Mike Minutes Mastermind 11/29/2022

Hey, everyone, let's go ahead and get started.

Okay. I'll post this again. It looks like.

Okay. Hopefully it goes to Facebook. Why doesn't it go to Facebook? Sorry. I'm going to post the YouTube link in here. There it is. All right.

A couple things I wanted to go over first before we get started.

Let me put this here. Okay.

Start off with announcements. Announcements.

Conference. Everyone check your email. There is a link in there, a form that I need you to fill out for every person that's coming to conference. So check your email. I sent you an email last night. Everyone needs to fill it out. The sooner you can do that, the better. Very much. Help me. We're only four or five weeks away from conference and we got to get a ton of food ready to go and clothes and name tags and all the rest of it. So if you could please fill out one per person, that would be great. Next thing up. I was talking with one of our owners the other day and I think I wanted to share with everyone that is like decision making process on do you want to keep growing one location past 7,800,000 or do you want to leave that location to general manager and go start a second one? Here's something I said to him that had never really verbalized before and that is honestly a lot of it comes down to.

Being self aware enough to realize, are you an operator or do you like the entrepreneurial side more? Let me explain this specific owner. I don't think he'd mind me saying his name because we're just inside a Gust Nation. So it's Nick setting up in Canada, up in.

Ontario, just outside Ottawa. And so his business, about $700,000 in revenue this year. I think it's his second full year with Augusta and crushed it. He's young, very young. He's done a great job, learning a lot. However, I was honest with him and said the thing that he is going to struggle with is he does have shiny object syndrome, mostly because he's an entrepreneur. And when I say shiny object syndrome, that doesn't assume he's starting other businesses. It means that inside of the business, you create havoc as an entrepreneur because you're constantly trying to break things and make them better when they don't need to be fixed or changed. And the reason I'm saying that is because what I told him is I did the same thing at the Bellingham shop when I was there. And there's a reason why the year that I walked away from daily operations and handed over to Liz and Tali and we suddenly tripled profits. We didn't change anything. We didn't even, I don't even think that year we raised prices, we did cut out some services. But the bottom line is it took removing the entrepreneur that is trying to make things better and fix things and new ideas and new marketing campaigns and new services. And so what I told Nick is like, because like in just knowing him over the past couple years, it'd be like, okay, well, I'm going to acquire this other person, I'm going to do snow and then I'm going to do zero escaping. And we're going to do, we're going to focus a bunch on treatments and applications and, and okay, I'm going to make a separate website. Like all this stuff is always going on, going on. It's like, look, you're an entrepreneur, I understand you want to fix things and make them better and improve them and come up with new ideas. And that's where you get all of your.

Your dopamine from, is making new things. But ultimately, what's more profitable and better for the business is you letting an operator take over and run the systems. Because the most profitable businesses are not the ones that are creating and innovating. If you look on the public stock market or any business, the most profitable businesses are not the ones innovating. Innovation costs a lot of money. Breaking things and making new things and having new ideas costs a lot of money. The boring businesses, the ones that have been doing the same thing the same way for a very long time are the most profitable. And so what you want to do if you're an entrepreneur is if you're, if you're at the size, this is just a decision making framework. Should you start a second location and hand it off to a gym or should you not, if you have a good operator, someone in your business that is just going to take what you have and run with it and not change stuff. Not be constantly trying to figure out new methods of marketing. Like, oh, this new service, we're gonna like really do a big marketing campaign around this. Like, oh, I'm gonna do acquisitions and I'm going to try doing this different type of compensation, like all these different things. Like, look, use the systems. Here's an operator, your general manager is a follow these systems and they're not going to work on the weekends. They're not going to stay up all night long thinking about their marketing plans and all, but they're just going to run the systems. In that case, the entrepreneur should go start a second location and let an operator take over. I can guarantee you an entrepreneur that is in the place of an operator, if they let leave that location, it'll do better profitability, profit from a profit standpoint, increase the prices, reduce growth and give keys over to an operator that's just going to follow the systems and just do what they're told because the entrepreneurs mess this stuff up. So that is something to think about. And also to think about is are you a good operator? Because you're a really good operator. You might want to just grow on location. If you enjoy being in the day to day and you like getting your hands dirty, you might do better in that role of growing one location versus having multiple. Where now it becomes you are. Your job is managing managers, right? And we're trying to create frameworks for Chuck, who's the regional manager. Cause that's really what you would be stepping into is like how do you start managing managers, having meetings for your managers, training your managers. When do you step in when managers are doing things wrong? These are the type of things that you. That would be your new job. And you as an entrepreneur would enjoy it because you get to focus on the thing you love, which is growth and new and constantly going more and more and more. When you can have as you section off the business to do $500,000 locations, you give it off to someone and say make that profitable. And you hold them to the systems. You don't need to change the systems if they're working well and they're being profitable. So don't be entrepreneurial when something's working just fine. It'd be like me, like, oh, like I'm going to become the CEO of you know, bnsf, the railroad company. And like, oh, we're going to like going to have inflation inflating tires and we're going to do hovering instead of going on rails. Like rails are just so outdated. We're just going to do hovering. Like we're going to have propellers and we're going to hover. You're going to drastically reduce the profits of that company. Because rails have worked for hundred plus years and so why change it? And so the same is true when it comes to when you start thinking strategies. Second looking, I consistently have seen when people that are entrepreneurial start second location and then they go focus on the new and then an operator take over the first one. That first location becomes wildly more profitable, okay. Especially because they stop growing it and they focus on profitability by raising price and decreasing their close ratio. Okay? So that's just something to think about. I hope that's helpful. Other thing I was going to share, I just had this and I took a screenshot, but I thought it might be helpful.

Window. Boom. Okay, so this is a comment. I think it was on Instagram. I usually don't go on there, but I made a post for managers this morning. GMs. If you would like to be hired as a GM inside of Augusta Nation. And I put the locations that emailed me and are looking actively for gm. So this is kind of a way to hopefully use the audience to get some of us GMs. So there's several of you that are looking for GMs. I put your location names in there. If you emailed me like you. Like I said a couple weeks ago. That being said, someone made this comment which I thought was really good and I wanted to talk about it. See if you guys can see this better. There we go. Okay, so the comment is, is this purely residential? I don't mean any disrespect, but 500k in one or two years is incredibly reserved for a franchise. Great point. This is my. Is my response and I want to dig into it a little bit deeper. Yes, residential only conservatively. First year should be over 300,000. Second year over 500,000.

Do people get there within six months? Yes, and GMs are incentivized to get there faster. However, I do try to err on the side of conservative when I give numbers online, so I can't. People can't say I embellished that. Next comment is the one I'm focused on though. Also keep in mind that very few franchises with 50k startup costs have a 10x multiple on that in terms of revenue within one to two years per dollar of capital invested, McDonald's will cost $2 million to get started if you're doing like a freestanding restaurant. And maybe they will do 2,323 million dollars in gross revenue. I invest 50 to 80k per location, tops. Investing more money would make growth rate increase, but due to faster hiring marketing, but to increase due to faster hiring marketing, but typically outpaces the GM personal bandwidth. All right, so this part obviously we could talk about in terms of the reason that you do usually grow to a million dollars in your first year with a secondary or third location is the GM that you're hiring typically can't handle that style of growth because they're not. They haven't had the experience and they're probably not an entrepreneur, they're an operator. So what works really well is get an entrepreneur like yourself to start it, then take it and give it to an operator that's going to follow the systems that seems to work very, very well. When you're starting a GM from scratch, it's going to take a little bit longer because they're typically not the go getter driving sales. It'll sell ice to an Eskimo type of person, which is fine. Just realize you're going to have slower growth if you're putting that person in the position to start a location. Okay? So the secondary part though, the part I want to focus on is this one. And this is why a couple of people on the weekend text me about why am I starting my own locations when I have a higher leverage thing in the form of software or the franchise or the media, where my money potentially has a higher return. Let me explain it like this, okay? This is the part I want you to focus on. The reason I'm starting, hopefully four new locations. We just hired another GM last night. Let's go. Good job, Chuck. We're trying to start four more. The reason for that is this, okay? If you can take $50,000 or 60, 70, whatever number is, let's just call it 80, let's call it $80,000 to start up a new location. You get a couple trucks, a couple employees, you ramp it up and you follow exactly this right here. 300,000 the first year, 500,000 the next year. All right? The fact of the matter is that in, let's just call it 24 months, you took $50,000, turned into a business that is 10x that in revenue. It is almost impossible. No, I'm gonna say it is very hard to find a franchise or any business model that you can do that in. And it's not, say Augusta's different. It's the fact that we have a low barrier to entry model in the form of law and care and landscaping. But that also means if you do it well, and actually you know well, your returns on capital can be extremely high. Because to go be a McDonald's franchisee, I am going to have to spend at least $2 million to build a location out. And that's kind of come along with a 20 year lease on property as well as all the equipment being rented. I was talking to a, was it four or five months ago to a.

Trainer for the region, our region for McDonald's. And they have like 20 locations. They're like in charge of regional training and stuff like that.

And they said now with inflation the cost of building all the rest. You need at least $2 million to start a location for McDonald's, and that's if you get accepted, because typically they want people to start like five or ten to a chain. So you typically need millions and millions of dollars. Let's just say you're going to start one location though for $2 million. $2 million and a good location. Let's just look it up. I think I remember looking this up before. Average sales per McDonald's, if I remember correctly, it's 3 million, but let me just check.

$2.7 million and that is as of 2022. Perfect. So $2.7 million is the average.

Sales for a McDonald's location after the first year. Okay. What it means is you have about a 11 to 1 1/2 x multiple on your invested dollars. That's in revenue. Now if you can run a profitable, say 30% profit margin business in the McDonald's store, that's great. You get $700,000 in the form of profit and you will be able to recoup your money in probably three to four years. Okay, if you put two million dollars in, you're getting 30% back on a, let's just call it two, two and a half million dollar business. You're getting $700,000 in profit. So it'll probably take you three years to recoup your capital. With a low barrier entry model. The numbers are just smaller, but the percentage of return is higher. Okay, so if I put $50,000 in, trust me, I'm going to get my $50,000 back before three years. And more importantly, I'm going to have more like a 7 to 10x multiple on my money within a year to two years in terms of revenue to how much I invested. So the numbers are smaller. But you have to realize I would rather personally start like I'm going to do next spring, four locations for $320,000. But in, but in two years, I expect those locations to be doing around $2 million in revenue. And I only invested 350 versus the 2 million. Right. So return on equity, return on capital is something that's really important as you start thinking like an investor instead of an operator. And I know for a lot of you, and we're going to talk about this conference quite a bit and like getting out of the investor, the operator mindset and into more of an investor mindset as the company grows. You don't need to be thinking about being an investor when you're your first five Years of business after that, stepping out of operations and thinking, okay, I have money, where's the best use of this capital? And so for me personally, when I look at all the different areas I can put my money right now, real estate, stocks, whatever it might be, I look at what I can do with four locations and like, that's probably the best, one of the best returns I can personally get. And that's how I think about it. And when you. The reason I think that way is because I'm completely removed from the operations. You simply are thinking about money in, money out. That's all you should be thinking about as you move from an operator into an investor. And for most of you, this is more like a five year mindset, where you're going to be in five years. But this is where you want to get eventually. Because the reason most people are like, oh man, multiple locations and like DMs and all the reason they think like that is because you're thinking like an operator. And that is, man, think of all the employee issues. And now I got more issues because I got the GMs. No, like follow the systems, have your general managers follow the systems so that way they handle those issues. And you are now handling growth, expansion and training and fighting the fires for GMs. Right? Different problems, bigger problems, a lot more problems, but at a different level of an investor versus an operator. Okay. And again, that is the long term mindset for most of us that it's like, that's like your five year old, where you want to be at. But trust me, that's where you want to be. If you're an entrepreneur, if you'd like operating your business, keep growing one location, don't do two, don't do three. You'll run, you'll run yourself just crazy because you're going to have higher level problems and issues. For example, a GM that gets sick and now has 5, 10 employees that are needing direction.

A job goes south, that's massive. Your GM should be able to handle it, but if they don't, you still will have to. So there's going to be more psychological and financial pressure compared to the physical pressure and stress that we talk about if you move from operator to investor. But for most entrepreneurial types, that's where you should be at because you can break things and start new things and be focused on creating how to train your gems better and when, what time the cadence of the meeting should be at and having zoom calls and all the rest of it and you'll enjoy that. But for, but for now, the next three or five years, if you're an operator, just focus on that one location, make it as good as possible, follow the systems, get it ready to hand off to a GM so they can come for training. And you say, great, here's the keys. Follow the systems. That's, that's the whole process. The only reason why we'll start for next year, next spring, and I have it, I will not have met the GMs. They will do just fine. And every is because every single model, like, if you guys talk to Chuck, you talk about how religious he is about the systems. Like, just follow systems. Just follow systems. The reason for that is that's what makes it possible to copy and paste, copy and paste and think of business as more from an investor standpoint in terms of thinking. Like when you think new location, think number of employees and then how many trucks. It's not that it's like capital in and you're investing money and you're getting a return on that money. And I, there's just no way I'm ever going to like these real estate deals that I'm selling right now that I, we quote, unquote, crushed it over the past couple years on the returns on that is like 10 to 20% on my invested capital. It's not great. It's, it's good for real estate, but I can double or triple that in a small business as long as it's run efficiently. So anyways, that's my rant for the day.

Let's see here. I got to get off this call in 15 minutes. Let me go do these questions and I'll come back to these questions.

All right, zoom in.

First question. Kevin, what do you think about this for spring? We want to lower our prices a bit and double down on marketing in the spring to gain as many recurring customers as we can to help sustain us through the recession time of this coming year. Okay, I like the premise. I would say you're not going to need to lower your prices if you're doing good marketing. We're going to talk a lot about this at conference.

My opinion is that people are going to have great intentions of spending their marketing this coming spring and they're going to see it not working and they're going to stop because the marketing that has worked for the past 12 years is not going to work anymore. Because in the past it was a matter of just touches. You just have to say, hey, I do mowing, I do mowing, I do mowing, I do Mowing. I'll give you my money because I saw you 10 times. It's not going to work anymore.

I don't think you'll need to lower price. Now. What I would say is be very flexible with your pricing. Because this is what typically happens. People will lower their price. They fill their schedule like crazy full, and then they realize they're overloaded and they go, they raise their prices. But for the next four to eight weeks, they have booked out. They're doing work that's less profitable and it crushes your soul because you're working harder, longer hours, you're booked out, you're stressed out, your mind Spring rush, and the prices are lower on those jobs. So what I would recommend is if you're gonna do that, just be very quick. When you've got to anticipate demand, you've got to anticipate demand. You gotta realize, okay, last week we had 120 budget hours. This week we had 140. This week, 160. Okay. I anticipate in four weeks we're gonna be completely booked out and I'm not finding enough employees. I'm gonna like, raise my prices now. Right, because the last thing you want to be doing is working two months through, during spring rush. So you're working through the backlog of when you sold work at a lower price. So what you potentially could do, though, is keep your project prices higher. And then on the recurring side, you could go lower. Just again, be very quick to anticipate demand. If you sell like at 70, 80, close ratio in the first couple weeks of spring rush, you're probably one of going to slowly bump that back up. So. But it's not a bad, bad strategy, especially as we go through the peak fear, which will be next spring, in terms of like recession, recession, housing prices going down, all that stuff, get them in the lower price then, and then literally six to 12 months, you could raise their price once we are on the other side of that. So that's not a bad strategy. It just kind of come down to you're going to delay profitability for that location by one year. Right.

Okay, I think you had some pictures here. Let's go. Oh, they open up now. Let's go. That's sweet. Okay, now I don't have to open up, do a different thing and everything. Sweet. Yeah. Post these on the Facebook group, Kevin. So that way I think there's about 10 or 15 locations that are doing at least that are doing Christmas lights, maybe 20. Now maybe post these. Oh, you guys have that group. You guys have that WhatsApp group, so that'd be cool. I know there's a WhatsApp group. Make sure those pictures get passed along. We just can't post too many specific Christmas lighting because the majority of people still don't do Christmas lights. We can't do it on the main in the main channel.

I was listening to a podcast this morning and they were comedians talking about how effective story can be in performing in front of a large audience and how it can captivate them. They had a guest on Dr. Andrew Huberman, a neuroscientist who brought up that they had tested groups of people who watch or listen to a story at the same time, such as movies or other performances, had the same emotional uptick at the same time throughout. This had me thinking about story based marketing. How and if we can commit this more into our businesses to help captivate our customers and even potential team members in our hiring ads. I don't see this being used much in our industry. Would this type of approach work? What are your thoughts? Yes, this is great.

The problem with this is we can't standardize this very well across the whole system because the story works well when it's coming from a person, right? So when you're talking about like on stage performances, when you're talking about comedians, it works very well. Storytelling, when it's coming from a person, when it's coming from an entity or a corporation, it seems inauthentic. So for example, I have played with the idea of trying to take my story and like this is the founder of Augustin. This is how the story started. The problem with that, it's not gonna work well for you and your market. Cause you're hiring, you're the one doing the marketing. And so what this means is. And we'll talk more about this conference. Cause you're like right on. What I'm talking about at conference. And that is about the marketing, the way we have to change our marketing. And the best storytellers, the people with the best offer, the people that have actually figured some of these things out will win. And we will be talking more about this, but it will take one by one, each of us figure out what is your story like. Everyone should know what your 15 second and one minute pitches of your story. Everyone should know that I don't really have a story. No, you do. You just gotta figure out how to concisely make it. Like for example, if you talk to any media personality, they have a 15 to 60 seconds little slot of them so it's like, hey, what do you do? They have a 15 second version. They have a 60 second version. They might not be thinking about it, but they do. They've ironed it out, right? So for me, I know at my 15 second, if someone's like, hey, what do you do? I say, I do a lot of work in the lawn care and landscape industry. I started college when I was 13 years old. There's my hook, there's my story, right? That was become a doctor. Boom. That's 15 seconds they want. That's a 15 second version. If you want a 60 second version, I can go a little more deeper. Why? Dropped out of medical school, started Augusta Lawn Care, bought Anytime Fitness, went to franchise, did the franchise thing. Now trying to vertically integrate the industry, blah, blah, blah, blah. That's the 62nd version, right? Everyone here should have what that version for you is. I used to be a teacher. I dropped out after Covid. I now believe I can invest in my employees and create something in the community.

I.

Was a recovering addict, I couldn't get a job anywhere. Started mowing lawns, decided I want to scale up and actually use systems. Here's my story, right? I hit rock bottom, got divorced, changed these things in my life. Whatever the story is for, you've got to figure it out. And most of us, until recently, I didn't have to do this. But like most of us don't know that story because we're not asked a lot. But you've got to figure it out. You've got to figure out what's the 15 second and 60 second pitch of you and your life and your story. And that needs to be conveyed in a marketing message, needs to convey it in applicants and interviews, et cetera. I'm going to move along because I only have 10 minutes. I've got to get this call.

We will restructure our current LLC into an S Corp. The S Corp will have a 9010 split between Jeremy and myself. We will have two LLCs inside this S Corp. ALCs in North Augusta SC of South Carolina and ALCs of Augusta. When converting the original LLC Fine Lines Landscaping into an S Corp, do we create a new LLC? This would create 1s corp with 2 LLCs inside for profit sharing purposes. And clean books would recommend having a bank different. A bank account for each LLC location and a separate one for the S Corp. Okay, so let me answer this quick and then I'll keep reading. Talk to an attorney. That'd be my first thing. You should always do that for Your state. But personally, we keep the S Corp as an empty shell. And then I have LLCs underneath it.

That's what I personally do. So, like, all of my.

Actual locations have their own LLC. Different bank accounts, different QuickBooks, different servers. Everything's different. Above that entity is an S Corp. And the reason I do that is because the S Corp I can get like articles of incorporation. I have minutes with an attorney. It's like very formal. If you're doing a bunch of locations like you are Brian, that's probably the structure I'd recommend. But talk to an attorney. If you guys are doing like two locations, maybe three, just do separate llc. It's not a big deal. But if you're doing a whole bunch down the road, you want to create like a holding company, you'd want to do an S corp above it.

We are forming an additional S Corp.

For all the locations that Jeremy and I have a 51 Fortnite split. We are using a territory that we are thinking about selling. We are forming, going to form one S Corp and have individual LLC inside with different equity splits. For the LLCs are 9010 and ones that are 5149. Our account said that this would work, would not work, and we would have to create 2s corps in order to create different equity. So it doesn't sound correct. Yeah, like it's going to be really challenging because the S corp that's going to have a split equity, it's going to be challenging to start splitting equity inside the LLC underneath an S corp. So if your accountant said that, talk to an attorney. I would. They're the ones who I would be talking to about that specifically, because that's more of an entity thing. However, that sounds right to me. If you have an S corp with a split, with an LLC with a split underneath, it's going to get complicated if they're different splits. So I would keep this simple for you right now. Honestly, I would do. I would do separate. You only have two locations. So just do two separate LLCs for now. When you get the third location and beyond, then get an S corp above it. Because this is going to cost a lot to set up. So just do your LLCs now with different splits and then down the road figure out the whole S Corp above what splits. Because S corps start getting expensive and you start actually developing with articles, incorporation, the minutes, all the rest of it. So sick. I gotta go fast. All right, guys.

AI freaks me out. Every once in a while I think about a time in the future Where AI might surpass humans ability in most things at that point, when AI. Sorry, give me one second, guys. Hey, Andrew.

Did you get that document? Did you send it to Liz? Did she print it off?

Okay, cool. Oh, she did.

Okay. All right, that's fine.

What are we going to do for work and spend our time on in your opinion? Makes me dread the future and feel depressed. Sorry if this is outside the scope of what Mastermind intended for. Just sharing what's on my mind and bothering me. I wouldn't worry about this. Every single decade and generation, humanity has been concerned about some extraneous force wiping us out. Whether it be asteroids, would it be cars moving past the speed of 30 miles per hour? Whether it be robots, whether it be AI, we've always been concerned and hyped up the fact that we could get wiped out by some technology and it's never happened. So maybe I'll be wrong one day. But until that time, I'm not gonna let dread. These are the things that. These words are what scares me. Dread, depressed. Don't let that happen. You can't control this. You cannot control whether or not AI does this. Don't worry about it. You can't control it. Don't worry about it. I literally don't understand.

When people worry about stuff. You can't control it, so why would you worry about it? It's a waste of time. How much time do you recommend the entrepreneur stays in a new location until they pass it on to a new gm? I wouldn't say it has to be done this way like I personally am not doing it. So let's be clear. I am not starting these locations as the quote unquote entrepreneur and then putting in GMs. That is the most efficient way to do it though, because you'll have way less waste and you'll grow faster. So if I started a new location, I would expect to be over 500,000 for here. Hand it off to a GM and then turn the profit knob on. As a GM, that's gonna take them two years to do. So if you're doing it though, the most efficient way, I would say get it above 500,000 because that's when it can afford the overhead and that's when you can turn. When you turn the profit knob on, you're talking about $100,000 in differential in profit.

Is $300,000 in the first year realistic if a location is offering mowing, weeding, treatments and property plants? Or does location have to offer small projects? Small projects like mulch Definitely help. The reason for that is because it increases the lifetime, the annual value per customer so much.

But if you really double down property cleanups, the same thing can be said. Right? So proper, you know, mulch, installing gravel, things that are 2000, $3000 definitely helps your annual value. But again, we're not doing like none of my locations are doing pavers, you know, water features, big tree. We don't do any planting. So.

Do you expect a location to keep growing in terms of revenue after it's been passed on to the manager and the entrepreneur leaves? I don't really because my goal is to grow it to a certain point, turn on the profit knob and then just make it more and more profitable. Growing in terms of revenue probably will grow 10% a year just because of cost of living going up as well as increasing prices marginally, tweaking things, making them. You just get more customers. But I don't want it to grow much more above 700,000. Like when you start getting above 800,000, you start needing a second person to help manage. I just want one person at the top copy and pasting that model. It's easier when you start getting two managers. You have people arguing, you're going to feel disagreeing, you have resentment over who works more. All these other dynamics. And I've got to grow the business to like above 1.1.2 just to make it profitable because now I have two overhead people.

Couldn't find a general manager yet for my first location. I'm hoping to find one until the training in December. Which platform should I use it to post general manager job? Indeed. Indeed is what I would recommend in terms of finding those GMs.

And act December training. Talk to Chuck. He's hiring and putting up indeed ads and everything for me right now. Getting GMs.

Sweet. Cool. Sorry to be rushed. Happy to get out to this other meeting in two minutes. Appreciate you all and we'll see you tomorrow.