Mike Minutes Mastermind 11/15/2022

Good morning, everybody. Hope you're doing super well. Let's rock and roll. The YouTube link in here, Streamyard, keeps changing things up on me. Okay, why is it not going to Facebook? See, I can't comment on Facebook. It's the weirdest thing ever.

Now.

All right, let's go ahead and start. I had a few questions that came in on the form. See, I got put in manually into here.

Okay, here we go.

My questions.

Cool. By the way.

You might have seen.

People staying in the news and stuff like that, but, like, it does look like inflation is slowly going down. Cpi, Consumer Price Index the other day came out a lot lower than expected. This morning, the Producer Price Index came in lower than expected as well. Actually came in flat, which is really good. So those are all very positive signs. Just don't think that that keeps us from a recession because things move a lot slower. Typically, it takes about a year to see the impacts of interest rate hikes in the market. So similar to like when we had the supply chain shortages last year, a lot.

A lot of that was caused by what happened in 2020, like when everyone shut down factories and things. So it takes a while to see it actually happen. So don't think that, like, oh, you're going to see people in the news, inflation is going back down, blah, blah, blah. Yes, fine and good. But it doesn't mean that we're not going to see the consequence of it still when interest rates have gone as high as they have and are higher than they were 10, 15, 20, 30 years ago. So let's jump into this and get going. Let me zoom in. You can see that a little better. There you go. Cool. All right, question is, from Max. How does the population of a territory affect the growth, the rate of growth? We've grown a decent amount this year from 128,000 in gross revenue in 21 to 300k in projected gross revenue this year. But I was hoping for a little more because the population of Burnaby and the relative lack of competition. We only offer simple services. Mowing, weeding, treatments, property cleanups. Have you noticed a certain limit on growth even if territory is located in a populous area?

No.

Okay, so this is going to make sense. Have you noticed a certain limit on growth if a territory is in a populous area? How does the population of a territory.

Yeah, so your growth rate is going.

To be higher if you have a lot of people simply because you have more fish in the pond. The thing is, you typically have more competition and you typically are going to.

Be less Efficient and profitable because you're trying to go in different, too many different directions and you're not as efficient with your routes.

So it's not to say it's more profitable, but you can grow a little bit faster if you're in a more populated market. You also have a larger labor pool to typically tap into. That being said, the numbers of 128 to 300, you have to keep in mind, is like 120% growth rate. So don't beat yourself up over that because 100% growth in any business, I don't care if you're going from 10,000 to 20,000 or 200,000 to 400,000 or a million to 2 million is massive. You're going to have to have changes of systems, changes of processes, and there's going to be a lot of stress in the business. So, like, if you do the same thing next year, it would mean that you would be 680,000 approximately. So just keep doing what you're doing, your growth rate, because that's what you're actually talking about here is your rate of growth. Your rate of growth is fine. And yes, by having these less services, you're going to have a business that grows slower.

You just are.

That being said, last night I was on a conversation with someone that was doing hardscaping and design build. They were in goat game and they were reaching out because they had seen what happened with Aaron on business bootcamp and they grew their business in six months to 200,000 per month in revenue, 30 employees.

Let's go.

Here's the downside. Went to $400,000 in debt in six months and is currently in bankruptcy and has two kids and is now in a divorce court over everything because of that business. Six months. That's what happened. So growing really fast is not. There's nothing to be proud of if in six months that's what you're going through and that's not the goal for what we're trying to build here and you're trying to stay in business for long term. I would be concerned if you went from 128 to 450 or 500 and no profit. You're stressed out in your mind. Like that's when you need to slow down. The fact is, I know Max, for example, you're pretty profitable. You're doing well. So just keep growing at that size. You're not $400,000 in debt. Yes, you don't have a 200,000 per month business in six months, but you're profitable and you're growing and you're worth a whole lot more than someone who's negative 400,000. So by having mowing, weeding treatments, you're going to have a slower grow. You're not doing project based work which is when just doing that would would have probably put you at 500,000 or plus 500, 600,000 this year. But keep in mind you're growing a sustainable, profitable, systems oriented business that's simple services that you can hire people, plug them into your system and at work. So there's just no pride in having a business that grows really quickly if it's not sustainable. And so.

As expected, this market that we've gone into the past six months is going to expose the person that has grown their business in a way that is highly leveraged, focused mostly on, on project based work. And all those lead times are decreasing. People are becoming much more price sensitive on 30, 40, $50,000 projects. And we are just, we have not seen that in the past six months. Most of Augusta Nation has raised price in the past six months. We have not been reducing prices to be able to compete with other contractors on design build stuff. So the reason for that and you can I listen to the Home Depot's.

Conference call, quarterly conference call. They know it. It's like when the housing market starts to have pressure, people stop spending money on home improvement.

They just do because they don't see.

Their home and as investment anymore. They see as an expense. When adding a $20,000 patio.

And you know that the value of your house is going up dramatically, you look at.

That as a value add or you.

Know I'm investing in my real estate. It doesn't seem that way when you're $30,000 down over the past few months in equity on your house and your loan is starting to become where it's almost underwater.

So.

All right.

Do you think it's worth hiring a door to door Salesperson who is 100% commission? Have you experimented with it? It seems like it could really increase growth for a nominal cost. For example, $50 per sale of recurring work. Yeah, I've never actually done this mostly.

Due to the fact that we are of size enough.

Like I've never done that from the scratch.

Just be honest. The problem is if someone is good enough to actually sell door to door, they probably are have the capacity to make 60, 70, $80,000 pretty easily selling higher ticket items in lawn care. That being said, you could find a diamond in the rough or train someone up or you could Just literally teach them to introduce themselves and just a numbers and a math game. I am fine with that. I have just never tested it. I think this is a good idea to try it though and see what happens. Especially in a market where there's not a lot of HOAs, not a lot of gated communities and there's not CC and RS around you. You not handing out material and knocking on doors. I think this would be a good strategy. I would definitely test this out because again, ultimately it comes down to cost per lead. As long as they get one lead every hour or two, they're making good money at 50 bucks per sale. And you're happy as well because it's 100% commission. Convincing someone to be 100% commission going door to door might be tough, but if you can find someone that is willing to do that, you probably have yourself an all star. Even just the desire to want to do that. I hear a lot about section 179 and I am very aware of what it is. It can be a great tool when used properly. But most are still putting themselves into debt for this purchase.

At what point is it smart to pay Uncle Sam instead of buying something to reduce your tax liability? I have a hard time wrapping my head around people who spend $100,000 to save. Paying the government 20,000. Just an example. In short, when should you pay versus when should you buy stuff? A lot of it has to do with your anticipation of where you're going in the future. So like next year for example, you're gonna be really, really profitable. You probably don't want to section 179 stuff this year.

Right? You're right.

Like eventually you're gonna pay the government. There is no way around it. It's like you're just simply trying to even out the high years and you know, go in the down the years when you have low. And when you, for example, when you sell something and you have a whole bunch of capital gains, you're like, okay, how can I offset this with more losses? I don't want to take more money out from the business in terms of distributions because now I'm paying at a higher rate, I think 35, 37% versus 22, 24%.

Right.

So there's definitely strategy to that. And you can use Section 179 as.

A way to kind of put yourself.

In a different bracket and pay a different rate, stuff like that. But ultimately you're going to pay.

It's just a matter of do you have cash on hand like if you have a lot of cash on hand, like you have tax liability, maybe just pay it. And then that way going forward the next few years, you're not going to have to worry about, you know, taxes.

As much because you know you have something to amortize. But if you section 179 everything, you are going to start getting on a treadmill. And that's, that is the thing that you want to be careful of is.

Getting on the treadmill of debt or.

Leasing in order to just satisfy the section 179 because you don't have enough cash in order to be able to pay your tax liabilities. You just, you just basically keep kicking the can down the, down the field because eventually if you sell that, you got to remember if you take a section 179 and, and then you depreciate.

100% and then you sell it, you have to do depreciation recapture.

So for example, If I do $100,000.

In buying a truck, for example, and.

I take a section 179 but I sell it for 50,000, I only really can depreciate 50,000, but I've already taken $100,000 depreciation loss against my taxes. So now I've got depreciation recapture which is an additional 50 grand because I sold the truck. Is that a good explanation, Brad?

Good. All right.

I got a thumbs up from a cpa. Good stuff.

But ultimately you should talk to a cpa.

That's why you should be talking to someone like Brad and figure out what is the best thing for you. He's been working on a couple spreadsheets and kind of finalizing and tweaking to.

Make it really, really clear for you.

On decisions for your business, which one's better and what your expected tax liability is, things like that. So again, talk to Brad on a coaching call and I think that would be my recommendation there.

All right. I think that's all I got for today.

No other questions came in. Okay, cool. Well, hope you all have a fantastic day. And let's see, anything crazy. Oh yeah, I'm going to service autopilot conference tonight. Tomorrow I think I could go down to Seattle tonight. I fly out 5am Tomorrow starts at 1pm So I get in at 12:30, drive straight there and then Jonathan Pitochnik starting at 1.

Let's hope that I have any late.

Flights because I do not want to miss that one. And then I'm going to talk to Jonathan in the afternoon and then I'm.

Talking to Mike Callahan in the evening having some meetings with them. That's really the main reason I'm going there. After Wednesday, I probably will likely not go any of the keynotes. I will probably just like go to the meals and interact with people and then go back to my room and plan for conference. So I really got to start figuring out what I'm going to be talking about in six weeks. And I also am reaching out to some of our owners in a guestination to be able to talk on Thursday about specific topics I think they'd be really good at. So I'm really looking forward to that as well. So that is the plan. I will not be on schedule for a Mastermind tomorrow morning because I will be on a plane, but I will have something recorded for you at some point. I am going to make a better video about capacity and record it so it is not an airport where people are behind. It's really loud. I'm going to record it and I'll post it for everyone, hopefully this weekend sometime. But the one I made I think is really instrumental. I got a lot of good feedback about it, but I want to make it a little bit better in terms of just the presentation and then I will post it for everyone on this weekend, hopefully. All right everyone, have a great weekend. Take care or weekend. My goodness, it's Tuesday. Have a great day. Take care.