The Truth About 1099s vs. W-2s (Coaching Call w/ Mike Andes)

Feel free to fill me in on anything. I know you're kind of thinking about the franchising route, so however I can help, just fire away.

So we opened a Portland location and we have a one full time salesperson there right now. We're in process of hiring a second person, second salesperson because we have enough leads. So right now what happened here? We have 10 crews here. So we would send our crews there because we didn't have enough work for 10 crews here. But now we're busy enough that all our 10 crews are working here. And then we're working. We're opening capacity to people from Oregon. For contractors like here, we only work with employees. But I'm thinking, hey, I don't want to buy more vans because what if there's slow season? I have to pay for financing, I have to pay for insurance. I'm like, what if they use their own van, their own tools and their own workers? We'll just write them a check. And so I don't know, we're going to try it out. We already found a person, we already found a contractor. We're thinking, you know, if everything goes good, we're gonna have two, three crews working full time spring and, and summer.

Cool. Good for you.

My, I turned down my marketing, you know, like, I'm, I'm paying like 2 on Google guaranteed. I'm paying 250 a week and I pay Yelp and SEO and that's it. And I still have a lot of, a lot of leads coming in right now, you know, but I know, and I know that if I would turn on the leads, if I, let's say I paid like 5,000 a week, I would have way more leads. It's just we don't have enough sales guys. You know, we just, right now we have five sales guys here, Here in Seattle. We're working on getting more, but takes time.

But we, we, we just hired a guy. We want to do video, video sales because, because, you know, I'm thinking we, we can do more quality than quantity instead of just, you know, because some of the jobs, some of the estimates, they're just enough to fix a couple panels or one post. And then if our guy has to drive there and valuable. So we're like, hey, what if we just do those video on video calls and sell on the spot and just give like big bigger jobs, more qualified to our existing sales guys. Do you, do you think that's a good, that's a good vision?

Is your, if you took like the 14 million for the business from service side, what percentage of it do you think is coming from those smaller jobs versus the, you know, the installs?

Smaller jobs? Oh, well, that's a good question. I'm thinking probably like 10%.

You might just want to cut it.

Or maybe even less than 10% because like our somewhere right now installs are like in LA, like 8, 10,000, 17,000, 22,000 or you know, or maybe jobs that are under $2,000.

You could just put on your, you could just put on your estimate proposal. Like, hey, a certain minimum bid. Like, hey, like we, our jobs, we start at $2,000, for example.

Do you think people like, I'm about, I'm all about great customer experience. Is that, that's like a bad experience? I like, hey, we don't service well.

If the constraint currently is finding more salespeople, it's not leads. Yes, I don't, I don't care if, if I am pushing away leads, because that's not the constraint. So maybe because I would imagine it's making up 10% of, let's just call it 7, 8, 9% of your revenue, but it's probably making up 25% of your incoming leads. So if I can remove that 25% by having a threshold of a minimum charge I make very public to everyone, I can immediately get rid of the 25%, come along for the ride, and a $700 job becomes 2,000. And I'm okay sending in a salesperson there, but like right now, your most valuable commodity is your salesperson. So I'm going to protect their time at all costs.

Mike, Back in the day when I had like, I don't know, I had like two salespeople and there's a lot of leads. So what we would do is we would qualify the leads, right? We would tell the customer, you know, tell us how much linear feed you have. Do you have a gate? And it will give them approximately amount. Because sometimes, you know, sometimes people think, oh, fence is going to cost me like a thousand dollars. And then we come in, it's like a thousand, like, whoa, no, no, no, no. So we're. So what if we give them a price when our sales guys come, come there, right? And they shake hands, right? They have this report, they, they talk. Customers trust does grow. So even though sometimes when we do give a higher price and they're shell shocked, sometimes they still go because we have a really great representation. Like our sales guys when they come out, first of all, it's a wrapped car, right? Uniforms they give also they Leave not, not brochures, but like the whole presentation. They actually leave with the customer binder with all the pictures. So like it's very nice. I don't think anybody's doing this in the fence industry. I know H Vac does it. Heating in air. Kidding. They, they do that. But their average ticket is like, it's really expensive. I think like 17,000 or something.

If we can get 25% of our salespeople's times back right now to focus on those jobs, like long term, hey, the goal is to basically wipe out salespeople. It is to do the 3D stuff. Let's just say that's in five or ten years from now. Once the software is where it's at, the adoption of the customers, where it's at, etc. There's levels to that. So you could say, hey, video chat with the customer saves us time and we're able to still have this level of a degree of service. Not as good as shaking their hand, not as good as literature, but it's a continuum of saving our salespeople time. The only reason I'm saying this, Igor, because your constraint is not leads. Your constraint is the time of your salespeople. If you're like, hey, I have no leads and I have all these salespeople sitting around, we don't do this. We want to take every single lead and just squeeze the juice out of it. In this case though, I think it is a matter of how do I save myself 25% of time by cutting out all these low end jobs that I'm not making money on anyways. And when I continue to go up market with the software, you're going to be, you're still going to be high end. You don't want to be going after these small jobs anyways. So like I'm just thinking, what is the constraint of the business? The constraint, the business right now is salespeople. So we should be optimizing them in front of as many five and $10,000 jobs as possible compared to 300, $500, little repairs. Yes, because at any constraint, whenever you look at a constraint in the business, any time or energy or resources that are spent on that constraint could otherwise be spent in some other aspect of the business. So for example, we could be spending time, energy, money on leads like marketing, advertising. That's not the constraint though. So all the time and energy to grow the business is, should be focused on the constraint. And this time it is salespeople. It is the time that they are spending and So I would fix that to the point where you like, oh my goodness. Because we save them 30% of the time by not having the small jobs. Then we save them 20% of the time by doing video estimates. Oh, now all of a sudden I can, I can expand the business because I can go put money on the fire of leads.

Wow, that's really good. So, yeah, Mike. So my main competitor, they probably don't even know about me. But they're lower America. I think they're like in 14 states. I think only in California, they have 10 locations already. Or again, you know how they win, Mike? They don't have employees. They stand even. Even. Even if they have a project manager that's on site, he's 1099. And I'm just thinking, guess how much money they save. They have to pay payroll taxes, no sick leave, there's so much taxes. I mean, you know, you live in Washington state. And I'm like, man. So what they do is they hire like a person from Philippines and they do the video call, you know, and they find a contractor, local contractor.

What they've done is they've realized that the constraint of their business is getting the sale ironed out, right? So you've perfected what they perfected and that's getting leads. The part that they have right now is they've perfected the sales process. And so once you become really good at sales, then the actual operations, the installation of the fence becomes a commodity. And so you can give that to any contractor. And then the reason that you make all the margin is because you're up channel. So you can be way up channel and be like producing the products and goods and the actual, like the wood, the metal, et cetera, like massive billion dollar companies making aluminum. More down channel from that is you can treat control, lead flow and you make the sale. And then the lowest level of leverage is doing the actual work like installing the fence. And so that part, if you sub it out, great. The part then again, the constraint of the business, the part that is hard that you're figuring out and that these guys have not even come close to is the sales process. And so that's what they've nailed. This whole video thing, how they do that process, that's why they're able to scale, because they've gone up market, they care less about the labor. The installation part, they're saying, hey, we're going to do what everyone else is not able to do. And that is the sales process. And so that's why I think like really honing in all these aspects. You talked about making it virtual. Then you can actually scale that. Because what they've done, they've removed the bottleneck of sales.

Yes, and not only that, Mike. They removed the bottleneck of having vans. Like now I'm thinking having vans, having employees, it's almost like a liability. They. They remove that because I pay so much taxes, just payroll taxes. Insane. That. And I'm sticking to California is even worse. So when you have a contractor, you write them a check.

So they're doing that, and that's why they're in so many states. I mean, I can beat them through franchising because people still would want to come to their house. Someone wrapped. Someone wearing uniform in a wrapped car. It would be a better experience. 70% of our customers are women. And that's why I think I can beat them with that. But, but, but I don't want to have those van. I don't want to own the vans, you know, so do you think it's possible, like, for example, to do the franchise where I control all the sales, the virtual sales and all the sales, but sell the franchise where. Where they will do the work is.

That 100% you actually have higher value to the franchisee if you actually produce the leads. So if you say, hey, look, you join the franchise and we just, we get you leads, you don't have to do anything. Like, you're making this an easier proposition for the franchisee. And the thing that everyone always thinks they need, think, think, think they need in their business is leads. So it's very appealing to franchisees when you say, hey, I will produce leads for you. And that's usually when a royalty model makes actual real sense because you say, hey, look, I'm going to give you work. And if you're really confident in your sales and your marketing, you could literally say, I will give you all the work you want. You just are going to be doing the work itself. You're gonna go with the trucks. And this is why franchising is helpful to scales, because then use their capital to go buy assets like trucks, equipment, et cetera, inventory, hiring, management, et cetera. You just focus on, how do I get leads and convert them to sales. If you figure out that and then you can remove the constraint of sales and marketing from a franchisee, then a royalty structure makes a lot of sense. Because if you do subcontracting, you're gonna do exactly what we just talked about. You're gonna do the lead, you're gonna get the lead. You're gonna make the sale and then you give it off to a contractor and they're going to make some sort of margin on it. You're probably going to mark it up to some, some degree. What, 10, 15, 20%. The same thing is now going to happen with franchising. You're going to charge a royalty of 8, 9, 10%. And that's very appealing to someone that is really good at installing fences but cannot figure out how to do websites, marketing, advertising, set up a sales process, create the software. None of that.

I'm offering them 30% of the job.

Yeah, but the subcontracting model, right. So the franchise model, if you try to go over 15%, like 1, 5, it's gonna be difficult because now you're looking, they're going to feel like a subcontractor instead of a franchisee. They're not going to feel part of the cool cat brand.

Yes. I don't want to do that. I want them to feel like owner. I want them to carry all the liability if something happens. You understand? I don't want to be a babysitter. Yeah.

And so, so now the reason you're willing to go from. I would, I would recommend being willing going from 30% down to 12 to 15% royalty. The reason I would recommend doing that is because. And the reason you can make sense of that is because right now as a subcontractor you still do need to get involved in like making sure the job goes well, you are somewhat still liable, the customer could come back to you, you got to go to make sure things are going well on the job site, etc. Whereas with a franchisee you get the sale and you hand it to them and you are completely out of the picture goal. Because even, even if you do subcontracting model, you're going to have to have project managers, people that make sure the customer's still satisfied, the subcontractor is doing a good job, all that stuff with franchising, you get the sale and you hand it to them and they are responsible. And then your franchise disclosure documents and franchise agreements gives you the liability protection to, once they get that, it's on them. Whereas if you do subcontracting, there is still a level of, of financial and liability, legal liability, and for that you have to charge 30%.

So in that case, Mike, in that case, I don't need to own any cars, any trucks, any physical people. I will only get sales through people in Philippines and through the call and through the 3D model and I know that model. I can't close all the jobs because there's some jobs that are so hard, but I can still pass it on.

Yeah, yeah. The challenging part is a franchise or franchise relationship is very different than what you currently have with them. A franchisee franchise or relationship is they can have demands of you, they can sue you a lot easier as well as like an employee that's joined you is likely having like a 6 to 12 month window of how long they're going to work for you. A franchisee is signing a 10 year agreement like they're in bed with you legally. There's fees, there's conferences, there's training, there's a lot more involved. So typically employees being swapped over into franchisees like that, you really just want to become subcontractors. That's really what you're trying to get to. But what you could also do, Igor, let's assume you don't franchise because most employees aren't going to be like, yeah, sign me up for a franchise. Maybe one out of 20 of my crew members want join a franchise. They just want a job. Like that's what they're signing up for. And maybe they want to subcontract and own their own thing, but they don't want to be part of my brand. They don't want to sign a 10 year agreement. They're doing this fencing thing for a year or two. They're not thinking about the next 10 or 20 years. Like that's a, that's an entrepreneur, that's a business owner. And so what you could do alternatively is you could also just have a leasing company that has trucks that are cool cat, has equipment that leases to them. If they become a subcontractor of your other brand, of your other company, you create a completely different entity that leases them the equipment. So they still, that's still them. They're independent of the other company which is actually generating the leads. You know what you're currently trying to sub out, you could do that.

So you're saying there's already a way for me not paying them. I'm just thinking because me paying them as employees, I just have to pay so much taxes because when I pay employee, I have to pay taxes from, for myself, for them. You know, their is deducted from them and deducts from me from employer.

And I'm like, man, yeah, so study Amazon and what they do with their delivery. So all those trucks that roll around that are Amazon, they are not being owned by Amazon. Those are third party entrepreneurs that own their business and then they lease those trucks from Amazon. Now, is it Amazon? Exactly. No, it's a different company. So like you can have them lease from, from your trucks, your equipment, et cetera, from this company. And then they are 1099 to this other company and they're independent contractors to the actual fencing company. But you create a leasing company and again, there's a lot of legal tape around this. So you've got to all done. Right. But that's what Amazon does with their delivery drivers. Those are not like, the vast majority of them are not Amazon drivers. They're not employed by Amazon. They're employed by some third party delivery company that then licenses and pays fees to have that Amazon logo and a lot of times will lease the trucks from Amazon.

So. So the other company pays all the employee tax. Employee taxes.

Correct, Correct. So look into that model. It's, it's really what potentially could be the thing you're thinking of instead of franchising. But you still have the added benefit of having the brand because trucks rolling around are cool cat fencing. Which then reinforces the loop of leads coming back to you. And then you get more leads and you subcontract out to these people that are still using your trucks and equipment. But they have the full autonomy and they're independent to be able to do it whenever they want, like a subcontractor would.

Whoa. Do you by chance have like any, any, any laws or anybody that understands that that can help me out?

No, I didn't go this route at all. Like, I went the franchising route. So I didn't go the whole, like, how do I have a leasing company and do this whole rigor? I can guarantee you can figure this out pretty easily. Look into the Amazon stuff, see who's on their legal documents. Because there's a bunch of legal cases around this, around their whole 1099, how it's structured. And they've been able to protect it for years.

Because then what you do, you go, you say, hey. You go to your crew members, your leads, you say, hey, look, you can keep working here. I'll still pay you. Here's all the extra costs I have of having to employ you as a W2 employee. You're going to go lease a truck and equipment from me for $1,900 a month. I'm just making up of a number. You're going to lease it for me. 1900 dollars per month. It is going to be your equipment you're leasing from this other entity. Then once you do that you could become a subcontractor for Cool cut fencing. We will do all the sales, all back end, whatever. You're a subcontractor of us. You're a 1099.

Wow, man, that's really interesting. Yeah, because I'm.

You have to do it very right legally because there's a lot of red tape around this. But the Amazon model is what you can follow. People, people like hate me for when like, because like this is very much what Amazon did though. And that is they have third party vendors that are using their vehicles and they're leasing them from them.

Because look, Mike, they're smart because if you do go the regular route, it's just like it's so hard to make money because you carry huge liability and so much and you're like, whoa, this makes sense like this. So about margins, sold on margins and.

If they, that truck gets in an accident, it's on the third party. And then what you do is you can start doing like through your leasing company getting bulk discounts for their insurance. Like it becomes somewhat of a franchise without all the red tape and legalities. Because I think like, hey, I don't want to do this anymore. Great, stop paying your lease and you stop getting leads from us. The equipment in the truck goes back to the leasing company and there's, there's rules and regulations about the, how it needs to come back to them, etc.

Because you know, because even right now, you know a lot of, a lot of taxes being deducted from them. So if I pay them 1090 a check, they'll get to keep a lot of it, you know, and how it feels like if you, hey, I'm making more money because it's subconsciously, you know, because when you get there, like they're thinking, hey, I'm not making money. Like, hey, no, you made good money. Just let's say you made $10,000. But taxes ate up, you know, 2,000 or two and a half thousand from you. Y so and people always think how much they made after taxes. But it's a very subconsciously like, you know, you actually made really good money as an employee. You making $10,000.

Yeah.

So I actually listened to Jeff Bezos the Amazon his story and I remember how they fought against ups. I think UPS was delivering their. And I remember how they were asking UPS to, to lower how much UPS is charging them. Like I don't know, like 25 cents, I think was per mile or very small portion. And UPS is like, no. And then Amazon just halted all Their, all their packaging. So it was like a battle who will stand. And then ups. Okay, they relented and they, and I'm like, man, Amazon was fighting for 25 cents or for that small. Yes, because when you take 25 cents and in the long run, it's a lot of money on a fact with little margins. I'm like, you got to be smart. So I'm just the model that I have right now, Mike, it's working, but I'm just, it's, it's like I see the margins. It's just like I want to increase the margins because of the liability that, that I carry. And plus, I mean, but how our guys win, you know, we give them helpers sometimes. Right now we give sometimes three, four helpers so they have a big project. When you have three, four helpers, I'm like, we're helping you make money because you're, you're the one who getting the bigger percentage. Not this employees. Because our format are performance. Oh, by the way, I'm reading your book. Like if you look at it, it's like, it's like all underlined in the red.

And yesterday I read how you said performance paid for performance and I agree with that. You know, that's why a foreman, they want to work hard because they know they finish faster than I get paid more. The hourly is not a good for service business, is not a good plan. However, our foreman's performance paid by his helpers are hourly. But he pushes, but he's pushing. And if they do, they buy him pizza or to motivate their people. Like yesterday we had a meeting in the morning. We got all the foremans on their helpers.

Oh, I saw that. I saw that. I saw in your social media.

Yeah. So we have it weekly when I meet with foreman and I track how much reviews they got, you know, how many plates they put on the fences, how many yard signs they put in. You know, I track all that because it works. You know, so, but a lot of people, so much companies left me and I'm like, man, if I had a different model, they could have been maybe a franchisee or too many. I, I basically create my own competition. And then they're really good. They're. They have very strong leaders. Well, so there's different models, you know, there's different, you know, so you can do franchise. Because the way how I see it, I mean there's two options based on what we talked today. You know, I can just go and just sell the jobs, you know, virtually and give it just to have like 10% royalty and then give it all to the franchising. Or I can control the virtual and sales people like and find contractors and keep bigger portion, keep like 30% of the job.

But the third way would be you still do the subcontracting route, but then you give your crew a way to basically lease trucks and equipment from a different entity that have cool cat fencing and then do the work building the brand. But you still have the subcontractor relationship. So I think, like, if I was you, Igor, I'd probably be like, hey, let's try to figure out this whole subcontractor thing. Because you figure it out. How do, how do we sell the job? How do we do all this stuff around subcontractors that are currently not using cool cat fencing? I think down the road, when you want to build a brand, build for private equity, you want to sell this. Or if you want to grow enterprise value, then we say, okay, we've perfected the model around contractors. Now how do we allow contractors to have a cool cat fence? And then we go attack this whole idea of leasing out trucks, getting our current crew into those trucks, and then becoming 1099s. That starts to look really, really interesting down the road.

Yeah. Because I think that's why I told our guys that right now going to Portland, Oregon is going to be very strategic right now, working with tough contracts, because we don't know what we don't know working with them. We'll see the constant pros. Because there's some stuff that we might not like with that we might like. But. But when you're committed, right, It's a journey, you know, you. You'll find what works best for you. But you guys, you guys just, you guys, you guys don't give, you don't promise leads to your guys when they buy into your. Right into your system.

Yeah, right. And the reason, the reason being is we don't have the royalty. Almost every franchise has the royalty as soon as they start giving leads. Because then I need that money to continually market and get the leads and service leads and sell. Right. So that's. I can't afford to, you know, on sixteen hundred dollars a month I get from them, I. I can't afford to go and do marketing, sell for them, et cetera. So it's just a different model. Because the alternative is I would take 10%, 12%, I would do marketing, I would get the lead, I would sell it to them. And I know I make a piece of every job So I just, as long as I can get the job for 3 or 4% and then quote unquote, sell it to my franchisee because I got a portion of revenue at 10 or 12% and I can make money.

So, so basically you win. I'm just think like, I'm like, how? So what's your goal? So let's say you have 150, all right. Locations. If you go 150 and let's say they pay 2,000amonth. Wait, 150 times 300. 300,000, that's really good. Well that's basically, that's, that's really good, you know, so. But also you offer them software, right? Where they pay monthly.

There's software, there's command center, there's retraining, there's multiple locations. Like you can make more money outside of just the franchise fee. But the question is, do you want to do those add ons or like most franchises do is they get in the game of royalties and then they produce leads. So I've been much more like, hey, we know that local marketing is usually going to get the best cost per lead. So like I'm not going to take a marketing fund of 2, 3, 4% and then just run ads. And so instead it's like, hey, you determine do you want to be in growth mode. This is the problem, Igor. If you're doing a royalty or you're giving like a subcontractor model, the problem is you're depending on them wanting more work. Like if they don't want more work and you have a lead, you're kind of, you know, you're, you're stuck. Right. Because you, you producing the lead. But they, they don't want to do the job. And so instead for us we just say, hey look, you guys market, you advertise, we'll give you all the tools to do it in the training. But we're not going to take money from you and then go get leads and push them towards you. So it's just a different model and we just can't afford with a flat fee model. Like we have to actually go market for them. Yeah. And then like down the road our goal is potentially to have it where they can pay for leads and then we do market for them on a flat per feet per lead model. Right. So like if I can get a lead for 40 or $50 and then sell it to them at 100, then I can make some margin. Right. So there's always ways to like different ways to skin the cat. I think in your way, your model. Like I'm not against you franchising. I just know the level. Like it's a different business. So completely different than like subcontracting. It's just a totally different business because now you're really like thinking about branding. You're thinking about. You actually have to train them on how to do marketing. Whereas if you're doing the, the subcontractor model, you don't have to teach them anything. You just run the systems in the back end and then sell the lead off to them.

And if I can convince them to grab their cars with cool cat fans, I'll give them higher percentage. They can still do their business, sell their jobs. But hey, as long as they, you know, advertising man. So there's different ways. But I know that 1,800 junk 100 joint man, they have hefty royalties. They making so much money from royalties.

Yeah.

Like if I'm not mistaken, I believe you have to pay 400000 to buy their franchise, if not more. Yeah. Not only that, you have to pay huge royalties every. But they have a very strong brand. Right.

You think about they can only do that now because this brand is where it's at. Like to get the initial franchisees you have to be much more pro franchisee in order to be able to like they don't have 1, 800 junk when it first started franchise didn't have the brand power it does today. So the value to the franchisee was less. So the cost that they were willing to pay was less. Right. It's like we raised our franchise fees recently, the first time in five years. But we did it because like now there's more value. And so as you get more franchisees you can raise it toward now like for them it's hard to get territories because they're all sold out. So they just increase prices.

I know one thing that my current model that I have here, it's like I want to change it. I, I don't want to. I want to change it because it's too much. You have to pay too much, you know, payroll taxes. That's number one. If somehow I can work with subcontractors, you know, that will own their vans. Because one thing that's really I think about strong thing about me is I know how to market and I know how to sell jobs. Those are my strengths, you know. And so because I believe 2025 branding and reviews are number one thing, you know, brand, you know. And I, I'm seeing that our brand is being and that, you know. You know, So I wrapped the cars. I was the first one who wrapped the vans here. One of the first. Maybe one of the first ones, you know, and now already only in Seattle, already four companies copied me. Four companies. So I'm like, man, they're copying me. So I have to. I have to hurry up and go nationwide.

Yeah, I think it's just a matter of, like, if I was you, I'd use that Oregon location. I try to do subcontracting only. I'd really refine it. And then from there, you have a lot of options, you know, going just, hey, let's just keep scaling subcon. Subcontracting to like other companies. That might be an option. That's the easiest, lowest friction. If you go to franchising, you have to learn the skill of training. You're also going to have to learn the skill of selling franchises. Not. It's totally different than selling fences. It's a completely different model. Is you create content marketing. To sell a franchise is a completely different business. So that's another option. Third option is we go the route of how do we get our existing team to become 1099s and do the jobs for us, which will only be increased by you nailing the subcontractor model. That's why I think doing what you're doing is really smart. The organ thing, using that as your test, do subcontractor only. Don't get a bunch of crews down there. Make it all based upon subcontractors. Get your bumps in there. You'll make some mistakes, you'll lose a couple jobs, they'll go bad, whatever. You have to figure out your agreement with those subcontractors. And then from there you have two options. Wheel franchising. Or do we now make. Try to make our current W2 employees 1099s and create some sort of a leasing model or a way for them to be able to go out and cool cat trucks. But be on 1099, I think.

So I got to do something because. Because, you know, you live in Seattle, right? It's so expensive to live here. Like, I'm thinking that you got to make at least $10,000, you know, to have a, you know, decent living. And I wanted to make money because what. Because when they make good money, they. They don't want to leave. Right. So if I can create that, you know, you know, there's these loopholes, whatever it is, but legal ones, Amazon's using it, and they're way richer than us. And they're using it and you know, why not us? Mike, how are you doing? How's, how's your business? Like, how's your day to day look, are you stressed out or are you having fun?

It's like pressure is a privilege, you know what I'm saying?

So if you're going to be growing and you're moving through the 4L framework, like, you know you're attacking the next constraint, right? So this past year has been really about like finding super good engineers. For me, that's been the constraint. So like same thing like I mentioned at the beginning, like for you in the current state of the business, your salespeople, your constraint, like all your time and energy goes into that. So whether it be refining it, using technology, outsourcing, whatever you can do, getting subcontractors, cutting out, lower end jobs, same thing as like, for me, it's like I gotta get rid of a bunch of stuff so I can focus on getting great engineers, right? So it's always like identifying the constraint. Then like just laser, like focus on like that one thing instead of the other hundred things that could potentially be changed. The business could be improved, the marketing could be done, the website could be better, whatever, whatever. But it's like, that's not the constraint.

And then when you go into software like you're building a copilot, man, that's, that's a. I watched your video a little bit, how you were building the co pilot and how people yellow, whole bunch of bugs. That's a lot of pain. I don't know.

The dollars of that pain. And people are like, hey Mike, we paid you the money, we can do our work. And you're like, hey, you can't do nothing. Like, hey guys. Oh, that's a lot. That's a lot of pain.

Yeah. And like I think as you the thing to think about too, that comes to franchising is you're connected with these people outside of just a subcontractor relationship where they, they can leave at any time and you can leave from them. Like a subcontractor relationship is nice because like as long as it's serving you and you're serving them, everyone gets along with franchising. There's ebbs and flows of value, right? So at the very beginning you're producing tons of training, they're like educating, they're learning all these things, like it's super awesome. And then they're like, hey, I got it. Cool. Now why do I need to keep paying royalties, Igor? And now you become the Enemy, right. And then over time they start to realize like, oh, like actually I do need them because when my general manager dropped out, I had to send someone else for training. Oh, like it was super helpful to start another location using the systems of the franchise. So like, there's just different levels of community you require once you start franchising. Because all you can just fire them like a W2 employee, right? And they can't just leave either. You have a 10 year agreement. So there's a lot more. Like the pressure that comes with having a franchise is difficult because you care about these people, you care about their families, you want them to succeed. And so when you do something stupid, it's not just a matter of like, ah, I lost one job because a subcontractor wasn't happy with me. This is like, it is extremely emotionally taxing, to be honest, because. Because you care about the people.

Wow, wow, wow. Because also, you know, some people, they resent being an employee. You know, they're like, you know, I don't want, you know, people. So if they somehow I can create it right now, loophole that they are like subcontractors. Like, hey, you're your own. No one's making you. They're gonna be. And I'm like. And then paying them a higher price. They're gonna make more money. They're gonna make more money. I'm gonna make more money. You understand it with 10.99, they're gonna be happier and I'm gonna be happier. So this is really interesting thought, Mike, that you shared, you know, about the Amazon, you know, see, if they're doing it, there has to be a will. You know, I mean, a will. Wait, if there's a will? There's a way interesting about this.

I think what will happen naturally, Igor, is if you do the subcontractor model, you're gonna get employees be like, hey, I want to do that. And so then, then it'll naturally ebb into either A, do you franchise to them or B, do you start to figure out the leasing model so that they can use the cool cat trucks? I think it'll like naturally go that way because they're gonna start to see you subcontracting an organ. Like, hey, I wanna do that. Can I just, like, can you just sub jobs out to me? And then you might actually get pushed into. Okay, yeah, I'll go figure out this leasing thing and then we'll figure it out with you.

But if I do leasing, that means I still going to own those cars and in the winter time, there's no work, I have to pay for them.

Different entity, but the lease is owned by the subcontractor. So the subcontractor, you say, hey, look, in order to be a subcontractor for this company A, you need to go lease your vehicles and trucks from vehicle from entity B. Entity B is going to have an agreement with said subcontractor and it's going to be like a 12 month agreement on a lease, just like a leasing, like a leasing a car. And then you would do a financial arbitrage of going out and buying a whole bunch of trucks and then getting a margin on whatever you're paying on financing versus the lease. And then they can't just like come back and return it during the slow season. It's on a 12 month agreement. So you have a leasing company and you could even have it outside of your company if you wanted to. Because there are companies that are shell companies built just for this, which is just leasing vehicles back to companies. So that way you're not actually the one. You know, it's not from your company.

When you started out, Mike, you didn't, you, you didn't do franchise, right? You, you just had your own business. When did it dawn upon you today you want to do franchising?

Well, because I'd started sharing the content online and no one was listening. Like no one was implementing paper performance or the systems we talk about. They weren't paying their trucks like you mentioned, et cetera. And I'd seen what it did to, for me, my business. And I was like, it made it be profitable. It could run without me. And um, the only way to get people to, to do it was like have skin in the game with them. Instead of being like a content creator, just be like, hey, we're both Augusta long here. I only want you to win. I charge you a flat fee. I just want you to stay in business. I don't want to make a royalty. I don't need to buff up your sales and your top line revenue. I just want to see you win. And so that's why we had to franchise because like no one was doing the systems we talk about.

Wow. So just use it out of the abundance of your heart. And it turns out that you wanted to serve people and you got elevated because the more you help people, the more you're elevated. You know, if you can help people reach their goals, you can have everything you want. I mean, that's what it is.

That's what I would do with you, you're like, you and your crew, you care a lot about them. I would build the entire Frank, like, not franchise, but like the whole model. I'd build it around that. Like, hey, when you join at Cool Cat, you can make 25 an hour as a helper. You can also make 100 grand a year if you're a crew leader and doing this. And then you create the third step. The third step is the part that you. I don't want you guys to be capped out. I want you to make more money. I want you to have multiple crews of your own. I want you to make 200, $300,000 a year. And now we've created the system to do it. And so you build it all based upon helping the team member. I care about. I care about the franchisees. I care about the landscaping and long hair industry. And so I simply made the model for them to follow and move up that value stack. And then I same thing. My employees, like, they join, they can be a helper, they can become a general manager, and then I give them, hey, you can become a franchisee. And so you just build the whole system as if you're talking to your favorite crew manager that has worked with you for a long time. And you just want them to make more money but still be able to work inside your business because right now you can't afford to pay them more money.

And again, it's a process. Yeah, it's a process. You just as you go. Because, you know, my mind's opening. You know, I feel like my last six months, I grew more than my last three years because I had a CEO before, and I was kind of like, mentally out, checked out. And now I'm like, hey, I'm in. I can't blame anybody. I'm in charge. But yeah, Mike, it was really nice talking to you. I really, like, you're my coach.

Let's go. Well, hey, man, I wish you all the best. I think as long as you do the subcontractor model, doors will open up. I think your crew is going to actually start asking for the second model. And you could. You could do franchising still. So I think let's. Let's do the subcontractor model. Perfect. That work on that next three to six months, you know, really iron out that model in Oregon. Figure out what the kinks are when you don't have a crew to actually just like, go cover for a subcontractor. What happens to the brand? What happens to reviews when all of a sudden you're going to be on the hook for a bad subcontractor. Figure that stuff out, and then I think doors will open up down the.

Wow. Wow. Thank you, Mike. I really appreciate your time, your inspiration to a lot of people. Keep going. Thank you so much.

Thank you, brother. Best of luck to you. We'll stay in touch.