The Service Industry is About to Get WIPED OUT!

Hey everyone, it's Mike Andes. Today we are doing another live show. We're doing a call in show, so feel free to call the number below. But before we do, I want to talk about the recession that I believe we are in slash going into. And I've talked about this literally for seven, eight months now. But officially we're going to be in a recession, I believe in a couple weeks because theoretically what a real recession is is when you have a negative GDP or gross domestic product product, a negative number annually for two quarters in a row. So we've already had one quarter. But in a couple weeks the new GDP information is going to come out for Q2 of 2022. And I believe it's going to be negative. And if it is not negative, it's going to be slightly positive. And if it's slightly positive, I'm going to believe it's something like the inflation number, which is completely false and fabricated by our government. And if you look anywhere in our economy, economy right now, you're seeing massive holes and you are seeing it in the stock market, you are seeing it in the real estate market, you are seeing it in the amount of money that people have on in savings, you're seeing it in company earnings reports, you're seeing in massive layoffs. So the fact that if anyone in two or three weeks, whenever the negative, the print, I think it's the 29th of June, I could be wrong. When the GDP number is actually going to be given publicly, if that number is not negative, I will be shocked out of my mind and I will probably not believe it. But if it is, which I expect it to be negative, we are going to see on the frontline headline news of every single newspaper, magazine and news outlet media that we are in a recession, it's going to be all over the place and people are going to freak out. And it's literally what we talked about has happened almost exactly over the past six to eight months. And so before we get into two weeks, in two weeks when everyone's going to freak out, let me talk about a little bit why that's happening. I came across this report because what I usually spend my nights doing is looking at reports and because I'm boring and I'm going to show you some small business trends that I find pretty alarming. But before I do that, I need to take down my banner here because otherwise you cannot see it. So I am going to be doing calls right after this. So make sure that you do go ahead and call the number that was on the screen there. I'll get back to in just a second. Let's go ahead and jump into some numbers. All right, so this is small business owners in 2022. Now this is a few months old data. It's very difficult to get data that's like literally up to date. And in this type of economy, literally every few weeks counts. And so I hope you can see what I'm trying to show you here. And that is just these numbers on this graph. All right, so first of all, small business owners in 2022. Small. Some really interesting stuff here. First off, mostly male, mostly white. And it's very surprising, like there's twice as many business owners that are Republican, 40% versus almost 20% for Democrat. But also knows that a third of people are unaffiliated. So a third of business owners, like, forget this. Either one's going to get me in trouble and I'm not going to take care of me. So forget them. You got age range here, some information here. Happiness level. All right, so their level of happiness. Okay, why they got what their motivation was to get started in small business ownership, 61% were dissatisfied with corporate America. I promise you that will change inside of a recession when all of a sudden job security becomes very, very, very important. So I'm just showing you these numbers. All right, this one's really, really crazy. Look at this. 65.3% of businesses are currently profitable. Now this is three months ago. In my opinion, this number is probably more on 50% as of just being a few months old. Because the past few months have been the. I've seen a massive ramp of just how intense and acute the economic issues inside of our country are. And they're being hidden by data that is months old. So even if you look at unemployment numbers from months ago, if you look at.

A lot of different indicators from the economy, even a few months difference is massive. So when we look about just a few months ago, 65 of businesses are currently profitable. What that means to me, what if you can read the Inverse of that, 35% of businesses are reportedly. These are the ones that actually are willing to report that they are unprofitable. So this is, this to me says, look, more than one in three small business owners are not breaking even, they are losing money. It'd be literally like saying, can you imagine saying having a stat said one third of employees show up to work every single day and pay their boss to go to work? That's exactly what this profession of small business ownership is more than A third of small business owners as of January 2022 were literally losing money to stay in business. They're unprofitable. I have no joy in these numbers, by the way, but I would, I would imagine this number is more on 50%. As we head into a economic contraction and a recession, that number will go below 50%, which means the majority of small business owners will actually lose money in 2022. And in 2023, I believe we'll have a record number of closed small businesses. Small business since 2007, 2008 and 2009, basically the last recession. We haven't had a recession for a very long time. And because we've had no recession for so many years, I feel we're gonna have even a more intense withdraw and collapse of the small business market. So can be very, very interesting. All right, let's check out the next graph here. Let's check this out. The great resignation. How difficult was hiring this past year? So this is looking back into 2021, and if you look at the chart here, more than 70% of people said it was difficult. So very difficult and somewhat difficult. Those combined. More than 70% said it was difficult to hire people in the past year. Again, this is 2021. I would imagine this number is probably more like 90 to 95% in 2022. All right, so these are just some really interesting things. What changes are you implementing in terms of hiring? Trying to increase compensation, improving retention, expanding recruitment, increasing benefits, hiring bonuses, expanding programs. These are things that people are doing. Most essential skills for employees. There's, there's a whole bunch in there in terms of communication, cause of difficulty filling these positions, low number of applicants, or lack of interest in your organization. Literally 50% of small businesses are saying that they're not getting enough applicants because people are just not interested in working for them. And then 30% are saying competition from employers. Oh, let me pull this up for you. Let me pull this up. Let's do jobs data usa. Look at this.

Check this out.

Okay, I, I pulled this up the past few months. Let me go ahead. And I want to pull up. Let's see here, Let me see. Here we go. This one, this one's pretty raw. So I'm not going to actually show you this in super detail because this is like a very boring way of showing the information. But all, all of that say, if you go through the BLS most recent update, the Bureau of Labor Statistics, it's going to tell you that they say 3.6% unemployment. Fantastic. And unemployment and non farm payroll, which means people who don't work for farms rose by 390,000 in May. All very positive. But if you actually dig into this report, what you're going to find is that small businesses lost jobs in the month of May. Okay? You're going to look at every single sector. You know, leisure and hospitality, up 84,000 jobs. Let's go. Food service and drinking places, up 46 jobs. Let's go. You, you can literally go through every single.

Industry and see an increase in the number of jobs even in, in, what was it, construction? 36,000 jobs. Let's go. All right, 17,000 for specialty trade contractors like lawn care, landscapers, et cetera. You can just go through this and see all this positive data. All right? And then if you actually look at where the jobs were going and you actually break down what size of company these jobs were going towards. And the majority, not the majority, every single one of these job increases went to big companies with 500 plus employees. And in fact, there was a negative 96,000 jobs added in May of 2022. So what we are seeing right now is a massive shift away from small business and towards large companies. And then when you look at those large companies, because the first businesses that get impacted in a recession are small businesses, then when you start seeing big businesses start really starting to, you know, raise the red flags, they're doing a bunch of layoffs and they're starting to project in the future for lower sales. Their 2020 fiscal reports, trust me, we are going into a recession, all right? And it just becomes more and more clear. And until it's like, it's like slowly turning up the heat until finally everyone in a couple weeks are like, we're in recession. Oh my goodness. Oh my word. It's like, look, this is should have been something we've been planning for years ago. This should mean. I talked about this yesterday. I made a post on, on YouTube, Facebook and Instagram about, basically I was imploring people to start focusing on recurring work. And I'm going to get into that in just a second. Last chart, I want to go over the effects of the pandemic. All right, so do you. Did. Do you expect your business to survive through the pandemic? 85% said yes. Guarantee. Less than 85% survived. 20, 20, 2021 and 2022. All right, how confident are you in small business as pandemic matures? Check this out. 6.5%. A small business owners are very confident in their small business as the pandemic matures. It's incredible, incredible information. All right. And.

Unfortunately, as optimistic as I like to be, it is not going to get any better. And for everyone that has been saying for the past eight months that I am trying to make catchy thumbnails in order to get people to be able to get riled up about the economy. And then you go all the way back to October of last year when I sold half of my stock portfolio, which was over $500,000 worth of stock. And I said, look, I do not see a good 2020 on the horizon and we're preparing our businesses for recession. Months ago I told my managers we're going to get all of our businesses ready for margin compression, the lowest margins we've seen. And we're going to get ready for a two to three year recession. I don't think it's going to take three years. I think it's going to be more like six to 12 months of really, really acute impact on the economy. But yesterday I made a post about the importance of recurring work and recurring revenue in your small business, especially service based businesses. Home improvement, landscaping, lawn care contractors, et cetera. And I literally begged people to start focusing on getting recurring work. All right, I'm gonna make a video about this later this week. But Keith Kalfus, a prominent YouTuber, he made a video this past week about how he raises prices. And there's nothing against Keith, by the way. This is just the economy. It's not his fault. I'm just using him as an example. Cause he's public about his information and data, which most people aren't because they just hide behind last year's numbers. And so he was honest enough to say, hey, Look, I got 300 calls in my business, 300 leads. I weed out 90% of those. So I qualify it down to 10%, which is 30. Okay. And in the past, out of those 30, I would have gotten 15 accepted jobs or about 50%. 52%, he said of close ratio on his projects. And he does landscaping and project based work. He doesn't do recurring, he doesn't do mowing or anything like that. However, he does do. Sorry, take that back. He does a little bit of recurring in terms of.

Projects, in terms of landscape, recurring maintenance. So he, I would assume, trims the bushes, pulls the weeds and maintains a customer's landscaping. So he raised prices because of all of the inflation that's happened over the past several months. And he raised his prices and on his recurring jobs, he lost just a few percent. I think it was like less than 10% of his customers he lost because he raised his prices by 20%. He raised his prices to new customers for new projects. And literally his close ratio went from 50% down to 10%. So instead of closing 15 out of those 30 jobs, he closed three out of those 30 jobs and had a 10% close ratio. And so this is the absolute epitome of what happens during a recession. And this is what I've been talking about for the past three to four years, encouraging everybody inside of Augusta Nation and everyone on this channel to get ready for recession. Because during a recess, it comes very, very quickly. And everyone that has been saying, oh, you're calling crying wolf and everything is great and the housing economy, my market is doing fantastic. Just wait, just wait a couple more months. All right? And I've been very consistent about saying it's going to come, the recession. I've been more consistent in the past year of telling you it's going to happen in 2022 and showing you by the, the financial moves I'm making, preparing my businesses, selling off my investment portfolio to get ready for this. And now it's going to happen. It is going to happen. And so the reason recurring work, if you look at what Keith talked about, look, 90% retention on his recurring jobs that he raised prices on that he can now be profitable on and 80% less jobs accepted on new work. So from going from 50% close ratio or 15 jobs accepted down to 3 jobs accepted, that's an 80% decrease in your close ratio on new work. This proves two things. I made a video last week about raising prices on existing customers versus raising prices on new customers. And the stickiness of your product is coming into play when you raise prices on, on existing customers. And so a lot of you, like, they thought that video is horrible. That's so wrong that you would raise prices on existing customers but not new customers. No. You have to realize the reason your product is sticky and the reason that you should raise prices on existing customers over new customers is because customers that are, are existing. You've already proven to them your worth. You've already proven your value to them, raising prices to them. The reason they're willing to stay with you is because the alternative to not going with you is going and finding another contractor and going through that whole process again. Whereas if you're raising prices to a new customer, somebody you have not done service with, they don't know if you're good, they don't trust you, they don't have they haven't built up that relationship with you. Guess what, they're going to be more inclined to leave. They're going to be more inclined to be part of that 80% that say, you know what, let's go try other, get some other bids and go with the cheaper option. And so this proves two things. One, recurring work is more sticky, and number two, it is going to stick around longer during a recession because if you raise your prices and you lose 80% of your projects.

What'S going to happen is inflation continues to ramp up over the next 12 months.

So I've talked about recurring work for a long time and a lot of people laughed at me because they said there's no money in mowing. And so, you know, I don't really talk a lot about gloating back at the people who say stuff, but this is the time and for everyone that's still saying that, well, my market, I still, I'm booked out six months with project. That's fantastic. The, eventually the real estate market's going to catch up. What you're seeing in the stock market and you've seen, you know, bull, bull, bulls, bull market for years and years and years, and all of a sudden we have this massive downturn in every single stock exchange and is in bear territory and down 20 or more. The NASDAQ's over 35 down. Just wait till that hits the, the housing market. And everyone's like, oh, well, you know, there's just not enough supply of houses that are for sale. So the housing market will never crash. I don't think it's going to crash. I think we're going to have a 10 to 15% correction. But for everyone that's purchased in the past four or five months, they're going to be upside down on their mortgage. And yes, they have better credit now than 2007, 2008. And that's what's going to keep us from a crash in the real estate market is the fact that everyone's much more qualified buyers. However, when you're 15, 20% underwater on your mortgage, you're more likely to go and put it for, go through foreclosure. We hadn't seen any foreclosures because everyone's market, everyone's values are going through the roof. But guess what? Now with interest rates going up, people cannot afford those houses. And you are going to see the cost and the value of these properties start to plunge. Right? And so I've said this for a long time, it's just starting to happen. Like, oh, like I'm starting to notice more for sale signs on these properties. I'm starting to see more for sale signs on, you know, taking longer to sell these houses. Yeah, things are not flying off the shelves like they were just a few months ago because now interest rates are 6 and 7% on a 30 year mortgage instead of 2 and 3% which is, which basically means the cost of that mortgage is literally 30 to 40% higher than it was just four to five months ago.

So.

It'S going to be a crazy time. And I think that as small business owners we have to buckle down on creating better systems. We have to make sure that we are able to retrain, retain talent. And most importantly, the thing you can start doing right now, if you're listening to this, is focus on some sort of recurring work. I beg of you, I beg of you. The reason everyone is in existence today, I should say 90% of people that are in business today, small business owners in project based work only are saying how great it is and all the money is made in projects is because Most of them, 90% of them were not in business in 2005, 2004, 2003, when everything was fantastic and the market was going amazing. The reason you don't hear about the people, because most of them went out of business and through three years of 2007, 2008, 2009, they couldn't, cannot stay in business. Get recurring jobs, be more sticky, you'll raise prices more and you're going to be able get to this recession. Discretionary income when it comes to project based work is going to sink through the ground.

Over the past year, the very first Augusta lawn care location in Bellingham, Washington, um, last year we did about 1.5, $1.6 million in revenue, did over 20% profit margin and I took out over $300,000 in distributions. After taking a salary this year that will probably be half of that. Why? Because we raised prices in June instead of like we should have done and that was in February. We did not do it because we wanted to retain all of our customers. And we were thinking more about along the lines of trying to retain and not raise prices during when the Ukraine crisis happened, the war started and all of a sudden gas prices spiked. We didn't want to do it right at that moment because we didn't want to have a double shock and lose customers. So we raised in June. So it really hurt our profit margins in the first half of the year. This year I expect to take less than half, maybe Half, maybe a little more than half of those. That number of distributions from that one location. Why? Because we had to add health benefits, we had to increase wages and cut hours to retain employees. We spent way more money than normal on attracting talent and all of that, while literally a doubling of our fuel prices. And if anyone wants to ever wonder why everything is going up in price, every single thing, like literally stop whatever you're doing right now, look around your room and ask yourself, is there anything in this room that was made without the use of oil?

News alert. Nothing. Absolutely nothing in your room was made without some form of the production, some form along the supply chain being used with oil. Like, oh no, this water bottle is eco friendly. No, no, this was made with a hydro press or some sort of a press machine. And this plastic probably used some sort of a mold which that metal was fused using oil. And this rubber was no doubt is a petroleum based product. Oh, and all of the stitching was made in a factory that was ran off of oil. So when the price of oil doubles and triples like it has over the past six months, everything is going to go up in price. And if everything goes up in price, guess what? Wages are going to go up. The cost of everything, including parts, supplies, grass seed, fertilizer, everything is going to go up. And if you think it's going to slow down in the next few months, wake up. Because we are not going to be able to solve the problem. We're not going to somehow get the Keystone pipeline set up in the next six months. It's not happening. And then the fact that our oil companies do not want to produce in the United States because the way they've been treated from the government the past couple decades, they're not going to. And by the time they actually invest hundreds of million dollars in infrastructure in two years, you're gonna have a new administration. It could be completely different rules and then four years later, completely different rules. So why in the world would they want to create refineries and spend hundreds of millions of dollars investing in infrastructure in the United States? They're not going to. So we're just going to see an increase in prices going up. Do we think that the war in Ukraine is going to end like tomorrow? No, it's not going to. It's. And by the way, we have sanctions on Russia, which is the third largest oil producer in the world. And they're not hurting because guess what, they're just going to go sell their oil to Brazil, China and a whole bunch of other people that are very happy to take their oil. So the fact of the matter is oil being hot as high as right now, and like I said when it first happened in March, every single time that a barrel of oil has gone over $100 per barrel, we have gone into a recession. So that was just another indicator that hey, we're going to recession. After we went at 100. Oh, by the way, it's like 150 right now, at least 130, but it's getting very, very high. It's crazy. So I'm on a little bit of rant here about oil, about inflation, about everything going up in value in costs and margin compression. It's going to be the fittest of the fit will only survive the next few years. I've been very trying to encourage every industry, whether you're in lawn care, landscaping or roofing or fencing, every single industry. You can ask yourself, how can I make recurring revenue a bigger part of the chunk of the revenue that comes to me? So I'll talk about that first location that we, I asked you had $300,000 in distributions plus a salary. This year we'll have a salary plus probably 150, I'm guessing, in distributions, like literally half. Why? Because we took and we got very focused on one thing, recurring work. We want work that is simple and that we can get mostly recurring work from. So we have changed from about 45% of our work being recurring to now 75 plus percent of the work being property cleanups and mowing. And that's been a hit on revenue. And so that's why we have the margin compression is because if you have fixed expenses and you go above that and you have a very profitable business, you're gonna have a whole bunch of profit like we did last year. If you bring down revenue but you still have those fixed expenses, you're gonna have less margin. But I can guarantee you in 2023, the business will be stronger than ever. Because we've set it up this year to take basically no projects on besides simple services and mowing. And those are the companies that are going to win in 2023. They're the ones that are going to survive, be able to hire employees. Guess what? Unemployment is going to go back above 4%. It's going to go back above 5%. I believe it'll go above 6%, possibly even 7% as we go into recession. How, how do I know that? Because what we're going to see is we're going to see big businesses start to lay Massive amount of people off. Tesla just laid off 10% of its workforce. Look at Walmart. Target all these companies, what are they doing? They're cutting workers. And so when the big companies start to do that, instead of just the small businesses, unemployment's going to go up. And when unemployment goes up, guess who's going to take the money? The companies that can still grow and expand during that time. The companies that are going to be growing, expanding are the ones that are doing recurring services and not the ones that are based upon discretionary work, that are project one time one off jobs. And when recession happens and project and real estate values start to plummet, people do not want to spend money on home improvement. They want to spend money on home preservation and preserving the asset. Not growing or building or making the value of that asset go up. And everyone laughs at me because they don't remember or they were not around in 2007, 2008 and 2009. And guess what? I wasn't either. I was getting started in 2008. I was just getting started mowing lawns. But I made sure as I went to my mba, as I've started business, that I talk to a lot of people that went through that era and I read a lot of books and I've read a lot of articles about exactly what led up to the 2008 crisis and what people had to do to get through it and what businesses survived and which ones went out of business. And I've talked about this for years. So focus on recurring work. Focus on increasing prices on that recurring work because it is a more sticky service than one time jobs. It's going to be more recession proof. Focus on being able to get your business in a financial position over the next six to 12 months. As unemployment goes back up, you're able to take advantage of it and hire people for pennies on the dol. When all of your competition is going out, the people who are going to feel this the worst are number one, people who are focused only on projects. I don't think you need to focus just on recurring services. You don't even need 75% of your revenue to be on recurring services like we do. What you do need is at least 20 to 30% of your revenue coming from recurring services. And you're like man, well I don't do mowing and I don't want to be in landscaping industry. Every single industry. You can create some sort of recurring revenue and warranty or service based upon this. The one time jobs you install, if you do Roofing, guess what you can do. You can sell annual cleanings and checkups on the roof. You can sell Gunter cleaning. You can sell the ability to be able to get off, you know, pests off of the roof. Like, there's a ton of stuff you can do. You just got to get creative. You start thinking outside the box, focus on those things and you'll stay in business to the point where when things are on pennies on the dollar and we're not, it's not impossible to find employees. Those will be the companies that win. The people who are going to find this feel that's the worst, like I said, the ones that project based only and the one that have between three and 15 employees, the ones that are above that, are you going to be financially able to get through this? The ones below that are going to be able to also be able to financially get through this because they are the chuck in the trucks. I say a statement. I was wrong. On my last video. I said, chuck in the trucks will go out of business. When I, when I said that, I did not mean solo operators. What I meant was the person that had no systems, was doing things under the table, would just give a call or a text from a customer, go do the work. Those people will go out of business. The ones that won't go to business and will stick around and will actually thrive and leave more of them is people just doing work on the side on the weekends by themselves. They'll be fine, but they'll also get a job once the economy recovers. What I'm most worried about is people between 3 and 15 employees because they're the ones that are going to have a very, have had a very difficult time this year hiring. Their margins have gotten squeezed with inflation and with wage inflation. And when people talk about, oh, it's 8% inflation. No, it's not. It's like 20%. Look at the numbers. Strip out some of the things that move really slow, like real estate. Look at rent. Rents are going to continue to go up like crazy. I did this in October when I sold off, have my stock portfolio. And I said, hey, I'm buying real estate. And here's why. I said, I don't think the value of these properties are going to go up, but rent is going to continue to go up like crazy. Crazy. It's happening right now. The rents in, in buildings that I own are now more than double what they were less than two years ago. And some of them are almost double what they were six to eight months ago. And so this is going to continue when inflation is not going away. Sorry. And the cost of fuel not going down. Sorry. The importance of recurring work is not going away. Sorry. And if this is an extended downturn, which I don't believe it is, honestly, I think it's gonna be six to 12 months. But if it does, that is when people will actually start to close businesses. And I was looking at some other data. It was something along the lines of 60% of small businesses. Let me think about this for a second. It was either 60% of small businesses or 60% of the jobs that were employed by small businesses during the recession of 2007 through 2009, 60% of the jobs were gone, vanished, disappeared for small businesses. And so if you look at the past few months of jobs reports and you see a literally negative growth in the amount of jobs that small businesses are having, I get very, very concerned. All right, that's enough of a rant. We're gonna go ahead and have the first caller come in from 612. Sorry, you've been holding for a very long time. 6, 12 from. It says Minnesota. You're on the show. Go ahead.

Hey, what's going on, Mike? How you doing?

Good, good. How you doing? Sorry for the long wait.

Doing pretty good. Yeah. No, you're good, you're good. Hey, I was calling you made a video a little while back about.

Like, automatic mowers, like robot mowers and stuff like that. And I was just calling to see what you think about. About that and see if that's going to be a good hedge against the labor shortage, you know, going forward. I know robot mowers are in early stages. I just kind of want to get your take and see if either it's going to be a good hedge against labor or if it's going to really, like, affect or wipe out the lawn care industry.

So I definitely don't believe it's going to wipe out the lawn care industry. I made a few videos on why not. But there's two major things that have to happen for. Well, let's just focus on one. The one major thing that has to happen for these robots to actually take effect in the mowing industry is they have to come down in cost. And what's happened over the past 12 months with inflation and the issues with supply chains, the cost of these mowers have almost doubled. And if you can get your hands on one, and the production, manufacturing, and transportation of all of their. Their supply chains has been wrecked because a lot of them are made in China. And so you cannot pay 3,4000 dollars for a robot mower and put it on every single lawn. You just cannot do that. Now if that price comes down to 3, $400, or you can lease it for 20 or $30 a month, that starts becoming really interesting. But what's actually happened, in my opinion, over the past 12 months has actually hurt the evolution of the robots. Because the number one thing we're all looking at is the cost. And so If I have 500 lawns like we do locally, 500 recurring mowing customers, in order for me to get a robot, every single one, if I have to dump hundreds and hundreds of thousands of dollars in capital expenditures, and just to recoup that money is going to take a few years. And in a few years, that technology is going to be completely antiquated. That's probably not going to be a very good use of my money. And so I actually feel like robots have taken a step backwards in the past year and part in part due to the fact that all these manufacturers are so backed up that they're not spending money on R and D research and development, they're spending on just trying to get things out the door. And so just my humble opinion is that it's actually slowed down the evolution of the robots taking over. But I would not be afraid of the robots, because if they can take over mowing, I'd be thrilled out of my mind. So we can focus on more higher margin tasks like edging, blowing things off, mulch insulation, trimming bushes. That's not going away anytime soon. A robot's being able to take those things over.

Gotcha. And you think the same thing goes for homeowners, you know, like, oh, instead of paying, you know, 6, 700 a year for lawn care, I'll just spend, you know, a thousand bucks and, you know, pay, pay it off within a year, you know, basically limiting the need to even hire lawn care worker.

Well, this is the thing, right? So let's, let's break that down. So first of all, it's not a thousand for, for most, most homeowners, unless you're talking about very, very small lawn. So let's talk about a very, very small lawn. You're gonna still need to pay about fifteen hundred dollars to buy one of these machines. You're going to probably have to put the line, install the line on the edges. So with taxes, installation, the whole line usually look at least 1500-2000 dollars. And even if you do that, you still got to do what Edge, blow things off, pull weeds, trim bushes, install mulch. There's like mowing is just one very small component of taking care of a landscape. And so even if they did that, like, if, like the best thing in the world is tomorrow steel comes out, like we're going to give away these things for free. I'd be thrilled in my mind because every single time I saw an orange little robot running around on a, On a mo. On a property, I would be going directly at a house, knocking on the door and saying, trying to upsell them on the things that that mower cannot do. Because if they're going to get the mower and they're going to get a robot on their lawn, it also means that they, they do not want to pull weeds, edge the lawn, blow things off. So I, I think robots for mowing would be the best thing in the world for professional lawn care and mowing professionals because we'd be able to focus on our limited amount of supply of labor towards having the greatest bang for our buck in terms of profit on other services that that robot will never be able to do. So I'd be thrilled out of my mind if tomorrow robots could take over and we could focus on more higher margin services because the limit to almost, almost every single. Like, I only speak for Augusta Long here because I know them the best. Like all of our franchisees, 95% of them, their growth has been stunted by one thing and one thing alone. Not finding more leads, not getting more customers, not getting more mowing customers, not because of the robots labor. So if the robots come along and fix just a piece of that labor equation on our lowest margin service, which is mowing, I would be thrilled out of my mind.

Make sense?

Gotcha.

Yeah, no, that, that makes sense. Yeah. Like I said, I saw some videos. I didn't think it was going to. I just wanted to get your, your take on that and stuff like that. So I appreciate you taking my call and definitely appreciate all that you do for the community. You're definitely a lifesaver, bro.

Cool. Thanks, brother. You have a great day.

Yeah, we'll see you. Bye.

Cool. All right, feel free. If you want to call me, the number here is.

It. There it is. 3617-333-3333. Give that number a call. And I would be very happy to talk to you about the recession, about all sorts of things. I have a whole bunch of questions. I know they're popping it in. On the comment side, I would like to be able to make this more of A call in show for today. We'll take a couple more callers and then we'll call it a day. But let me just kind of filter through. I know a lot of people are making comments, so let's see here. Mike, do you think that, think through that, through that. During the recession, companies that survive will be able to grow. I'm in my first year and do about $6,000 in monthly growing revenue, but want to double that next year. Honestly, when you're at $6,000 a month in revenue, you're so low still, the recession is not going to have a big impact on you. You're going to actually do very, very well. Because when companies go out of business, which is going to be that middle sized company, three to 15 employees, they're the ones that are going to be struggling the hardest. In my opinion. You are going to do just fine. You're going to, you're going to be able to pick up those customers no problem. You're probably going to be cheaper than them. You and you're gonna be that cheaper option that homeowners will look for in times of recession. Who's really going to take off? Who will create the Companies of the 2000-30s that are massive in their markets and completely dominate will be the ones that do continue to slowly grow, get employees, focus on recurring work, focus on systems and just get by basically at the expense of their profit margins. But do continue to grow throughout the next couple of years. You can absolutely grow during recessionary. You got to build your business to be able to be efficient enough to be able to deal with margin compression. You have to deal with wage inflation. If you deal with the cost of all this fuel going up. And if you can just stay in business and keep taking market share from everyone else that's losing customers, like just wait for every single Facebook group of landscapers, lawn care people as well as every other home improvement industry start complaining about customers not accepting close ratio going down. No one's wanting to accept the phone's not ringing. Just wait for that to happen. Because for the past 15 years we've been used to the phone ringing off the hook. We don't have enough. We have so much work coming in like it. You have to realize that projects like Discretionary is going to disappear.

Yesterday the location I just mentioned had 71 estimates for recurring work and literally none of those estimates. I shouldn't say none, probably two or three of them were, but like I'd say 95% of them were for recurring work and property cleanups. They were not for install a patio, install a wall, all the rest of it. It is for services that must be done, not what can be done. And I'm just man.

Like, it's going to happen in six months. We're gonna get, I'm get a ton of calls from people that are going out of business. They've burned through their pipeline of projects. They don't have any recurring work. And now they're wondering, should I be laying people off right now and letting them go, discounting my services and just basically giving things away to keep my crew busy. That's what's going to happen. Look at the number of, of look this up on Redfin. You go to Redfin data center and see how many houses are on the market in your local area that have been on the market and lowered their price. That number has skyrocketed in the past month and a month and a half because interest rates are going up and the affordability house is going so low that people have to drop the price in order to sell their property. And when you just cannot realize, you think that if you think that oil has a correlation with inflation, like I just mentioned, like everything in your house is made out of oil, was produced with oil. Batteries, phones, rubber, metal, every single thing was made with oil. Correlation between inflation and oil is almost direct. If you think that's true, you've got to realize that the housing market is directly correlated with home improvement. In the home improvement industry. Every single industry and service that offers around a house has a direct correlation to the real estate market and how well it's doing. And so we've been in boom boomtown for literally the past 12 to 14 years. And that time has come to an end. Next caller is from says Florida area code is 3, 2, 1. Welcome to the show.

Hey, what's up Mike? How you doing today?

Good, how you doing? What's your name?

Doing great. My name is Reuben.

Reuben, what's up? What's your question?

Hey man. So I work in a law maintenance company. I'm still new in the business. Been just. This is my second year on it. I'm a solo operator and so far so good a solo operator. But I feel like I've been hitting like, I don't want to say a ceiling, but somewhat of a ceiling. And I was wondering, besides mowing and all that stuff, what would be like that, that hook, I want to say besides the mowing that you will recommend for a solo operator kind of to kind of pass that feeling because I feel like Just by mowing and mowing, I want to make more money. So what would you recommend for a solo operator?

Yeah, like, I would focus on increasing the amount of revenue, the annual value of the each customer by trying to add ancillary services besides mowing. Because almost every single one of your mowing customers also has needs for weeding, bush trimming, installing mulch. You know, if you really want to go further, which I wouldn't recommend trying to scale the company, but like cleaning out gutters, pressure washing, they need all of those things. Anyone that hires someone to mow lawn.

Yeah.

Is not, it's not like they're going to hire you to mow the lawn and then go trim their bushes. Most people don't do that. If they hire you to do their lawn, they're going to hire someone to do everything around their property because it's the type of person that they are. And a lot of people are like, oh, man, like the baby boomers, like. And I believe this next 10 to 15 years, the money is going to be on the baby boomers. But here's another little news flash, and that is the millennials are the biggest part of the housing market right now in terms of buyers. They are going to be the next generation. Guess what, Millennials, we don't want to mow lawns. We don't want to work outside, we don't want to get our nails dirty. And so anyone that's willing to do something that someone else is not willing to do has great job security. And so you're going to do fantastic. I think I would focus if I was you. If you're, if your goal is making more money, realizing that your mowing customers have other needs and try to focus on marketing to them. You've already developed the trust with them. And the same way we talked about, like recurring work being sticky, it also, you're going to have a higher close ratio trying to upsell compared to cross sell and trying to get more customers. Right. So I'd focus on upselling your existing customers on bed maintenance. So if you're going to come and mow every week, try to sell them an extra $20 a week to pull the weeds, an extra $50 a month to trim the bushes, whatever it is. If you're in Florida, you literally have to trim bushes like every couple of weeks so you can really stack on those recurring services. Because again, any homeowner that has you mow their lawn, they're not going to just like randomly wake up one day like, oh, they're Going to mow the lawn and I'm going to install the mulch. No, like, they need that service done. It's just a matter of identifying those things. Especially as a solo operator with you being on the properties, you can literally identify the issues with every single property. And what I would recommend is literally, I talk about this landscape businesscourse.com and that is having, like I say, annual, but you could literally do a monthly or quarterly inspection and have a checklist of all the services that could be done and check off the ones that they need done with a price next to it and give it to them. You're going to sell so much, you will literally take the value of a customer from $1,000 per year, which is probably what you're at right now, per customer, to literally $2,000. You'll double it just by doing a property inspection on a monthly or quarterly basis. We do it usually annually when we're at our slowest time, like during the winter, we'll take our recurring customers, let's drive by all of them, and we'll just literally try to sell them every single service that we offer, if they need it, based upon their property with a price, and then they just have to accept those. So I would really recommend on upselling and increasing the annual value of each customer. That would be my recommendation.

Awesome, man. Thank you so much. That's good advice. Can I get a second one more question, though?

Go for it.

Besides law maintenance, I'm thinking about the future and all that stuff, and I'm dipping, you know, dipping my feet into the cryptos and all that stuff, and I've created, like, YouTube channels and all that stuff. Well, besides all those things, what would you recommend as looking into the future? As a business owner, I want to invest on some other areas. What. What will you recommend besides, you know, what would you recommend as far as investment in the future?

Oh, my. Okay, so let me ask you this.

I know it's a deep question. I know so many areas and all that stuff. Real estate and all that stuff. But. Yeah, and the crypto market right now, it's kind of bearish right now, but. But, you know, I just. I'm just wanting, you know, your opinion. All that stuff.

Yep. So when this is. So when you're at the beginning, curve. I wish I had my tablet and I could do a drawing. We're at the beginning building wealth. Right. You're at the. Like, if you're. If you're building wealth over time like this, and you're at the beginning Stages as a solo operator, we're not talking about hundreds of thousands or millions of dollars that you're looking to invest. You're, we're talking about thousands. Right? And so you have to ask yourself, where can I get the most return for that money? And let's just say that tomorrow Bitcoin tripled, which would be, it'd be like it's all time high if it tripled tomorrow, going from like 18,000 to like 60,000. A doubling or tripling or quadrupling. Even tomorrow, you would probably take your $5,000 and it would become $20,000. That is not going to make a meaningful impact on the curve of your wealth. If you look at it in a, in a 20 and 30 year horizon, all right, it'll make you feel rich tomorrow, but it's not going to do anything in that long term wealth. Now take that same $5,000 and you invest into your business. You're, you're going to have something that potentially could lead to a much larger gain and maybe in five to 10 years be returning $100,000 or $200,000 in profit distributions to you as the owner. That will get you further down the curve than trying to triple the money tomorrow. And by the way, you have no control if it triples tomorrow or if it gets half tomorrow. If it goes down 90%, like many cryptocurrencies and stocks have over the past few months. I would highly recommend you focus on the thing that you have proficiency and you have a, you have a, a market.

You have an imbalance in the amount of, of skill and knowledge about the industry. Right. So what I mean by that is you, I would guess, do not have some sort of market advantage. That's what I was looking for, market advantage. When it comes to cryptocurrency, you don't know the next cryptocurrency, the technology. You're not a developer, you don't build the blockchain. And so you don't have any meaningful advantage against the market. And what I find, whether it be in business or investing or whatever it is, people fail to realize you only beat the market. You only get better returns in the market and the average and the mean, then if, if you have that information, that's why hedge funds, that is why insider trading happens, is because people have information that no one else has and that's why they beat the market. The only way you can beat the market is you have some sort of advantage. And so what I would ask you, and this is what I think every small Business owner needs to focus on is if you have experience in lawn care landscaping, if you have experience in roofing, if you expensive experience in construction and you are better than the average at that thing, that's thing you should focus on because that's where you'll get outsized returns because you have a skill that is greater than the average. As soon as you have average levels of information about cryptocurrency or stocks or real estate, as soon as you have average levels information, you have average returns. And if you want outsized returns, if you want to take that $5,000 and in 10 years it be worth $500,000, that's 100x return in five years, that's much more likely because you are taking a skill which is lawn care landscaping that you have experience in greater and far above that of a homeowner or the average person. If you graph out lawn care experience and skill on a chart, you're probably like the 95th or above percentile. You go all in on that thing. When you take the graph of knowledge about cryptocurrency and experience cryptocurrency or stock market investing or real estate, you're probably like the 5th, 10th, 15th, 20th percentile. Like in terms of the experience, how many deals you've done, landlording, experience, renovation, construction. So like, why get involved in that game until you have money created from your original pillar, your financial pillar, which is going to be your lawn care business. Then take that money when you can't get the returns that are outsized from your business. Because like, buying more trucks isn't going to help me right now. Okay, great. That's when you go focus on investing in something more passive like real estate or stocks, et cetera. But I would highly recommend you take that money and put in your business. That's where you're going to have the advantage over the market.

Copy that, man. Thank you so much for that info, man. Appreciate you for real.

You got it, brother. Take care. All right, next caller is coming from. I want to say it's Pennsylvania, but I'm not sure it is from a area code of 81 4. You're up.

Yes, sir, I was calling in. I would like to what is the best way for a lawn care business with three to seven employees not only to survive, to thrive through the recession or possibly depression? Coming?

Yeah. So do you mostly do mowing and lawn maintenance, did you say?

Yep, lawn care is our primary focus.

Okay. And you do treatments or mostly just mowing?

Mostly just mowing. We have about.

125 customers. And roughly when was the last time you said $10,000 a week in revenue?

10,000 a week. Okay, good. That's good to know. This spring you raised it this past spring on your mowing clients?

Yes, sir.

Perfect. Perfect. So what I would be doing, if I was in your shoes, I would be. I would be making sure that those margins are good. If you just raise prices. I'm assuming that you've been okay throughout the past few months, even though there is inflation, all the rest of it. Because if you raise price in the spring, you're probably good. I would make sure that your prices are increased on, on new customers as they come in, which might slow growth down a little bit. But if you have a sticky high margin recurring base of work, you're kind of set. So I would say if you're between three and seven employees, 30, 40, 50,000amonth in revenue is, you are probably in a really good spot to grow over the next year or two as you start getting. Because I'd imagine the reason you haven't grown as much is because of finding employees. And that's probably been your biggest problem the past six months. Am I right?

Yes, that is correct.

And so I would. I'm. Again, I'm kind of assuming this, but if you just raised your prices, you probably have decent margins. And so you're going to be in a good spot over the next 12 months as companies with 40 employees start downsizing, as companies that have 8, 9 employees start going back to solo. As that happens, you'll be able to pick up those employees and fill in the gaps that currently you're having. So what I would do in the meantime is spend no money on marketing. Stack cash aside. You don't have a problem with getting more work right now, so just stay your current size even. Even like the rest this year, for example, keep those margins high. Focus on not spending money, so not buying trucks, not spending money on marketing and advertising. Stack that cash, because a dollar saved right now is probably gonna be worth $3 next year in terms of purchasing power, because the cost. No, people stop advertising in a recession. So money will go farther on Facebook and YouTube ads and Google Ads and all the rest of it. It'll go three times as far when it comes to hiring. It'll go three times as far in terms of buying a truck. All of those things are going to happen during a recession. So I would focus right now on the fact that, hey, I'm going to just stack cash right now because I have a recurring Base of work. I have plenty of work and I'm struggling finding employees. Great. Focus on margins. You've raised your prices. Great. Keep that up. Don't spend any money on marketing and just focus on really stacking cash right now. Then when all this will flip and that is marketing will get cheaper, getting employees will be easier. They'll be cheaper to get. That's when you'll be able to expand. Well, everyone else is compressing and everyone else is getting smaller. Does that make sense?

Yes, sir.

Awesome, man. Best of luck. You have a great day.

Hey, thank you for all you provide your channel for the community. Great value for me and God bless.

God bless you, brother. Take care. All right, next caller is it says From Austin, Texas, 512 is the area code. You are up. Go ahead.

Hey, Mike, it's Marcus out here in Texas, actually San Antonio, Texas. So my question is how can I keep giving my clients that personal touch that, you know, the small businesses can give while growing into a larger business with multiple locations?

Yeah. So multiple locations. Are you the, are you having general managers eat those locations? Are you just having like where you park the trucks at different spots?

As honestly right now I'm still small just in my first year, but I'm trying to, you know, think ahead and what I can do now to stay ahead of that. So in the future it will probably just be like multiple trucks and then eventually, you know, moving into different cities and stuff like that. But I still want to give them that neighborhood lawn care feel for every location or every truck, you know.

Yeah. Like, first and foremost, I would say don't worry about it. This will be an a natural evolution as the business grows. And thinking about it right now, honestly, is, I don't want to say a waste of your time because I understand you're trying to just plan ahead, but it's going to happen organically. Right. The organization of the business will fall into place because as you start growing, like, oh, like I need a manager. Oh, if I'm starting a second location, I need someone to actually manage that. They're going to be a gm. Right. So you can always try to be personalized and things like that. And this is what's funny is right now you are probably as a small business, this is, this is like the standard. Right. And so I say you, I don't really, it's really just like the average, most really small companies try to act really big. And as they start growing, like, oh, like I'm getting really big, I want to pretend like I'm Small. This is why like big companies try to have this personalized feel and like they try to make it look like they personalize emails and automations and things like that. And so everyone's always trying to be what they're not. And so I'd recommend you do is just embrace who you are, right? So like right now you are small. You can have that personal touch. You can know every customer by name, you can say hello to them, you can write them a card. Like I remember my first couple years of business, I wrote every single person a Thanksgiving letter by hand, put a $5 gift card in there to our local coffee shop. Every single person by hand. Like that was like super, super high touch, right? That can't happen now. Yeah, 10,000 people in the database, it's not going to happen. And so, but just embrace you are in the moment. So in that moment when I'm small I'm like, hey, I'm going to lean into being small and being, having that personal touch. When you're big, you're going to lean into the professionalism, you're going to lean into the automations and the fact that you have a credit card on file and you have all the systems in place and you have someone to answer the phone for 80 hours a week, like that's what you'll lean into. And it's just a different demographic of individuals that will want that service. So instead of trying to be something that you are not, just lean into who you are and you'll attract the customers that value that thing. And so don't think that what people value now, which is you having a personal touch is going to be what people want. When you're a $10 million business, they're probably not going to be if that's your goal and ambition to build that big of a business. The person hiring a $10 million business is not looking for someone who's personal, they're looking for someone who gets the jobs done. Comes when they say has automations that has a card on file, can call and get a quote, can call and get someone you know basically at all office hours and not wait on the, on the voicemail. So that's what people are looking for. So just realize that embracing who you are in the business is probably the best route for success. The same way that I would say that to, you know, someone trying to make a YouTube channel or you know, become an influencer. It's like, look, just be who you are because that'll attract people. If you're trying to be Something else that you are not. It's just going to come across artificial. So don't worry about it, honestly, that's how American. Just don't worry about it. Be who you are at every stage of the business and you'll attract a different type of clientele throughout the the different life cycles of the company.

Awesome. Okay man, thank you.

Best of luck. Take care. All right, next caller is from. It says, I want to say is that Michigan or Missouri? I'm so bad at states. It's because I went to school in Canada till grade eight and so I know the provinces and capitals of Canada a whole lot better than the states. So am I. I don't know if that's Missouri or Michigan. Let me think for a second. Michigan, I don't know. But the caller is two and you are now on the show. Go ahead.

Hey Mike, I'm actually from Michigan by the way.

Sick. All right, go ahead.

So my question is how do you, how do you determine when to raise your prices like in relation to inflation? Like do you just reevaluate like every year or how does that work?

I don't think I've ever said someone not to raise prices. But ultimately what it comes down to is supply and demand. What I mean by that is if the, if the demand for your product and services is in excess to the supply and the supply typically for us is going to be labor. If you're having a hard time finding labors and you have all this pent up demand and people wanting work, really good idea to raise prices. Right. So whenever demand is in excess of supply, which for us we're selling labor, that's what we're doing. That's our supply. So whenever that is in excess, that's when you raise prices. That's why the cost of like used cars and trucks have gone up because the supply is so low. Sorry. Yeah. The supply became so suppressed by Covid that the discrepancy. Demand was so high, supply was so low, price goes up. And so what we got to realize as small business owners is how do we create that discrepancy between demand, tons of work and not enough supply. That's when you should raise prices. So like we raised prices just recently past couple of weeks at our local shop because we're like six weeks booked out and we only do simple services. So the fact that we like our 6 week booked out in June for us is crazy. Used like three or four weeks. So that massive difference between demand and supply, that's when you got to raise Prices that make sense.

Yeah, that makes sense. So you're basically just constantly watching the market and raising it based on that.

Yeah. And really judging based upon like, okay, if I'm having a really hard time finding employees, guess what I have to do to find more employees? I have to raise wages or benefits or something. In order to compensate for that, I got to raise prices. Right. And so by doing that, that would raise supply. You're always going to do one of two things. You're either going to, you can increase supply, hire more people, or you can reduce demand. That's raising prices. So if you're having this imbalance of really high demand and low supply. I wish I had chart. Sorry. If you're having really, really high demand for your products and services and really, really low supply, you can do this. You can fix the problem by doing two things. Either one, hire more people, increasing supply. And if that's not possible, like in this type of labor market, like, I just can't find people. That's when you reduce demand. And how you do that is you raise prices so your close ratio comes down. And what I've found when I talk about Keith and Keith Kalfus and what he talked about last week and stuff is I have found that the stickiness and the price sensitivity of new customers is greater than old customers and recurring services. And so that's why I really love being able to have a high demand of recurring work of. Of a whole bunch of recurring jobs because I can raise their price and them and not lose 80% of them. Right. So that makes sense. I felt like I went off a tangent. I apologize.

Yeah, that does make sense. You're not worried about, about the people that'll fall off because of a raised price? Basically, yeah.

Like, I'm a big fan of raising prices by 10% until you lose 20% of your customers. Right. And that's usually when you're, you're at your kind of profit maximization and equilibrium of not raising prices too much to, to have demand, demand consolidation, but then still being able to, you know, get to keep demand high. You can't have demand fall flat. And that's what, that's what happened to Keith. Like, he said, hey, all of a sudden, like, I have a 10 close ratio. What happened there is you raised prices too high, demand collapses, and then the only way to get demand back up in that scenario is lower price. So, yeah, I need to graph that out. That would be a really good topic.

Cool. That makes sense.

Yes, that totally makes sense. Yeah, I appreciate the help.

You got it, brother. Take care. All right, next caller comes from. It says Houston, Texas, area code 346. Go ahead.

Three, four, six. That's me, right?

Yeah, that's you.

Oh, wow. Because they're telling me about a Visa. Great, man. Thank you for everything you do. So.

Basically, I have one business, right? New Green Landscaping. Right now, I have around $5,000 every month, 30 clients, BI weekly, and some of them are weekly. I live in Houston. I just want to know what is the best thing you can do with cash during a recession? Because I've heard a lot of people say cash is king during that time. So I want to know what is the best, I guess you can say, investment to make with a hundred thousand dollars cash during that time.

A hundred thousand?

By the way, this is not my money. Yeah, 100,000. Like, this is not my money. This is my family's money. They've been saving for a while, and I guess they've been waiting for this. And I heard you say that one of the best times to make wealth is during a recession when everybody is panicking. So this is like our time, you know, to make the best of it. And I figured that you are one of the best people that I could tell this too, since, I mean, you're. You're a legend, man. So please help us out. Quick, please.

So instead, instead of just giving, giving you a broad answer, let me dig a little bit deeper. So if you have, you have a hundred thousand dollars, it's your family's money. And so let me ask some questions so I can give you a better answer than just saying what I thought right away. So do you own a house right now?

No. I guess that's the thing. We live in a trailer park. The trailer is ours. We're only renting the trailer area or where the trailer is sitting. That's the only place.

Cool. That's great. So what's really cool about trailer parks during a recession is the value of the trailers actually usually go up because people are trying to downsize and move into them. Rent goes up and because people can't afford the housing. And typically trailer parks do really well during a recession. So this would be my personalized advice because this is not for everyone. But based upon your scenario, having $100,000 of your family's money, you do not want to put at risk. All right. But you also want to build something that is going to give more cash flow down the road. This is what I would recommend. If we were sitting down together, I would probably say. And thank you for being vulnerable enough to give all the information, because that's how I get come up with a better answer. Like this would be my personal recommendation. And that is put 50,000 of that aside for the business.