Mike Minutes Mastermind 11/25/2024

Good morning, destination. Happy Monday.

Let's get this thing kicked off.

We'll jump right into questions.

Why is there two of these? What is going on? Okay, make sure I got the right one. No, I did not. It's okay. I'll move this one down here.

Sorry, give me one second.

All right, first question. We got three today.

Comes from Aaron from Abbotsford. Hi, Mike. I'm trying to plan for spring rush. I find I'm struggling to find enough work in this industry. So my plan for next season is try fill my recurring capacity to 100 or as close as possible. I'm at about 95 clients as of right now. I've had to purchased over 70% of those clients since starting in the history two and a half years ago. I asked him, I will need 200 to 250 clients to get there. Maybe 300.

Okay. Currently four trucks. Maybe buying a fifth in spring.

Okay, the question is I currently have my starting moe's at. Just wait one second. Why is there four trucks? Give me a second.

Okay, so 95 clients as of right now and you have four trucks. I don't know why we need a fifth one.

Yeah. I would bring this up on your coaching call with a coach. I feel like there's excess capacity here.

I know, I know you just joined Aaron and this kind of your first spring rush, but I would definitely go over this, go over your capacities with a coach. Having four trucks, thinking about getting a fifth one when you have currently 95 customers. I would just, I would just check that. Unless you're doing a lot of projects that are not inside that recurring base, that could be possible. So the question is, I currently have my starting mode at $55 per cut, but feel that's obviously too high, would the recommendation be to lower it 45, $39 lower. The goal is growth. The only constraint in the 4L framework is leads. Yeah. Like if, if you're only. If your main focus is growth and, and if you have huge amounts of excess capacity like you might be having, then, you know, I want my close ratio above 70% and so to have four trucks, 95 customers.

I want every single lead that comes in to get closed, even if it's at a lower price. So would I go to 45? Yeah, probably.

Unless you already have a high close ratio. If you have a high close ratio of like 50, 60%, I probably wouldn't move it. But if it's been at 30, 40% more of like a profit mode situation and you've been there for a Long time, I'd probably go down to 45. Prove your worth to your customers, raise everyone after 6 to 12 months. But you got to get to capacity. All your profits are sitting between where you're at now and the capacity of your trucks right now. So yeah, if you told me I needed to hire two to four full time guys that do door hangers straight for three months, sitting, hitting homes six times to reach that goal, we would get it done, I guess. Has anyone had success trying to muscle in the market in their first season? I've heard you say it usually takes two spring rushes to get traction. Can it be done in one? Yeah, like we're seeing better in one more and more because we're ranking so quickly on Google. But in terms of people knowing about the brand in your local market, they haven't seen any of your trucks, they haven't seen any of your ads, et cetera. And so that's why first spring rush is always a little bit slower. It's still significantly like we get about three times as many leads in our first year at Augusta compared to our first year on long care web design just because the brand and we get to the first page usually within a matter of a couple weeks now.

So that's helpful. But it's actually not so much the second spring where I should take off in terms of leads as much as you're able to, you know how to manage the leads. So when they come in, you have systems organized, everything's ready and dialed and ready to go. So I would say this. I would probably bring my price down to 45. If you have this much excess capacity and you want to grow in your first spring, I bring down your price. I would then do exactly what you just said. And that's probably the door hanger strategy. I would not go all in. Test it with like a 2000, 3000 door hangers early in the spring rush. If it shows any signs that it's going to work, I'd go all in. The reason I say that is because you're going to be early. So. So for example, in your market, Aaron, I'd probably be doing this like late February, maybe the first week or second week of March when the grass just is starting to grow. If it starts to do well, then I'd go all in. I would get one person full time at least just doing door hangers and filling up my schedule. And you can scale that to two or three if you want. And your most impactful times can be April and May in terms of in your market because you're just across the border. So.

Yes, it can be done. But if you've been stalled out in growth, in part it's going to be helped by the brand. But also keep in mind, if you're trying, if you have that much excess capacity, I would fill it. I'd rather fill it with lower priced customers and then get to capacity. Because right now you having four trucks, you could theoretically have six, seven employees. You could directly be doing 200 recurring mowing customers with that capacity. And so I'd be trying to get to that 200 marker as fast as possible. And I do believe you could do that in your first spring rush. It would just take a diligent effort in the part of making sure your close ratio is above 7% and then making sure that when you do hit pay dirt in terms of which channel is marketing, it sounds like you have the capital to invest. So like I would really test the door hanger strategy. I would do it on a thousand to two thousand homes at minimum. If I got one or two customers from that, I'd probably go all in.

Back up the truck, do three to six weeks intense contract with somebody and go that direction.

Brian Connor from Augusta, Georgia. The question sprung up from the POD AK C suite unfiltered. As you know, Jeremy and I are partners. The splits are well defined. However, having any equity split can complicate seemingly simple moves. Yeah, Jeremy received 10 equity a few years back in consideration for his loyalty and desire to do what was required at the time. At a time when the business did not have much to offer. And I honestly wanted to give up. This equity applies for all locations, current and in the future. Last year I added 10%, so he added. So he has 20%. This is both true equity and distributable cash. Okay. That additional 10% came with the burden of having to contribute 10% for any out of pocket growth. Got it. Ooh, that it's hairy. Okay. Because now you have two different types of stock. So you have, you have like, you could say this is preferred shares, like B class stock versus preferred shares or something. Because you have 10% where if there's a loss they have to contribute and then you have another 10% which is not that way. So these are technically two different types of stock that you would have in the company. Jeremy has the ability to buy in for additional locations up to 40% total ownership. He did so for the North Augusta location. So the split is 60, 40. Got it. We are opening the Aiken location in January we are financing the startup. I anticipate having to put down 20% of the $150,000 loan amount. I figured we would have $30,000 in out of pocket contribution. Jeremy would would put in 9,000. I would put in my 21,000. The bank does not require down payment. What is your perspective on how we we now can we do now concerning the split? What is fair and equitable if Jeremy wants to obtain the 40% for ain? That's a good question. Not sure if this. If the big picture helps with framing. Yeah, this is super helpful. Not sure if the big picture helps with framing a response. In a nutshell, our growth plan is to grow as many locations as God provide us opportunity. The first region will be completely formed when we split the larger location into three and coupled with Aiken and North Augusta. I will be the regional manager starting this coming year until we start the second region. I know that journey from two to three and then one region to two will require enormous discretionary effort on both Jeremy and myself. I want and need to grow Multiple at least 2, 3 locations to give number one to number one, give opportunity growth for Jeremy and other team members. Wanting for two GMs and number two to have the financial means to pay for this growth and still have fruit for myself after the harvest. Okay, awesome. One second. Let me check my microphone. I didn't check it beforehand. Okay, we're good. This is a great question. So. Man, this is tough. So there's a lot of. Because how you've been doing it is each location you've been doing is like a separate structure. It gets a little hairy because technically you are giving percentages of each individual location separately versus the entity. So like there's not really stock. It's more a matter of like, hey, it's an agreement, you know, which is fine.

How would I do this last one? I would probably say to contribute, I would still require the contribution at a 4060 split. If that's what you both have agreed to, I would put that. Because who's taking the risk? That's actually the real question. Who's taking the risk here? The. This debt, if it's on you 100%, you're taking all of the risk. There is no downside whatsoever for anyone else. So keep that in mind. Whoever's taking the risk of the debt is really the one that should be getting the majority stake ownership. I would then say you could split some sort of like contribution capital to the working capital of the business that it would potentially need over the course of the first year as it begins to grow or even just. It just requires contribution. It's kind of like skin in the game. It's like, hey, I'm gonna put up X amount. You're gonna put X amount? We're gonna split this. Yes, we're getting the money to the bank, but like this is the contribution required to be able to gain equity in this entity or this location. I should say.

You could do it that way. I would say whoever though is co signing on the debt is the one that has all the risk. So what I would probably do in this case, man, this is tough because you don't have an entity binding all of them.

I would consider this if I was speaking to you both specifically. I would probably think about.

Having an LLC for each location underneath a holding company. And then that way the LLCs you could split however you want in terms of equity and like the different types of stock etc. That's probably the way I would do this.

Because it seems like it. I have a feeling like as you start more locations, each one you're going to probably kind of negotiate slash, like what do you want to do in this one? How do we finance it? Each one's kind of been custom and so I would just try to keep it probably like that down the road, like keep track of it. Now I'm sure you guys have this in writing. And then like probably when you pass your third location, when you start your fourth location, I would definitely like get LLC set up, have different your classes of stock set up correctly in your shares. So it's very clear because you're gonna start losing track and you don't want this to end up burning a relationship down the road just because like there was this miscommunication.

So for this one I would probably say if I was doing this, I would number one be looking at who's on the, on the debt. If, if we're gonna go partner, I want both people on the debt. So even if it was like majority stake ownership, whoever stake majority is going to get first place in the debt. And then whoever's second place on the debt co signing on it would get some equity and based upon their contribute, but they have to be the minority stake owner. I would never let a minority stake owner hold the debt like as first position. So that's what I would personally do in this one. So I'm going to use names here because you've been very open here, Brian. So I would probably, in this case I would probably say, okay, okay, we're still going to contribute this capital to the business in order to gain equity. There's going to be working capital, $21,000 and $9,000. We're going to split 60, 40. Jared's going to be second on the note in terms of who's signed co signing for the loan because I'm going to assume they're not just giving this loan to the business without a personal guarantee. So like he has to be a personal guarantor if he's going to get 40%. That's what I would do.

I would still require the contribution of capital. And if like, well, we absolutely do not need the capital, like, like there's plenty of cash that they're giving us, well then just waive that part I guess. But you have like whoever's going to have that, like there's no downside if you're like I'm going to give equity to someone. So you go, well what, what are they contributing? What you're contributing in this case is risk. And so both people I would recommend being on the debt. So.

Yeah. And if you need follow up on that, Brian, feel free to put another question in there. I know I kind of went two different directions but I would probably in this case if you didn't had no need for capital. There's plenty of cash. We don't need to do contributions. Great. Put both people on the debt. Whoever's first place is going to get a majority stake ownership. Whoever is secondary is going to get less equity.

I'd probably proceed that way. I just know I would just recommend pausing after your third location when you go to your fourth. I don't know, that would be a couple years away. But like when you go to your fourth, I would really recommend I can, I can give you some attorneys. We'll talk about it at the Seven Figure Club in July.

I can go over, I can give you some attorneys I would recommend to kind of help you split this out correctly. Joel from Lafayette, Colorado. I've heard positive reviews about from Tommy Mello and others on a recruiting agency help source and interview candidates for manager roles. Would you recommend using a recruiter to help find someone for a working GMO roll? Why or why not? For context, my location will end 2024 around $400,000 with three field techs plus me and I want to grow it to 500,000 to 600,000 with one GM to replace me and four to five fuel techs in 2025 then switch to profit mode in 2026. Got it.

You're earn $400,000. You're wanting to grow it next year and then in 2026 switch to profit. Got it. Okay, makes sense.

So I've, I've, you know, I've heard winning solution like Ray reviews about recruiting agencies from people like Tommy. I've also talked to people like the Hermosis that like swear not to use them again. So I don't know like your thing is you're not, you're not hiring the agency, you're hiring the people that they find. And so what you're really betting on when you hire a recruiting agency is that they're going to be able to do a better job of weeding out bad talent.

And they're going to be attract people that you would otherwise not be able to.

I do think the brand like in, in the general like industry, lawn care industry, we have enough brand power, people kind of know about us a little bit already. And so I would lean into that heavily when I would be marketing. I would say this, if you're going to do a search, don't search your local area. Do do like the four to six states around you and you're gonna get flooded. Flooded with applications. Okay. I'm also assuming here first and foremost that you have no one in your crew that you think could become a working gm. Right. So assuming that's not the case, I would be looking at the surrounding areas. I've had GMs move 1, 2, 3. I've had three of my GMs move to work for my locations before and they all they would do great. So. So like when they move there is a certain level of like all in kind of nature. Just keep in mind you also made their family move. Like I feel a little more responsible to ensure their long term success even if they don't perform well kindly because I made them do it. But I do believe it does show a certain level of commitment. So if I didn't have anyone in my current crew that was a of working GM quality, which means they can't sell but they're able to manage the crew and keep it chugging along in profit mode. If there was no one, I would be conducting a search far greater than just my local area. I think that's the part that people fall into. And when you go to recruiting agency they just immediately go nationwide and then they get 100 candidates and wheel it down to 10 that are decent and then give you five, their favorite. So it comes down to how much time you're willing to spend on this and that's what you're hiring a recruiting agency to do. Otherwise.

I would personally, if I was you, do an indeed campaign. I would not spend money on ads because if you go wide enough, you're going to get flooded with applications.

And yeah, put everything in there in terms of what the app, what entails, call it a general manager position with profit sharing and rock and roll. I think if you went wide enough in terms of where you're, you're scoping out and you make it clear in terms like you give them like a moving bonus, you know, two, $3,000 something to get, just help them move, could do more if needs be. But then you have a huge application pool and that's worked out well for me in the past. I've just heard too many horror stories of recruiting agencies getting someone in. They look great on paper and then culturally that are so abysmal and then you have to fire them. And I feel like the pain of firing someone I just paid tens of thousands of dollars to get recruited would be more painful than just getting someone that was like not great and I made the mistake, I'd rather it be on me kind of thing.

And so yeah, I've heard mixed reviews. Tommy's a big fan of it.

I've also heard some of the stories from even there that didn't go well. So I'm guessing net positive. He thinks it's a net positive. I would just say like if I'm gonna be hiring a lot of GMs I'd end up just making a department for it. Like they, they do a much better job than a recruiting agency. Like remember, like any agency is thinking about you part time. I want people thinking about their job 100% of the time. I've seen even the difference of contractors and agencies in like software and code versus when you hire someone full time. Even someone with less experience or less skill when put in a full time position is able to think about it and come with creative solutions on a 247 basis instead of just like periodically hopping back in and working on your account. And so I think the same thing when it comes to recruiting. So I would run indeed ads, you know, increase your scope. I would say in my personal opinion I would only do recruiting a recruiting agency for executives that you feel you have, you do not have the skills to be able to do yourself. So if you do not have the skills to hire a certain like you do not have the skills that the role is supposed to be filling, you probably shouldn't be hiring for it. That's what got me in trouble last year with Copilot, and so I would only bring in recruiting firms for that, and. Because you don't know what good looks like, and you don't know what to. How to actually judge talent otherwise, like, if I'm assuming, you know, a good gm, looks like you've done the work. And so in that case, I would. I would say you're the. The best candidate to weed through applications, everyone. You'll have a fantastic Monday, great week ahead, have an awesome Thanksgiving if you're traveling, and we'll see you tomorrow.