Mike Minutes Mastermind 11/11/2022

Hey everyone. Hope you're doing super well. Let's go get started. YouTube link in comments.

Cool. I am in the airport. I am flying out to Michigan today. Liz is also flying out on a different flight.

So gonna get there at like midnight and then I speak tomorrow morning and then fly right back. So should be good. Make sure you guys can actually access people right here. Sorry, the notes in the middle of the day. Watch this later. You're busy.

Getting it started. I wanted to quickly though first go over something I had talked about last night in the Facebook group. Tamara had a good question. A couple other people chimed in about capacity and so I pulled out my power button and started drawing some things I thought might be helpful. So let me pull this up. This might help in terms of determining should I buy another truck, etc. Etc. Etc. Let me see if I can share this. Sorry. On my secondary screen today.

I think you can see that.

Are you serious? You can't. What in the world? Why does it do this? It's okay. I'll take this and I'll drop my PDF into a drive. All right. Now you'll be able to see this. Okay. Hopefully you can read my drawings.

This will work. Any PDF can now be drawn up into Google Chrome tab. Okay.

This is not going to be great for the ability. One second.

Okay. Hopefully you all can see this. It's not too bad. Okay. Capacity based growth. Let's talk about this in a little bit more detail. So sorry, I only have one screen so I switch back and forth. Okay. Class based growth. Let's run some math here. You can literally determine where your capacities are. And remember your capacity is where you're going to get most profit. It's also going to be where you have the ability to turn on your profit or you have the ability to continue growing if you'd like. So.

One man and let's just assume 35 budget hours a week, right? So this is. They're gonna. You're gonna be doing some overtime hours. This would probably be like 30 budget hours if you're gonna be more conservative. Okay. I would multiply that four weeks in a year. Let's just say it's 140 budget hours a month. Again, this is pretty aggressive. You'd probably more inclined like 120. But again I'm trying to show high capacity. So these number are going to look a little bit higher than probably some of you would have. $140, 140 hours in the month. Multiply that by your hourly rate and it's $11,200 per month in labor revenue. Okay. Not, does not include E fees, dump fees, material markup, anything like that. So based upon labor, labor based capacity, one man would be 11,200. Two men would be 22, 403, Freeman, etc Etc. Now this would be in the perfect world where every single one of these people was just as, as efficient as the prior. Right. Obviously when you put two people in the same truck, you're going to have less capacity. I'm sorry, you're going to have less efficiency. So keep that in mind. Capacity based growth is determined by two things, capacity of labor and capacity of assets of trucks. Right here. So based upon this one truck, a two man route would get $22,400. One truck, two employees. If you get two trucks, your capacity now is four employees and $44,800. Again using this same map right here. Okay. And if you have three trucks, $67,000 based upon six employees is the average asset based capacity at this size, three trucks, you're probably going to need another vehicle just for you to go doing sales and other things. So it's not the number of trucks you have, but the amount of trucks are going out and working every single day. Okay. This is going again going to seem high because I'm using 35 budget hours per week and $80 per hour. So adjust these and literally you could figure out what your capacity is based on the number of employees you have and the number of trucks that you have. If you have three trucks and you're not at whatever number this is for you. Once you do the math, I would recommend if you don't have cash available, if you don't have money sitting around and you're like you've been growing really quickly and you don't have a lot of cash, stay around that 60 to 67,000 level because you'll be very profitable at that level. And you can dial up your prices, reduce your close ratio and become really profitable there. Before you go, spend more money on a fourth, fifth truck, etc. Okay. When you're growing, it seems like you don't have any cash. The reason is because growth sucks cash. And so what you do is you stop growth in order to bring up your cash flow. Let them build back up over time. And while you're staying level at that same revenue, you can increase prices because you don't need to grow. So it's like a double combining effect on your cash balance, on your cash reserves. Okay.

And this is the part where I talk about.

Capacity Based growth is because, and I say like, look, only just grow into capacity as fast as possible. The reason for that is because you have a certain break even point where you have to make a certain amount of revenue. This is what we talked about the other day, a certain amount of revenue in your month before you ever make any money. Okay? And so let's just say this is for a given month you have your fixed expenses. These are things like your franchise fee, rent, insurance, potentially a salary, things are fixed. If you have an office space, rent, things like that, that's all fixed expenses. And you have variable expenses, typically the biggest pieces, labor, materials, etc, things that are the more jobs, the more jobs that you do, the more cost. You're going to have variable expenses. Okay? And then you can see as your revenue goes past this point, this is where you have profit. Here's the thing, if your revenue is right here, hopefully you can go closer. It's right here. You can literally have a 4 profit margin. You move your revenue up just a little bit and now you're having a 20, 30% profit margin. Not because your revenue is 20, 30% higher, it's simply due to the fact that everything beyond this point gets more profitable. Right? Here's that in better example. Sorry.

I don't know if that's annoying for you guys or not, but I apologize.

So here we have an example. Here, zero is our revenue. Over here is our capacity. We have three trucks. If we go back up top here, we know that three trucks with six employees, our capacity is $67,000.

So that's our capacity. This is our break even point, this dotted line based upon what we know, our fixed expenses, our variable, this is our certain break even point. And all of you should know what that number is. And if you don't, talk to a coach on it and they'll go over, hey, where are your fixed expenses? Where your variable expenses? Where's your breaking point? What's the dollar amount you need every single month in order to just make any profit? And you can get that usually within 3 to 5%, like knowing exactly what that number is. Okay? All right, so here's the deal. This is the most profitable revenue because look at this. My revenue to cover fixed expenses, let's assume, is $35,000. Okay? That's my break even. I do $42,000 worth of revenue in the month. My capacity is 67,000, which means I probably have a couple trucks sitting around at the shop occasionally. My guys aren't working full time, they're kind of you know, there's just not, there's not a lot of stuff. This is the lost opportunity. This is where all the profit of your business is sitting is between where you're, what you're doing in revenue now and what your capacity is. The reason for that is because everything above this break even point is your most profitable revenue. Okay? And that's why some people don't like this same business, for example, at $32,000 would lose money. Their fixed, their break even is 35. They would lose money at 32. And people like, oh, I gotta give up, like this is such a, such a big no. I was like, look, if you just grew your business by $10,000 a month to 42,000, you now have a chunk of profit. This is your most profitable revenue, anything above break even. So what that means is.

Getting up to break even that 35,000 point, you're literally profit margin is zero. Your profit margin is zero. We can just get into that point, you get to zero. Anything above that we can assume it's like a 60 profit margin because we're just taking away our labor, okay? And maybe some materials, etcetera, even say 50, whatever it is. But this is extremely important to realize because that's why I always say accelerate to capacity, grow to capacity. I know you could lower your price significantly on this side of the equation when you're growing the capacity because you have all of this margin. Once your past break even, you're in the clear. You have the flexibility to lower price if needs be, if you need to get to capacity. But this is the lost opportunity between where you're at in terms of revenue now and your capacity in terms of your trucks or your labor as the capacity. And what's funny is, trucks are much more stable in terms of their capacity. What's going to flux? That number, that thing on the right is going to flux is your labors. How many labors you have is going to flux. Bottom line is keeping your revenue as close to your capacity as possible is the goal. Okay? And you have two capacities, remember? Right. I only have one here, but technically you would have two. One would be labor, one would be a truck. Your trucks is probably going to stay the same. Your number of employees you have is going to be varying. And you're going to want to gauge that labor capacity down if there's this lost opportunity in the form of revenue being way lower than capacity. Keep in mind, if we have a 60% profit margin on this revenue after break even, that would mean that break even is 35, revenue is 42. That's a $7,000 in revenue above break even. Now if we have 60 profit margins on that $7,000, we would have a profit margin. Why is this not scrolling? Oh, last one. This, that would be a profit margin of a profit of $4,200 in a month. Okay, now this is what's really cool. Watch what happens if we take the revenue of $42,000 a month and we just increase it to $52,000 per month. Okay, we increased $52,000 a month because we grow to capacity. We really focused on upselling. We really, if we lowered price a little, that's fine. Check this out. Now, our profit went from $4,200, which was a 10% profit margin. Remember up here we had. We did revenue of 42,000. We did a profit of 4,200. Because again, 60% profit margin was on that 7,000 above our break even. But watch this. When we move our revenue to $52,000, our profit goes to $10,200. Because that $10,000 in extra revenue is all on the right hand side of this break even point and is 60% profitable. Therefore your profit margins literally double from 10% to almost 20% and your profits more than double go from 4,200 to 10,200 more than a doubling of your profit. And you only move your revenue up by about 20%. This is the power of growing to capacity, Mike. Talk about growing the package capacity. It's not about just a matter of maximizing revenue before you have to buy trucks. It's a matter of more profitable. When you are after break even and the majority of your profits are left between break even and your capacity. Anything in between, that is where all of your profits are at first. Okay, gotta get past break even for a lot of us going the next few months. That's the challenge is get to break even. That that is the goal. Just get to break even at all possible. You need to get to a certain number. That's why you don't. I don't care if you got a discount, whatever, just break even. But beyond that, even is more. When it comes to your capacity, is everything between there is your most profitable revenue. All right, if you want this explained further, I can answer questions on this. But this is extremely important in my mind. And this is why I think everyone should know what their capacity is and what your break even is. Anything in between. That is where all of your profit margin is. You're literally going to be 50 to 60% profitable on that revenue, not gonna be 50, 50 to 60% profitable on the business, but on that piece of revenue you're 50 to 60 profitable. The reason we all get in these 5, 10, 15%, 400 gains is because we're barely past our break even and we have a whole bunch of excess capacity. That's where all of your profit margin is at.

All right. I hope that made sense and I hope I didn't lose anybody there.

What's a good amount of cash to have on hand for one person? 500k. I have to consider low in cash. I think a good benchmark is going to be really is determined by your threshold of risk. Right. The less cash on hand you have, the more risk you are of running out of cash if you like. For example, I personally want to have one month of revenue at least in the bank before I would be thinking about spending more. When I first got started and I was in heavy growth mode, I was not hitting that number though. So I would recommend just when do you start losing sleep over how much money is in the bank? I would definitely make sure you at least have one or two payrolls in the bank at all times. Like two, I would say at least two pay periods. But yeah, it just depends on your threshold of risk and what you're willing to kind of how low you're willing to go and how well your cash flow is in terms of collections. There's a couple questions.

That's my flight 100. Cool. Let's go.

Very exciting.

Should I get my roller bag? That is the question. Okay. Can you take away an employee's PPP and bonus profit sharing otherwise if they are filed. Yeah. So in our employee handbook we basically have said that their paid time off as well as their bonuses on P4P and profit sharing are all removed as soon as they are fired or if they give their notice.

That's what we do. Just having your handbook but in most states and provinces that is completely fine including paid time off as long as it's in trailer handbook. You think Performance Max apps are secure to regular ads on keyboard. So why? It seems like Performance Max ads might be better for branding but in my campaigns the click through rate is much is way lower. I'm guessing this is because Performance Max is not purely intent based marketing whereas search ads are. See picture. These ads have a similar budget and have been running for roughly the same amount of time. All right, let's see the picture. Remove this one. Take away this one. Sorry, I'm at the airport. If you just Logged in.

That's where I'm at. Let me present this picture.

Share screen.

All right. Yeah. Performance max. Is the conversion rates way lower? Yep. And your average cost per click is a little bit lower on the performance max. There you go. Okay, cool. Great. Yeah. So you can see here your performance, your cost per click is a little bit lower. So that's. That's a good thing. This is the bigger deal, though. You're only able to spend $13 and therefore get probably, what, six or seven clicks? Whereas this one, you were able to get, you know, two, three by 300 clicks. Right. Or 245. There you go. Oh, this is for the whole campaign. I see what you're doing.

So what I would recommend, or this is how I would think about it, is, yes, your conversion rate's gonna be way higher on regular search. The thing is. Sorry.

It'S super loud. I apologize.

But, yeah, basically, in terms of performance max versus the regular ones, ultimately the problem with regular Google Ads is you can only show if people have searched. Therefore, you're gonna have a higher conversion ratio. You're gonna have a much. A greater number on that. On that side of things, you're just not gonna be able to pump money into the system when you want to get more leads. It's not like Facebook. You can just increase your budget and make more money and get more clicks and get more traffic. So it is definitely more of a branding game. However, it's optimizing on the back end. So I would do both like you are doing and just play with it. Looking at performance max as more of an option to be branding, whereas the clicks are going to be much better in terms of search. The bottom line, the reason that the Google performance match is so good is because if people are searching on Google and then they go to, like, Angry Birds, they'll see the ad for you there too. It follows them across that platform. Right. So that's something like Facebook can do if you stay on Facebook. But people don't typically search for lawn care on Facebook. Right. So the ability of having someone search for lawn care and then go see you on YouTube and on the banner ads and other display ads, that's the power of Google performance. And doing both like you are doing is good. Keep in mind, you're probably literally competing for the same keywords when you have both of them going at the same time.

Okay, I think there's one more question. Let me share this screen. Sorry. There's like 20 tabs that have opened when I'm in This.

Okay, I think there's one more question.

What whey protein do you recommend for someone just getting back from the gym, lifted weights. Let's go. But lots of different opinions about this, right? It's like whey protein is only about 20% of the protein inside of.

Milk products. The other 80% is casein. But typically the most common forms of powderized protein is going to be either whey protein or isolate. Whey isolate.

And so basically, whey is more of a whey concentrate, is typically cheaper. It's typically going to only have 20. In order for it to be considered whey concentrate, you only need to have 25 to 80% of it be protein. So a lot of these protein powders are actually. There's sugar in them. There's all sorts of garbage in there. If you want a higher, a little more expensive, but a higher, typically a better product. Better. The amino acid profile is better. And the percentage of whey that is actually protein, I would recommend whey isolate. The way that they are synthesized a little bit differently in terms of the amino acids. So if you're really getting into it, I would just make sure you're getting a high quality whey concentrate that isn't like 30% whey or 30% protein and 70% a bunch of fillers or do an isolate. The isolate is going to be much. They are typically 90% plus protein. So that'd be my case for that. The reason you typically would have it for lifting weights is because if you're not eating enough protein outside of your diet, just in regular foods, which is common, if you especially just lean back in the gym and lifting weights, you'll get super sore. You'll need a lot of protein just to like fill in the gaps and have all the amino acid profile. So if I was getting back in the gym and lifting weights, I'd recommend whey protein. A little bit of creatine, especially if you have your super sore for days on end. And then amino acids as a multivitamins. That's what I take every day. Multivitamin. Okay, I'm gonna shut it off right there. Sorry for these loud, loud stuff. All right, guys, I'm headed to Michigan. I'm in the airport. We'll see you guys later.