Mike Minutes Mastermind 12/03/2024

Ladies and gentlemen, boys and girls, welcome to another Mike Minutes Mastermind. Let's get this party started. We got Christmas spirit coming alive. Got all sorts of Christmas lights in the office last weekend. Let's go ahead and get started. Let's see how many questions we got today.

Oh, we only got two. All right. We only got two questions so feel free to fill out the form in the description if you want to submit another question or in the comments. Either way I will get to it because we only have two questions today. Let's see what they are present Share Screen.

Next few days you're going to get an Update email from LizMD Center. They have some really cool updates they have. We were going to save them for conference but we have so many so much I got to cover at conference on the Thursday in terms of announcements. So we're going to move this one to December but this was originally going to be a release at conference but we just got so much we're trying to trying to release that day on Thursday at conference that I wanted to move this one forward. So Liz will be going over that in an email. Nothing ground shaking or nothing but goods. There's only upside. So looking forward to being able to share that with everyone and there's already been plenty of testing going on so looking forward to sharing what that is. Liz will be having that email out within the next week or two. All right, let's jump into the first question we got from Mr. Anonymous.

My wife and I have $30,000 of personal debt. I would like to take 30 I'd like to take $60,000 from the company as a salary and she makes 70,000. We accrued the debt while she was in medical school and are making payments monthly payments on it. I'm a new owner and I may not immediately take a 5k set 5k a month, but should be able to within the first few months. Since August when we started the company, monthly revenue has been between 5 and $10,000. My hope is to get to $20,000 revenue next year which would leave me about 40k in net profit.

You might be higher than 40k net profit if you're doing 200,000. Just FYI because you already have the assets required to get to 200,000 DOL like the truck, equipment, etc. And you're doing a lot of the labor so you might get more than 40,000. Just as like a side note here but you know planning for that is probably a fiduciary wise thing to do. Our interest rates are low around 8% on average. Should we be thinking about using some of the net profits to bring down our personal debt or use the profits to grow the company the following year and make minimum payments? I only have my mower financed and my two trucks fully. Oh, you have two trucks. Yeah, you got lots of capacity here. Full, fully paid off. With the intentions of using both for next year. The mower is 250amonth. Okay, so this kind of ties into the question from yesterday.

I always think it's somewhat funny.

It's not funny, it's horrible. Based upon the seasonality of our revenue.

We gyrate between wanting more debt and then wanting to pay off debt. And so I'd be very careful in November and December of wanting to pay off debt. The reason is because you have the cash, have it available and people do it. And then when they actually, then what they do all of a sudden is they will get go get new debt in spring rush. And so be very careful with this. If you sign long term fixed interest rate loans, if you're going to growing business, usually the best thing is to use the money to grow the business. So for example, if next year you do 200,000 and then based upon how much cash reserve you have, you do next year is either going to be 350 or 480, that difference of $150,000 in revenue. If that's being determined by whether or not we pay 10 to 15 or $20,000 off on this loan over the next year. I happen to believe taking the second like the more risky route is probably going to lead to a better outcome. It just depends how fast you want to do it and how risk averse you are. If you're more risk adverse, you'd probably pay this debt down. You'd stay around the 200 to $250,000 level for a couple years, be very profitable. I think you'd raise your prices in the second year, be very profitable on it with you and one helper, pay this thing off and then grow. That's fine. If you want to save yourself a year, year and a half and cut the corner, then you're going to pay the minimum debt, minimum payments. You're going to invest back into the business. You're getting another employee and you're going to go from 200 next year to 400 or more the year after that. So that, that's a personal.

You know, decision. I do think you have two paid off trucks which allows you to technically up to three employees. You could technically get to like $400,000 in revenue. You just had enough customers. So it becomes a marketing play, right? Like can you advertise? Can you get your customer acquisition costs nailed down? Do you hire someone next spring rush to actually do door hangers full time? These are the type of questions I'd be thinking about if I didn't go spend that 10 or 15 or $20,000 on this debt next year. And then what does that do that business? Does it double it? So those are the things I'd be weighing out. It sounds like I would really speak with your wife, like what's her risk tolerance on this? Because you paying the minimum payments and putting it back into the business is going to be a little more risky. Some people just hate the idea of having debt and they want to get rid of it at all costs. It doesn't sound like that's the case because you went into debt with this for school and it's been something you've been paying off for a long time.

But at 8%, I would just keep paying it. I would take the money. Your minimum payments I'm assuming are a few hundred me depends on what the original principle was. But it could be probably like 300 to 500 bucks a month. I'd probably just keep paying that. I would grow the business. I would grow at least to 200. Like, at least like I'd be trying to get to like max capacity with you and one employee because it can be max profitable there. And then once you hit that spot, then make this decision. That's what I would do. That's exactly what I. I would accelerate as quickly as possible to full capacity with you and one employee and then make a decision from there. Do I raise prices for one year, pay off this debt, or do I continue to grow? And it's probably going to depend on does that happen in March and April of next year or does it happen in July and August? That'd probably be the determining factor of whether or not I go full in earlier. Like so if that happens earlier and then versus just putting wait the rest of year out be very profitable. Stay at full capacity and pay the debt down.

All right, next question.

Dustin from Central Illinois.

For all my Ohio guys out there, I think it would be great if you gave a big go blue in honor of the once in a century wind Michigan Wolverines had over them this past Thanksgiving weekend. Jokes aside, I hope you're able to spend some time with family. Okay, thank you, Dustin, for showing your loyalty to the Michigan football team. All right. I did have A question about the private buy in opportunity for copilot Augusta Media Group. Obviously nothing is finalized, but I'm interested in hearing more of your pitch to investors on plans and directions to get to $1 billion for public IPO. Okay. Oh, well, we got a big question. Okay. All right, I will read through the question. Just know that like first off I was gauging interest on the Facebook group. Um, I was expecting 10 to 15 people, to be perfectly honest. The fact that I think there's 50 or 60 people that have earned like, okay, I, I, I take note of that. I'm not promising anything. I'm not guaranteeing there's gonna be anything. Um, but I have thought this through the past several months as more and more of Augusta nature asked me. And.

And then to be perfectly honest, like Alex has, has recently talked a lot about how like Jeff Bezos owns, I think it's like 4 or 5% of Amazon. Elon owns 20% of Tesla. Jensen Yang Huang of Video owns 4%. I mean, I mean him mixed up with Amazon. I think Jeff Bezos 8% of Amazon. Anyways, all of that to say when we ring the bell, when we go, I would rather just do it with all of you. Like that's just the bottom line. Like the money I, I make, I'm going to spend on robotics. I know that I would just rather have a huge party with all of Augusta. Nation of people that invested in us really, really early on took a big bet on me and that's why. And then obviously like using the money would allow us to accelerate a lot faster too. So anyways, let's keep reading the question. So I just want to put the caveat. This is not set in stone, this is not happening for certain. I am based upon last weekend's interest that was overwhelming.

Taking actions to see, like, what can we do? I got a lot of feedback in the comments about like, hey, can we somehow extend this to the later of the year? Because really.

There'D be things we have to change if we're going to put allow people to invest later in the year. But I also understand the lawn care landscape industry if you're, if we're making the cap in, you know, the end of the round in February, like a lot of people are getting ready for spring rush, so there's some things I'm trying to move around. I'm doing a lot of exploratory work with attorneys, making sure everything is 100 kosher and above board. I also realized that I am taking on the stress that comes along with taking on capital I've never had before. And I have enough stress just working my own capital, let alone people like I love. So it'd be different if this was like venture capital or like private equity because like they have money to burn and obviously I would still try to be a good steward of their money since they invested. But when it take that aside, when it comes to people that I love money investing like that, that's a lot of pressure and I'm also gauging whether I want to even deal with that. So we'll see. I just want to put this massive banner here and that is this is not a guarantee. This isn't. This is. I'm not saying this is going to happen. I am exploring it though in depth. So. All right, let's keep moving on. Let me just read this whole thing and then I'll try to break it down. Or maybe not. It's luckily happens. Okay, let's go through these sections. I kind of broke into three sections in order I feel is most important. Management moats and plan for growth. All right. For the management section we bought in Augusta locations and a lot of it was due to the management of the business. Your ability to lead and the success of the Augusta as a whole. I see no different than the success of an individual location. Is heavily impacted by its GM as it currently sits. I don't think anyone would question this aspect of the business as I think most strive to lead as you have. Yeah a big part of the over even the raising the money and like even like this this the clarity we have now in terms of doing the IPO and like the timing of it and all the projections is what's bringing allowing me to attract great talent. I'll talk a little bit about this conference. It's just these are things that I've always thought I've always had in my own but I've never shared. Well when I once I actually started sharing the. The exact strategy and the plan. Here's how it's all going to tie together is what's allowed me to attract incredible talent. Like you've seen some of the talent coming on like head of design, some engineers, obviously Josh V of VP of product. But there's some other ones we have in the pipeline that like they have done this before. They have taken a startup public and they are very technical. And so attracting that kind of talent is not because we have the best financials. It's not because we're making the most money. It's not because they are getting the best pay comp compensation packages. It's because I am sharing the vision and I'm willing to share the equity. And so that is, that is kind of the management side is a huge piece of going from where we're at now to the next level is attracting like all stars. And these are people have done it before and now they just want to do it with more notoriety, a better position and skin in the game. All right, for the moat section, what are the moats you see that will keep competition from being able to do the exact thing we are doing? Oh, okay, this is a good question. If we get a company paralleling us, while I think competition is good in general for the market, this would have the potential to decrease the IPO of what Augusta does is copiable a copyable. Is there any. Is there anything currently in place to protect what Max is doing on the phone code inside Copilot or anything protecting the franchise other than the fact that there's a barrier when it comes to finances required to replicate? Okay.

So there is moats that are currently in place. There are moats that we are working on and there are moats that we want to achieve. The want to achieve part I'll work backwards. The one to achieve part is robotics. I think there's. And I'll talk about this like I already have a lot of the documentation of my thoughts of like why who should. Who would think about this investment and why like what's the deposit parts? Because I've had to pitch this like although you will eventually likely see a pitch investor deck, I have used the exact same deck to attract great talent to Augusta and to co pilot and to what we're trying to do.

And so.

I would say that the future moat and the thing that will actually will become more mainstream I believe is once we go ipo, I will use that money to be able to go into robotics. But I believe we'll be able to make my robotics profitable because we'll have the moat of this, the distribution of the locations and the scope and like that many locations gives us a mass amount of distribution as well as command center and Max AI to be able to interface with the machines. So for example, right. I'll. I'll take some pictures next month when I'm out there. But I'm going to be going to a very solid startup that does this in commercial with robotics right now with you have one operator and you have one mower out in the property. The mower mows it. It uses lidar the first scan though, they have to call into their office and their. They actually call it command center because of they follow the content. So they call it command center. Their command center is staffed by people that make hundreds of thousands of dollars years as engineers that are ex military. That is never scalable. It's just not like you'll never make money doing that. And so the ability for us to make the software intuitive enough to our command center can be that person that gets called the call in that we can create the software that the tech could eventually do that sort of scan on the first property. That's the type of thing that I think we can do in the long run. So that's like long, long term Moat no. 1. You're just not gonna have money to do that honestly.

As an independent operator. And then the moat that we are currently working on is the ability to have software to do what we want. And this is again, this will be the focus until likely we do ipo. And that is like some stuff we're rolling out at conference that like only a Gusta Nation will be able to do because we have backend access to be able to build directly into our infrastructure at Copilot.

Same thing with command center. In terms of.

Moats in the past, to be honest, what gets the thing of preventing someone from going from zero to where we're at now is honestly the media. This is why like you'll see the investor deck. The secret behind like all of this from zero to where we're at now is the media side because we don't spend money on marketing. Like if I had to spend money on marketing, the average franchise to sell an average franchise is usually 15 to $20,000. And so most franchisors, their goal is just to break even. When they, when they do 35, $40,000 for initial fee, they're trying to break even on that. By the time they cover their cost of training and then they cover the cost of sales, we don't do that. Like I don't spend money on marketing. Sometimes I've done some stuff, some things that test what works, but we don't spend money on marketing. It's all the media. And so if we were able to have a negative cac, which means the more money I spend on media and content in the media team, we're able to attract more and more leads to all the different services.

And essentially make the media arm profitable. So this was inspired when I started Augusta from Red Bull. Red Bull. Basically they took a drink, not this one, but A drink. And then they are a marketing company and so.

They have Red Bull racing. They had all sorts of Red Bull stuff. Nothing to do with the drink. It makes money though, all their marketing efforts. So there's a really good, I think story brand is a good one. There's another one I'm completely blanking on. There's a really good book I read way back in the day and that's when I started the media to scale it, like invest a lot of money into it. But that is the moat. Like no one, I don't think anyone will be able to do that to be perfectly honest. And they won't, they won't build it the way I did it because the first three years is just so difficult. Like I wasn't Mother Teresa living in, in the closet. We didn't have any money. And so.

And the reason is because we didn't take the royalty, we didn't force everyone to sign that they had to join in. And you'll see like in the investor pitch deck, like it hurts our valuation.

But what will change investor like when we ipo, what will change people's mind is the success rate, the numbers, the growth rate and the amount of people that stay on. And so those are things that we focus on anyways. What are the things here? We got other protecting the French other than the bare to the finances required to replicate. Like I just don't believe that like you can see the growth rate of like grounds guys, us lawns. These are other franchises in the longer industry. They've been flat for a very long time.

And so in terms of replication.

I just, I don't think, I don't see it happening. And if they did I don't think they'd go direction we're going which is like massive amounts of software and the media like that the three coming together is what makes this difficult to replicate. And that is anyone could probably replicate the franchise, anyone could probably replicate software. Anyone could probably replicate the media side and kind of like what we've been building for the past seven, eight years. But it's the three of them combined I think is a trifecta that's super powerful. And so when you, when you do something like that, that's what allows you to have a very marketable security. So from like Amazon they have aws which was a spin off because they needed back an infrastructure to support their retail store. Their retail store doesn't make any money. Like literally a couple quarters ago they were negative cash flow on the retail side. And even for the whole business. But AWS pumps cash and, and so. But as a whole, all their different products and services elevate the entire Amazon, you know, stock, you'd say, all right, last thing I would like to, I would move to is where do you see the growth coming from? Is it from the sales of new franchise locations, raising of monthly fees, cost to users and more users inside of copilot, additional services added down the road, et cetera on an eventually that the plan is to get the franchise to a thousand locations and it will obviously have impact on the franchise's valuation. But curious what you see the main drivers being to that valuation to 1 billion. Okay, so I do use actually a helpful.

Podcast, the one I did with Lee last week. We talked a lot about this with Jersey Mike's. So they have, I think 3,000 locations. They got a valuation of.

3,000 locations. Yeah, 3,000 locations. They got a valuation of 9 billion.

Subway, you got around 9 billion as well. And they have 38,000 locations. So if you look at the valuation of those for subway was around $250,000 per location is what they got valued at Jersey's. Mike Jersey Mike's was valued like 2 to 3 million per location. And it's mostly around this, their unit economics and a success rate of their owners. And so that's like my main North Star. Because that's just the franchise, though software gets valued very differently. Like a company that loses money in software but is growing fast. People just love it from a valuation perspective if you're trying to go in the market. So this is why I think that the combination of the three helpful because the franchise can become very profitable and fund a lot of the developments on the software side that take capital to grow. Like everyone thinks, oh, you just put the money in and then just print cash. With software, it's not that way. As you grow in scale, you need more engineers for security, more engineers for authentication. Like, if you're actually building the product correctly and not like we did earlier in 2024, it takes huge amounts of investment. And so.

But, but, but the market is very, very forgiving of a company that loses money when it comes to software. And so how I see it is if we can get customers for negative customer acquisition costs through the media, and then we have a very profitable arm of the company, kind of like aws and that is the service side, Augusta Lawn Care Services. And then we have the software side that we can really use to grow and expand. That becomes powerful. So just interesting thoughts again, I know nothing is Finalized. Just interested in hearing what you are thinking, the direction the business is headed. Yeah, so that's generally it. That is generally it. And I think for everyone that has joined in the first five years when all of this was not as obvious and like the direction of where we're going, I want to be able to participate in that. And I would just. Yeah, like, I just. I don't think it'd be fun ringing this New York Stock Exchange bell by myself. So I already know I'm gonna. I'm gonna personally flout the first 10 owners inside of Augusta Nation.

And obviously I'd have like my team there, but I want the people that invested me from the early onset and that are willing to, you know, be on this vision for the next 10 to 15 years with me. And yeah, I think it's a, it's a cool opportunity, especially if you're like, hey, like, I don't have that. Like, I'm not going to go try to do that. I don't want to spend 10 years of pain trying to figure out these aspects, but you could come along for the journey. Like, that's the value of the community. And I want to share that with as much as possible with all of you because it's going to be a wild ride. And so I think it'd be a unique ability to be able to, like, I, like, I'd like to share like annual reports with the investors, I. E. The people from Augusta Nation and share like this aspect of stuff, like stuff I'm working on and how you play a piece of that and not just be. Whereas me, like, I will get all the notoriety, like public facing, but like, I always know, like behind every time someone says something, I know, like there are people at command center answering phones all day long. There are owners inside of a Gusta Nation that believe me when, like there was absolutely no evidence of success. The first 10, the first 50, the first 150, like that still believe me when I made a bunch of mistakes, etc. And so I will remember that. And that's fine, that's good. But I would like it to also be where there's a monetary upside for those that actually put some skin in the game. And so that's the objective here. I think when, if and when the investor debt comes out, you'll see how I want to spend that money, why I'm doing it, a little bit of breakdown where that money is going to go and how it's going to accelerate. Basically, we fell about a year behind in on copilot with this past year because of all the issues and I'm confident the changes we're making even later this month will put us in a good spot going in 2025. But if we can get feature parity with Service Autopilot and then the UI of Jobber we're going to crush. There is so much pent up demand we believe, and there's just so many people that are just waiting for us to basically to leave Service Autopilot. I'm obviously in touch with their previous founder and that'll play a piece into it later down the road once they have an exit. So yeah. So anyways, I shared a lot, hopefully not too much. Anyways, hope you all having a fantastic rest of your Tuesday if that's of interest to you, that sort of stuff. There'll be more information down the road if we go that direction. I am just making sure everything is done exactly legally, that there's software that you can track your investment, that there is full.

Everything is done exactly how it should be. So I just want to make sure that the last person, last people in this world I want to ever take money from and then be a bad steward of is yours. So I just want to make sure it's all buttoned down exactly right before if we're gonna do it. So all right, love you all. Hope you have a fantastic Tuesday and we will see you tomorrow. Take care.