Mike Minutes Mastermind 11/26/2024

Ladies and gentlemen, let's get started. Welcome to their mike minutes. Mastermind.

Let's get this party started.

With some questions. Looks like we got quite a few today. Yeah, we got eight questions.

Present.

Boom. All right, first one up, Mr. Anonymous. I'll not make it through the winter without taking out business loans. Do you recommend I skip conference and save myself $2,000 worth of plane tickets, hotel, Uber, etc. Then watch the recordings. Is it worth going on loaned money?

It would really depend on your situation. If you're growing super fast and for that reason you have not been able to build out your winter revenue enough to be able to not get through without digging a hole, then I probably would probably just watch the recordings. That being said, that's like the main topic we're going over at conference and that is to fix this problem so you're not in negative cash flow during the winter. Some of it will be reviewed, but it'll be a good place to be able to really solidify that plan. If you're growing really quickly though, and you're crushing it, it might be a solid investment. But I would be much more concerned with why we have negative cash flow going in the winter. If we didn't do Christmas lights, did we not sell winter services strong enough? And that's something that we're going to be really talking a lot about at conference. So I just don't like loans in general. Like you could fill in the gap for whatever should I get money for loans? Like there's risk immediately. So I don't like that.

But I highly recommend being there because it could mean have not like fixing this problem next year, which is.

Having negative cash flow during the winter. Like this is a problem and it is a solvable problem. So.

Yeah, the recordings will not be as good this year either because we are not going to be recording from the back. We're only going to have our the media team doing it. So we're not gonna have a big fluid camera from the back. We're not gonna be recording it. So yeah, I would recommend being there as much as possible. But what's the appropriate approach if I'm constantly seeing ads from a nearby August location in my protected territory? You should thank. Count your lucky stars and be very grateful because any leads that come in will come to you. So they're paying for your ads. I would probably mention it to him. Like, hey, FYI, I'm seeing ads in my area. Keep in mind too, if you're like on a private browser, if you're traveling through their territory, etc. You might see them. But keep in mind, if anyone calls from inside your territory, if anyone submits an essay request form from Tiger territory, it comes to you. So technically speaking, you should be happy because any lead that comes in, even it's for them, it'll come to you. If it's inside your territory. Coach Connor, a lot of times I see it happening when people do radiuses. They'll do like a big radius around their like shop space and it'll go into someone else's territory. Just know you can always exclude and exclude some areas. So if you ever need to do that, feel free. Coach Connor, I know you have mentioned before that command center services should be in the range of 8 to 12% of monthly revenue if they're. If they're for a service with my wife doing the phones during the main parts of the day. An office admin.

What does 2528 mean? Oh, 25 out of 28cc tasks, etc. She is on salary for 34,000, which is all we needed to take for her to take on the task. Clearly she is below 8 12%. However, we still have some overflow for command for after hours and special projects. I'm trying to incentivize my wife's position, just as any other position would be that 10% of annual gross sales would be the goal for admin. And if we are under budget, between her salary and command center bills, she can keep 50% of the remainder. And anything over budget is no bonus. It's gonna get tough to grow. You're gonna push this. Okay, let's keep going. This part is pretty straightforward, however, in that 10%, do I need to throw in office subscriptions like Docusign or anything else you've had to pick up since we now do them internally. Or is this something that is different than admin cost? Yeah, it's all considered admin costs along with your rent, your utilities, like things like Internet, computers, office space rental. If you're doing it from home, you obviously wouldn't have that, but that's. I would bake that in because you're going to use it for your taxes, likely as an office expense. So yeah, subscriptions like DocuSign Exit are all considered part of what I consider admin. For context, after replacing landscaping with mowing last next year, need about 60 more and should get in spring rush. We will again reprice this again and aim for 600,000, maybe 650,000 if Christmas lights pick up. I hope this makes sense. Yeah, it Makes total sense. I think you might have a perverse incentive though. So regardless of this, is your wife or not, like, that's one thing. Like the $34,000 I would negotiate if I was her working full time for that price. But all things considered, she gets other benefits and she's obviously equity. Right? She gets equity in the business.

So I would also keep in mind, yes, it's going to be under 10%, but it's because you're taking that artificially low salary.

So keep this in mind, like when you start saying like, well, my labor rate is low. People say this all the time like their, their cost of labor is low. It's like, oh, it's only like 25%, but like they're working and they're paying themselves nothing. And so you can artificially make numbers work simply by paying yourself less. Right. So you know, if you're looking at this from like the businesses perspective, yes, it's fine and good until you have to go find someone that's going to have to do her job for 55, well, probably 45, 50,000 plus taxes, 55, 60,000. That becomes challenging. And so I would just keep that in mind. I would secondly say.

I would not do anything of sort of incentive around that 10% thing because.

If you start growing or you need more leads now, you put a perverse incentive on the admin staff. Like they don't want the phone to ring, they don't want more calls.

And then what's going to happen is as you begin to grow, what happens is then the way that they complain is instead of saying like, we're too busy, what they say is, we can't get all this done in a day because they have this cap that you've put on them which is like, basically you've got to get everything done within this amount of time. And so I would see, I see some friction happening there. I would just be careful with this whole logic of using percentage. Also when you raise prices, it allows you to have expense creepy. So now 10% of admin, if you raise prices by $100,000, technically you have $10,000 more. You can spend an admin. So I just be careful with that as an incentive. Again, your wife, this would probably work just fine. She trusts you. There's not going to be, she's not going to be trying to do anything delicious to the business.

But I would, I would always build the business in a way as if it's not going to be your spouse in the office.

Because stuff happens and you don't want to be in a spot where it makes perfect sense while they're in the office. And then when that changes, eventually it will. Whether it be in two years, five years, or 10 years, eventually that does. And if the finances no longer make sense because they're not there now, you have a bottleneck in the business. So, like, this is in part why we do command centers. Because, like, if you can build the business in a way where you can hand things off to command center and the numbers still work, you can sell this much easier. You can, can. You can do multiple locations easier just because you don't have to worry about that as being the bottleneck.

So.

Not saying she shouldn't do it, like, that's a great deal. It's a great deal for the business. It can definitely work. And it's likely that she's not working full time for large part of the year. So, like, the 34,000 also might make sense. I would just be careful on incentivizing that sort of structure because if you ever hand it off to someone that wasn't your spouse, that didn't fully trust you, there'd be a conflict of interest of like, how much work was being done for that amount. Because you started growing the business, they're gonna start being like, hey, look, this is no longer fair because I can't get this. I can't hit this percentage, so.

Landon Smith, Tallahassee, Florida. Hey, Mike, I made this post last week and just wanted your thoughts on it as well. In my area, everyone pretty much charges the same price for weekly. And there. Give me a second. Let me go back. I might have misunderstood this question.

Okay.

Yeah, this is, this would be totally fine.

Yeah, I just.

This would be great for your wife. So take your wife out of the picture. That's where I feel like the trust factors can be tough. If you had someone else in that position and you basically said, hey, you're going to keep 50% of everything between this dollar amount and this amount. It just gets. Gets a little weird because what's going to happen is basically you just incentivize massive cost cutting, when in reality you might need the opposite in order to scale the business or to be able to make it run efficiently. So especially if they're on salary and they're just getting a percentage of like, the difference between X$, and Y$, there's no incentive based on performance. It's just a matter of, like, do your job for as little as possible. There's no, like, performance metric. So this is not like this would be like P4P but like the lower you like just don't spend money. Just don't spend money. And in admin it is a cost. Yes, but it also is required.

And I would focus like if you did this I would have a different another performance metric. So something around like revenue growth and this or like profitability and this just I would just be careful with giving an incentive around like essentially cut your. Cut your expenses as low as possible and do not go above it.

That could lead to like someone just like leaving early for the day. Like we're like well technically yes you are cutting costs in your area but that's not what we need. So I just feel like you'd end up having a very rule driven culture. All right. In my area pretty much everyone charges the same weekly and bi weekly. My weekly price is competitive. However my bi weekly rate is typically way higher than everyone else. I charge 25% more my bi weekly rate. While I do have almost all my customers on board with this, I do believe it's hinders my growth by not allowing me to come in at a good rate then raise prices. For example my door hangers exceptions rates is typically about quarter to half percent. It'd be great if I could get them on through this then raise prices without losing my shirt initially. A little more insight. Pretty much everyone goes biweekly except for three to five months of the year. How would you go about fixing this issue? So I could ramp up growth with good rates while not losing money on Mo's thanks matrix below are for entire lats house included. Thanks for all you do. Yeah, I'm going to go out in a limb and so you don't have to beg. So. So when you don't have to bag.

Yeah when you don't have to bag clippings, the cost of biweekly doesn't take you a whole lot more. You're really giving a cost. You're giving a discount for people that go to weekly and you're basically getting a volume discount. Right. That's how I would look at it. And so you could definitely just lower your bi weekly prices. That's fine. Just the 25% instead of like say 50%.

Yeah, like if you wanted to lower your weekly just as a frame of reference but if everyone's going bi weekly like that's kind of your rates. So like again all of this is subjective. Like all you can, all you want to think about is like if you're closing enough job like 70 plus you have room to wrote movies up. If you're only closing 25, 30 of your jobs and you're trying to grow then you're going to need to bring the price. That's like the bottom line. Whether you 25% premium or 50% premium biweekly doesn't really matter. I would just, I would also make sure you're set, you're doing your, I would default to weekly like on, on their, their estimates if they accept the estimate at default to weekly and if you're like well no one does it then you could do go bi weekly only to keep it simple if it's causing a big admin issue for some reason like people always confused why they're on weekly but having the weekly prices anch price price lower, it's getting a volume discount. When they look at someone else's prices they're going to compare it to that lower number. So there's, there's some benefits there. So but again this all comes down to your close ratio and so if you're trying to grow and you're wanting to close as many jobs as possible, you might want to reduce that rate by reducing both of them. And I would at least have a 25% discount for weekly because a volume discount, right. So like they're getting twice as many services from you so they get 25% off. You also get like a 60% plus bump in annual customer value by having them on weekly. Dylan Wirtz, how would you respond to this? The context is I had an employee blow up last week when I was doing estimates while he was in the field working a long day. Didn't even work his full 10 hour shift. He put his two weeks in. I was supposed to have his last day 125 in this situation I typically wouldn't have, wouldn't have them work these two weeks but since I had just fired another guy and taken over a second second location, we needed the help to finish leaf season cleanup. While I'm on this topic, there are several multi unit operators that are not in the multi Unit chat on WhatsApp. I highly recommend joining that. We had that call the other day so I think it's like I know Pete from Virginia, Dylan.

Forest. There's several that aren't there. So I do recommend go to the dashboard and go to the WhatsApp groups and and scan that in. I also had a scare with him a couple weeks back when I thought he was faking a shoulder injury trying to get a workers comp claim. Ended up resolving it and paying him for two days off out of pocket to end that situation. He is medically retired from the military, but I was with him yesterday and he definitely didn't seem like his shoulder was injured at all. Anyways, not sure how to respond because I want to get out of this out of the workers comp claim if possible. I think he's been searching for.

Well like obviously like I think this type person you should probably let go. I would try to find a replacement and then I would let him go and I would do it based upon his performance and say hey, like I'm letting you go. You didn't. What was it here in the field working a long day.

He blowed it. So like I would, I would do it over this, right? So it's hey, I'm letting you go. And if, if there's any reason that is required it's because of this situation. But you don't even have to say that. Just you're letting them go. And I would try to find someone first. So I would be on an all out. I know it's Thanksgiving but like I would be an all out, have a get someone, find them, interview several people tomorrow and Friday I'd be hiring them on the weekend and Monday I would be starting them and I would be letting the other person go. So that would be my goal. If I can do that, great. If not, I'd probably just keep him on, get what labor I can from and you know, see where the chips fall. If he's going to try to do something malicious workers comp he's going to do it whether you fire him or whether he gets he does his two weeks notice regardless.

Hutch, assuming you want to optimize your profit and build a business as consistent work year round, would you rather a or one bid work as it comes in with surge pricing, lowered close rate but increased profit margin during peak times like spring and fall, then no. You'll need to make some of that profit to advertise in the other seasons to keep same budget on the schedule. Example a a mulch and bush trimming in the same day but both had 3x e fees. 2. Stick to a routine calendar only where only certain services are provided at specific times of the year, slowly converting the business to more high end customers that can afford weekly mowing. Three bush trimmings, mulch etc. Each year. Example mulch is off only offered January through mulch bushes round is March to May et cetera.

I would be careful with this because some people would want their bushes trimmed in July. And so if I'm going to make them all the way to all the way to March, that could be problematic. I think what I would probably stick more towards is when am I doing recurring jobs versus when am I doing project jobs and when am I doing time sensitive jobs versus price time insensitive jobs? I would probably just stick to those to keep it simple. Otherwise you get very, very.

In the weeds of like January through March is only what I'm doing mulch. Okay, so if someone contacts you in July and they're like I want to mulch. And so are we doing it? Are we not? Like I would just stick to are we doing are we focused on projects? And like that's what we're booking into these months for projects. And then these months we're focused on recurring. So when it comes to scheduling it is a matter of I am booking time sen and recurring jobs during the busy, busy season and trying to book the projects out into the future into my slower season. Now to your point, you could match the surge and have surge pricing and capture more profit that you could then later on use for advertising. The reason I usually don't default to this is because it requires you to increase capacity, so requires you to have enough trucks and equipment and employees to match the peak of the surge. And so although you do get more profit, I rarely see the extra profit that is captured made up for the fact that you have fixed expenses of trucks, equipment and the excess management required to hire for peak employees. That offsets the other nine months of the year where you're not in peak season. So that's why across I know this is a real thing what you're talking about. You don't hear me mention it in my content at all. I just stick to time insensitive and project based jobs are out into the future and time insensitive and recurring jobs are during my peak season. The reason I say it and I keep it like that is because most people, if they try to go the surge route surge pricing method, do not capture enough profit to make up for the other nine months of the year when they have two trucks sitting there extra to match. You have to, you have to get capacities to there. So you like, well guys are going to work overtime. Well all of a sudden if they're working overtime, they're not making much money on P4P or they don't. They want, they stop, they burn out. It's like when you go above capacity, you eventually are going to lead to burnout trucks, equipment and employees and Personal capacity too. And so you have to increase capacity in order to meet surge. And rarely do I see people capture enough profit in the times of surge pricing to make up for the fixed expenses that come along with that increasing capacity.

Matt from Salem, Oregon. It seems that when starting a new location, owners jump in as operators for at least a few years. Do you think this is more about the particular owner, the franchise systems, franchise maturity, or the nature of the industry or something else? What are the major constraints for someone taking over by existing location 500 to 1,000 miles away? So this all comes down to whether or not there is a general manager in place and if the system's been followed in order for a general manager to take over. Because if a general manager can take over a location and someone else can buy the location, so it's easily transferable. What the reason why in our industry, most time people the owners do operate for the first few years is because we're growing from 0 to 500,000. And from 0 to 500,000 it is difficult, not impossible because there are some locations that do this and they've optimized for profit heavily at 250, 300,000 and they make it with a general manager and they can still make 10% distribution to the owner. Fine, awesome, cool.

But in terms of the vast majority, they need to get past 500,000 in order to just take enough money out personally before they can hire. You can go get a general manager or they can work even in the business as a expense and overhead versus a.

Revenue producing team member. So if you look at a business, that's $400,000 and business B makes $400,000. Business A has the owner working out in the field, probably producing $120,000 a year, easily in revenue, actual labor revenue. Business B has, they're not producing revenue. They're actually taking like a salary from the business in the form of like say 60, $70,000. The delta on that is huge. Like 120 plus and negative 60. It's the difference between the business making good profits and and negative negative cash flow. That's why the wilderness is so hard. That 200,000 to 500,000 level, you don't see any more profit because you spend less and less of your time in the fuel working, producing revenue. And so your margins collapse, they dive down. So the reason this happens is because most time, realistically in this industry, most people don't have enough capital to accelerate to 500,000 fast enough to where they can get a general manager. From day one, you need a hundred thousand dollars plus in order to be able to do that, to be able within three to six months get it to being at a size of 30 to $40,000 plus and on its way up to 50,000.

That, that, that takes a considerable amount more capital expenditure. So that's usually why it's not a bad thing. It's just a matter of you know, cash speed things, cash will speed things up and this is no different. If you don't have the cash, you're just going to spend the time to build up that cash reserves.

Over the course of time in the business, working in the field. Matt from Salem Morgan, I know you mentioned helping out some special people early adopters of Augusta Nation when it came to time to go public. Is there a way to be arrest is there going to be a way that the rest of us buy stock pre IPO when you decide to go public or are we going to have to wait like commoners? How would you like to raise guessing in series B or C. So we're not going to raise. We don't have any plans to raise Series B or series C or anything like that. Like Siri, when I, when you're referring to series A, B C typically it's like you have your seed or precede seed A, B C D round that's usually private and then you take it public IPO and then everyone kind of gets liquidated. We don't plan to do that raise privately. Let me clarify that. Secondly, when we ipo, I want to do something. I just don't know what it's going to look like. And me giving any sort of thoughts around that one and that's a 8 to 12 year proposition is kind of shooting in the dark. So I do want some something to be done and whether it be pre IPO or just options where people are allowed to buy stock at a different price, that would be something I certainly think about and want to do. It's just I don't, I don't, I don't even know enough data. 8 to 12 years and what's going to look like Do I want to do this? Yes, absolutely. I just don't want to make promises I can't keep or things change.

Laws etc. There's nothing against.

A franchisor selling their stock to franchisees. I know that and I've looked into a little bit but don't make any promises. But yes, it is in my head. So. All right everyone, I hope you have a fantastic rest of your Tuesday. I will see you all tomorrow. I am traveling, but I will still be on the mastermind. Love you all. Take care.

Ah. I gotta. Click. End recording. Boom.