouldn't mind if you were involved doing some training. Like we did this in Mooresville for my location as Jason was training with Chuck before coming to training, but he was not the official GM making the calls and running the company until after training. That's just my two cents. You're going to run into issues otherwise.

Some questions on debt. Before joining Augusta, I was never being on debt. We ran the business pretty much on zero debt. That being said, this is the rundown on what we got now. Tractor with loader. You have $9,000 left to pay. Payment is $150 at 0% and next month isn't due until May of this coming year. Oh wow. Next payment isn't due until May. Let's go two mowers and one loan. You have $15,000 left on that payment is $475. Next payment is due in January. Aerator 6000 left payment. Ooh, that's a high payment. Mercy due January. We also have a business credit card but I said to exclude this as it gets paid in full each month and variable. Yep, total my payments each month, not the 1400. Total debt is 30,000 for extra context if needed. We will hit 500k this year and our year to date, 24% profitable through quarter three. I have not taken a dollar for salary or wages and I'm rolling 100% profit in the Bloomington and stacking cash for champagne. Okay, so you're probably going to be around what, 100, $100,000 in profit. My first question is, at what point does a business become over leveraged? Okay, so if we take $100,000 in profit, assuming that you're 20%, let's say 125 to be more accurate. 125. And then the fact that you have $1400 a month times that by 12, that's like I just say call it 15 grand. 15 grand. So about 10% of your profits going out the door right now to.

Debt service.

At what point does someone look they have too much debt compared to income, not lend.

This is not a big deal because your total debt is 30,000. It's such a small number when it comes to your debt to income ratio. That's the major thing that a lender is looking at. Your debt to income ratio is very low. So you know, let's say that you stopped growth and you did $125,000 in your pocket. You know your debt to income ratio is like 0.25, right? Which is not bad. And you'd be amazed at how many, how many like multimillionaires and billionaires have debt to income ratios like 4 to 1. Just massive amounts of debt leverage, especially when they get into real estate.

Am I wrong in taking profit from all aerations and immediately using it to pay down their aerator? Yes, the aerator is the one that scares me. That $675 a month is killer. You guys might have seen me make that video. I'm doing like that business boot camp thing. It's great because I'm only have to make content for like one day out of the week. It's great. But what's cool about that is I'm able to talk to these other owners. What's funny is, well, I don't know if it'll come up in the boot camp, but I found out this morning was that one of the owners that is struggling and you'll actually see his bank put his payments on hold for two weeks. He was in Tigran's Mastermind or whatever for Goat Gang and basically kind of bought into the notion of buying big equipment and went into so much debt. He runs a $900,000 per year business, but he just bought a bunch of trucks, trailers, a track loader and a whole bunch of other stuff. And basically now the bank.

Literally would not cash his checks, wouldn't do anything. So that's very scary. And I've seen this one other owner inside of Augusta That I was really trying to push against going to debt and growing so quickly. But now it's a matter of like, now their fixed expenses are so high they have to make 50 to 60 thousand dollars throughout the winter. Otherwise they're going to lose money, which is fine as long as we have planned for that. But that gets me very worried. And so my biggest thing when it comes to this is during the winter months, can you still make the payments without going negative on your profits? Right. That's a big determining factor. When someone goes negative on profits because of fixed payments on debt, that, when it's, when it gets very risky. So lastly, I'm sorry for the book. Should I be at all worried about paying off any debt down quicker to open up more opportunities for new debt on new equipment? No, I wouldn't, I would not recommend paying it off simply to get different debt because your debt next spring is going to cost you more than what you currently have. So if you're thinking like, oh, I need to pay this debt off so I can get more debt down the road, I would highly recommend anyone not to do that because whatever debt you're going to be getting is going to be at a higher interest rate and you're not going to gain 0% down as easily as you were probably a year or two ago. And if you are, the premium that they're going to make you pay for that is going to be so much higher. So.

I hope that makes sense.

We definitely do not think like, oh, I'm going to pay these debts down so I qualify for more debt next spring because your, your, your, your interest rates are not going to be as nice to you as they were. Like 0% down potentially is going away for most dealers right now because in this interest rate environment, they are eating 7, 8% a year and they can't afford to do that. So it's going to become less and less frequent or you just have the cost of the piece of equipment is going to go up if you do use their financing program.

Okay, let's see here. I hope that made sense. I kind of was a little bit distracted there. Sorry. See here. Hey, Mike, off topic question. My wife is thinking about starting an Airbnb cleaning business. Not to scale, but for her to do maybe her plus one employee at max capacity. But what are some ways you would go about getting to these hosts? You can't contact them through Airbnb and as far as I know, their contact info won't be listed elsewhere. That's a good question. I bet you could probably look at your city registration and see who has filed and registered for being an Airbnb or STR short term rental. You can look for those registrations. I would definitely go on to your local real estate groups and just post in there. You'd probably get people right off the bat.

And what I would recommend is trying to not just be the cleaning person, but try to manage the Airbnbs. Because then you can, instead of getting like, probably like 4 or 5% of the revenue, you can get like 15 to 20% of the revenue if you manage the Airbnb, which means they will give you access on the app. You'd actually respond to and from tenants or guests. You would set up times, you would set up codes and do the cleaning. But you'll make way more money and more importantly, get a better education than just how to clean. Right.

My agent shared that with me about the trucks. He said, no big, I know you're busy. Who is this? Who is this? Who is this? I know what you're talking about. Give me a second. I am lost. Give me a second. I gotta jump into Facebook and see who said that.

Connor.

I'm lost. Sorry. My agent shared that with me about the trucks. He said, no big. I know you're busy.

Okay. Sorry, I just don't know. Recall to use money. So use to use money that you would pay off early to buy that equipment. Yeah. Like if that's your plan. Yeah. If your plan was simply to pay off the current debt so you could get other. Other loans in the spring, I would not do that. I would keep the current debt, whatever cash you were going to pay off that debt used to buy the other equipment. That's exactly what I would do. Because you're not going to be able to get the financing terms that you currently have, 0% down, you don't have payments till next spring, et cetera. But definitely that aerator, that 675, that one's a killer. I would probably, if I, in my mind, just because it makes more sense, is like as you do aerations over the next few weeks, I just plow every single dollar from aerations into the aerator. If obviously you've already made the calculus that that was a good purchase in terms of the equipment instead of renting. So in my mind, that 675 is a lot per month. I'd try to get that down just for mental sake. But again, it's zero percent financing. Like, so paying that off now gives you absolutely no benefit versus paying it off next Spring or next year or whenever the end of the term is. So 0% is something you do not want to be paying down right now and is why I don't really like paying. Selling the real estate is because the terms on that debt is so good and that's what. Why I'm not going to like sell the real estate and then go get more debt for the headquarters. No, because I'd be trading in like 3 and 4% interest for 7 and 8% interest, which is stupid. So don't, don't switch loans if you have any low interest rates. Interest rate debt, now that's fixed or 0% down, do not pay that off because it literally inflation. And the cost of what you would otherwise be paying on interest right now is eating 7 to 8% of that every single year.

He's talking about the insurance info. Oh, oh, about the insurance info. Yeah, yeah, yeah. About the trucks. Yeah, okay, gotcha. Roger that.

He shared that. Whoever drives his cover, even if you don't submit. Yeah, gotcha. Okay. Your insurance, your insurance. Insurance agent is brave because technically they're not supposed to tell you that because they are. They have interest and they are part of the brokerage, the insurer, so if they, if the broker ever found about that, they'd be in trouble. Anyways. All right, hope you all have a fantastic day and we'll see you tomorrow. Friday. Let's go.