Mike Minutes Mastermind 12/07/2023

Ladies and gentlemen, welcome. Thursday.

Thursdays I go to the Bellingham shop. So I start my day working at house.

Let me go ahead and drop this link into Facebook and we're gonna jump in. And per usual, when we have a day when there's no questions, the next day we have a ton of questions. So let's go ahead and jump in. It's December 12th and we got 12 and we got seven questions that came in. So let's jump in. See here.

There you go.

Bam. Add it to stage. Did I know I dropped this in here?

We're going, we're going, we're going to.

There it is. Paste. There's the YouTube link. Okay, let's start off with the hard hitting questions from Connor Hutchinson.

Do you over how to properly forecast for a business? You mentioned likely liking to do forecasts more than other forms of metric tracking for revenue. Expensive business as a starter. I'm, I'm curious how you determine good growth versus bad growth and how you predict that throughout different parts of the season as well as how do you make realistic projections like the one copilot is five months ahead on. I find it difficult to know how well time and money was spent when reviewing a P L. And that shows mowing from the month prior, labor from the actual month and marketing time, money to work in the future. Oh, good question. Okay, so yeah, so how do I do projections? So you can do financial projections, which typically the most accurate way of doing that is projecting growth and then moving all line items of the P L forward by that percentage.

And then starting from there, you start saying, okay, well, is my rent going to go up 50% if my revenue goes up 50%? Probably not. My rent's gonna probably stay the same. But will, will gas go up 50% if I'm growing my coupling revenue by 50%? Yes. So that's why you have economies of scale. You get profitable as you pass 500. More profitable as you cross certain spots in the stages of growth is because you have spots where fixed expenses stay same even though your revenue is growing. And they got to jump up to kind of get to that next stage of growth. And so that's the most accurate way to do financial projections in terms of how I do projections is I just try to think about in terms of inputs and outputs. So my inputs are usually going to be trucks and employees and my outputs are like number of customers. So I asked myself, how many customers do I want to have by next spring? Okay, I want 200 customers. I'm at 100 now, so I need to improve by 100. I'm going to lose. Let's just call it 15, 20 of the minutes, okay? I got to shoot for 120 new customers. There's 20 days in a month. And so I need to get. Let's call it. So I need 120 customers. I want to do over the course of three months. So I need 40 per month. So out of the 20 working days each month, I need two welling customers every single day. Then I work backwards from that and say, okay, if I get to 120 customers, if I got 100 net new customers, how many more employees want to get? How many more trucks do I need to get? How many, how much will I have to spend on marketing to be able to get to 120 new mowing customers? I'm 120 new customers, 100 net because of attrition. So that's why you got, you got to account for that. So now I'm going to work backwards. Okay, what trucks do I need by equipment do I need to buy? And then how many employees do I need to hire? And then what I'm looking at is, as time goes on, whether or not I'm beating my projections is am I spending what I was expecting on marketing trucks and employees, but now I'm outstripping that two per day. So that way I know, okay, I'm only two months into spring rush, and I'm already 140 customers. Okay, I'm like two months ahead based upon getting two per working day of the year, of the month. And so I just simply look at it as like, number of customers. That creates an output of revenue. But I'm just mostly just focused on number of customers. Then what does that do for me in terms of trucks, equipment, and hiring and marketing? And those are like the variable costs, the markings, the variable costs. The trucks and equipment are fixed expenses. But it doesn't really matter. Both of those two things I just talked about the number of customers. And then my, my costs that go into getting those have outputs, right? So inside of number of customers, I'm gonna have revenue off of here, which is the amount of trucks, equipment and hires I need. And advertising comes expenses. Then you could extrapolate further and start looking at financials. But I most of the time just focus on really simple number of customers. And how many customers do I need to have and then what trucks, equipment, expenses am I going to be purchasing? And do I have enough cash for that? That's typically all I focus on. And Then if you want more financial projections, I'm going to look at the P and L. I'm going to take what, okay, getting 100 new customers. What's that going to do to my top line revenue? Okay, well that last year I got $1,800 per recurring customer. Great. 1800 times 100.

Okay.

I'm expecting to grow $180,000 in top line revenue. Great. Last year I did. Let's just call it $360,000 in annual revenue. I'm expecting to grow another 180,000 this year. What's that going to net me? A 50% increase in revenue. So now I can go to financial projections by being 50% bump on every single line item and then ask myself is this realistic? So.

I apologize, that got you in the weeds for a quick Q and A.

Chad from Valparaiso, Indiana. One, I have very limited cash available, basically set aside for cash for taxes in preparation for next year. Is there a formula of how much cash I should keep on hand? Is it based on revenue assets, profit growth, etc. I actually Chad, I would use what I just said there as actually your way to project how much revenue, how much cash you're going to need to keep on hand. Second, my first winter I took a significant amount of debt. I could have avoided and or minimize this if I started.

Winter Services last year. This year Winter Services will at least pay for my franchisee as well as cc. Thank you Lee for talking so sense into me. I'll be starting a part time job to supplement my income and pay personal bills. Can you give some advice or direction to ensure I don't neglect the business in the process? Yeah, the number one thing is that keep your existing customer base warm, right? So one click estimate emails, catching base with them, etc. And then I would also say um.

And I don't know if you've done.

This already Chad, and if you have like just ignore me for a moment. But like if you did change your mindset and that is I'm going to mine. The name of my business is Augusta Winter Services. You have proven to yourself that maybe I'm get. I'm going to go out on and say maybe 30 or 40% of people accepted Winter Services since you didn't do it last year and we usually see around 50 to 70% except on their first like if you do it right.

From the get go, as soon as.

You let one winter go by without them having it, typically that drops down to like 30 or 40% typically or less.

And of course I'm using my AirPods.

I apologize.

One second. Three, two, one.

But I would, I would, if I was pushing you, I would say that. But it sounds like you got the job. No, but make sure you keep your customers warm. That would be my main thing. And I would just push you to think that, okay, if you can go sell 50 customers. No, let's just bring it down 30 or 40 more winter services. You all of a sudden might be making just as much doing that as the part time job. And so the question is like, okay, well let's do the math. If you can sell one winter services per day, that would mean that by mid January you'd be able to replace your part time income if you sold one per day. And then it's a matter of, okay, so will I literally not be able to eat dinner until I have one person to. Yeah, I might be a little extreme. Like I am going to sell one person per day on winter services. Do I need to knock on 200 houses? Do I knock on 300 houses? Do I need to go stand with a sign next to the road? What is it that you're willing to do? That would be my question. If you weren't trying to stay full time. If you're doing the part time thing, great, I, I would just keep your customers warm.

That's what I would say.

All right.

We are Mr. Anonymous. For the last three years we have done right around 130 worth of sprinkler repair work per year over five to six month period with one guy. We have found it difficult to find competent employees and frankly I don't know how to do a lot of the work repair work myself. So training is difficult. We have been charging hourly, which has caused some complaints of high prices when clients get their invoices leading to bad reviews. Also, scheduling jobs and giving an hourly rate means we don't know how long jobs will take. So communicating with clients about when we will be there is hard. It's hard to give up this service because the leads come in even without paid ads. Because there is no competition in my service city for the service. Do you recommend dropping the service and putting more effort towards more simple services or do you have any suggestions to minimize scheduling and training issues?

I think you know my answer on this one. It has dropped the service. I don't know who this is, so I can't, I can't distinguish what $130,000 of your revenue is going to do to your top line. Like if you're doing above.

$500,000. I'm pretty confident in saying that you should cut the sprinkler repair. If you're doing 250,000, you're going to have to wean yourself off of it by saying, like, okay, I'm only going to do these certain types of repairs that are simpler. I'm not going to be doing, like, valve replacements or these other things.

Like, I'm only going to do heads and pipes and maybe like the controllers, for example, or like checks in terms like blowing out the sprinklers and starting them at the beginning of the year and doing zoning stuff. So if you're doing. I'll just give you a really solid answer. If you're doing over 500,000 annual revenue, I would cut the service because I really do believe you'll be able to replace 130,000. Just focusing your time and energy on that and taking out you as the bottleneck of the business has a whole lot of downstream effects that you're not even thinking about. If you're doing under 500,000 annual revenue, I would slowly wean yourself off of it. Because taking too much of a hit in revenue means you're gonna have ineff. Inefficient assets like trucks just sitting around. But you do not want a service that only you can do. It is extremely. And furthermore, it sounds like you can't even do it. Like, this is a very scary place to be. This is what I did with artificial turf, and it cost me dearly. Kevin from Bloomingdale, you mentioned it would be good to have one month's revenue in the bank. See, my revenue is third. So let me clarify. That is, if you are in profit mode.

Say, my revenue is 30k. Most of my expenses are due between the 15th and 22nd of each month. 50 to 60% of my revenue also hits in my account on the 15th of each month. At what point of the month should I have 30k in my account? It's more of a generalization. Like, I'm guessing you're probably floating between 20 and 40. Right. 30,000 is like anytime you're below that, I would just say that you are at risk. From a cash perspective, when we look at the 4L framework, if your liquidity, I personally define that as less than one month's worth of revenue inside of the bank, does that mean that you can run the business at a risk for a long time?

Yes.

Especially when you're growth mode, you won't have a month's worth of revenue in the bank because your money is better spent on the business than just simply padding your wallet in terms of capital on hand. And and I'll be honest, like until literally like a couple years ago, I wouldn't have that much money in my most of my bank account because I was just like full out growth mode. Now with the amount of like especially liability that I have, I have to make sure I have more cash in hand. But it's not a form of me wanting that. Vlad from Winter Garden I Posted on the P4B chat a few days ago and no response. Last year Yes, I apologize. Here's a little secret. I am the person answering all the chats for P4P. Please don't tell that to anyone but it's just a matter of like it's so few and far between that I'll eventually give it over to just part of the P4P department at command or something. But they're very busy too and I don't want to bother them with people that are not inside of Augusta because people not inside of Augusta seem to figure out how to use systems very strangely. Sometimes a manual adjustment for a payroll bonus says guaranteed in bonus reports. Yet when a report is run the money marked as guaranteed is in the formula plus day refund. This can equal out is less than guaranteed amount. See attached for this reference I needed the $136 to be payroll bonus as a guaranteed bonus for the pay period. The payroll bonus total is less than 136 marked as guaranteed payroll bonus. Okay, I will look at this. Vlad, I'm assuming you sent this into the chat. I'll look at this because if something is marked as payroll bonus.

Then it will be inside it. The only thing that I would say is if.

If you if your timing on it is is like you're when you're running the report. So I'll take a look at this individually and I'll get back to you. Vlad, if you put in the chat.

Mr. No Name Mr. Anonymous what is the best guess when the waiting list will be complete? I'm trying to determine if I should set up multi step programs or wait for the multi or wait for the waiting list. We typically start spraying around March 1st. I have about 300 spraying clients. Yeah, I don't know who this is but I have a short list of which owners in Augusta are going to be affected by spraying stuff and I'm confident by March 1st we will have it. Knowing this date I will make sure that we at least have a week before that. If you are trying to set it up and literally switch into it. So I'm pretty confident that packages. It's there, it's there. We have people doing chemical spring but no one above like a thousand customers doing spring. I would say I think you'd be fine but I wanted to try to accommodate. I know if you're used to the waiting list, you're used to multi step programs. So I'm pretty confident by in February we would have this and if it's like mid February and I know it's not going to be done, I'll let you know. But I'm pretty confident by March 1st.

That that part will be done.

It's literally the next like feature we're working on right now though for December, working on mostly bugs and we're working on feature refinement of sequence automations and job costing.

This is from Ryan or sorry Nick from Napeen. Hey Mike. One of my main guys, Ryan approached me asking for a salary since he doesn't think he makes enough money for the year. He makes a lot per hour on P4P but wants a more consistent income for the year. Half the year for us is still removal which drastically reduces their pay. He would be a good GM of a second location if we were open to one, but I am not in a cash position to properly open a second location this year. I want to give him more responsibility but I'm trying to figure out where to fit him in. Here's the structure I came up with. Andrew runs full big landscape jobs so I am not distracted by these projects including sales and ops. We work 4 tens and he would do sales for projects on Friday myself. Sales for lawn care, smaller projects and overseeing general operations. Ryan operations for lawn care, smaller projects. Pretty much like a working gm but I would be doing a lot of the same sales for him. What do you think of the structure and how would you structure Ryan's compensation if you were doing something like this? P.S. i need to separate sales and ops this year. Regardless. It's starting to be a bit much to handle myself. As long as you're going to do over a million in revenue, like I just get really, really hesitant with that many like top heavy people in just essentially sales and operations. Three people in just sales and operations and then like saying command center is kind of your admin, you need to be doing over a million which are pretty close. So assuming you're, you're planning to grow and kind of use all your assets to their full capacity, I'd give you the green light on this I would be careful with salary. I am not a huge fan of salary.

Like it's not a matter.

Oh snap.

Why did my camera get unplugged?

Sorry guys, I did not. I just noticed that my camera got unplugged. I don't know why.

All right, let's see what we got here.

And we're back. Yeah, I'm not a huge fan of salary most of the time because it gives perverse incentive, especially for a hard working person. Like if they're kicking butt on PvP, I bet they're making just as much as you're going to give them on salary. And when they get to salary, they'll start figuring that out and they'll be like, oh, this is not a great situation. And now you're starting to say, okay, are you coming in on Friday? Well, you should only work Monday through Thursday. Why am I having to come on Friday now? So like, I'm not a huge fan of this situation, to be honest. I'm much more a bigger, a much bigger, bigger fan. Unless someone is the GM.

And they are in the field and they are in the office and where P4P isn't possible, I've much rather prefer hourly and then give them incentives. But if you're going to set this up because if he's asking for an et cetera, like.

I don't know, I've just never seen this work out great.

Because a lot of times they'll get into the salary and then they'll start running the math on what they were making on P4P. If they're a highest performer on P4P, they can make just as much as what they would have been on salary. And then they start running the math like, oh, sick. This is not a great situation. Now they're asking for more on salary. Now they're like, well, I want to.

Take a couple weeks off and you're going to be.

I'll be stuck with this moral dilemma of you're going to pay them 100% of their salary.

So.

I would just be careful with it. But if you're going to do it, just make sure you're going to get over the million marker. Because you're having three people that are essentially above the company and you're probably going to have eight to 10 guys. So you're starting to look at like 30% of your workforce being in some sort of level of management. Sounds like some of you, Ryan and Andrew, they're kind of in the field though, so you at least can make some sense of it, though, because they're kind of like working GMs. But I would just be careful with it.

I would just be careful because a lot of times your Highest performers on P4Pmake just as much as if they were on salary. And then they start doing the math when they're on salary and they're like, this is not a good situation. I want to go to hourly now. And then they ask for way more because they know what you're going to ask of them now. So I just be careful with it. I think that's why hourly is not a bad situation if someone's in the field and sorry, hourly is not a bad situation if they're primarily doing, like, the management side. It's. I like salary when they're doing both, because then they're doing P4P. They can't really do P4P in the field. And then in the office, like they're doing hiring, all this other stuff. Then salary makes sense to me, but I don't. I'm not a huge fan of salary. I want it to be when they work 80 hours, they get tons of overtime because, like, the company needs them and they're like, incentivized to be there, be there late. They're getting time and a half. I. I like that.

But you really have to do salary if you're doing a working gym because it's back and forth, back and forth. And it's going to be too hard.

For them to try to do P.

For P and all the rest of it.

That's all I got for the day, everyone. I have to head to Bellingham Shop. I'm going to be two minutes late. See you guys, and have a.