Watch these 78 minutes to build a $1M business in 2023

Welcome back to the Mike Andes Podcast, where we discuss the ins and outs of owning a small business. If you're new here, the Mike Andes Podcast is all about taking your business to the next level. Going into 2023, we'll be entering a landscape like home service hasn't seen since 2008. That's right, we're in a recession. And when it comes to keeping customers in a recession, we need to look at something that we haven't looked at in a long time, and that's attrition. Mike talked about in length about this during Landscape Summit this year. And even if you couldn't make it, we want to make sure that you didn't miss out on this crucial information. So buckle up and enjoy this keynote from landscape summit.

So nine years ago, I was 18.

At the time, and I just finished my pre med degree, my undergrad.

And.

And then I'd gone to Africa for six weeks. And at that time, I'd now determined that I wasn't going to go in the medical field in the US And I was left, what am I going to do now? And for the past seven, eight years of my life, all I had ever known was medicine. And I was the guy with all the muscle diagrams and the skeletons in my room and all the rest of it, and that was my life. And I dedicated every single minute to reading textbooks and doing flashcards and memorizing synapses and nerves and every single part of the body. And I got back and I didn't know what I was going to do. I had no idea what I was going to do. I just felt super lost because that was my identity and that's what everyone knew me for. I was the young kid that was going to become a doctor when he's really young. And so I remember very specifically where we live. We live on a place called North Golf Course Drive. Sorry, Castle Rock Drive. My bad. And I was upstairs in my room and I literally just remember sitting down at my computer and typing in Landscape Business course. And I was like, I had seen all the stuff on YouTube and I knew that that wouldn't make me successful. And I didn't really want what anyone was showing. And it's crazy that nine years later we're in this room, it's almost exactly nine years because I got back from Africa in December. And so it's crazy what nine years can do. And so if there's any source of inspiration or you look at what we've done and it's like, hey, that's pretty cool. Just know, 10 years putting your head down and grinding like you can make something pretty cool and you can help.

A lot of people.

And ultimately, several years later, after realizing that my business wasn't built correctly and wasn't built on systems, as most of you know, I got caught underneath the dump truck in the PTO and was put out of commission for a bit and realizing that my business did not work without me and that was really tough. And that's one if you look at landscape business course I kept the old videos in there.

But the very first ones, if you look on my neck, you can still see the lacerations from getting caught underneath the pto. And that was a crazy part in life. Both those periods of time right after getting back from Africa, realizing I didn't really know what I was going to do. It was the first time in my life where I was like, I don't know what I'm going to do next. And then the next crazy period in time was realizing that what I had built and had left that medical career for wasn't worth a dime because it couldn't run without me. And so I, I hope that over the past four or five years, Snap.

Something would be said that would encourage.

You, hopefully inspire you.

I told the team, all the hard working people in the back that deserve all the credit for this conference, that part of why we come here is sort of like why you go to an NFL event or you go to a concert and that is some people just want to disconnect and see how the game is really played. And it's not from a point of being cocky or being boastful or proud. That's definitely not my intention. But the reason why the quality of people that I wanted at this conference this year, it might seem unattainable. It might seem like these massive millions of dollars and all this stuff and it might seem like it's out of reach.

But whatever your capacity is for your life, that's what I want you to achieve. And that might be $100,000 a year business where you can provide for your family and you're only used to making minimum wage. And maybe it is a hundred million dollar business or a massive company or multiple locations.

But if you're in that period of life, like I was either A, A, you don't know what you're doing and you feel lost and you don't have any direction or B, you're in a place where you realize what you have built isn't worth anything and you're really starting to Question whether or not you even want to do this. I hope this weekend helps. It's why we put this on. And, yeah, statistically speaking, who here believes that we're in a recession or going into a recession? One of the two. Just raise your hand. Either in one or going in. Raise them really high. I'd probably say it's 80, 90% of the room.

Based upon that, we would have to then assume that one third of the people in this room will not be in business in 24 months. And so those are the type of things I think about when I come into a conference like this. That's why we don't have sponsors. That's why we don't have equipment. That's not going to get you through this recession. It's not. And so I hope that Tommy, Corey, myself, even just this evening and the speakers coming up this weekend.

I don't take it lightly. You guys fly across the country and spend days and all the time and energy. It costs about $2,000 to get a person here. By the time you have airfare and tickets and rental cars and hotels and food. And I do not take that lightly at all. And so I hope that every dollar you spent comes back to you in spades in value. And I take it very seriously. The team knows I push extremely hard on them to make it worth your time and money. And I just want to say thank you for coming. Appreciate it.

All right, let's rock and roll. All right, numbers now.

We're good. Perfect size business. That's what we're going to talk about. I know it was on Saturday.

I think it was on Saturday in.

One of the event schedules.

I switched it last minute.

I felt like we needed to catch up on certain things.

And so for some of you, this.

Is gonna be a review if you.

Follow my content religiously.

But I need to catch everyone up.

On a few things before we jump into the rest of the conference. All right, I'm gonna go pretty fast.

Because Tommy was so short, I literally.

Went in the back and added more slides. So the last six or seven of these slides were made about 15 minutes ago. So it's gonna be great.

All right, so we're gonna talk about several different things. We're gonna talk about debt, key performance.

Indicators and capacity based growth.

Again, if you know what those are.

Don'T think this will be the same as everything else I've said. I'm adding a little bit to this. I want to bring this home for everyone.

All right, so everyone knows I'm typically.

Known as the guy who likes cash only.

Let's run actually the numbers and look.

How this actually impacts your business.

Cash only option number one. Let's assume that you're doing $70,000 of.

Cash invested, is typically what we spend.

About to start a new location. This could also be, though, what you would spend to start a new crew, start a new div, buy a truck and equipment to be able to get the business expanded, et cetera. But you're in this scenario, going to spend $70,000, $70,000.

What we're going to spend in cash.

Because I invested $70,000. We're going to assume that that led to $300,000 in new revenue. We're going to assume that we have a 20% profit margin in this business. Net profit that I can take out of the business at the end of the day, 20% of $300. That's $60,000. If you take.

$70,000 invested, divide that.

By, sorry, I did it wrong.

If you take $60,000, $60,000 and divide that by 70,000, your investment, you come up with a return on your investment of 88.7%. Now, let's look at the same example, but this time we're going to use some debt. So Instead of doing $70,000 worth of cash, we're going to take option two, where we take a $25,000 loan, sorry, cash, and a $45,000 loan of debt. Now, that same $70,000 investment is spent on the exact same thing, whether it be marketing trucks, whatever you need in order to be able to expand the business by 300,000. And therefore, regardless of whether you get cash or debt, the effect is still the same. We're going to buy the same stuff. $300,000 in annual revenue is added to this business. If we assume a 20% profit margin, still $60,000 in profit. However, now we need to pay interest because of inflation and all this other stuff. Maybe we're going to pay 10% interest on this loan. That's $4,500. $4,500 is 10% of 45,000 net net. My profit on this debt is going to be $55,500. If I take $55,500 and I divide it by the actual cash invested, $25,000. So I take 55,500, divide it by 25,000. My return now is one more than double its 222% return on investment. And this is the thing that seduces many people into debt, because you can grow faster and you can do it in a manner that literally skips years of time if you're trying to grow quickly.

And I'm not to say which of these two you should do.

And I think a lot of times.

I get thrown into number one, mostly because I see people misusing or option number two under the guise of.

Accruing tax benefits, or B, because they simply want equipment and fancy trucks to boost their ego. And ultimately it leads to something that's very bad. Because although this bottom part has a higher return on investment, if you go to zero in option number one, guess what? You lose $70,000 in option number two, if you go to zero and you fail, you've lost your $25,000, you have a $45,000 debt, and now you're paying $4,500 a year for absolutely nothing.

So there's risks involved, but you can absolutely use debt as a way to improve your return on investment. Most companies that grow and scale very large use debt. Just because someone is big and uses debt does not mean everyone should go into debt in order to grow quickly. Growth sucks cash. And at the same time, you're growing and expanding and presenting all sorts of new challenges to you. Your business style, your management skills. And at the same time, you're cash strapped because all the cash is going out the door. It can lead to financial suicide. And I think this is the case that's going to happen over the next 12 to 24 months. If you actually believe we're in a recession, this will happen over the next year or two. The second option will happen. Those that have used debt in a manner to be able to buy the things that they cannot afford and live a lifestyle that their business and their personal life cannot maintain will go out of business.

That's what happens in a recession.

We're going to talk very deeply about tomorrow morning about the recession and go very deep on how the macroeconomics and the timing of all that works. I'm not too concerned about that today. I want to move along because I'm literally just trying to set some groundwork for what I need everyone to be brought up to speed for, for the rest of the weekend. So I'm going to move along. KPIs key performance indicators. All right? We're going to talk about something that Tommy touched on for a little bit, and that's attrition, all right? That is how many customers you are losing every single day, week, year, et cetera.

Now.

I know Ohio's pretty butt hurt recently about their football team.

But.

When.

It comes to football, you typically have three parts of a football team. You have defense, you have offense, and you have special teams when it comes to your business. The defense in your business is attrition. Because ultimately going out the door every single day. The thing that we don't track so often of the times is how many customers you are losing.

Who here could tell me how many recurring mows you have, raise your hand.

This is not a trick question.

How many people know approximately how many mowing customers you have?

Fantastic.

I would guess and imagine that less than 10% of the people that raise their hand actually know how many customers they lost. Last year you said, oh no, no, I went from 100 to 200. Great. But actually you got 150 new customers and you lost 50. Your net might have been 100, but you lost 50 of your customers. That might be 20, 30, 40% of your business being lost every single year. Here's what's really scary about a recession. Attrition goes up at the exact same time that new customers filling that attrition.

Stop coming in anyways.

Attrition is your defense close ratio. How many jobs you close is your offense. Okay, so, so attrition is the clients that you lose per unit of time, day, week, year, however you want to break it down, divided by your total clients. In this industry, it's very common to have 20 to 30%. If you're in residential, it's a little bit less if you're in commercial simply because your contract size is larger. Ultimately though, your attrition is a number that we need to know in our businesses because that's how many customers you need just to keep the revenue the same as last year, how many clients you lost. Let's say, for example, you have 100 total mowing customers. If you lost 10 customers last month, you have a 10% monthly churn or attrition annualized. That means over 100% of your customers are going to leave 10% every single month. That means that every single year you will have to get 100 customers just to stay at the same revenue that you are today. And yet most of us know our offense. If you go back to number four, and that is our close ratio or how many jobs we're getting in the door. That's the thing that we usually obsess about, because offense is sexy. Everyone knows who Tom Brady is. Everyone knows the wide receivers and the running backs, because why they're all on offense. What's not so sexy, what's not so cool is Playing defense. And we've become obsessed in this industry with new customers growth numbers. And you will not hear me say a revenue number this year, weekend.

Oh, we want it.

Who cares if the things that I say need my numbers to back me up, Please walk out. They either work or they don't. Me bragging about the numbers that I have means nothing. But when it comes to close ratio, that's a number that we typically know more about. We know how much our top line revenue is. We know how many jobs we got last week. We know what our revenue is anticipated for 2023. And the vast majority of us, if I asked you what your target was projection for revenue is in 2023, you'd have a number in a matter of a couple seconds. But very few of us know our defense. And we all know the saying defense wins championships. And let me tell you, your defense will be the thing that allows you to win during a recession. If we all believe that's where we're at. This is something we need to start to focus on. How many customers are leaving the back door every single day. Now, when we talk about our close ratio, all close ratio is essentially how many estimates did you close or got accepted in any given period of time? Let's just call it month. Let's say you closed 30 and you had 50 estimates that were total. Given 30 estimates accepted divided by the total number of estimates that were sent out is 50. That would be a 60% close ratio. Everyone following?

Is everyone following?

All right, let's go. We gotta stay on track here.

Now what I wanna talk about though, when it comes to the key performance indicator of close ratio, which I believe we all be tracking like every single week, you don't know the efficiency of your salesperson. If you've grown to the size that you have a salesperson, if you do not track their close ratio, you don't know if you're a good salesperson or not. And be able to judge like Tommy did in terms of whether or not you should be the salesperson or the OPS person, if you don't know your close ratio, These key performance indicators are KPIs for a reason, and that's because you must know them. I do not care about the size of the tires on your truck or which brand of mower you have, it will not move the needle for your business. And in a recession, everyone that thinks it is and consumed their time is it is going to be caught with their pants down.

When it comes to your close ratio, there's two things that ultimately affect it. If we look here at the bottom, how do you improve or adjust your close ratio up or down? And you do want your close ratio to go down sometimes, and we'll talk about that. But ultimately it's speed and price. These are the two main factors that go into affecting your close ratio. Now, how we can determine this and how you come to this conclusion is the fact that all humans at the top value time and money. Basically, most of us are here in part because we want to make more money. Another reason why we will pay for Uber or we'll use Airbnb or we'll do a myriad of other things in our day and pay for those services is because we either believe or do save or make time.

Time and money is the thing that we sell to our customers. That's what you buy every single day from the products and services that you purchase. You're usually either chasing money or time. All humans, therefore, if we know that time and money is something that everybody values and is basically everything that everyone is goals are oriented towards, we can assume that all our customers, because they value time, want things faster. And because they value money and they want money, they want things to be cheaper. And because in order to be faster, we need to improve speed and because we want things cheaper. Your price is going to be a dictating factor of what your close ratio is. These are the variables that go into the KPI of close ratio. I need you to know this number. The last session of this entire weekend is going to be simply about one thing only. I'm going to spend an entire hour talking about one kapi, and that is your close ratio is the determining factor of almost every single aspect of the business. And we talk about this, and most of you have seen me talk about this before. When we talk about the top here, we got clicks, referrals, leads. These are the new leads. These are the prospects coming in the top of your funnel. All good things start with the funnel. We got clicks from Google, from Facebook, from nextdoor. Whatever you're trying to drive, you might be doing every door, direct mail, and driving phone calls, but ultimately you have new leads and people coming at the top of your funnel. Now, on the right hand side, based upon these clicks, we can calculate CPCR costs per click. This is usually very easy to determine because Google and Facebook love giving you this number. It's very easy for them to track how many people clicked on your ad and how much you spent. Very easy to determine cost per click. And you have people say, well, I spend a dollar per click. I spend 15 cents per click. I spend this on Facebook or Google or whatever it might be. Ultimately, you're simply paying for someone to click on an ad, regardless of whether it's on YouTube or any other online medium. You are trying to get them to click on something. You could also flip that around and use it for something like every door direct mail. You're just going to change the language slightly, but ultimately cost per click. You could also call this like a.

Cost for impression if you were doing.

Every door direct mail and flip it around. But all that to say if you're doing online marketing, you have a cost per click. And let me just say, by the way, everyone that thinks that they've got through their business without marketing is going.

To have a rude awakening in 2023.

Because their attrition is going to go up and they're going to have no.

Way to bring in new customers.

Conversion rate so once we have clicks coming in the door, then we need to have a conversion rate. What percentage of those clicks are going to be converted into leads? This means how many people that come to your website are actually going to fill out your estimate request form? How many people are actually going to click on the phone number and give you a call? How many people are going to send you an email? Ultimately, how many people that click are going to actually become a lead and submit their information to you? This is typically mostly having to do with web design, search engine optimization. But again, SEO doesn't have a lot to do with the fact that they're already clicked, they're already on your site. So typically design is going to be the thing that affects your conversion ratio the fastest or the most. How fast your website loads, where the placement of your estimate request form is, et cetera. Based upon our cost per click, let's just call it a dollar. And let's just say that our conversion rate is 1 out of 50 or 2%. Which means that out of every 50 clicks that that I get, I'm going to get one lead. If I have to pay $1 as a cost per click CPC and I have a 1 out of 50 or 2% conversion ratio, my cost per lead is going to be $50. Cost per lead, $50. Now, a lead is not money in the bank. And any marketing agency that brags to you about their lead acquisition cost, they are not at the bottom of the funnel. And it does not matter. All leads are not created equal. A lead from one avenue is not the same as from another. Talk more about that tomorrow. But cost per lead now is at $50 accepted estimates divided by total estimates. That's your close ratio. Let's assume for now that that number is 50%. So 50% of the leads that ask for service, you're going to close. You're going to get them to accept and become a customer. So if we have a $50 cost per lead and 50% of those leads become customers, what is our customer acquisition cost? 100. $100. That means that if I put $100 into my business, I'm going to get $100 out. Here's another really interesting fact. If you lose a customer, you just lost $100.

And he's like, well, customer service, you know, I'm just trying to grow. We've got all these complaints. Customer service issues are costing you a lot more than your marketing spend. The reason we like marketing spend is it's something you can keep tapping into and spending more. Whereas attrition takes some deep work on customer service and changing your systems. And for the people that can't have good customer service and also cannot market that equation, when attrition goes up and they cannot get the leads in for the cost of acquisition, that is acceptable. They will fail in 2023.

All right, so at the bottom of this funnel, this is where most people stop, and that is new customers. That's number one. That's our offense. That's what everyone loves to talk about. That's what most people know. That's the things we understand. That's the thing that's sexy. That is the quarterback. That is the running back. That's the front of the magazine. That's what every single company in this industry is trying to sell you on is offense.

You'll make more money, you'll be more efficient. You'll save 50%. You'll be able to do twice as many jobs. If you buy this piece of equipment, if you buy this, if you buy this, they're always talking about this. You know why? Because it's hot as hell, it's sexy, and everyone likes to talk about it. I want to talk about the bottom part, because this is what we all need to know. Going into recession, when we start to lose customers, and that's when you get a new customer. That lead that became a customer drops out of that funnel and goes into this bucket. And in that bucket, this is where you actually make money. By the way, a new client doesn't give you anything. They don't give you a single dollar. This is your customer base. These are the recurring customers. These are the projects that you consistently are able to upsell a project to a property cleanup, a mulch install, a leaf cleanup. These are the people inside the bucket of your business and the holes at the bottom is where their customers leaving every single day. These are the ones that quietly quit on you. These are the ones that just say, hey, we're gonna go ahead and just do it our own. And really they're hiring the guy next door. These are the guys that get laid off from their job. They used to be making $100,000 a year. They get laid off from their job and now they need to cut back out some expenses and they're going to try to cut out that $200 per month mowing bill by doing it themselves. This is the guy that you miss your edging on two or three times in a row and finally he's just fed up with it and he cancels. This is the person that tries to contact you asking for an upsell, asking for a property cleanup and you don't get back to you for five days. And so he just does it himself. And so next spring he just decides he won't use your service, he'll use somebody else. And these are the silent killer of almost every single service based business and why. Most service based businesses will plateau if they're trying to grow and they don't understand why. And they're constantly trying to feed money and marketing and more customers and more equipment and more trucks and they've bought into the lie that getting more customers somehow makes you more money when getting new customers makes you not a single penny. Keeping the customers that you have and keeping them for a long time over and over and over again and delivering on the promises that you made to them when they came out of the bottom of this funnel. That's what makes a real business.

That's number two. That's your defense. And a lot of people will even stop there. But there's a third part and a third component to every great football team, every great organization. And that is the fact. Yes, you have your offense, your close ratio, yes, you have your defense and you need to guard attrition. And you make sure that people answer the phone and do the estimates fast and all the other things that we just mentioned. But the thing that many of us also forget about, again, we just neglect this because it's not sexy and no one wants to talk about it. But the people that nail this are the ones that grow great businesses, not big businesses, great businesses. I recommend a book called small giants and ask yourself if you really need to build a $100 million business to.

Be called great as an entrepreneur.

Number three is you have a special team. You have your offense, you have your defense, and then you have your special teams unit. What does the special teams unit do? They come on the field when the team has made a mistake.

They come on the field when they didn't convert on fourth down or third down, I should say. They come on the field when typically they're pinned up against their own end zone and they have to flip the field. And a good special teams unit can save and heal a lot of wounds created by a bad offense and even a bad defense.

Hey, thank you so much for listening. Looking back, Landscape Summit 2023 was a game changing experience for all of us and we even had such a good time. We can't wait a whole nother year for another one, so you don't have to either. Coming this October 16th, we're holding a whole new Landscape Summit. We've outgrown our hometown and we need a much bigger and better location to host the largest business conference the green industry has ever seen. So for the first time we'll be holding Landscape Summit in Louisville, Kentucky at the Omni Hotel. Start out your week with great talks from industry leaders and keynotes from Mike Gandies that will completely change how you do business. And then head over to Equip Expo. It's just down the street at the Kentucky Expo Center. This isn't like any event we've held before, but we need your help to make it happen. So get your tickets now@mikeandys.com summit and.

A good special teams unit can save and heal a lot of wounds created by a bad offense and even a bad defense. Because if that special teams can be backed up on their own two or three yard line but kick a great punt and now you're down at the 10 yard line of the opposing side of the field. That can really flip the momentum of the entire game. But somehow we don't realize that special teams is important. You don't get to see the kickers and the punters in the NFL on the front of magazines. Nobody knows their name and they're usually geeks and they wear glasses and they're a joke. They're the laughingstock. Are they even an athlete? And ultimately in your business, the RE engagement program is what that is. How do you take someone who left your business? They've been the person that fell out of the bottom of the bucket. They are part of Your attrition, they are part of your churn. How do you convert them back into becoming a paying customer again?

And some of you have never even thought about this. We talk about marketing and we'll talk.

About this weekend and we'll get excited.

We're gonna do this marketing. Let's go drop the marketing keynote this entire weekend.

I'm not talking about marketing.

I know usually I give my top five and where things are at. It's not going to be the differentiating factor in 2023. It's gonna be the people that figure your defense and the special teams of reengaging the customers that drop out. What do you say when someone says they don't have the money to be able to continue service? What's your re engagement program? Oh, it's fourth down. We'll just give you the ball and.

There'S the end zone.

That's what a lot of small business.

Owners are gonna do in 2023.

Just gonna give up.

They're just gonna throw in the towel. Cause they're backed up and they feel like there's so much pressure and it's.

Like, why would I even try to re engage? Why would I try to do an email campaign? Why would I call that customer when they just blasted my crew in the face? And because they haven't blown off the back porch five times in a row. It's a re engagement program on a monthly basis. You'd be contacting every single person in your database. I don't care if they curse that you said a negative thing. Put a negative review on to Yelp or Google or whatever it is. You've got to get them to flip the field back to being a paying customer. Because maybe you were the first service they tried and they thought you were horrible and ugly and all the rest of it and they wrote a bad review. But then they go try three other services that don't show up. You know, it's not so bad. At least they showed up and they did a good job and they answered my phone calls. I can deal with the fact that one blade of grass was on my front porch. And you wrote them off.

Attrition, like we already talked about, clients lost time to close. This is another KPI, another key performance indicator that I think we should all know on the back of our hand. The same way that close ratio is important. Time to close is extremely important. This is the average number of days that an estimate goes from cent status to either won or lost. I don't care if it's won I don't care if the job is accepted. I just want an answer from the client. Your clients, if they ask for an estimate, they owe you an answer. It might be no. They might think you're the most ugly most. You want to make all this money, you're parent ripping me off and all the rest of it, but you need an answer and it is horrible. I scrolled through dozens of CRMs every single day and see this consistently. First thing I do when someone's complaining about stagnating growth or about attrition is I go to this number, I go to the estimates page, I select how many estimates were sent and I see how many of them over the past few weeks are still their status is sent. They haven't been won or lost. It is staggering. I would imagine 50 to 60% of your estimates never get a response.

They don't say no. They don't say you're too expensive, they don't give you a reason. They just don't accept. And you're somehow okay with that? The fact that you took 15 minutes of your office to take all the notes and put them through some screening process about what projects you can and cannot do, you check the service area, you make sure they're in your area, you scheduled the estimate for them at a certain time. You slotted out a window of time in the middle of your day when you could be making 80 or $100 an hour on a job, and you drove 30 minutes to go visit with them, and you spent an hour with Mr. Jones and then you drove another 30 minutes back. That's two hours that you just spent on that. Now you spend another hour putting together the estimate and then you send it over to your estimate. The person that sends it out, your office person, they spend 15 minutes putting together the numbers, putting in really nice detail, putting on pictures and videos, and you send it. And now all of a sudden, if you multiply the hours you've spent on this estimate, it's likely four to five budgeted hours that if you multiply it by the opportunity cost of, let's just call it $80 per hour, you're literally paying 33 to $400 to get this estimate to a customer. And somehow we're okay with them not telling us yes or no.

But that requires a hard conversation because you're going to have to call Mr. Jones and say, Mr. Jones, I came and met with you a couple days back. I sent the estimate over. I left you a message yesterday. And now I'm just wondering, would you like to accept the proposal, and if it's no, that's fine. I'd just like to know why. But if it's yes, I can get you on next Thursday. We can get the project started.

Well, you know what? It's just too expensive, all right? You need to have an answer for that. You need to be convinced so much of the fact that if Mr. Jones accepts anyone else besides your proposal that you're letting Mr. Jones down. And if you care about Mr. Jones and you actually believe that, that you are the best option for Mr. Jones, it is your duty to ensure that every objection is cleared and for the path towards an accepted proposal.

And yet somehow half of our estimates don't get any sort of answer. I don't care if you have to go to their house, print off the estimate and demand an answer. I don't care if you have to harass them, but get an answer on these. When an estimate is sent, it is not done. You made no money. It likely costed you hundreds of dollars.

There are ways to improve this.

For example, with mowing, where you do quotes over the phone.

There are ways to reduce this by making sure you do screen projects and ensuring you're not going to a project, that you actually don't do those services and wasting that time. But ultimately, this is the number one deciding factor of whether or not your customer acquisition cost is going to be at a place where when recession happens and your attrition will go up this year, who is able to spend effectively to retain and get new customers into their funnel? That's who will win this game. Labor efficiency, another KPI key performance indicator. Every single project needs to be tracked. If you do not have a CRM, I'm begging you, flip a coin and choose one. Anyone, just please start tracking this stuff. I talked yesterday to a landscaper I was pulling up at the bank, saw this landscape. I hadn't talked to him for probably five years because I've just been out of the field locally. I saw him parked there. I rolled up on him. And because now I'm out of daily operations, most of them will talk to me because they don't feel as threatened. So it's great. So I roll up to him, say, hi, how you doing? And he does hardscaping. We sub stuff to him all the time to subcontract the projects we don't do locally. And so obviously he likes us because.

We give him the work and stuff like that.

But I asked him, do you use a CRM? Do you have any software or anything. He's like, no, man. I usually just tell my wife on text and then she'll put together the invoices and we'll do paper and we'll send it out. You can't track this on paper efficiently. And if you're one person, like, oh, it's so much work, you will never get more than one person because you'll never be able to keep track of these KPIs effectively or efficiently or know them very quickly. But this is another KPI key performance indicator. Budgeted hours. How many estimate hours do I believe the job is going to take? Typically for projects, this is extremely important. Mowing, you can get away with this sometimes, but for projects you've got to know this. For recurring jobs, it's important that over the course of a period of time you understand this number because this is the number that's going to determine where you raise prices. How should I raise prices? Who should I raise prices on? How much should I raise it? This number will tell you if on average 20% of your jobs have a higher clocked hours than the budgeted hours because they're taking longer than expected over the course of a year. That's the 20% of customers you should raise your prices on for projects. This is something you gotta know. How are you paying your people when they're taking forever? But because they work hard when you're in front of them, somehow you believe they're your best guys. It is a laughing stock when I roll up on cruise because now I don't have a Augusta vehicle, a little red Civic. I can roll up on crews and watch them all day long. And I'm able to watch crews that literally will work for about 10 minutes while the crew manager or the estimator comes and shows them the job in the morning. And I watch them go back into that truck and take a nap for an hour and an hour and a half.

So why in the world will you not track this to determine that maybe Something's off that Mr. Jones job, that should take 30 budgeted hours. Somehow, boss, it took 80. The back was aching, it was wet, the tires popped, the wind was blowing from the northeast. What other excuses have we got? This is the number that's going to tell you how efficient your labor is. And ultimately the only thing we sell in this industry is time.

Oh, no, we sell mulch and lawns.

No, no, no, no. We either are saving people time or saving them money. That's what they're buying. So you're either going to be cheaper than everyone else or you're going to save them the most time. Oh, you know how you can save people time? Making sure you answer the phone and you communicate effectively and you have automations and you can charge their credit card. These are all really basic stuff if you've been doing it for a long time. But I'm astonished how many people can't track that when this is. The only thing we sell is time labor. Your job, as in any home improvement business, any service business, is how do I take a unit of something time an hour and I spend $20 to get that hour, Say, oh, we're gonna flip things on ebay. Here's a flip for you. Take that $20 worth of labor and time and create a system by which over the course of time you've made sure that you turn that $20 into $80 or $100 or whatever your hourly rate to the customer is. That's the best arbitrage most of the people in this room will ever have.

But we've got to know what our budget hours are very quickly. If your budget hours and your clocked hours are not being managed, you can be running an extremely inefficient operation and scale massively because your marketing is on point, that is your offense is on point and your defense can't stop anything because you stink at customer service. You can't flip the field because once you get a customer that swears at you, you write them off, you swear back at them and you pound them. You go do this seriously. Where's the re engagement program? Where's the thought that I'll get them in three months, they'll come back, I'll keep working on them on the email, I'll call them next month to see how they're doing. Where is it in this industry? Because that's who's going to win. When customer acquisition cost goes up and attrition also goes up, the only people that will win is when the top of that funnel is now no longer making any sense to any of us in this room. And you can't buy customers for anything. You have to rely on a good defense and a great special teams field.

Project completion percentage. If you're doing projects, this is again pretty basic stuff, but you've got to know how many hours have been clocked on the job, on the project divided by what's the budget hours on the project. How long should this job take? Well, if there's 50 budget hours, it's already clocked at 60. We're over budget where are the red signals going? Hey, hey, we're over here. Let's talk to the crew manager. What happened? What went wrong? Let's have a recon. Why did this go 20% over budget? Either you as the estimator, if you're doing sales is incorrect and needs to be corrected and modified, or, or B, you have a problem with that crew. But if you don't track this, you're going to judge their efficiency based upon how they feel at the end of the day, the jokes they tell you and what they do on the weekend with you. And that's who you'll incentivize too.

All right, let's talk about capacity based growth. Is this helping anybody? That did not sound very convincing. Is this helping anybody.

Spend too much energy for not enough response? Come on people.

All right. Capacity based growth. So this is extremely important. If you can figure this out and this makes sense to you by the end of this weekend, I guarantee you this will change your business.

And I'm not charging you for it or anything. So like there's no perverse incentive, just do it.

It's great. Capacity based growth is the key way to, as the title of the keynote says, determine exactly how big your business should be to maximize profit. Okay, let's go ahead and do some math. Everyone ready? I know it's late, you guys are all on Eastern standard time. You got a little yawn. Let's go. Stretch it out. Let's go. We're gonna get into some math. Alright? Capacity based growth. Follow me. And if you lose, just try to hop back in.

Okay, get the concept.

All right, we have one person out in the field, one man, 35 budgeted hours per week. Like oh no, we work 40 or 50 or 65. Okay, fantastic. Let's assume that you're a regular human being that is going to get 35 budget hours done in a 40 hour week. That is extremely high by the way. I would rather you budget for 30. So if these numbers seem a little bit high to you and you're going to do these yourself, I would recommend using 30 budget hours. That's a 75% efficiency rate. 30 divided by 40. Remember back labor efficiency, you got your budget hours divided by your clocked hours. 75%.

That is assuming 25% of wasted drive time, load time, unload time, and whatever.

Else they waste time on throughout the day.

All right, so if we have 35 budget hours per week, which again is very, very good, and we multiply that by 4, we can assume about 140 budget hours worth of labor being completed on a monthly basis. Now, you can punch your numbers in here. 140. Multiply that by 80. That's $11,200. One worth of labor revenue per month per person. So if I have one person out in the field working full time, again, very efficient, 35 budget hours, and I'm charging a good rate, $80 per hour. But if I do that, it means I should be able to, based upon the labor capacity, I should be able to do up to $11,000 worth of labor revenue like we do $40,000. You're probably in projects or chemicals.

All right, take it easy, buddy.

But if you're doing mowing and you're doing 80, and we're not taking into account chemicals, or we're not taking account product costs or estimate fees or dump fees, labor revenue, that's what we're tracking here.

All right?

Yeah, like what Liz said at the beginning.

I didn't tell her to say that. But the whole ego thing, we gotta kick the thing out the door. People like, come on this weekend.

If anyone's like, oh, I'm so like this, just seriously, please, you have my full permission to sock them in the mouth.

It'd be great. That should not be on camera.

All right, so $11,200 is what we can expect in terms of capacity for having one person. Which means if I have two people, assuming an efficient system, obviously there's waste. As you start to add more people, you're going to have more meetings, you're going to have less efficient use of labor. But just follow me for an example. $22,000 is going to be my labor capacity. That means I should be able to do about $22,000 per month in labor revenue before I would need another employee or I go beyond capacity, which typically means you're not working 40 hours a week. Now you're working 45, you're working 50, you're working overtime. And we'll get into why that might not be a good idea in just a second. Three man, four man, etc. We're just doing the math based upon 35 budget hours, an hourly rate of 80, etc. So that is labor capacity. All right, freeze frame that in your mind. There's labor capacity. Now let's talk about asset based capacity. Because if we're going to assume that the maximum number of people that you want to have in one truck is going to be two. And you can change the math on this. I'm just doing this as an example. But if we assume that it's going to be two people in each truck. That's your max that you will put in a truck, which if you're doing.

Residential mowing, is typically a good idea.

If you're doing commercial, you can usually get 3, 4 or more if you're doing 16, 18 budget hours on one stop. But anyways, if we're going to assume a two man crew is the max that you would allow on a route, we can then assume that because we have one truck, that would assume two employees. Therefore we know our capacity based upon assets that we have, the trucks that we have that we can do $22,400 in labor revenue if we have two trucks.

It's just math, right?

So two, two trucks.

You can see the math if you have six.

We should expect that if we have three trucks, six employees, that the absolute capacity. Keep this all in mind, absolute capacity is going to be 67,200 in this case. Cool. Now freeze frame that for a second. All right, so we got labor based capacity based on how many employees we have. And then we have truck capacity or asset based capacity based upon the trucks that we have. Freeze frame that because we're going to add a third one in a second. But I need to explain this.

I'm going to step over here.

Sorry, guys.

All right, so we got revenue over here. As we increase in revenue, whether you're doing $20,000 a month in revenue or $60,000 a month in revenue, there's going to be certain fixed expenses. Basically, fixed expenses are things that do not change. The cost that you pay for rent, for insurance, whatever it might be, that do not change based upon your production or the amount of revenue. Just call it revenue because we're selling time. So that's ultimately production. As your revenue goes up. If that fixed expense stays the same, that's a fixed expense. If it stays the same, things like your insurance, your rent, it's not like your landlord's like, oh, you made less money in winter, we'll dock the rent. Not happening. That's a fixed expense. Does not change month to month based upon the revenue. Everyone clear on that? Very cool. So that means regardless of how much revenue I do on that bold line, this fixed expense is basically the same. Typically fixed expenses over the course of a revenue on a chart like this will do step ups because you'll have to upgrade your insurance or upgrade your shop space. It's usually steps, but over the course of any smaller unit of time, your fixed expenses do not change. If next month you doubled in revenue, your insurance wouldn't change immediately. It'd change on your next renewal and it'd step up. Does that make sense? Fantastic. We have fixed expenses. We're looking right here though at this is not time. This is not time on the bottom. This is revenue. So as I increase in revenue, my fixed expenses stay the same and my variable expenses do go up in time. Why? Because the biggest variable expense that we have is labor. And if you do project based work, you're going to have materials in there too. But it makes a lot of sense that it's a variable expense because it varies based upon how much revenue you do. So if you double in your revenue next month, it's very likely that your variable expense of labor and materials is also going to approximately double. Make sense. Fantastic. It's a variable expense. It varies based upon the revenue you produce. And you cannot just double your revenue without moving variable expense up. Typically, wages and product cost are the largest factors which when it comes to your variable expense. This is also called cogs, cost of goods sold, direct labor for us in the service industry. Pop it in there.

So what this means is as I grow my business, I am eventually going to hit something called a break even point, which means I cover my fixed expenses, but I also have to cover these variable expenses that I have in my business because I have labor and I have other costs like fuel. A variable expense, the more I drive typically correlates with how much revenue I make. So as I make more revenue, I expect to pay more in fuel. Is this okay? Is everyone following? All right, fantastic. So this is your break even point. This is where you hit a certain dollar amount and you start to make profit. Anything below that on a monthly basis, you are losing money. So anywhere on this chart where I'd be making this amount in revenue, you can put whatever numbers you want. You'd be losing money because you're below break even. You might cover your rent, you might cover the fixed expenses, you might cover your insurance, but if you can't cover your wages, you eventually go broke because you're losing money. As soon as that line crosses this one though, I start making profit. Here's what's really cool.

So let's go ahead and use this example. I'm just going to use this example. You can throw your numbers in here. I'd recommend taking pictures of these slides. Revenue. Let's just assume that we're doing $42,000 per month in revenue.

We have a fixed expenses of $35,000 that we must Cover in order to be able to just cover costs. This is the revenue to cover our fixed expenses. Now over here we have our capacity of three trucks, which is $67,000. Our revenue here, 42,035 is our cost to break even on our fixed expenses. Here we go. So our break even, we're going to assume is $35,000. Just assume that. Let's just peel some stuff away. If you made $35,000 a month in this business, you'd break even. No profit, but you'd break even. Everyone following, let's assume you make 42,000. That's the revenue for this month.

The most profitable revenue in your business is this part from break even forward, the part between where you're currently at the 42,000, that's your revenue. And what your capacity is, is lost opportunity. Because this is where all of the profits in your business are. And people are like, oh man, I just can't make any profit. I'm running a 3, 4, 5% margin business and I ask them how many trucks they have and I find out that their capacity is literally double or triple what their revenue is. This is where all of your profits are sitting, every single person in this room. If they could just calculate their capacity, what their revenue is, what their break even is, and realize that anything on the right hand side of that break even is way more profitable on the left. Because guess what, Your profit margin up to break even is 0%. Because guess what? If you make 35,000 revenue, your cost of 35,000 all in break even 35,000, I make nothing. Here's the cool thing. Let's go back a few slides. Check this chart out. As soon as I pass break even, I no longer am having more fixed expense. It's only variable expense. And for the vast majority of if you can have your labor be like 30 or 40% of your gross revenue, that means that the revenue that you generate after break even is usually around 50 to 60% profit, right? So let's look at this business. We have $42,000 in revenue. We have a break even of 35,000. That's $7,000 above break even. If we have a 60% profit margin on that revenue, that means that we're going to have $4,200 profit. If you take 4,200, you divide it out by our total revenue of 42,000, we now come to a total profit margin of 10%. In this industry, that is considered a good business. 10% profit margin. Here's what's really cool if you just knew your capacity and realized, okay, I have enough trucks to be able to do more revenue, I have enough employees.

Do more revenue, there's capacity for me to grow.

And I'm not trying to push anyone to grow.

And trust me, you're going to get.

That sense in a matter of minutes. But if you just grow $10,000 in top line revenue, if you did that, you'd go from $42,000 in revenue to 52,000 in revenue, 10,000 more in revenue. However, because you cross break even and all that revenue is on the other side of break Even and you're 60% profitable on it, you'd literally be $6,000 more in profit. So you go from $4,200 in profit to $10,200 in profit, you would double your profit, more than double your profit by simply adding about 25% of revenue. 42%. 42,000 to 52,000, approximately 25%. But you double your profit and your profit margin went from 10 to 19.6%, effectively doubling your profit margin. This is how close many of our businesses are to be extremely successful and profitable. It's a matter of realizing that you simply need to realize that any sort of revenue that you generate from now to capacity is where all of your profits are at. And the problem is you're so wrapped up in the fact you're running a 5, 6, 7% margin business and where is the money? But yet your trucks are sitting around, you have $80,000 a month in capacity and you're still sitting at $40,000 in revenue. And, and because of all those fixed assets, because of all those fixed expenses, your break even is so high you're not making any profit. And then you wonder why I tell people that buying more trucks and equipment is literally less than 1% of the time. Why they fail, it's because of this. They buy stupid stuff that over hire and have people that are so inefficient with labor, their capacity is so high for both assets and labor, and yet their revenues are literally half of their capacity. And all of their profit is literally sitting in the shop space in unused trucks, equipment and labors capacity based growth. Now I thought this was pretty clever, pretty cool. And then one time I went and talked to one of our franchisees out in Michigan and he talked to me about what he had gone through in 2022. And I realized that this was missing something because this model that we were using was, was missing one very key component, another capacity that you have to take into account.

Personal capacity. What amount of revenue are you able to do without breaking? This is a number that requires some serious self reflection and looking inwards and asking, really, what can I handle emotionally, psychologically, spiritually, with my relationships? What amount of revenue can I handle?

Because if you cross the capacity of any of these capacity limits, both labor. Cross that limit and you're gonna start overworking your crew. You will not have employees. And you're like, my churn is so bad. Yeah, they're working 50 and 60 hours a week. You're over capacity. So, Well, I gotta buy new trucks. Why? Because I only got two and I work them every single day. Yeah, you know what you're doing? You're over capacity on the truck. So when it breaks down. Yeah, you are in a really bad spot. So you know what you go do? Go buy a $50,000 truck. No.

Realize that you're pushing capacity beyond the trucks you have. And you've created dependence for the business because now you're over capacity limits. And the same thing is true when it comes to personal capacity. Because it's very easy to look at laborers and employees and see them as math and look at trucks and see it as math. But we all miserably fail at this personal capacity. What is your actual limit? And I know the garbage that people are fed of, like, it's limitless. You can do everything. No, you can't. You're gonna burn out.

Instead of, I cannot afford that. I should say, I am not willing to endure the pain that is required. I remember thinking this, like, I don't know, late at night, wrote it down in my little remarkable.

That's what all these little marks are. There's my pad.

Instead of, I can't afford that. Because I hate when people say that. Just take that whole little phrase out there. I should say, I am not willing to endure the pain required. You know why you aren't in shape? Because you're not willing to endure the pain required of waking up early in the morning and going to the gym. You're not willing to endure the pain that is required to eat a healthier lifestyle and do things that are hard. You're not willing. Just admit it. Come to grips with the fact that you do not have the personal capacity to lose weight, put yourself in the gym, grind yourself, work hard, do 50 hours, and guess what? That's okay.

It is an extreme release when you realize that. That, that's okay. If you can't work 50 hours a week, that's okay. If you can't run a 200 million dollar business like Tommy Mello, that's okay. That's not your personal capacity. And if you try to push yourself to that limit and you say, oh, Tommy did it, I can do it too. My truck kind of looked like his truck, I should do garage doors. I could do $200 million. You'd literally burn yourself alive. You'd burn every relationship you have. You'd burn all your finances. You'd just completely waste your life.

Any capacity gone beyond the limits of what it should be at will eventually catch up with you is a short term process and a short term gain. When you exceed capacity in both labor assets and your personal capacity, yes, you can push your crew in the short term and get them to do more and get the job done. But if you do that over and over and over and over and over again, you're gonna break them. If you take your trucks and you go beyond the capacity that we just talked about and the math of how much revenue you should be doing per truck, and you start grinding those trucks, yes, one of them is going to break and you're gonna lose a contract because you didn't show up on time. It's gonna break.

And if you push yourself personally to go and match the hours or the work that I or any other person next to you or at this conference or in this industry tries to do and you try to match that, you, you're going to break.

And ultimately, when it comes to your personal capacity, you have to ask yourself the question, what am I willing to afford? What am I willing to pay in the form of pain to get what I want?

The $200 million business that Tommy talked about, the business that Cory talked about, these great things we look up to.

It takes a lot of pain. And the reason I have really made it very clear to myself in the past several months is I will not talk about my numbers. And all the rest of it is I do not want anyone putting a benchmark on what they should be doing because of my actions, because my personal capacity is different than yours. And your personal capacity is different than the person sitting next to you and the person you're gonna have lunch with tomorrow. And the person you admire on social media, it's different. And if you just try to match them, you're gonna wreck. This is something we fight in Augusta because we all know each other so well and we start to compare and oh, man, they're doing so good and they're growing and their capacities are different than yours.

They don't have to go to church, they don't have a family, they're not married, they can put 60, 70 hours in. You can't. If you try, you're gonna break.

When it comes to the pain that you say, look, I have the trucks.

I have the labor, so I have.

The asset capacity, I have the labor capacity. I'm currently doing less than that. And I feel that my personal capacity is significantly higher than where I'm at currently in terms of the size of my business.

You're only cheating yourself if you leave capacity on the table. The same way that lost opportunity is the result of the difference between your revenue and your capacity for labor, assets and personal capacity. The bottom line is that difference between what you are capable of, your personal capacity, and where you're at now is an absolute waste of talent. And you're cheating yourself, your family and your community from what you could be providing for them.

And shame on us if we don't push ourselves in this area, you say, well, that's really kind of speaking on both sides of your mouth. You say on one side, don't push yourself on personal capacity. You also say on the other side to push yourself and really reach. The bottom line is, are you self aware enough to realize what is your capacity? I really implore you all to know what your capacity is and just be objective about it without pride, without comparison. Just be like, what kind of business do I need to have to where the capacity that I have personally is maximized, but I don't exceed it to the point where it breaks me.

What are you willing to pay?

What are you willing to afford for your church, your family? Experiences that you can have?

You can fix pain, a lot of pain with money and building a great business. You can fix a lot of pain for other people, for family members. You can provide jobs, you can provide a safe place for people that are hurting. You can do all of that. You can solve problems with money. Money solves problems. Might not make you happier, but it'll solve problems for you and for other people and people that you love. And so if your personal capacity is so much greater than what you come to this conference with, my only hope, dream and goal of having people with hundreds of millions of dollars worth of revenue is hopefully inspired to realize your personal capacity is so much greater than you think. But if you don't know what that number is, there's a very good chance you're going to cross that and you're potentially going to break.

Like I said, excess capacity when it comes to labor based capacity, that's how many employees you have asset based capacity, that's a lost profit opportunity. That's how much profit you could have. That is the delta. That is the difference. That difference between what you're making now in revenue and your labor based and asset based capacity. That's lost profit. But their personal capacity if left untapped is buried talent.

Now this is the part I wrote in the back. Let's give this a whirl. Here's my plea and the thing that I actually am super excited about. Half of the people in this room should stop growing their businesses. Like Mike, you've never said that. That's so bad. This is the bottom line. Half of the people here should stop growing the business and instead they should focus on taking what they have and making it more efficient and profitable. They should focus on trying to maximize the capacity they already have instead of completely buying more trucks and equipment and all this other garbage.

I'll get to that in a second.

But I truly believe this, especially as we head into recession. If you're spending money at a clip that is so high and you don't have the systems in place for marketing, it's okay to stop growing. If your customer acquisition cost doubles or triples like it does in every recession. At the same time, your attrition is going through the roof because people are trying to save money. You do not need to grow because the math won't work. If you're pouring so much into marketing and you're not seeing results, it's okay to say hey you know what, we're not going to grow. Rather we're going to deploy. All this time that we would usually spend on hiring and training more employees, we're actually going to focus on something else called defense and we're going to start tightening down the automations, the office work, how we do follow up processes and that's what we're going to focus on. The defense that costs you absolutely nothing besides time, energy and a little bit of self reflection to realize that your business has problems too, like mine does and you're going to make mistakes like I do.

Coming to Landscape Summit has been the catalyst for hundreds of green industry professionals to jumpstart their business and take it to the next level. However, the roadmap to success has already been laid out step by step by Mike Andes himself. Landscape Business course walks you through exactly how to grow your business to over 100,000 monthly revenue in just three years. And and it's the only place to find the full recordings of Landscape Summit featuring talks from home. Service industry leaders like Tommy Mello and Corey Ballard enroll today@landscapebusinesscourse.com to get this month's exclusive lecture and so much more. We'll see you there.

The reason that March 2020 was so scary for this industry and everyone forgets so quickly what March was like.

When we didn't know what was happening, we were all closing down. Most of our states were telling us we could not work. Here's the real reason why everyone was afraid. It was the first time since 2008 that we ever saw people leaving our business. And no one was buying and no one was accepting estimates and everyone was delaying their jobs. And everyone was like, ah, I'm. We're just going to see what happens. All of a sudden, oil tanks, people's retirements tank. All of a sudden, everything is in massive calamity mode. Why? Because demand destruction. All of a sudden, people did not need your service because the $20 that you used to save is no longer worth the extra hour that they save because they don't have a job. And all of a sudden you have a spike in unemployment. And guess what unemployment people do. They go get a mower from Lowe's and they start mowing people's lawns for a lot cheaper than you can ever afford. And the reason we did not learn our lesson in 2020, we did not in this industry because I got so many phone calls from massive companies that were scared out of their brains because all of a sudden their projected revenue for the next three months went from 4 million to 2 million. And that was above their fixed expenses. And they knew they would be only a matter of months before they'd be out of business. Now we got saved like no other business by Jerome Powell coming in saying, we're going to give money, we're going to cut interest rates down to zero, and we're going to let this thing ride. And sure enough, we got out of it in a matter of months. But when that comes again and we can't do what we did from a recession standpoint and cutting interest rates, that will not happen again. They will let the recession happen and we'll talk about this tomorrow. Jerome Powell is very clear. There will be a period of pain for this, all this inflation stuff to get out of the system. That means high interest rates. And when high interest rates go up, no one spends money. Because we've all been living off the good life over the fact that since 2008 we've had real estate prices go up, stocks have gone up every Asset has gone up. Our economy has been doing fantastic and interest rates are so low, people are willing to spend money on the new deck, the new landscaping project, the new sod. Just tear it out and put new sod in. That stops during a recession. And people all of a sudden I close every single job. It's incredible. When I ask people what their close ratio. I close every single job. Every single job. Really Fantastic. So tell me about the last three. And all of a sudden they actually boil the numbers down to 40%, 50% close ratio. When that goes to 10 and 15%, that person is going to go out of business. And why I plead people to have recurring revenue, at least some of it is to protect yourself because at least you have a bucket. At least you have something to try to hold onto to cover your fixed expenses. Because a project doesn't have a bucket is a one time job. You've got to have something to play defense with. And that's why recurring companies are typically the largest in this industry. You don't see a lot of nine figure project based only companies because they can't scale to the point and withstand a massive recession where all of a sudden projects get wiped out. What the news will say causes a business failure. I looked this up. I kind of went throughout.

What the news or what the Internet says about a business failure, I kind of looked throughout. These are the four financing hurdles, can't get enough money, et cetera. Inadequate management, ineffective business planning, marketing mishaps. This is a bunch of garbage. This is not why businesses fail.

This is why big businesses fail. This is why people in the stock market fail. This is not why small businesses, especially service based businesses like our own, that have a low barrier to entry. This is not why they fail. Context matters when we read or listen to anything. All right? When you hear someone that has millions of revenue talk about something, you should ask yourself, the advice they give me, is that pertinent to my business that has $100,000 in annual revenue? News alert. It doesn't.

So when people are going to say, hey, we gotta buy brand new trucks, we're gonna massive equipment, we're gonna spend all this money for tax drivers. You don't have any profits to save from taxes. Why are you buying stuff?

When Tommy bought all those new trucks, he was doing 5 million in revenue and had profits to protect with taxes. If you're running a business that's at 2 and 3% margin, you don't need to buy new equipment for taxes. It's an absolute excuse to feed Your ego.

The context, and the size that someone's speaking to needs to matter in this industry. It's ridiculous.

So the size of these businesses. Yes. This is why Fortune 500 companies fail, because they can't finance things. Interest rates go way up, like they are now. And that's why we're seeing a lot of bankruptcies. Talk about that tomorrow. Yes, people do. Bad management practice, et cetera. That's not why small businesses fail. This is a bunch of excuses that I hear from people when they go out of business is, oh, man, we just couldn't get in finance. The loan. The SBA called our loan, and, you know, the management, he just. My manager, he just left me yesterday. And it's just. Can't find any good people and all these other things. Oh. In effect, we just didn't have a plan, Mike. You know, we came to conference, we heard everything, but we just didn't create a plan. It's our fault. We're bad. We didn't do a good plan. Oh, no, no. Marketing just didn't work out this year. That's gonna be a massive excuse in 2023. Just wait. Oh, man. Like marketing. No one was accepting our quotes. All the rest of it, marketing. That's what people are saying, why businesses fail and what we tell ourselves, why we fail. And the excuses that I hear is.

Well, the economy's not that great. I can't find employees. I can't trust anybody. No one wants to do the hard work. I gotta cut service. I gotta do this. All the excuses we tell ourselves why the companies fail. And unfortunately, I get to see hundreds of businesses fail every single year. I get a very good pattern of what's working and what's not. And the ones that aren't are not on that list. They are not having issues with financing and inadequate management. These are the lies that we use to try to warrant why we died, why the business died. That's what we say. The economy's so bad, the labor market's so bad, no one can find employees. I couldn't find anyone walked off the job. Customers are bad. This is my market. All the excuses we say as to why our businesses failed. The only reason I think I put that there is because this is live.

I think tomorrow long care business for sale.

It's completely free. And I'm literally doing this because I know a lot of small businesses, especially in this industry, are going to get wiped out in 2023. And I sure hope that I'm gonna make videos about how to sell, how to Buy and how to optimize your valuation. I hope it helps them somewhat. This is not paid service. It's completely free. It's gonna be live tomorrow. And I sure hope this is the last something I can throw at someone and say, please at least sell the business and pay for food to the kids. Like do something. That's the last line. I don't want you ever to use this. Here's why they really fail. What actually makes landscapers fail is these three things consistently. The locations. Whether it be Augusto or landscaping or service based businesses or any small business. These are the three things that I see why they actually fail. It's not financing, it's not the economy, it's not the labor market. Those are excuses and those are rationalizing why you fail. This is why they usually fail 90% of the time. I would say one of these three things contribute are the main factor as to why a location will close or business will fail. Number one is your relationships say, oh.

Man, Mike, we're going back to the soft stuff.

There's a balance here. You've got to push yourself. And then you also have to realize that there's certain limitations that you have as a human being and those are different from every single individual. Number one relationships. The amount of businesses that close because a spouse is not on board during the process of the business growing is staggering. In my opinion, that's the number one.

Reason why businesses fail.

Because an issue happens with a relationship, family, kids, parents, spouse, whatever it is. What's that got to do with business? This is landscape business.

This is landscape summit.

What's that got to do with. This is everything. This is why businesses go out of business. This is why people fail. This is why people quit.

This is defense say, well, you mean having date night with my spouse is going to help me run my business better? Yeah, it is. It might save the business during a recession when you're really scraping by and you need to put 55 hours in a week just to scrape by and pay off your fixed expenses.

Physical health. Why in the world are we so sloppy? This industry needs to pick it up. Why is the gym not full? Why aren't we eating healthier? We are literally working outside. We're hard physical labor. There's no reason to be sloppy. What's genetics, okay? Are we going to throw excuses? Try just go for it. What pain are you willing to endure to see the results in your business, in your life, in your family? Physical health is massive. Do you think I really enjoy working out? No, I'm Tired as I'll get out. My feet are killing me right now. And I'll go home and do jumping jacks or something stupid just to get my heart rate up. Do I enjoy that? No. Do you enjoy waking up early? Do you enjoy eating good, healthy food? I'm gonna go downstairs, hopefully meet with some great people and eat some salad. Do I enjoy salad? No. But it's the pain I'm willing to endure to see the success I want to see in my life. And I believe that the personal capacity I have is so much greater than where I'm currently at. I must put the work in. Because if I don't, I'm only letting myself down, my community down, my family down. And there must be be a duty that you receive and recognize that your personal capacity must be increased and you have something to do with it. You say, well, my personal capacity, I can only grow a business with one or two employees. Or is it. Is it because you're binging on Netflix, drinking alcohol and getting stoned every single weekend that you can't grow a bigger business? And that's bringing your personal capacity down?

And then the third and final reason.

I see consistently people failing in this business is they cross one of those.

Three capacities, whether it be asset based.

Capacity.

Labor based capacity with their employees, they're pushing that too hard. Or they push past their personal capacity. And we wonder why there is depression, we wonder why there is suicide. We wonder why there is anxiety. And trust me, every single person that will get on the stage has gone through it. You are not different, you are not strange, and you are not weird. And we need to talk about this stuff because this is why people will fail in 2023. It's not gonna be all the other garbage. And the reason that we're gonna talk about the rest this weekend, the market, the economy, labor, how this is gonna work, their marketing. That's not what makes businesses fail. And in 2023, defense is the game we must play. It's not gonna be offense. You will very rarely hear me talk about growing your business this weekend. Cause I don't believe that's what's required to get through 2023. And if we're gonna prevent a party. Third. Third of us in this room from going out of business over the next two years. It's gonna be the people that play the best defense. And that's defense. You gotta get your spouse on track. You've gotta get them on the same page. And that might mean you reduce your personal capacity because you value the relationship. But if that breaks up, you're dead and the business is dead too. Most bankruptcy is caused by what? Breakups, Relationships that didn't go the right way. You gotta get on the same page. There's a reason why we have the support track downstairs tomorrow and Saturday. Because I needed spouses to come and get on the same page. You gotta have some hard conversations about what you want, what is your personal capacity. You might want a billion dollar business, but if your spouse doesn't, you're gonna get dragged through all sorts of garbage and going through a divorce and all the hurt feelings and the distractions. And you will waste five or 10 years of your life on something that's preventable by just recognizing what your capacity is and then communicating with the spouse. By the way, 50% partner on life. Gotta figure this stuff out. You know why I'm so passionate about this? You're like, you don't even have a wife. You're right. But I see time and time and time again the reason why owners have a 1, 2, 3 year step back in their company or they go out of business is because of that top one right there. They can't figure things out with the people that are most important in their life. And that includes their family, their spouse, and the people that they love. You gotta get on the same page. You should talk about what you should. What are your goals? Like I consistently see the companies that win are the ones that bring their spouse to these events consistent because they're at least on the same page. They at least know where the ship is going. You've got to talk this through. Say this is totally off topic. This is why businesses fail. I see it all the time. It has nothing to do with marketing. It has nothing with the labor market. It has nothing to do with any of those things. It's relationships, physical health, and growing beyond your capacity. This is what I want us to focus on this conference. I know it's tempting at a landscapers conference to talk about everything but these three things. But this is what's actually going to.

Move the needle and going to help you in your business.

Focusing on this stuff. It might be a good time to get a little bit vulnerable to people you talk about and talk about the.

Struggles you're having with relationships, about the business.

Get a little bit personal about the physical health problems that you're having, the medications that you're on, what you're struggling with psychologically and mentally. That's what's limiting growth for you. It's not the economy. It's not any of that. You having an extra 50, 60 pounds on you every day. I promise you, you are limiting your personal capacity, the amount of energy you can have when you are at an appropriate weight and healthy eating correctly, sleeping correctly, not drinking to oblivion when you're doing those things, your personal capacity is so much greater and anything that's artificial that brings that down.

You'Re simply wasting the talent you've been given by God.

And shame on us.

So this weekend, I hope it's helpful. I hope we talk about business, talk about big numbers and all the rest of it.

You know, I love numbers and all.

That, but this is ultimately what I.

Really hope we talk about.

At breakfast lunches, when you're down in.

The lobby, when you're out going out.

For restaurant tonight, which I recommend everyone do, I'd ask you to talk about these three things and get open and vulnerable. You can trust the people in this room. I don't want anyone to have ego and it's okay to say I'm not doing great. Maybe not financially. You might be crushing it. There might be people in here with 3,4 million dollar businesses that want to commit suicide or potentially they're struggling with their family and their relationship and they're here because they're just trying to escape. This is what will close your business down. Please talk about this more and less about trucks and equipment.

Thanks, guys.

We'll see you tomorrow morning, 8 o' clock up here.

This has been the Mike Andes podcast. Hopefully you now can take a deeper look at your attrition and plug those holes in the bottom of the bucket. And if you liked what you heard today, we have tons of lectures, interviews and more over on the Mike Andy's YouTube channel that'll be right up your alley. That's all we got for you today and we'll see you next time.