WEBVTT
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Hey everyone, it's Mike Andes, founder of Augusta Lawn Care and Homeworks.
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Today, we're going to be diving very deep into how to compensate your general managers, your operations managers, sales managers, you could kind of fill in the list here.
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But one of the biggest things when it comes to hiring and attracting great talent is explain to them how much they're going to be compensated.
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So there's something called on target earnings, which allows you to be able to show prospective applicants how much they would make if they perform at certain levels and certain amount of profitability in the role.
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Today is actually going to be behind the scenes because at Augusta Lawn Care, we every single week do what's called an office hours call.
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It's a live video on Zoom with all the owners.
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And this is actually going to be the first section of the office hours with Nick, our owner success manager, and Lee, who's our head of sales.
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They're going to be talking about on target earnings and how to use this document to attract great talent as managers in your business.
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We got something special planned for our Ops Hours for Thanksgiving week.
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We have a VIP guest.
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Our VIP is the VP of sales.
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I would like to welcome Lee Park to Ops Hours.
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Lee, how's it going, sir?
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Hello, I feel truly blessed to be here.
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Now, it's good to see all you guys.
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I know I don't get to see everyone as much as I used to.
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So it's good to see everyone.
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But yeah, Nick invited me on.
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We're going to talk some fun stuff.
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Excellent.
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Yeah, figured we'd just kind of geek out, take you guys a little bit out of the day to day, maybe some more head in the clouds kind of stuff as you guys are grinding through the last bit of the season here.
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We're gonna talk about something that's very familiar to Lee in his world, the sales world, which is the concept of on target earnings.
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So I know for many of us, even me very recently,
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not familiar with the subject and how it relates to us and what we're doing.
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So Lee, I guess from like a really ground level perspective, what is OTE or the concept of on target earnings?
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Yeah, it's a great question.
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It is typically a phrase that is used pretty heavily when you look at like sales jobs.
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So on target earnings, meaning how much money can I potentially make at this job if I am performing to a certain level, what could be my take home pay.
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And so ultimately, the idea behind an on target earnings chart or on target earnings plan would be to ultimately tie someone's performance to potential pay, it shows what is the output that I might receive for my input.
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And it makes it very binary around the numbers.
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And so you've all probably heard of this, if you've ever had a sales job or talked to anyone in sales, it's like commission based pay, right?
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Okay, if I sell a certain amount of commissions, I'm gonna make a certain amount of money.
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But what we wanted to do is more so conceptualize this concept of on target earnings to actually potentially tie to what general manager performance might look like inside of Augusta.
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on target earnings is not something that's typically talked about outside of sales.
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And Nick and I had an idea and Mike and I think it was actually at the seven figure club retreat that it was like, would there be a way to potentially so general managers what their pay might be instead of just saying, Oh, yeah, it's a
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distributable cash or it's profit sharing, or I'll give you a piece of the bottom line.
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It's like that doesn't matter.
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That doesn't mean anything.
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Those aren't real numbers.
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How can we actually show those numbers to potential general managers?
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And so that's what on-target earnings is, is what could I potentially make?
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How is my performance tied to my pay?
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Yeah.
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And so Lee, you know, given learning this concept in the sales world and then just thinking about how could he take this and apply it to what we do with general managers and basically incentivize them towards hitting these targets that they want in order to make their pay and see how those connect.
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Lee created a really awesome spreadsheet that he's going to pull up and, and we're going to kind of go through some different scenarios.
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So I guess Lee, if you're ready, we can kind of pull that up and,
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just kind of show everyone generally, and then we can kind of walk through it and maybe build out a couple of different scenarios.
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Yeah.
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Yeah, yeah, 100%.
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Let me share my screen here.
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Give me one second.
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I'm going to try to figure out where to put this because obviously there's a ton of information here.
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Now don't don't read ahead, because there's a lot of information.
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We are going to make this availability available through the dashboard for you to be able to access and edit yourself.
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And I would also say for owners to if you're like, hey, I don't have a general manager, I might not have a general manager for the near future.
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It's a great big
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build this scenario for yourself.
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Like what do you want to take home?
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What goals do you need to hit in order to take home a certain pay, right?
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That's ultimately what it is for it is what can I take home.
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And so when we look at this scenario builder, I just want to zoom in over here on the left side, and then and then we'll actually get into the numbers.
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So Nick, feel free to cut me off.
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And obviously, you know, this is this is your show.
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These are your office hours.
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But anyone feel free to interject ask questions.
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So if we look over here on the left side, it's ultimately is a general manager compensation scenario builder.
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Now what you would want to do is put in the general managers base pay.
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Now this is just a kind of standard salary base pay of around 5,800 per month.
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So 70k per year, we're just going to assume that this is for an established location, if that's going to be your base pay for a general manager, you're probably going to be in the fifth stage of growth.
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This business that they're managing is probably doing 800,000 plus
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in annual revenue.
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So we're just going to make a lot of assumptions here while we show this chart.
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Now, there are variables when it comes to compensation.
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The first variable is the percentage of distributions, how much are we actually paying out to our general manager?
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Now, depending on the size of business, the roles and responsibilities that general manager, that percentage may fluctuate, increase or decrease.
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Okay, so that's the first variable.
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The second variable is what is the business's target revenue, because we're obviously going to pay based on the performance of the business as a whole.
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Then we have the distribution threshold, we'll get into that in a second.
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But that's ultimately what can be distributed out distributable cash through bonuses through this bonus structure.
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Then we have cash on hand, quite literally, what's the money in the bank account that the business has.
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Then we look at the distributable cash, that's basically an equation of distribution threshold versus cash on hand.
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So how much can be distributed out from the business.
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Then we have the potential general manager's bonus, and then we have the base pay.
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So I'll walk through the chart there as we go.
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Any questions or anything you want to add clarity on there, Nick?
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Yeah, really quickly, kind of the general distribution threshold that we use is a rolling average of your last three months of revenue, right?
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So if I did, you know, 80,000 for the last three months, that's my distribution threshold.
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And if that drops off in the winter, let's say I do 40,000 for three months, that's the distribution threshold.
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So everything beyond that number of revenue equivalent in your bank.
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So everything beyond the average of three months revenue, 40,000, anything above that is on the table for distributions.
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This is a nice way.
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You can fine tune this over time, especially if your manager has had consistent distributions for years, you can set maybe more of an arbitrary
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uh distribution threshold but this is just a good starting point and it what's nice about it is you never have to make any adjustments as long as it follows that general rule of thumb of an average three months of revenue as long as you have that equivalent in the bank you can safely distribute that and the business will still have enough money to operate the way that it needs to
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Yeah, 100%.
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Great clarity there.
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And also with this chart, we are kind of assuming a 25% net profit.
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So this is a location that's established, it is going to be running in profit mode, right?
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So 25% net profit.
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This is not a business that is growing at an aggressive rate, they're purchasing a bunch of assets, spending much on marketing.
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So we're also, once again, making a lot of assumptions here.
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So this would be, I guess, to generalize to this comp plan, this would be built around a location that's more so in profit mode than growth mode.
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Because if you're in growth mode, you're probably going to incentivize your general managers differently.
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I mean, that's what we recommend.
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We talk about a new owner training.
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This is more so profit mode on target earnings.
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Now, to add a little bit of clarity before we jump into the actual numbers, because everybody wants to actually see, okay, what can what can we actually make?
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What can we actually take home in this document, the yellow cells are more so for the general manager to edit.
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Now, technically, the owner of the location should edit this and then provide it to the general manager with guidance.
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But I also want the general manager to feel like they have ownership over this document.
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Hey, you have control, you can edit some of these cells because you are in the driver's seat of this business.
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Now the light green cells, the owner would edit and then really anything else doesn't need to be edited.
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The cool thing about this document is all the equations are being done on the back end.
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So you don't have to do anything just fill in the yellow cells from the light green cells.
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All the numbers will will populate automatically.
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Now, when we define some of these terms, business revenue target, that is the money generated that month or that year.
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And for some of you, this is going to be like, yeah, Lee, that's grade school.
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Totally.
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We're pretending that you are providing this to a general manager.
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So they need to know what these terms actually mean and that the definitions are understood, not that you're just telling them that, hey, you're going to make a bonus if you work for me.
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Right.
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So we're defining what these terms actually mean.
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Distribution threshold is the average monthly revenue for the quarter.
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So Nick already went into a deeper explanation of that.
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Cash on hand equals the cash available in the business bank account at the end of the month or quarter.
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And the distributable cash equals the money available above the deposit threshold.
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Now, we also have kind of like a little Q&A, and we might add to this, especially after this session, if anybody has thoughts on like, we could add more clarity around X.
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Great.
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But some of the questions that your general managers might have is how much cash on hand should a business have?
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Because if you're going to pay me out of the distributable cash, how much should you have?
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What is a good rule of thumb?
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And we always recommend never below one month of revenue.
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Cool.
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Anything you want to add clarity there, Nick?
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No, good to go.
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Fantastic.
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So let's actually jump to the numbers because that's what everybody actually cares about is what what am I actually going to take home?
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So once again, we are assuming here that this general manager is getting a base pay of 70 grand.
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Now I'm going to zoom.
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I'm going to make this bigger.
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So it's a little bit easier.
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There we go.
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So we're going to assume that the general manager is getting a base pay of 70 grand.
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That means this is pre-tax, obviously, five thousand eight hundred and thirty three dollars paid out per month.
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That means in a quarter they're going to get seventeen thousand five hundred dollars in base pay.
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Now, if you remember here, yellow cells, the general manager gets to edit, light green cells, the owner gets to edit.
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So with your general manager, it's like, okay, what are our goals per month?
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What are the business revenue targets for each individual month?
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Okay.
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We fill those out there and that gives us our quarter total.
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Now the quarter total here is $175,000.
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We also have a green cell here that is the owner editing and in this location, the owner is willing to give away 25% of distributable cash.
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So probably a location where the owner is not showing up much, right?
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That's a pretty hefty amount of distributions.
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But that means that the owner probably isn't going to show up there.
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So they want to incentivize that.
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Now, the way we get our deposit threshold, excuse me, is once again, doing that math, we have our cash on hand here.
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So these are green cells, the owner would put this in.
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So the owner needs to put in what should our projected cash on hand be for each month.
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So you can see here, these amounts put in.
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And then basically, your quarter one total is just going to equal whatever it was in that last month there, as you can see.
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So $107,000 is the cash on hand.
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So our distributable cash equals $48,667.
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Now that number came from these two numbers above.
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Our deposit threshold was the average monthly revenue for the quarter.
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So you can see if you average out these three totals, that's gonna equal, excuse me, $58,333.
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The difference between the threshold and the cash on hand is distributable cash.
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Everybody follow that?
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Did I explain that clearly enough?
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Cool.
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So the distributable cash for this hypothetical location is $48,667.
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25% of that is to the general manager.
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So now this general manager's potential bonus for this quarter is $12,167.
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Anything you want to add there, Nick?
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Yeah, what's great about this, you guys, is it's kind of a collaborative approach to giving your GM clarity into how much money they're actually looking at making.
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And what's great about this is they can actually take it and tweak the numbers.
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If they want to make more money, it's literally, okay, whatever.
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like produce more, right?
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If you wanna make more money in January, instead of doing 45,000, do 65,000 and do it profitably.
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And again, one of the nice things with this is it connects top line revenue with take home distributions.
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So it really solidifies that link with the GM, like, okay,
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It's not just, oh, hit 60,000 this month and you did a great job as a GM.
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It's hit 60,000 this month, make sure that you have 25% net margins and you're collecting on that money by the end of the quarter so you can actually get a distribution bonus.
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So it connects that really well.
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But that's what's great about this is the owner sits down, builds it.
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Obviously, the cash on hand, that's just assuming that 25% is just stacking up every month, that 25% profit.
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But they go through, build this with the GM, talk about some of those, you know, like clarify anything that's unsure.
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But then you can hand this to your GM and say, hey, run wild.
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You want to make more money?
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like adjust adjust our monthly revenue targets and ensure that we still hit profitability and then lee can go through the rest and we can chart this out through the rest of the year but that's that's what i thought was really valuable with this is is getting the owner and the gm to collaborate and then also if the gm wants to make more money it's the same thing that we say on performance pay hey if you want to make more money produce more same thing with the gm
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Yeah, 100%.
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I even like to be, you know, if you have the relationship capital with a general manager and employee, it's like, hey, I'm a business owner.
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I want that number to be as big as humanly possible.
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So if you want this number to be bigger, make this number bigger.
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Fair, right?
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And that's kind of like the cut out all the noise.
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Like there are no biases here.
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I want to make as much money as possible.
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And if I want you to get paid for making that money, so if you want this number to be bigger, let's make this number bigger together.
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So it becomes a very collaborative approach, as Nick was saying.
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Very cool.
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So all this is broken down into quarters, because we obviously recommend that your GM compensation plan be paid out on a quarterly basis, right?
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So all this is broken down into quarters, not going to go into each individual one, you see I'm scrolling through it here.
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And then it actually totals all of it at the end of the year for the general manager, because this is on target earnings, meaning on target for the course of a whole year for the course of four separated quarters, what could I potentially make?
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So instead of saying, hey,
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I want you to be a general manager.
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The base pay is 70K and there are bonuses.
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Versus hey, the base pay to be a general manager for me is $70,000.
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Now I have the numbers from last year that we can put into this document and I can show you exactly what you could have made last year on this bonus structure.
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And then what we can do is put in the numbers that I wanna do this year and show you what you could make in bonuses this year as the manager.
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And now it gives them something tangible to actually hold onto.
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And if we run these numbers and these numbers aren't crazy, like Nick and I, when we put these numbers in for this example, made it semi-realistic.
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It is, okay, if you had a business in the fifth stage of growth, doing 800 to 900K in annual revenue, you can see that here.
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So that's our business target revenue, 900K.
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What could you pay out to a potential general manager and bonuses $42,000.
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Add that to their base pay $70,000, the on target earnings for this business.
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And it probably runs like clockwork.
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Like this general manager is not a slacker.
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They are high performer, but they are worth that $112,000 in our opinion, based on this model.
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Nick, anything you want to add to that?
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Yeah, and you can certainly exceed this again.
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This is just like the standard.
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This is like the template.
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And then Lee is going to share this on the dashboard.
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It's the same as always file, make a copy, and then you can just fill in the columns on your own.
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But the sky's the limit with this.
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And that's what's so great about on target earnings is you can just tell the manager, hey, if you would like to make more, figure out how to produce more money or sorry, figure out how to produce more revenue and then also make sure we ensure profit.
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And that's how you make more.
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So it's never like, hey, can I have a salary raise or anything like that?
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Like that just doesn't exist.
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Right.
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Same concept as P4P.
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Yeah.
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Yeah.
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And obviously you can edit this, right?
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That's where these, the owner sells, let's say, you know, you, you make up the compensation plan with them where it's like, Hey, I'm going to give you 25% quarters one and two, assuming I don't need to show up to the business after six months of you running the thing, I might bump it.
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I might bump it to 30%, right?
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And then that's going to increase their bonuses as well along the way.
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So you can see that bumped it $2,000 for the year, right?
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So let's just do 30% in Q4.
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boom, that just bumped their bonus up five grand, right?
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Just by changing the percentages slightly.
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So now I'm making like quick changes here, but ultimately it gives you a tool to play with.
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Like what can I afford?
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If the business is performing to a certain level, also what can I as the business owner afford to pay a general manager?
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Oh yeah, and if I do nothing, I wanna pay a higher percentage.
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And if I need to be there a lot, like I said, like you could start them at, hey, you're gonna get 10% in your first quarter, and then you're gonna get 15%.
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Now I wouldn't recommend doing this, you know,
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as aggressively, but you could do like a ramp where it's like, hey, you're going to get 10% and then maybe you're going to get 15% and then more and more and more.
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So you can see how it changes.
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And then that year end total obviously is reflected in those bonus changes.
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If this sort of discussion is helpful for you as you begin to copy and paste and do multiple locations, having this sort of community and training is what, in my opinion, sets Augusta Nation apart and allows you to be able to copy and paste multiple locations much faster and with more confidence and success.
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We already have the command center built.
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Your website's done for you.
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The ads.
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Everything is put in place so you can copy and paste with the greatest amount of ease.
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So if you have...
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read the book and you're like, that'd be a lot easier if I was just on these office hours and able to ask my questions and have these sort of on target earnings just done for me, then I'd recommend joining Augusta Lawn Care.
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You can go check out Augusta Lawn Care services.com slash franchise and book a call with Lee and his team.
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And I'll see if joining Augusta Lawn Care is the right fit for you.
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Yeah.
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A couple of questions that came in through the comments and Marco, Tim, if you guys are available, I think your cameras are off.
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So if not, no worries.
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Oh, Marco, I think you're good, man.
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Do you want to clarify your question that you put in the chat?
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Yeah.
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If it's, does it stay the same, that compensation model that you guys are showing, if it's an operations manager that doesn't handle this compared to a manager that handles both the sales and operations, the same thing?
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Yeah, so this is based on distributable cash.
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So this is not like a sales comp plan.
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It's straight across, is the business profitable?
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And are we above a certain amount of threshold in the bank account?
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Then I can pay you bonuses.
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So that's Mike's preferred way of paying out general managers is through the distributable cash model.
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There are no incentives here around growth or sales.
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It's strictly run the business as profitably as possible.
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If you wanted to do sales bonuses, that'd be completely separate from this.
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Yeah, like this is really in line with like the whole Augusta model that we preach.
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One person at the top of the organization who answers for everything, and then they just get a cut of distributions.
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That's it.
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Versus having crew leads and operations managers, and then they get a cut of distributions, but they don't really have full ownership over the results.
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So then it gets really muddy, and then people kind of lose that link between their performance and their compensation.
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So again, this is...
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really just for the Augusta standard model, one GM running a location just under a million dollars.
283
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Yeah, and I think, and I do see a hand coming up and there might be other questions.
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One thing as well, like this is the big caveat for this is this is an established location in profit mode.
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Eventually, would I like to build out a comp builder for locations in growth mode?
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Yes, there are a drastically increased number of variables when trying to make a comp plan for a location in growth mode.
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And it also kind of depends on what you are willing to pay out to a general manager when you are in growth mode.
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Because if you're like very risk tolerant and you have maybe additional capital available in an extra savings account somewhere, you can just redline the thing and pay out way more per sales transaction than maybe some other owners.
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So this is as Nick said, this is around the Augusta business model.
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We have a business that is running very efficiently, high rate of recurring revenue, command center handling everything.
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One overhead position, this is what we can confidently pay them and reward them for their hard work.
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Yeah.
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And that, that kind of answers Tim's question in the chat.
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You know, he said, if, if you're in growth mode, is it good to compensate based on revenue targets?
295
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Um, since there's not going to be profit or distributions?
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Yes.
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Um, and again, just in line with what Lee's saying, if you're in growth mode and you're not bootstrapping it yourself as a manager, you're coming in as more of an investor type, you're supplying capital and the manager's on the ground doing everything.
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You're going to calculate that in your business plan, your five year projection.
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That's going to be part of your burn rate.
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It's like you're going to burn money.
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you know, you're going to be paying out revenue goals when they're doing 30,000 a month and you're negative because you're incentivizing growth.
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But then once that location matures, you park it, then you switch to distributable cash.
303
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Yeah, 100%.
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I think there were a couple of questions, Matt or David.
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I don't know if you guys can unmute yourselves.
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I can't see the chat or anything.
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So, yeah, I know you mentioned how you could use this for compensating an owner as well.
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Yeah.
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Yeah.
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Are there any changes that you would have to make to any of the calculations or basically just switch?
311
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Yeah, it's completely up to you.
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Like you basically the only sales we recommend editing are the light green and then the yellow cells.
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And then you just put in like, what is your base pay?
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And then how much are you comfortable taking out of that distributable cash threshold?
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So like for an owner, let's just say hypothetically here, and I'm not saying this is you, David, let's say you're like, hey, I'm just going to take bare minimum, like cover my kind of cost of living out of the business.
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Like I'm just going to take, you know, 50K, right?
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I'm going to take less than five grand a month out of the business.
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And then, but then I might give myself, you know, 50% of distributable cash.
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Right.
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So let's just run that on this, like very profitable model.
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Hey, you've worked five, six years to build this location, you're willing to take a bare minimum salary, but you want to get those nice distributable cash distributions.
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And now you can see like, hey, even a way lesser salary, you're still making more.
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and your bonuses are 84K, right?
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The distributable cash is $84,000.
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Your base pay is $50,000.
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You're taking home $134,000.
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But the business is objectively very healthy based on all of these calculations, assuming we have a 25% net profit.
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Yeah, and in the perfect world, everyone would work for free and they would only be given a commission based on what they produced.
329
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But obviously we have to guarantee base pay, right?
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So it's very similar to what we do with the field tax is like, you know, a base pay that's high enough to get them in the door and, you know, satisfied in case things go wrong.
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But then low enough to give them an incentive to...
332
00:23:51.942 --> 00:24:15.587
uh perform so kind of in this example that lee just gave obviously i don't think any of us would ever put a gm on this compensation structure but you can see how you know their salary is much lower than their upside on um their distributions so the salary would probably be the majority of it but there'd still be strong healthy upside um but i guess just throwing that out there is yeah
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Yeah, right.
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But I will add, I will add here, and I'm not going to give away too much, but like this was effectively my base pay when I ran Mike's location, the Bellingham shop.
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And I was paid out more in my distributable cash than I was my base pay.
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There is a balance to it, but that was a risk for me as the employee.
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I'm betting on myself to perform.
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And so if you have an employee that is willing to kind of bet on themselves, then yeah, you might give them more of the distributable cash because they're taking a lesser base pay.
339
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Now, obviously, that's within reason.
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But as Nick's saying, generally speaking, yeah, like doing like a nice solid 65, 70, if you're running a business of this size, and then giving them a reasonable 25 to 35 is very fair, very fair.
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Yeah.
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00:25:01.311 --> 00:25:03.213
And Tim mentioned this in the chat.
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This is part of kind of a new thing.
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It depends on which state that you're in, how aggressively that they're pushing this.
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But basically, I know there's a federal limit and a state limit, at least here in Washington, for the minimum salary threshold that you can have someone on without having to pay overtime.
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Um, so that's something to look into now.
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If you're like us and you love simplicity, we don't want to deal with that headache.
348
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Um, we're just going to meet whatever their requirement is.
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It's like in Washington, I think next year it's like, uh, uh,
350
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I don't know, it's like 70,000 or something like that to where, yeah, because we don't want to track.
351
00:25:42.760 --> 00:25:44.141
Yeah, we don't want to track over time.
352
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We don't have to mess with that.
353
00:25:46.022 --> 00:25:47.363
So anyways, look at your state.
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I know every state's different.
355
00:25:48.743 --> 00:25:52.745
Washington's literally jumping like 10 grand a year, which is just insane.
356
00:25:54.406 --> 00:26:01.231
So yeah, what I'm what I'm live doing to that point, what if you're going to have a general manager on say hourly instead of salary?
357
00:26:01.511 --> 00:26:01.751
Great.
358
00:26:02.012 --> 00:26:04.433
What I'm going to do is I'll build here a salary calculator.
359
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So that way you can have a nice round number for the top here.
360
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So if you do want to pay a general manager on hourly, you can basically say, okay, here's your hourly pay.
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Here's how many hours you're typically going to work.
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Here's generally what your salary might be.
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If you want to get around the idea of like salary caps or like, I think to next point, yeah, Washington state is bumping up salaried employees to, I think like 80 K next year, which is like very high.
364
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So it's like, Hey, then we're just going to keep people on hourly and track and make sure we're tracking it.
365
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So I'll build a salary calculator as well.
366
00:26:34.997 --> 00:26:37.939
And I guess the whole point Lee is like, we don't want to track that.
367
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You know, you don't want to be micromanaging the hours of your GM spent.
368
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Like, you know, it's working well, but,
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when the gm is incentivized by their targets and they just make it happen so i don't care how they spend their day i don't care what they did to get there as long as there's no issues in the business clients are happy employees are happy we're getting reviews whatever
370
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Um, the only thing that I'm tracking is the metrics and are we hitting our targets?
371
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Are we hitting our financial targets?
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So, you know, I don't care how many hours they're, they're working.
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I don't care, um, how they're spending those hours, whatever.
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It's like results that matter.
375
00:27:14.434 --> 00:27:16.255
That's why we don't want to track their hourly.
376
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Cause then even without caring, you're just going to start to be like, Oh, like I don't want to pay overtime.
377
00:27:22.078 --> 00:27:24.260
And you know, it's like something you don't even want to do.
378
00:27:24.280 --> 00:27:26.461
You're just going to start feeling like you have to track it.
379
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So thank the government.
380
00:27:28.488 --> 00:27:29.229
Yeah, cool.
381
00:27:29.249 --> 00:27:35.996
I don't know if there are other questions, but one thing I did want to share, I kind of was hoping there'd be a question on this because this is one of my favorite features here.
382
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Now, let's say hypothetically, this business here is not in a great cash position.
383
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So if you're not watching, you're not able to watch your screen, you're going to miss the fun here.
384
00:27:45.005 --> 00:27:47.247
But let's say this business is not in a great cash position.
385
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Something happens, whatever.
386
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But I'm just going to change one month here.
387
00:27:50.070 --> 00:27:54.693
So we know that for Q1 distributions, our distribution threshold is $58,333.
388
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Now, let's say hypothetically, the business only has $50,000 cash on hand.
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Something happened, things went haywire, whatever it is, there was a big mistake, big job failure, whatever it was.
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What happens is you can see here all these cells go zero and it doesn't affect their bonus in a negative way.
391
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So we also want to show your potential general managers that if the business is still in growth mode, if we're still spending a decent amount of money going into spring, you might not get bonuses.
392
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Right.
393
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And so that's a very good way for you to be transparent and upfront with your general manager, like because you might be promoting a general manager into their position at the end of the year.
394
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But you know that Q1 next year probably isn't going to be very profitable because you're still paying off some assets, maybe you have some large debt payments.
395
00:28:38.961 --> 00:28:44.245
Maybe you still haven't figured out your seasonitis gear and you don't have that consistent cash flow through the winter.
396
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So this is a way for you to show your general manager like, hey, in Q1, we might not be in a great cash cash position.
397
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However, if we can hit these remaining targets, you're still going to make a really nice bonus at the end of the year.
398
00:28:57.792 --> 00:29:13.455
So once again, what we're trying to do is ground their performance with their pay and ultimately being open book managers and showing them that, hey, we may have a down quarter, but you still can, based on your performance, still make some really nice bonuses here.
399
00:29:13.955 --> 00:29:14.515
Fair enough.
400
00:29:14.955 --> 00:29:17.356
And that's where they get buy into the system.
401
00:29:17.720 --> 00:29:19.681
Yeah, and it's worth walking through this.
402
00:29:19.781 --> 00:29:24.164
Again, it's like, you know, we can't assume that they understand distributions and all this stuff.
403
00:29:24.184 --> 00:29:26.265
It really helps walking through and seeing this visual.
404
00:29:26.665 --> 00:29:30.847
And like Lee said, it's like having the long-term perspective that like same with performance.
405
00:29:30.967 --> 00:29:33.629
It's like so it parallels with performance phase so much.
406
00:29:33.669 --> 00:29:40.192
It's like, hey, if you have a bad day on performance day, but the other nine days of the two-week pay period, you crush it.
407
00:29:40.813 --> 00:29:41.733
Who cares about the bad day?
408
00:29:41.913 --> 00:29:42.614
Like you're still up.
409
00:29:43.234 --> 00:29:43.974
Same thing here.
410
00:29:44.735 --> 00:29:47.817
And especially if it's projected now, if it's not projected, right.
411
00:29:47.837 --> 00:29:49.217
That wasn't the plan for the owner.
412
00:29:49.998 --> 00:29:51.038
And now you have a down quarter.
413
00:29:51.059 --> 00:29:51.839
It's like, whoa, whoa.
414
00:29:52.479 --> 00:29:52.739
Right.
415
00:29:54.020 --> 00:29:55.261
But yeah, I think it's great.
416
00:29:55.381 --> 00:30:01.805
It's, you know, obviously the leader being the GM running the day to day, the leader needs to know where the business is going.
417
00:30:01.845 --> 00:30:03.686
And that's kind of when you're taking leap from.
418
00:30:04.386 --> 00:30:17.189
the employee mindset of like, Oh, let me just focus on what's in front of me to Oh, I need to actually start thinking about this business in a higher level and seeing how my daily actions connect to the end goal, which is the money that the business spits out 100%.
419
00:30:17.229 --> 00:30:22.171
And it creates a little bit of, I guess, well, the whole idea behind it is creating clarity.
420
00:30:22.491 --> 00:30:27.212
But instead of using the word clarity, I think it creates a stability for a general manager as well.
421
00:30:27.532 --> 00:30:30.954
that they know like their long-term performance is what gets the payouts.
422
00:30:31.314 --> 00:30:33.815
Not a down month, not a bad quarter.
423
00:30:33.875 --> 00:30:35.436
It's like long-term performance.
424
00:30:35.836 --> 00:30:39.739
I need you committed here for the long term, and the payouts are going to be great long-term.
425
00:30:40.019 --> 00:30:47.643
So I can speak from my personal experience as a general manager of Mike, Q1 and Q2 were typically my smallest bonuses, right?
426
00:30:47.663 --> 00:30:54.667
But that's because you're hiring a bunch of people, you're getting a bunch of assets, you're spending money on marketing, you're working long hours, the crew's working overtime, you're tired, you're stressed.
427
00:30:54.907 --> 00:30:57.188
You're like, oh, man, these bonuses aren't worth it.
428
00:30:57.628 --> 00:31:01.689
But then I knew that in Q3 and Q4, the bonuses were really nice.
429
00:31:01.989 --> 00:31:13.232
And so it allows me to kind of have that stability of, okay, I'm willing to grind it out, put my head down and work hard for Q1, Q2, knowing that my long-term performance will give me those really nice returns.
430
00:31:13.532 --> 00:31:18.553
So it also gives them that stability as an employee and some sanity, in all honesty.
431
00:31:18.613 --> 00:31:27.415
When you're trying to get through spring rush and there's not a lot of money on the table, but you know Q3, Q4, there should be, then it gives them that stability to want to commit and work long-term.
432
00:31:27.675 --> 00:31:29.377
Any other comments, questions?
433
00:31:29.417 --> 00:31:29.637
Yeah.
434
00:31:29.678 --> 00:31:30.238
Poke holes.
435
00:31:30.478 --> 00:31:31.900
Tell me, tell me this is a bad idea.
436
00:31:31.940 --> 00:31:32.481
Like, I don't know.
437
00:31:32.521 --> 00:31:33.802
I'm, I'm here for it.
438
00:31:33.882 --> 00:31:34.963
I'm it's his office hours.
439
00:31:34.983 --> 00:31:35.824
I don't know how this works.
440
00:31:36.525 --> 00:31:36.725
Yeah.
441
00:31:36.765 --> 00:31:42.312
I guess anything on the, on target earnings, um, or general questions overall.
442
00:31:42.812 --> 00:31:43.833
What stage is,
443
00:31:45.475 --> 00:31:48.697
would you decide that you want to put a general manager in?
444
00:31:48.717 --> 00:31:55.882
Would you want to just kind of flip it to profit mode at 500, put someone in and then move on to the next location?
445
00:31:56.062 --> 00:32:02.227
Or would you kind of want to sit there for a year or two, get it to 800 and then hand it over?
446
00:32:02.957 --> 00:32:05.900
Yeah, I mean, I would default to this is where I'd push it back to Nick.
447
00:32:05.920 --> 00:32:07.261
I would say book your coaching calls.
448
00:32:07.902 --> 00:32:11.105
But generally, yes, it comes down to like what your long term goals are.
449
00:32:11.446 --> 00:32:24.659
So generally speaking, we don't recommend if you just look at like the stages of growth and the Augusta business model and what you're optimizing for, we recommend get the business to half a million in annual revenue with you as the owner operator before you hand it off to a general manager.
450
00:32:25.039 --> 00:32:33.242
Now, hypothetically, you could hand off a location under half a million in annual revenue to a general manager if they had sales incentives.
451
00:32:33.622 --> 00:32:36.263
This document is not covering sales incentives.
452
00:32:36.543 --> 00:32:39.464
This document is assuming this is a location in profit mode.
453
00:32:39.764 --> 00:32:41.265
So to your point, Matthew.
454
00:32:41.565 --> 00:32:49.172
Yes, you could hand a location off at half a million annual revenue, and then we could run the math for a location that's at half a million in annual revenue.
455
00:32:49.593 --> 00:32:55.398
And then you could go start your second location or do whatever else it is that you are trying to do.
456
00:32:55.699 --> 00:32:57.901
So that's where coaching has a lot more context.
457
00:32:58.241 --> 00:33:03.266
But generally speaking, yeah, get the business to half a million annual revenue before you hand it off to a general manager.
458
00:33:04.065 --> 00:33:08.949
Yeah, Matthew, to parrot that, I think it has a lot to do with your specific goals, too.
459
00:33:09.429 --> 00:33:13.552
So like we know the working GM, it's basically like you being in the wilderness.
460
00:33:13.713 --> 00:33:20.598
You know, you're producing out in the field, but you're also handling all the admin and you're doing that transition from 500,000 to 800,000.
461
00:33:21.258 --> 00:33:22.599
It's a difficult stage to be in.
462
00:33:22.840 --> 00:33:25.382
In my opinion, it's not sustainable long term.
463
00:33:26.202 --> 00:33:37.986
Um, so that's something you'd have to ask yourself too, is if you have someone who's in position at 500,000 and they're okay with that, and they're willing to just price increase and just slowly do a slow and profitable growth up to 800,000.
464
00:33:38.386 --> 00:33:38.706
Great.
465
00:33:39.246 --> 00:33:41.247
If you're like, dude, I cannot find that person.
466
00:33:41.267 --> 00:33:42.027
They're unicorn.
467
00:33:42.567 --> 00:33:52.510
And you're willing to spend some extra time over a year or two price increase, get up to 800,000 and then put a GM who doesn't have to be in the field in there from day one, except maybe in the off season.
468
00:33:53.270 --> 00:34:02.478
Um, that would be much easier, uh, to find that person versus a person who's, you know, skilled at 30 hours of production, but then also going to manage all of the other business tasks.
469
00:34:02.998 --> 00:34:11.786
So I think long-term, obviously the 800,000, uh, one GM in place, mostly out of the field year round, I think that's the end goal.
470
00:34:12.226 --> 00:34:16.750
Um, but if you're really, if you're have plenty of capital, you're moving quick, um,
471
00:34:16.890 --> 00:34:24.995
and you just want to offload that location, move to the next one, 500,000 profit mode, raise prices, put the working GM in place, and then go start the other one.
472
00:34:25.055 --> 00:34:26.576
So it's very circumstantial.
473
00:34:26.756 --> 00:34:27.496
You can play it either way.
474
00:34:27.637 --> 00:34:28.197
Yeah.
475
00:34:28.617 --> 00:34:33.620
I'd really love to be at the GM plus model.
476
00:34:33.660 --> 00:34:34.261
So if...
477
00:34:35.604 --> 00:34:48.558
if Lee would mind, like, what would that look like as far as distributions when you're trying to split it between an operations manager, a sales manager, a little bit for yourself?
478
00:34:48.658 --> 00:34:53.323
Like, to me, that seems like a lot of distributable cash just going out.
479
00:34:53.343 --> 00:34:53.443
Yeah.
480
00:34:53.623 --> 00:35:00.346
Yeah, and that's where the percentages change based on a lot of factors that aren't necessarily in this document.
481
00:35:00.366 --> 00:35:07.408
Like we have the variables that are like, okay, what are the bare minimum variables that a general manager needs to know about their potential compensation?
482
00:35:07.908 --> 00:35:19.873
Now, the variables for paying out compensation and distributable cash, when you built a location to $1.5 million plus, the GM plus model, $1.5 million in annual revenue, you're probably going to give away a lot less than that.
483
00:35:20.193 --> 00:35:30.797
So like I don't mind sharing my percentages for when I was Mike's general manager, my distributable cash for running the Bellingham location was 10% because Mike built that location over the course of seven to eight years.
484
00:35:31.097 --> 00:35:37.139
So he was not going to give me 25% of that distributable cash, which is completely fair and within his right.
485
00:35:37.500 --> 00:35:41.181
So I was given 10% of distributable cash for the GM plus model.
486
00:35:41.441 --> 00:35:51.965
So what you could do, Matthew, to your point is like, if you're the person getting the business to that 1.5 million in annual revenue, what I would recommend is potentially, yeah, just drastically reducing the percentages.
487
00:35:52.205 --> 00:35:55.066
So you have a salesperson, maybe you give them three to 5%.
488
00:35:55.707 --> 00:36:01.869
If you have an operations manager, they're probably driving revenue a little bit more in terms of, excuse me, they're driving more profitability, right?
489
00:36:01.969 --> 00:36:05.550
Operational efficiencies, keeping the trucks running, the crews running, things of that nature.
490
00:36:05.891 --> 00:36:07.591
I might give them six to 8%.
491
00:36:07.911 --> 00:36:09.452
If you have an in-house office staff,
492
00:36:09.692 --> 00:36:12.373
Yeah, you might give them a smaller percent like one to three percent.
493
00:36:12.573 --> 00:36:15.314
You're still around 10 to 15 percent in total.
494
00:36:15.715 --> 00:36:21.257
So I think that's something that as we've kind of built out what we call the GM plus model, I think we'll build more.
495
00:36:22.598 --> 00:36:26.259
We will build more frameworks around what that looks like for distributable cash.
496
00:36:26.619 --> 00:36:33.002
And I would also, you know, in true sales guy fashion, join Mike and he's dot com slash blackfish.
497
00:36:33.022 --> 00:36:33.463
Friday.
498
00:36:33.963 --> 00:36:49.005
But no, Mike's next book is going to actually highlight a lot of that Matthew, like, like a ton of that is going to be highlighted in terms of like, how do you actually separate ops sales admin at a profitable rate as you scale a business like his next book covers all of that in depth.
499
00:36:49.653 --> 00:36:49.993
Yeah.
500
00:36:50.153 --> 00:36:52.195
And maybe just a small side note to that.
501
00:36:52.295 --> 00:37:07.568
This is just kind of what I was thinking about because it's like, okay, if you're doing GM plus and let's say you get your GM in there and they're getting 25% distributions at 500,000 and then they have like, and then they slowly increased to 800,000, but then you're, you're in there as well.
502
00:37:07.608 --> 00:37:09.049
You're operating, you're scaling the business.
503
00:37:09.069 --> 00:37:09.890
And,
504
00:37:10.070 --> 00:37:14.594
It's sort of like if you raise prices on P4P, but you never adjust their hourly rate.
505
00:37:15.034 --> 00:37:25.562
So like if I did, if I raised prices to $150 an hour, but I'm still paying 33%, I'm paying an insane amount of money to my crew just because I'm priced really high.
506
00:37:26.043 --> 00:37:32.288
So what we know we do at that point is we take our percentage and lower it, but we still demonstrate to the crew that they get upside down.
507
00:37:32.788 --> 00:37:41.676
So I'm assuming, Matthew, you would do the same thing in this situation as if they were at 25%, but you're doing GM plus, you would probably work that percentage down over time.
508
00:37:42.157 --> 00:37:53.227
But you would somehow show them that based on the growth of the business, even at a lower percentage, their on target earnings are going to be significantly more than they were at the 25%.
509
00:37:54.628 --> 00:37:58.072
So that's one of those things, I guess it would be like cross that bridge when you get there.
510
00:37:58.673 --> 00:38:00.214
But that's just how I'm thinking about it in my head.
511
00:38:00.234 --> 00:38:10.185
It's like you would just work the percentage down, but demonstrate like, hey, you're getting a smaller percentage of a bigger pie and you're going to be much further ahead than you were prior.
512
00:38:10.365 --> 00:38:11.647
To end on that note, the.
513
00:38:13.069 --> 00:38:23.142
I did this when, when we were doing all the price increase stuff before I made a document, where it shows how to illustrate the decrease in percentage, but the increase in pay.
514
00:38:23.943 --> 00:38:25.205
So there's a document to that.
515
00:38:25.345 --> 00:38:42.248
I'm sure once GM plus becomes a model that more people do, which I know it's, you know, there's, it's not like the gold standard right now, but if more people go that route, more systems and things will be built around it, I suppose.
1
00:00:00.231 --> 00:00:03.453
Hey everyone, it's Mike Andes, founder of Augusta Lawn Care and Homeworks.
2
00:00:03.893 --> 00:00:12.136
Today, we're going to be diving very deep into how to compensate your general managers, your operations managers, sales managers, you could kind of fill in the list here.
3
00:00:12.517 --> 00:00:19.540
But one of the biggest things when it comes to hiring and attracting great talent is explain to them how much they're going to be compensated.
4
00:00:20.040 --> 00:00:31.205
So there's something called on target earnings, which allows you to be able to show prospective applicants how much they would make if they perform at certain levels and certain amount of profitability in the role.
5
00:00:31.486 --> 00:00:37.228
Today is actually going to be behind the scenes because at Augusta Lawn Care, we every single week do what's called an office hours call.
6
00:00:37.529 --> 00:00:40.090
It's a live video on Zoom with all the owners.
7
00:00:40.530 --> 00:00:47.900
And this is actually going to be the first section of the office hours with Nick, our owner success manager, and Lee, who's our head of sales.
8
00:00:48.241 --> 00:00:55.851
They're going to be talking about on target earnings and how to use this document to attract great talent as managers in your business.
9
00:00:56.392 --> 00:01:00.993
We got something special planned for our Ops Hours for Thanksgiving week.
10
00:01:01.553 --> 00:01:03.954
We have a VIP guest.
11
00:01:04.054 --> 00:01:07.835
Our VIP is the VP of sales.
12
00:01:08.175 --> 00:01:10.495
I would like to welcome Lee Park to Ops Hours.
13
00:01:10.855 --> 00:01:11.935
Lee, how's it going, sir?
14
00:01:12.356 --> 00:01:14.496
Hello, I feel truly blessed to be here.
15
00:01:14.576 --> 00:01:16.096
Now, it's good to see all you guys.
16
00:01:16.156 --> 00:01:19.577
I know I don't get to see everyone as much as I used to.
17
00:01:19.677 --> 00:01:20.617
So it's good to see everyone.
18
00:01:20.637 --> 00:01:21.798
But yeah, Nick invited me on.
19
00:01:21.818 --> 00:01:23.218
We're going to talk some fun stuff.
20
00:01:24.483 --> 00:01:24.803
Excellent.
21
00:01:25.323 --> 00:01:35.847
Yeah, figured we'd just kind of geek out, take you guys a little bit out of the day to day, maybe some more head in the clouds kind of stuff as you guys are grinding through the last bit of the season here.
22
00:01:36.888 --> 00:01:46.432
We're gonna talk about something that's very familiar to Lee in his world, the sales world, which is the concept of on target earnings.
23
00:01:46.972 --> 00:01:49.753
So I know for many of us, even me very recently,
24
00:01:50.608 --> 00:01:53.911
not familiar with the subject and how it relates to us and what we're doing.
25
00:01:54.871 --> 00:02:02.998
So Lee, I guess from like a really ground level perspective, what is OTE or the concept of on target earnings?
26
00:02:04.183 --> 00:02:05.124
Yeah, it's a great question.
27
00:02:05.204 --> 00:02:09.367
It is typically a phrase that is used pretty heavily when you look at like sales jobs.
28
00:02:09.407 --> 00:02:17.472
So on target earnings, meaning how much money can I potentially make at this job if I am performing to a certain level, what could be my take home pay.
29
00:02:17.813 --> 00:02:32.303
And so ultimately, the idea behind an on target earnings chart or on target earnings plan would be to ultimately tie someone's performance to potential pay, it shows what is the output that I might receive for my input.
30
00:02:32.543 --> 00:02:34.784
And it makes it very binary around the numbers.
31
00:02:35.184 --> 00:02:41.087
And so you've all probably heard of this, if you've ever had a sales job or talked to anyone in sales, it's like commission based pay, right?
32
00:02:41.147 --> 00:02:44.388
Okay, if I sell a certain amount of commissions, I'm gonna make a certain amount of money.
33
00:02:44.868 --> 00:02:55.833
But what we wanted to do is more so conceptualize this concept of on target earnings to actually potentially tie to what general manager performance might look like inside of Augusta.
34
00:02:56.273 --> 00:02:59.895
on target earnings is not something that's typically talked about outside of sales.
35
00:03:00.355 --> 00:03:10.960
And Nick and I had an idea and Mike and I think it was actually at the seven figure club retreat that it was like, would there be a way to potentially so general managers what their pay might be instead of just saying, Oh, yeah, it's a
36
00:03:11.460 --> 00:03:15.262
distributable cash or it's profit sharing, or I'll give you a piece of the bottom line.
37
00:03:15.543 --> 00:03:17.003
It's like that doesn't matter.
38
00:03:17.043 --> 00:03:18.724
That doesn't mean anything.
39
00:03:18.784 --> 00:03:19.805
Those aren't real numbers.
40
00:03:20.145 --> 00:03:23.487
How can we actually show those numbers to potential general managers?
41
00:03:23.847 --> 00:03:27.249
And so that's what on-target earnings is, is what could I potentially make?
42
00:03:27.670 --> 00:03:29.811
How is my performance tied to my pay?
43
00:03:30.603 --> 00:03:30.783
Yeah.
44
00:03:30.883 --> 00:03:46.431
And so Lee, you know, given learning this concept in the sales world and then just thinking about how could he take this and apply it to what we do with general managers and basically incentivize them towards hitting these targets that they want in order to make their pay and see how those connect.
45
00:03:47.411 --> 00:03:54.075
Lee created a really awesome spreadsheet that he's going to pull up and, and we're going to kind of go through some different scenarios.
46
00:03:55.135 --> 00:03:57.737
So I guess Lee, if you're ready, we can kind of pull that up and,
47
00:03:58.397 --> 00:04:03.294
just kind of show everyone generally, and then we can kind of walk through it and maybe build out a couple of different scenarios.
48
00:04:03.314 --> 00:04:03.595
Yeah.
49
00:04:03.918 --> 00:04:04.859
Yeah, yeah, 100%.
50
00:04:04.899 --> 00:04:05.940
Let me share my screen here.
51
00:04:05.960 --> 00:04:07.000
Give me one second.
52
00:04:07.020 --> 00:04:10.323
I'm going to try to figure out where to put this because obviously there's a ton of information here.
53
00:04:11.003 --> 00:04:13.925
Now don't don't read ahead, because there's a lot of information.
54
00:04:14.185 --> 00:04:20.510
We are going to make this availability available through the dashboard for you to be able to access and edit yourself.
55
00:04:20.770 --> 00:04:27.515
And I would also say for owners to if you're like, hey, I don't have a general manager, I might not have a general manager for the near future.
56
00:04:27.795 --> 00:04:28.756
It's a great big
57
00:04:28.856 --> 00:04:30.658
build this scenario for yourself.
58
00:04:30.938 --> 00:04:32.319
Like what do you want to take home?
59
00:04:32.359 --> 00:04:36.543
What goals do you need to hit in order to take home a certain pay, right?
60
00:04:36.583 --> 00:04:39.465
That's ultimately what it is for it is what can I take home.
61
00:04:39.986 --> 00:04:46.211
And so when we look at this scenario builder, I just want to zoom in over here on the left side, and then and then we'll actually get into the numbers.
62
00:04:46.271 --> 00:04:47.813
So Nick, feel free to cut me off.
63
00:04:47.833 --> 00:04:49.815
And obviously, you know, this is this is your show.
64
00:04:49.855 --> 00:04:50.976
These are your office hours.
65
00:04:51.336 --> 00:04:53.998
But anyone feel free to interject ask questions.
66
00:04:54.819 --> 00:05:00.520
So if we look over here on the left side, it's ultimately is a general manager compensation scenario builder.
67
00:05:00.840 --> 00:05:04.401
Now what you would want to do is put in the general managers base pay.
68
00:05:04.561 --> 00:05:09.442
Now this is just a kind of standard salary base pay of around 5,800 per month.
69
00:05:09.462 --> 00:05:20.244
So 70k per year, we're just going to assume that this is for an established location, if that's going to be your base pay for a general manager, you're probably going to be in the fifth stage of growth.
70
00:05:20.524 --> 00:05:23.105
This business that they're managing is probably doing 800,000 plus
71
00:05:24.445 --> 00:05:25.385
in annual revenue.
72
00:05:25.425 --> 00:05:28.506
So we're just going to make a lot of assumptions here while we show this chart.
73
00:05:29.246 --> 00:05:31.927
Now, there are variables when it comes to compensation.
74
00:05:32.467 --> 00:05:37.488
The first variable is the percentage of distributions, how much are we actually paying out to our general manager?
75
00:05:37.808 --> 00:05:45.510
Now, depending on the size of business, the roles and responsibilities that general manager, that percentage may fluctuate, increase or decrease.
76
00:05:45.570 --> 00:05:46.750
Okay, so that's the first variable.
77
00:05:47.290 --> 00:05:53.432
The second variable is what is the business's target revenue, because we're obviously going to pay based on the performance of the business as a whole.
78
00:05:54.172 --> 00:05:56.953
Then we have the distribution threshold, we'll get into that in a second.
79
00:05:57.153 --> 00:06:03.134
But that's ultimately what can be distributed out distributable cash through bonuses through this bonus structure.
80
00:06:03.714 --> 00:06:07.935
Then we have cash on hand, quite literally, what's the money in the bank account that the business has.
81
00:06:08.635 --> 00:06:14.156
Then we look at the distributable cash, that's basically an equation of distribution threshold versus cash on hand.
82
00:06:14.416 --> 00:06:17.537
So how much can be distributed out from the business.
83
00:06:18.297 --> 00:06:21.619
Then we have the potential general manager's bonus, and then we have the base pay.
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So I'll walk through the chart there as we go.
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Any questions or anything you want to add clarity on there, Nick?
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Yeah, really quickly, kind of the general distribution threshold that we use is a rolling average of your last three months of revenue, right?
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So if I did, you know, 80,000 for the last three months, that's my distribution threshold.
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And if that drops off in the winter, let's say I do 40,000 for three months, that's the distribution threshold.
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So everything beyond that number of revenue equivalent in your bank.
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So everything beyond the average of three months revenue, 40,000, anything above that is on the table for distributions.
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This is a nice way.
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You can fine tune this over time, especially if your manager has had consistent distributions for years, you can set maybe more of an arbitrary
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uh distribution threshold but this is just a good starting point and it what's nice about it is you never have to make any adjustments as long as it follows that general rule of thumb of an average three months of revenue as long as you have that equivalent in the bank you can safely distribute that and the business will still have enough money to operate the way that it needs to
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Yeah, 100%.
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Great clarity there.
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And also with this chart, we are kind of assuming a 25% net profit.
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So this is a location that's established, it is going to be running in profit mode, right?
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So 25% net profit.
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This is not a business that is growing at an aggressive rate, they're purchasing a bunch of assets, spending much on marketing.
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So we're also, once again, making a lot of assumptions here.
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So this would be, I guess, to generalize to this comp plan, this would be built around a location that's more so in profit mode than growth mode.
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Because if you're in growth mode, you're probably going to incentivize your general managers differently.
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I mean, that's what we recommend.
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We talk about a new owner training.
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This is more so profit mode on target earnings.
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Now, to add a little bit of clarity before we jump into the actual numbers, because everybody wants to actually see, okay, what can what can we actually make?
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What can we actually take home in this document, the yellow cells are more so for the general manager to edit.
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Now, technically, the owner of the location should edit this and then provide it to the general manager with guidance.
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But I also want the general manager to feel like they have ownership over this document.
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Hey, you have control, you can edit some of these cells because you are in the driver's seat of this business.
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Now the light green cells, the owner would edit and then really anything else doesn't need to be edited.
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The cool thing about this document is all the equations are being done on the back end.
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So you don't have to do anything just fill in the yellow cells from the light green cells.
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All the numbers will will populate automatically.
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Now, when we define some of these terms, business revenue target, that is the money generated that month or that year.
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And for some of you, this is going to be like, yeah, Lee, that's grade school.
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Totally.
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We're pretending that you are providing this to a general manager.
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So they need to know what these terms actually mean and that the definitions are understood, not that you're just telling them that, hey, you're going to make a bonus if you work for me.
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Right.
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So we're defining what these terms actually mean.
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Distribution threshold is the average monthly revenue for the quarter.
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So Nick already went into a deeper explanation of that.
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Cash on hand equals the cash available in the business bank account at the end of the month or quarter.
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And the distributable cash equals the money available above the deposit threshold.
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Now, we also have kind of like a little Q&A, and we might add to this, especially after this session, if anybody has thoughts on like, we could add more clarity around X.
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Great.
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But some of the questions that your general managers might have is how much cash on hand should a business have?
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Because if you're going to pay me out of the distributable cash, how much should you have?
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What is a good rule of thumb?
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And we always recommend never below one month of revenue.
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Cool.
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Anything you want to add clarity there, Nick?
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No, good to go.
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Fantastic.
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So let's actually jump to the numbers because that's what everybody actually cares about is what what am I actually going to take home?
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So once again, we are assuming here that this general manager is getting a base pay of 70 grand.
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Now I'm going to zoom.
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I'm going to make this bigger.
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So it's a little bit easier.
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There we go.
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So we're going to assume that the general manager is getting a base pay of 70 grand.
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That means this is pre-tax, obviously, five thousand eight hundred and thirty three dollars paid out per month.
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That means in a quarter they're going to get seventeen thousand five hundred dollars in base pay.
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Now, if you remember here, yellow cells, the general manager gets to edit, light green cells, the owner gets to edit.
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So with your general manager, it's like, okay, what are our goals per month?
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What are the business revenue targets for each individual month?
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Okay.
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We fill those out there and that gives us our quarter total.
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Now the quarter total here is $175,000.
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We also have a green cell here that is the owner editing and in this location, the owner is willing to give away 25% of distributable cash.
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So probably a location where the owner is not showing up much, right?
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That's a pretty hefty amount of distributions.
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But that means that the owner probably isn't going to show up there.
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So they want to incentivize that.
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Now, the way we get our deposit threshold, excuse me, is once again, doing that math, we have our cash on hand here.
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So these are green cells, the owner would put this in.
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So the owner needs to put in what should our projected cash on hand be for each month.
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So you can see here, these amounts put in.
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And then basically, your quarter one total is just going to equal whatever it was in that last month there, as you can see.
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So $107,000 is the cash on hand.
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So our distributable cash equals $48,667.
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Now that number came from these two numbers above.
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Our deposit threshold was the average monthly revenue for the quarter.
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So you can see if you average out these three totals, that's gonna equal, excuse me, $58,333.
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The difference between the threshold and the cash on hand is distributable cash.
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Everybody follow that?
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Did I explain that clearly enough?
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Cool.
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So the distributable cash for this hypothetical location is $48,667.
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25% of that is to the general manager.
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So now this general manager's potential bonus for this quarter is $12,167.
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Anything you want to add there, Nick?
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Yeah, what's great about this, you guys, is it's kind of a collaborative approach to giving your GM clarity into how much money they're actually looking at making.
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And what's great about this is they can actually take it and tweak the numbers.
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If they want to make more money, it's literally, okay, whatever.
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like produce more, right?
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If you wanna make more money in January, instead of doing 45,000, do 65,000 and do it profitably.
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And again, one of the nice things with this is it connects top line revenue with take home distributions.
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So it really solidifies that link with the GM, like, okay,
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It's not just, oh, hit 60,000 this month and you did a great job as a GM.
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It's hit 60,000 this month, make sure that you have 25% net margins and you're collecting on that money by the end of the quarter so you can actually get a distribution bonus.
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So it connects that really well.
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But that's what's great about this is the owner sits down, builds it.
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Obviously, the cash on hand, that's just assuming that 25% is just stacking up every month, that 25% profit.
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But they go through, build this with the GM, talk about some of those, you know, like clarify anything that's unsure.
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But then you can hand this to your GM and say, hey, run wild.
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You want to make more money?
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like adjust adjust our monthly revenue targets and ensure that we still hit profitability and then lee can go through the rest and we can chart this out through the rest of the year but that's that's what i thought was really valuable with this is is getting the owner and the gm to collaborate and then also if the gm wants to make more money it's the same thing that we say on performance pay hey if you want to make more money produce more same thing with the gm
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Yeah, 100%.
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I even like to be, you know, if you have the relationship capital with a general manager and employee, it's like, hey, I'm a business owner.
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I want that number to be as big as humanly possible.
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So if you want this number to be bigger, make this number bigger.
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Fair, right?
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And that's kind of like the cut out all the noise.
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Like there are no biases here.
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I want to make as much money as possible.
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And if I want you to get paid for making that money, so if you want this number to be bigger, let's make this number bigger together.
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So it becomes a very collaborative approach, as Nick was saying.
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Very cool.
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So all this is broken down into quarters, because we obviously recommend that your GM compensation plan be paid out on a quarterly basis, right?
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So all this is broken down into quarters, not going to go into each individual one, you see I'm scrolling through it here.
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And then it actually totals all of it at the end of the year for the general manager, because this is on target earnings, meaning on target for the course of a whole year for the course of four separated quarters, what could I potentially make?
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So instead of saying, hey,
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I want you to be a general manager.
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The base pay is 70K and there are bonuses.
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Versus hey, the base pay to be a general manager for me is $70,000.
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Now I have the numbers from last year that we can put into this document and I can show you exactly what you could have made last year on this bonus structure.
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And then what we can do is put in the numbers that I wanna do this year and show you what you could make in bonuses this year as the manager.
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And now it gives them something tangible to actually hold onto.
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And if we run these numbers and these numbers aren't crazy, like Nick and I, when we put these numbers in for this example, made it semi-realistic.
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It is, okay, if you had a business in the fifth stage of growth, doing 800 to 900K in annual revenue, you can see that here.
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So that's our business target revenue, 900K.
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What could you pay out to a potential general manager and bonuses $42,000.
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Add that to their base pay $70,000, the on target earnings for this business.
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And it probably runs like clockwork.
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Like this general manager is not a slacker.
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They are high performer, but they are worth that $112,000 in our opinion, based on this model.
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Nick, anything you want to add to that?
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Yeah, and you can certainly exceed this again.
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This is just like the standard.
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This is like the template.
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And then Lee is going to share this on the dashboard.
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It's the same as always file, make a copy, and then you can just fill in the columns on your own.
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But the sky's the limit with this.
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And that's what's so great about on target earnings is you can just tell the manager, hey, if you would like to make more, figure out how to produce more money or sorry, figure out how to produce more revenue and then also make sure we ensure profit.
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And that's how you make more.
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So it's never like, hey, can I have a salary raise or anything like that?
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Like that just doesn't exist.
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Right.
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Same concept as P4P.
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Yeah.
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Yeah.
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And obviously you can edit this, right?
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That's where these, the owner sells, let's say, you know, you, you make up the compensation plan with them where it's like, Hey, I'm going to give you 25% quarters one and two, assuming I don't need to show up to the business after six months of you running the thing, I might bump it.
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I might bump it to 30%, right?
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And then that's going to increase their bonuses as well along the way.
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So you can see that bumped it $2,000 for the year, right?
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So let's just do 30% in Q4.
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boom, that just bumped their bonus up five grand, right?
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Just by changing the percentages slightly.
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So now I'm making like quick changes here, but ultimately it gives you a tool to play with.
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Like what can I afford?
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If the business is performing to a certain level, also what can I as the business owner afford to pay a general manager?
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Oh yeah, and if I do nothing, I wanna pay a higher percentage.
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And if I need to be there a lot, like I said, like you could start them at, hey, you're gonna get 10% in your first quarter, and then you're gonna get 15%.
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Now I wouldn't recommend doing this, you know,
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as aggressively, but you could do like a ramp where it's like, hey, you're going to get 10% and then maybe you're going to get 15% and then more and more and more.
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So you can see how it changes.
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And then that year end total obviously is reflected in those bonus changes.
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If this sort of discussion is helpful for you as you begin to copy and paste and do multiple locations, having this sort of community and training is what, in my opinion, sets Augusta Nation apart and allows you to be able to copy and paste multiple locations much faster and with more confidence and success.
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We already have the command center built.
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Your website's done for you.
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The ads.
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Everything is put in place so you can copy and paste with the greatest amount of ease.
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So if you have...
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read the book and you're like, that'd be a lot easier if I was just on these office hours and able to ask my questions and have these sort of on target earnings just done for me, then I'd recommend joining Augusta Lawn Care.
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You can go check out Augusta Lawn Care services.com slash franchise and book a call with Lee and his team.
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And I'll see if joining Augusta Lawn Care is the right fit for you.
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Yeah.
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A couple of questions that came in through the comments and Marco, Tim, if you guys are available, I think your cameras are off.
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So if not, no worries.
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Oh, Marco, I think you're good, man.
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Do you want to clarify your question that you put in the chat?
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Yeah.
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If it's, does it stay the same, that compensation model that you guys are showing, if it's an operations manager that doesn't handle this compared to a manager that handles both the sales and operations, the same thing?
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Yeah, so this is based on distributable cash.
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So this is not like a sales comp plan.
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It's straight across, is the business profitable?
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And are we above a certain amount of threshold in the bank account?
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Then I can pay you bonuses.
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So that's Mike's preferred way of paying out general managers is through the distributable cash model.
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There are no incentives here around growth or sales.
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It's strictly run the business as profitably as possible.
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If you wanted to do sales bonuses, that'd be completely separate from this.
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Yeah, like this is really in line with like the whole Augusta model that we preach.
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One person at the top of the organization who answers for everything, and then they just get a cut of distributions.
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That's it.
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Versus having crew leads and operations managers, and then they get a cut of distributions, but they don't really have full ownership over the results.
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So then it gets really muddy, and then people kind of lose that link between their performance and their compensation.
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So again, this is...
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really just for the Augusta standard model, one GM running a location just under a million dollars.
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Yeah, and I think, and I do see a hand coming up and there might be other questions.
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One thing as well, like this is the big caveat for this is this is an established location in profit mode.
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Eventually, would I like to build out a comp builder for locations in growth mode?
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Yes, there are a drastically increased number of variables when trying to make a comp plan for a location in growth mode.
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And it also kind of depends on what you are willing to pay out to a general manager when you are in growth mode.
288
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Because if you're like very risk tolerant and you have maybe additional capital available in an extra savings account somewhere, you can just redline the thing and pay out way more per sales transaction than maybe some other owners.
289
00:21:06.611 --> 00:21:09.372
So this is as Nick said, this is around the Augusta business model.
290
00:21:09.673 --> 00:21:14.835
We have a business that is running very efficiently, high rate of recurring revenue, command center handling everything.
291
00:21:15.276 --> 00:21:20.194
One overhead position, this is what we can confidently pay them and reward them for their hard work.
292
00:21:21.913 --> 00:21:22.093
Yeah.
293
00:21:22.153 --> 00:21:24.314
And that, that kind of answers Tim's question in the chat.
294
00:21:24.514 --> 00:21:30.176
You know, he said, if, if you're in growth mode, is it good to compensate based on revenue targets?
295
00:21:30.776 --> 00:21:32.677
Um, since there's not going to be profit or distributions?
296
00:21:32.957 --> 00:21:33.237
Yes.
297
00:21:33.857 --> 00:21:45.461
Um, and again, just in line with what Lee's saying, if you're in growth mode and you're not bootstrapping it yourself as a manager, you're coming in as more of an investor type, you're supplying capital and the manager's on the ground doing everything.
298
00:21:45.821 --> 00:21:48.682
You're going to calculate that in your business plan, your five year projection.
299
00:21:49.022 --> 00:21:50.242
That's going to be part of your burn rate.
300
00:21:50.262 --> 00:21:51.483
It's like you're going to burn money.
301
00:21:51.983 --> 00:21:57.467
you know, you're going to be paying out revenue goals when they're doing 30,000 a month and you're negative because you're incentivizing growth.
302
00:21:57.947 --> 00:22:02.631
But then once that location matures, you park it, then you switch to distributable cash.
303
00:22:04.312 --> 00:22:05.153
Yeah, 100%.
304
00:22:05.253 --> 00:22:07.615
I think there were a couple of questions, Matt or David.
305
00:22:07.795 --> 00:22:09.196
I don't know if you guys can unmute yourselves.
306
00:22:09.216 --> 00:22:10.677
I can't see the chat or anything.
307
00:22:10.737 --> 00:22:18.643
So, yeah, I know you mentioned how you could use this for compensating an owner as well.
308
00:22:18.663 --> 00:22:18.783
Yeah.
309
00:22:18.803 --> 00:22:19.023
Yeah.
310
00:22:21.072 --> 00:22:25.332
Are there any changes that you would have to make to any of the calculations or basically just switch?
311
00:22:27.067 --> 00:22:28.607
Yeah, it's completely up to you.
312
00:22:28.667 --> 00:22:33.428
Like you basically the only sales we recommend editing are the light green and then the yellow cells.
313
00:22:33.829 --> 00:22:35.589
And then you just put in like, what is your base pay?
314
00:22:35.609 --> 00:22:39.150
And then how much are you comfortable taking out of that distributable cash threshold?
315
00:22:39.470 --> 00:22:48.352
So like for an owner, let's just say hypothetically here, and I'm not saying this is you, David, let's say you're like, hey, I'm just going to take bare minimum, like cover my kind of cost of living out of the business.
316
00:22:48.372 --> 00:22:50.392
Like I'm just going to take, you know, 50K, right?
317
00:22:50.412 --> 00:22:52.753
I'm going to take less than five grand a month out of the business.
318
00:22:53.113 --> 00:22:56.914
And then, but then I might give myself, you know, 50% of distributable cash.
319
00:22:57.294 --> 00:22:57.434
Right.
320
00:22:57.454 --> 00:23:00.157
So let's just run that on this, like very profitable model.
321
00:23:00.177 --> 00:23:08.606
Hey, you've worked five, six years to build this location, you're willing to take a bare minimum salary, but you want to get those nice distributable cash distributions.
322
00:23:08.987 --> 00:23:12.971
And now you can see like, hey, even a way lesser salary, you're still making more.
323
00:23:13.391 --> 00:23:15.792
and your bonuses are 84K, right?
324
00:23:15.812 --> 00:23:17.793
The distributable cash is $84,000.
325
00:23:17.813 --> 00:23:19.353
Your base pay is $50,000.
326
00:23:19.734 --> 00:23:21.794
You're taking home $134,000.
327
00:23:22.055 --> 00:23:27.617
But the business is objectively very healthy based on all of these calculations, assuming we have a 25% net profit.
328
00:23:28.357 --> 00:23:35.319
Yeah, and in the perfect world, everyone would work for free and they would only be given a commission based on what they produced.
329
00:23:35.419 --> 00:23:37.299
But obviously we have to guarantee base pay, right?
330
00:23:37.719 --> 00:23:47.441
So it's very similar to what we do with the field tax is like, you know, a base pay that's high enough to get them in the door and, you know, satisfied in case things go wrong.
331
00:23:48.001 --> 00:23:50.762
But then low enough to give them an incentive to...
332
00:23:51.942 --> 00:24:15.587
uh perform so kind of in this example that lee just gave obviously i don't think any of us would ever put a gm on this compensation structure but you can see how you know their salary is much lower than their upside on um their distributions so the salary would probably be the majority of it but there'd still be strong healthy upside um but i guess just throwing that out there is yeah
333
00:24:16.567 --> 00:24:17.028
Yeah, right.
334
00:24:17.449 --> 00:24:25.360
But I will add, I will add here, and I'm not going to give away too much, but like this was effectively my base pay when I ran Mike's location, the Bellingham shop.
335
00:24:25.981 --> 00:24:30.547
And I was paid out more in my distributable cash than I was my base pay.
336
00:24:31.328 --> 00:24:34.851
There is a balance to it, but that was a risk for me as the employee.
337
00:24:34.971 --> 00:24:36.352
I'm betting on myself to perform.
338
00:24:36.752 --> 00:24:44.678
And so if you have an employee that is willing to kind of bet on themselves, then yeah, you might give them more of the distributable cash because they're taking a lesser base pay.
339
00:24:44.959 --> 00:24:46.640
Now, obviously, that's within reason.
340
00:24:46.940 --> 00:24:58.910
But as Nick's saying, generally speaking, yeah, like doing like a nice solid 65, 70, if you're running a business of this size, and then giving them a reasonable 25 to 35 is very fair, very fair.
341
00:25:00.751 --> 00:25:01.151
Yeah.
342
00:25:01.311 --> 00:25:03.213
And Tim mentioned this in the chat.
343
00:25:03.693 --> 00:25:05.735
This is part of kind of a new thing.
344
00:25:05.755 --> 00:25:09.898
It depends on which state that you're in, how aggressively that they're pushing this.
345
00:25:09.938 --> 00:25:20.625
But basically, I know there's a federal limit and a state limit, at least here in Washington, for the minimum salary threshold that you can have someone on without having to pay overtime.
346
00:25:21.546 --> 00:25:24.449
Um, so that's something to look into now.
347
00:25:24.690 --> 00:25:28.514
If you're like us and you love simplicity, we don't want to deal with that headache.
348
00:25:29.194 --> 00:25:31.657
Um, we're just going to meet whatever their requirement is.
349
00:25:31.817 --> 00:25:35.000
It's like in Washington, I think next year it's like, uh, uh,
350
00:25:36.197 --> 00:25:42.160
I don't know, it's like 70,000 or something like that to where, yeah, because we don't want to track.
351
00:25:42.760 --> 00:25:44.141
Yeah, we don't want to track over time.
352
00:25:44.161 --> 00:25:45.121
We don't have to mess with that.
353
00:25:46.022 --> 00:25:47.363
So anyways, look at your state.
354
00:25:47.443 --> 00:25:48.623
I know every state's different.
355
00:25:48.743 --> 00:25:52.745
Washington's literally jumping like 10 grand a year, which is just insane.
356
00:25:54.406 --> 00:26:01.231
So yeah, what I'm what I'm live doing to that point, what if you're going to have a general manager on say hourly instead of salary?
357
00:26:01.511 --> 00:26:01.751
Great.
358
00:26:02.012 --> 00:26:04.433
What I'm going to do is I'll build here a salary calculator.
359
00:26:04.674 --> 00:26:07.255
So that way you can have a nice round number for the top here.
360
00:26:07.956 --> 00:26:12.820
So if you do want to pay a general manager on hourly, you can basically say, okay, here's your hourly pay.
361
00:26:13.040 --> 00:26:14.681
Here's how many hours you're typically going to work.
362
00:26:14.901 --> 00:26:17.383
Here's generally what your salary might be.
363
00:26:17.783 --> 00:26:28.291
If you want to get around the idea of like salary caps or like, I think to next point, yeah, Washington state is bumping up salaried employees to, I think like 80 K next year, which is like very high.
364
00:26:28.351 --> 00:26:32.875
So it's like, Hey, then we're just going to keep people on hourly and track and make sure we're tracking it.
365
00:26:32.935 --> 00:26:34.856
So I'll build a salary calculator as well.
366
00:26:34.997 --> 00:26:37.939
And I guess the whole point Lee is like, we don't want to track that.
367
00:26:38.299 --> 00:26:41.682
You know, you don't want to be micromanaging the hours of your GM spent.
368
00:26:42.062 --> 00:26:44.344
Like, you know, it's working well, but,
369
00:26:44.784 --> 00:26:59.644
when the gm is incentivized by their targets and they just make it happen so i don't care how they spend their day i don't care what they did to get there as long as there's no issues in the business clients are happy employees are happy we're getting reviews whatever
370
00:27:00.305 --> 00:27:04.828
Um, the only thing that I'm tracking is the metrics and are we hitting our targets?
371
00:27:04.848 --> 00:27:06.129
Are we hitting our financial targets?
372
00:27:06.609 --> 00:27:09.391
So, you know, I don't care how many hours they're, they're working.
373
00:27:09.411 --> 00:27:12.873
I don't care, um, how they're spending those hours, whatever.
374
00:27:13.053 --> 00:27:14.093
It's like results that matter.
375
00:27:14.434 --> 00:27:16.255
That's why we don't want to track their hourly.
376
00:27:16.295 --> 00:27:22.018
Cause then even without caring, you're just going to start to be like, Oh, like I don't want to pay overtime.
377
00:27:22.078 --> 00:27:24.260
And you know, it's like something you don't even want to do.
378
00:27:24.280 --> 00:27:26.461
You're just going to start feeling like you have to track it.
379
00:27:26.501 --> 00:27:27.862
So thank the government.
380
00:27:28.488 --> 00:27:29.229
Yeah, cool.
381
00:27:29.249 --> 00:27:35.996
I don't know if there are other questions, but one thing I did want to share, I kind of was hoping there'd be a question on this because this is one of my favorite features here.
382
00:27:36.376 --> 00:27:41.161
Now, let's say hypothetically, this business here is not in a great cash position.
383
00:27:41.241 --> 00:27:44.765
So if you're not watching, you're not able to watch your screen, you're going to miss the fun here.
384
00:27:45.005 --> 00:27:47.247
But let's say this business is not in a great cash position.
385
00:27:47.307 --> 00:27:48.328
Something happens, whatever.
386
00:27:48.368 --> 00:27:49.750
But I'm just going to change one month here.
387
00:27:50.070 --> 00:27:54.693
So we know that for Q1 distributions, our distribution threshold is $58,333.
388
00:27:54.753 --> 00:27:59.797
Now, let's say hypothetically, the business only has $50,000 cash on hand.
389
00:28:00.137 --> 00:28:06.622
Something happened, things went haywire, whatever it is, there was a big mistake, big job failure, whatever it was.
390
00:28:07.122 --> 00:28:12.805
What happens is you can see here all these cells go zero and it doesn't affect their bonus in a negative way.
391
00:28:13.105 --> 00:28:22.990
So we also want to show your potential general managers that if the business is still in growth mode, if we're still spending a decent amount of money going into spring, you might not get bonuses.
392
00:28:23.550 --> 00:28:23.690
Right.
393
00:28:23.710 --> 00:28:32.377
And so that's a very good way for you to be transparent and upfront with your general manager, like because you might be promoting a general manager into their position at the end of the year.
394
00:28:32.697 --> 00:28:38.641
But you know that Q1 next year probably isn't going to be very profitable because you're still paying off some assets, maybe you have some large debt payments.
395
00:28:38.961 --> 00:28:44.245
Maybe you still haven't figured out your seasonitis gear and you don't have that consistent cash flow through the winter.
396
00:28:44.505 --> 00:28:50.810
So this is a way for you to show your general manager like, hey, in Q1, we might not be in a great cash cash position.
397
00:28:51.250 --> 00:28:57.431
However, if we can hit these remaining targets, you're still going to make a really nice bonus at the end of the year.
398
00:28:57.792 --> 00:29:13.455
So once again, what we're trying to do is ground their performance with their pay and ultimately being open book managers and showing them that, hey, we may have a down quarter, but you still can, based on your performance, still make some really nice bonuses here.
399
00:29:13.955 --> 00:29:14.515
Fair enough.
400
00:29:14.955 --> 00:29:17.356
And that's where they get buy into the system.
401
00:29:17.720 --> 00:29:19.681
Yeah, and it's worth walking through this.
402
00:29:19.781 --> 00:29:24.164
Again, it's like, you know, we can't assume that they understand distributions and all this stuff.
403
00:29:24.184 --> 00:29:26.265
It really helps walking through and seeing this visual.
404
00:29:26.665 --> 00:29:30.847
And like Lee said, it's like having the long-term perspective that like same with performance.
405
00:29:30.967 --> 00:29:33.629
It's like so it parallels with performance phase so much.
406
00:29:33.669 --> 00:29:40.192
It's like, hey, if you have a bad day on performance day, but the other nine days of the two-week pay period, you crush it.
407
00:29:40.813 --> 00:29:41.733
Who cares about the bad day?
408
00:29:41.913 --> 00:29:42.614
Like you're still up.
409
00:29:43.234 --> 00:29:43.974
Same thing here.
410
00:29:44.735 --> 00:29:47.817
And especially if it's projected now, if it's not projected, right.
411
00:29:47.837 --> 00:29:49.217
That wasn't the plan for the owner.
412
00:29:49.998 --> 00:29:51.038
And now you have a down quarter.
413
00:29:51.059 --> 00:29:51.839
It's like, whoa, whoa.
414
00:29:52.479 --> 00:29:52.739
Right.
415
00:29:54.020 --> 00:29:55.261
But yeah, I think it's great.
416
00:29:55.381 --> 00:30:01.805
It's, you know, obviously the leader being the GM running the day to day, the leader needs to know where the business is going.
417
00:30:01.845 --> 00:30:03.686
And that's kind of when you're taking leap from.
418
00:30:04.386 --> 00:30:17.189
the employee mindset of like, Oh, let me just focus on what's in front of me to Oh, I need to actually start thinking about this business in a higher level and seeing how my daily actions connect to the end goal, which is the money that the business spits out 100%.
419
00:30:17.229 --> 00:30:22.171
And it creates a little bit of, I guess, well, the whole idea behind it is creating clarity.
420
00:30:22.491 --> 00:30:27.212
But instead of using the word clarity, I think it creates a stability for a general manager as well.
421
00:30:27.532 --> 00:30:30.954
that they know like their long-term performance is what gets the payouts.
422
00:30:31.314 --> 00:30:33.815
Not a down month, not a bad quarter.
423
00:30:33.875 --> 00:30:35.436
It's like long-term performance.
424
00:30:35.836 --> 00:30:39.739
I need you committed here for the long term, and the payouts are going to be great long-term.
425
00:30:40.019 --> 00:30:47.643
So I can speak from my personal experience as a general manager of Mike, Q1 and Q2 were typically my smallest bonuses, right?
426
00:30:47.663 --> 00:30:54.667
But that's because you're hiring a bunch of people, you're getting a bunch of assets, you're spending money on marketing, you're working long hours, the crew's working overtime, you're tired, you're stressed.
427
00:30:54.907 --> 00:30:57.188
You're like, oh, man, these bonuses aren't worth it.
428
00:30:57.628 --> 00:31:01.689
But then I knew that in Q3 and Q4, the bonuses were really nice.
429
00:31:01.989 --> 00:31:13.232
And so it allows me to kind of have that stability of, okay, I'm willing to grind it out, put my head down and work hard for Q1, Q2, knowing that my long-term performance will give me those really nice returns.
430
00:31:13.532 --> 00:31:18.553
So it also gives them that stability as an employee and some sanity, in all honesty.
431
00:31:18.613 --> 00:31:27.415
When you're trying to get through spring rush and there's not a lot of money on the table, but you know Q3, Q4, there should be, then it gives them that stability to want to commit and work long-term.
432
00:31:27.675 --> 00:31:29.377
Any other comments, questions?
433
00:31:29.417 --> 00:31:29.637
Yeah.
434
00:31:29.678 --> 00:31:30.238
Poke holes.
435
00:31:30.478 --> 00:31:31.900
Tell me, tell me this is a bad idea.
436
00:31:31.940 --> 00:31:32.481
Like, I don't know.
437
00:31:32.521 --> 00:31:33.802
I'm, I'm here for it.
438
00:31:33.882 --> 00:31:34.963
I'm it's his office hours.
439
00:31:34.983 --> 00:31:35.824
I don't know how this works.
440
00:31:36.525 --> 00:31:36.725
Yeah.
441
00:31:36.765 --> 00:31:42.312
I guess anything on the, on target earnings, um, or general questions overall.
442
00:31:42.812 --> 00:31:43.833
What stage is,
443
00:31:45.475 --> 00:31:48.697
would you decide that you want to put a general manager in?
444
00:31:48.717 --> 00:31:55.882
Would you want to just kind of flip it to profit mode at 500, put someone in and then move on to the next location?
445
00:31:56.062 --> 00:32:02.227
Or would you kind of want to sit there for a year or two, get it to 800 and then hand it over?
446
00:32:02.957 --> 00:32:05.900
Yeah, I mean, I would default to this is where I'd push it back to Nick.
447
00:32:05.920 --> 00:32:07.261
I would say book your coaching calls.
448
00:32:07.902 --> 00:32:11.105
But generally, yes, it comes down to like what your long term goals are.
449
00:32:11.446 --> 00:32:24.659
So generally speaking, we don't recommend if you just look at like the stages of growth and the Augusta business model and what you're optimizing for, we recommend get the business to half a million in annual revenue with you as the owner operator before you hand it off to a general manager.
450
00:32:25.039 --> 00:32:33.242
Now, hypothetically, you could hand off a location under half a million in annual revenue to a general manager if they had sales incentives.
451
00:32:33.622 --> 00:32:36.263
This document is not covering sales incentives.
452
00:32:36.543 --> 00:32:39.464
This document is assuming this is a location in profit mode.
453
00:32:39.764 --> 00:32:41.265
So to your point, Matthew.
454
00:32:41.565 --> 00:32:49.172
Yes, you could hand a location off at half a million annual revenue, and then we could run the math for a location that's at half a million in annual revenue.
455
00:32:49.593 --> 00:32:55.398
And then you could go start your second location or do whatever else it is that you are trying to do.
456
00:32:55.699 --> 00:32:57.901
So that's where coaching has a lot more context.
457
00:32:58.241 --> 00:33:03.266
But generally speaking, yeah, get the business to half a million annual revenue before you hand it off to a general manager.
458
00:33:04.065 --> 00:33:08.949
Yeah, Matthew, to parrot that, I think it has a lot to do with your specific goals, too.
459
00:33:09.429 --> 00:33:13.552
So like we know the working GM, it's basically like you being in the wilderness.
460
00:33:13.713 --> 00:33:20.598
You know, you're producing out in the field, but you're also handling all the admin and you're doing that transition from 500,000 to 800,000.
461
00:33:21.258 --> 00:33:22.599
It's a difficult stage to be in.
462
00:33:22.840 --> 00:33:25.382
In my opinion, it's not sustainable long term.
463
00:33:26.202 --> 00:33:37.986
Um, so that's something you'd have to ask yourself too, is if you have someone who's in position at 500,000 and they're okay with that, and they're willing to just price increase and just slowly do a slow and profitable growth up to 800,000.
464
00:33:38.386 --> 00:33:38.706
Great.
465
00:33:39.246 --> 00:33:41.247
If you're like, dude, I cannot find that person.
466
00:33:41.267 --> 00:33:42.027
They're unicorn.
467
00:33:42.567 --> 00:33:52.510
And you're willing to spend some extra time over a year or two price increase, get up to 800,000 and then put a GM who doesn't have to be in the field in there from day one, except maybe in the off season.
468
00:33:53.270 --> 00:34:02.478
Um, that would be much easier, uh, to find that person versus a person who's, you know, skilled at 30 hours of production, but then also going to manage all of the other business tasks.
469
00:34:02.998 --> 00:34:11.786
So I think long-term, obviously the 800,000, uh, one GM in place, mostly out of the field year round, I think that's the end goal.
470
00:34:12.226 --> 00:34:16.750
Um, but if you're really, if you're have plenty of capital, you're moving quick, um,
471
00:34:16.890 --> 00:34:24.995
and you just want to offload that location, move to the next one, 500,000 profit mode, raise prices, put the working GM in place, and then go start the other one.
472
00:34:25.055 --> 00:34:26.576
So it's very circumstantial.
473
00:34:26.756 --> 00:34:27.496
You can play it either way.
474
00:34:27.637 --> 00:34:28.197
Yeah.
475
00:34:28.617 --> 00:34:33.620
I'd really love to be at the GM plus model.
476
00:34:33.660 --> 00:34:34.261
So if...
477
00:34:35.604 --> 00:34:48.558
if Lee would mind, like, what would that look like as far as distributions when you're trying to split it between an operations manager, a sales manager, a little bit for yourself?
478
00:34:48.658 --> 00:34:53.323
Like, to me, that seems like a lot of distributable cash just going out.
479
00:34:53.343 --> 00:34:53.443
Yeah.
480
00:34:53.623 --> 00:35:00.346
Yeah, and that's where the percentages change based on a lot of factors that aren't necessarily in this document.
481
00:35:00.366 --> 00:35:07.408
Like we have the variables that are like, okay, what are the bare minimum variables that a general manager needs to know about their potential compensation?
482
00:35:07.908 --> 00:35:19.873
Now, the variables for paying out compensation and distributable cash, when you built a location to $1.5 million plus, the GM plus model, $1.5 million in annual revenue, you're probably going to give away a lot less than that.
483
00:35:20.193 --> 00:35:30.797
So like I don't mind sharing my percentages for when I was Mike's general manager, my distributable cash for running the Bellingham location was 10% because Mike built that location over the course of seven to eight years.
484
00:35:31.097 --> 00:35:37.139
So he was not going to give me 25% of that distributable cash, which is completely fair and within his right.
485
00:35:37.500 --> 00:35:41.181
So I was given 10% of distributable cash for the GM plus model.
486
00:35:41.441 --> 00:35:51.965
So what you could do, Matthew, to your point is like, if you're the person getting the business to that 1.5 million in annual revenue, what I would recommend is potentially, yeah, just drastically reducing the percentages.
487
00:35:52.205 --> 00:35:55.066
So you have a salesperson, maybe you give them three to 5%.
488
00:35:55.707 --> 00:36:01.869
If you have an operations manager, they're probably driving revenue a little bit more in terms of, excuse me, they're driving more profitability, right?
489
00:36:01.969 --> 00:36:05.550
Operational efficiencies, keeping the trucks running, the crews running, things of that nature.
490
00:36:05.891 --> 00:36:07.591
I might give them six to 8%.
491
00:36:07.911 --> 00:36:09.452
If you have an in-house office staff,
492
00:36:09.692 --> 00:36:12.373
Yeah, you might give them a smaller percent like one to three percent.
493
00:36:12.573 --> 00:36:15.314
You're still around 10 to 15 percent in total.
494
00:36:15.715 --> 00:36:21.257
So I think that's something that as we've kind of built out what we call the GM plus model, I think we'll build more.
495
00:36:22.598 --> 00:36:26.259
We will build more frameworks around what that looks like for distributable cash.
496
00:36:26.619 --> 00:36:33.002
And I would also, you know, in true sales guy fashion, join Mike and he's dot com slash blackfish.
497
00:36:33.022 --> 00:36:33.463
Friday.
498
00:36:33.963 --> 00:36:49.005
But no, Mike's next book is going to actually highlight a lot of that Matthew, like, like a ton of that is going to be highlighted in terms of like, how do you actually separate ops sales admin at a profitable rate as you scale a business like his next book covers all of that in depth.
499
00:36:49.653 --> 00:36:49.993
Yeah.
500
00:36:50.153 --> 00:36:52.195
And maybe just a small side note to that.
501
00:36:52.295 --> 00:37:07.568
This is just kind of what I was thinking about because it's like, okay, if you're doing GM plus and let's say you get your GM in there and they're getting 25% distributions at 500,000 and then they have like, and then they slowly increased to 800,000, but then you're, you're in there as well.
502
00:37:07.608 --> 00:37:09.049
You're operating, you're scaling the business.
503
00:37:09.069 --> 00:37:09.890
And,
504
00:37:10.070 --> 00:37:14.594
It's sort of like if you raise prices on P4P, but you never adjust their hourly rate.
505
00:37:15.034 --> 00:37:25.562
So like if I did, if I raised prices to $150 an hour, but I'm still paying 33%, I'm paying an insane amount of money to my crew just because I'm priced really high.
506
00:37:26.043 --> 00:37:32.288
So what we know we do at that point is we take our percentage and lower it, but we still demonstrate to the crew that they get upside down.
507
00:37:32.788 --> 00:37:41.676
So I'm assuming, Matthew, you would do the same thing in this situation as if they were at 25%, but you're doing GM plus, you would probably work that percentage down over time.
508
00:37:42.157 --> 00:37:53.227
But you would somehow show them that based on the growth of the business, even at a lower percentage, their on target earnings are going to be significantly more than they were at the 25%.
509
00:37:54.628 --> 00:37:58.072
So that's one of those things, I guess it would be like cross that bridge when you get there.
510
00:37:58.673 --> 00:38:00.214
But that's just how I'm thinking about it in my head.
511
00:38:00.234 --> 00:38:10.185
It's like you would just work the percentage down, but demonstrate like, hey, you're getting a smaller percentage of a bigger pie and you're going to be much further ahead than you were prior.
512
00:38:10.365 --> 00:38:11.647
To end on that note, the.
513
00:38:13.069 --> 00:38:23.142
I did this when, when we were doing all the price increase stuff before I made a document, where it shows how to illustrate the decrease in percentage, but the increase in pay.
514
00:38:23.943 --> 00:38:25.205
So there's a document to that.
515
00:38:25.345 --> 00:38:42.248
I'm sure once GM plus becomes a model that more people do, which I know it's, you know, there's, it's not like the gold standard right now, but if more people go that route, more systems and things will be built around it, I suppose.
