How Should a Painting Business Pay Key Hires (Admin, PM, Sales)

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What got me was what we're going to talk about.
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This is the fact that uh growth's expensive.
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You're going to pay this person the most that you've ever paid anybody else.
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Yeah.
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You think you'd be making more money, but it's actually the lowest as a percentage of revenue.
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In the swamp, you're hiring all these people like we were just talking about, and it's eating away at your margins.
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Welcome to the Profitable Painter Podcast.
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In this podcast, we help painting businesses know their numbers and what they mean and say big in tax.
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I'm Daniel Honan.
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I'm a CPA and former painting business owner.
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And over the last 10 years, I've helped over 500 painting businesses from startup to 25 million scale and know their numbers and what they mean and say big in tax.
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And today I'm super excited to be here with Mr.
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Cody Hall.
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He's the business development representative over at Profitable Painter CPA.
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And he's also grown and scaled a few businesses of his own.
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Uh three, right?
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You founded and scaled.
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Three large ones.
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I own several small ones, which I hadn't told you this today, but I have a uh a buyer from my restaurant.
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So seven, seven figure.
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So let's let's hope I can close that with you.
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Yeah.
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And you just had an eight-figure exit like two years ago.
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Two years ago?
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Has it been two years ago?
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Or was that you're talking about the most recent one?
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Okay, no.
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So that was a that was an eight-figure, and then you had a nine-figure, which was a few or not 100% on.
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So one just closed, uh is actually recognized last month.
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So that was uh the whole business was 110 million.
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Okay, right.
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And so I was a uh co-founder, and then two and a half years ago, how long we worked together?
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Two and a half years?
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So two and a half years ago, I sold my own, which was eight.
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Now I did that from bootstrap to to 15 million.
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That's awesome.
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It was horrible because I'll be honest with you, uh, we didn't have a there's not a virtual staffing CPA firm.
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I had to like find these things out through Braille.
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And I think what what got me was what we're gonna talk about.
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This is the fact that uh growth's expensive.
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And oftentimes I just thought that's I thought that this is what you did because my company was the first bootstrapped one I did, meaning that I went from zero with my own money versus venture and PE backed, private equity and venture capital, because I had money to spend to make things happen, right?
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And this time I had to use money that we were generating to make things happen.
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Right.
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And I felt the pain a lot more during that time.
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Yeah.
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So most painting business owners are bootstrapping, right?
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You're using your own money to start the business and grow it, and you're not backed by PE or venture capital, unfortunately.
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There are there is a lot more private equity in in the painting industry nowadays, but you know, they're not interested in painting business owners that are just getting started.
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They're usually waiting until they're at least a million in revenue or higher.
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But yeah, so starting starting with your own money and trying to scale from zero to one to whatever million is a different story.
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You gotta you gotta manage that cash.
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Uh, you gotta be really conscientious of your cash flow.
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That's why they say cash is king.
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Oh man, this entire time I thought I was darn it.
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Hey, you know what?
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Speaking of managing cash and paying attention to it, I want to talk about key hires, right?
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That project manager being one.
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Whether it's the first or second or third, I think oftentimes what I hear about when people come through and do consults with us is like, I need or I feel like I need this person, but I'm not sure I can afford it.
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Right.
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Yeah.
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So we typically break the painting industry, the painting business cycle into four different stages.
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So you have the startup phase from zero to three fifty, and then you have the build stage from 350 to 1 million, and then you have the swamp from 1 million to 3 million, and then you have sellable asset and 3 million plus.
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So key hires at the 0 to 350, that's really just getting off the brush, hiring painters.
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And I think most folks can do that without you know much help there for the most part.
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Like tip uh an average pay rate for a painter is$25 an hour.
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And you know, maybe it's a little higher depending on your location, maybe a little lower even.
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But typically are somewhere around$25 an hour.
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And so you're with payroll burden added in there, your payroll burden is gonna run you about$32,$33 an hour plus worker's comp.
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Uh so a$25 an hour employee is actually gonna cost you, the business owner, about$32.50 or something.
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And then from there, you do your your uh your markup, you do your charge rate.
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So your charge rate for$32.50 cost to you is usually gonna be somewhere around$70 or so, or maybe higher.
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Uh so that that higher, which is super important, get off the job site, get off the brush.
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That's usually accomplished successfully for most people.
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The problem is when they get into the build stage, they need like an admin, they need a production manager, like you said, they need a sales person.
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I hear a lot of coaches talk about uh a lot of folks.
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We don't we call it the key hire, we call it the project manager, right?
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Uh a lot of folks say that the admin's the first hire, which you know I'm a big supporter of.
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Yeah.
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But is it the first?
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Kind of which which I mean there's no first.
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You can do it.
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Egg or chicken or chicken or the egg.
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Yeah, there's many ways to do this.
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Uh but yeah, most folks still hire an admin.
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I think it makes the most sense is to hire an admin first after obviously painters.
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But like getting an admin because you can pay an admin part-time, maybe just focus on speed to lead, which is super important.
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You can break the pieces back up versus like project manager.
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Right.
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You can have them answer your phone, which is super important, because every time you miss a call, you're basically throwing away money.
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Have them do those kind of speed to lead, answering your phone, those are like really high dollar tasks that you can easily get an admin to cover down on.
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So that's that's why I like that hire first.
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Um, and the the typical range that we recommend for an admin, depending on what all they're doing, you know, somewhere between two and four percent of revenue.
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Wow.
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So if you're I'm bad with math.
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Yeah, if you're at a million, uh, that would be you know twenty to forty thousand dollars per year.
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If you're if you're five hundred thousand, that's ten, ten to twenty.
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Out of curiosity, Daniel, not on my not on my path today, but you say that.
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Are you indifferent to that person being remote or in person?
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Never hire over.
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I'm just kidding.
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In my defense, I'm near sure.
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So that's true.
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Over border, right?
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Yeah.
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Okay.
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Yeah.
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Uh no, I think it can be done well either way.
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You can hire your kids as a good tax strategy you to do something like that.
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Or maybe you you hire uh you know someone local in town, you hire um painter, the the painter VA, right?
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That's uh outsourced to Mexico.
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People speak really good English, you can't even tell the difference.
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Um there's many, many ways you can do it.
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Uh, I've seen it done successfully at all levels, right?
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Different ways.
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So yeah, I think it comes down to comfortableness too.
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And I think that even me sometimes certain things like uh I like to hire people near me because I like to see them, right?
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Like I really enjoy working remote with you because I couldn't imagine being in the same city as you.
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That was a good save.
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Like I don't want to be next to you that frequently.
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Um don't make me move to Orlando.
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Um, no, I I I think that's well said.
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Um and so talk about compensation back to the project manager being what we refer to as that key hire.
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I I think that you're talking about compensation.
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Is there bonus elements?
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Because I think some people bonus them and then they feel like they're giving them too much, not enough, right?
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They don't tie it to the right things.
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Yeah, hit that for me.
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Yeah, so project manager, it's a key hire because it's usually like the it's a big investment.
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It's like the you're gonna pay this person the most that you've ever paid anybody else, and and put potentially up to six figures.
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So that's a big deal.
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And so usually folks are at revenue of about I would say roughly 600,000 to 1.2 million, somewhere in that range.
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It's in the build stage usually, but people want to get some additional help.
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And sometimes people hire the salesperson first before the production manager, but most often they're hiring that production manager first because they feel more confident in the sales to be able to sell it, uh, sell the business, um, do the sales themselves.
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So, but yeah, for a production manager, typically what we recommend is a two-thirds base, one-third bonus structure.
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So um, and then another piece of this is to pay your production manager somewhere between four and seven percent of revenue.
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And the reason why that's such a broad range is because what a project manager does in one painting business is often different than what a project manager is doing in another painting business.
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So the the roles and responsibilities are often could be very different.
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So, for example, if you have an admin already, that admin, maybe they're doing color capture, like they're getting the colors from the customers, they're they're coordinating with the customers when they first onboard.
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They are maybe ordering the paint, maybe scheduling the job, and then the production manager takes on takes that over once everything's already done there, and then they start doing the walkarounds and collecting.
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I like that so much because it makes me think of a story.
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Uh, my wife, for the most part, runs the painter's VA, which uh I told you you didn't want a job.
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Um so it was a fun part-time gig.
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Now she's super busy.
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Uh, but she has two VAs that work for her that are a couple, they're married.
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Oh, wow.
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And so it's it's hilarious.
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Yeah.
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And so one works for one painting business, painting business A in North Carolina, and the other one works for painting business B in Washington.
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Both of them are admins for painting businesses.
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Their jobs could not be much different.
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I did one works for about 500k a year, and he does everything.
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Yeah.
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Answer the phone, color captures, translating job orders.
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His wife for B, she does one thing marketing.
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Yeah, she manages the relationship to the marketing firm who uh works with them so that they can do all of the so that it can be focused on the job costing and all the capturing of the cost of leads and everything.
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That's her sole joke.
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So he's always calling in because well, obviously, Payne BSB is a bigger company.
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She makes more, right?
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But he does more work.
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And so what I think is great about that is you're absolutely right.
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The jobs can be the same title, but depending on the company, and in paint, is it is it residential, commercial, directed GC, industrial?
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Like it looks very different because the competency of a project manager for an industrial painting business is very different than residential.
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Yeah.
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Yeah, for sure.
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So it can look a lot different.
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And in the depending on what the admin's doing, what what the production manager's doing, what the crew leads are doing.
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So because sometimes the crew leads are doing the walk-arounds, collecting checks, getting five-star Google reviews.
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So that's why there's such a broad range of four to seven percent of revenue or what what the production manager produces, four to seven percent, because they could have an admin, really strong admin, really strong crew leads that are doing a lot of that work.
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So it's all it's different depending on how you're structuring things.
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But go back to the the how to structure it.
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Two-thirds base, one-third bonus.
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So just to give a simple example, you know, let's say a production manager, you should you would would expect them to produce$1.5 million in production at the top end of what they could do.
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Like that's based off the rules and responsibilities.
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You would be ecstatic if they could hit$1.5 million.
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So a way you could pay them would be a two-thirds base, like$65,000 base, and then uh bonuses up to$35,000.
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And so they can hit six figures if they produce$1.5 million.
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So the bonuses, which I would I would pay out monthly, because a lot of folks, for some reason, they'll default to paying the bonuses at the end of the year, but from what I've seen, it's not very effective in terms of motivating motivating, yes, the production manager, because it if it's so far from when they actually did the work, it it's it's not as impactful to their behavior, changing the behavior.
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So trying to pay that bonus as close to when the work was actually done is is is better, right?
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So doing a monthly bonus, if they're hitting their production volume, if they're hitting the gross profit that you've targeted for them, and they're getting good customer satisfaction reviews, either Google reviews or whatever you however you track that.
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And so if uh if they're hitting those three metrics, then they'll be eligible for a bonus.
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And that so that$35,000 is spread out across the months, you know, whatever$35,000 divided by 12 is, I think$2,900 or something like that.
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Um you would pay them up to that amount given they they hit those three metrics.
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And if there's one thing I've learned about paying new business owners as well, um if you push off the bonus at the end of the year, having the cash to pay the bonus will oftentimes be a challenge because people will leverage that fund somewhere else.
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I've I've seen that as a challenge.
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Um you guess you're just lucky in Mexico they have Iganalgo, which is a yearly required called the 13th month, and we're required to pay a bonus uh equivalent to people's time and service and everything for the date and everything.
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So we're lucky in that regards.
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I want to before I jump to the next role, you you hit on five-star reviews several times.
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And as someone who's a big supporter of reviews, uh, tell me, right?
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You know, who is it?
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The project manager, it why is it important?
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You because you said it twice.
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Talk to me about five-star reviews.
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And you he's saying five star, he's not saying hey, give me a Google review.
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He says he's asking for a five-star review.
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Yeah.
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So yeah, you want to bonus people off of metrics that they can control.
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And so usually a a production manager can control the how satisfied the customer is, right?
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And if the job is profitable.
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Now they can't, you know, the crews have to be a part of that, they have to do a good job and stuff.
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But if a good production manager can manage the crew leads effectively and and get a five-star Google review for at least 50% of the projects, maybe even higher.
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But that's usually like a good benchmark.
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If they can get coverage on 50% of the projects they produce, if they get a five-star Google review, you could probably give them a bonus because they probably did a pretty decent job.
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You could you could increase that to 60% coverage, but I think somewhere in there.
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Um and and then the other piece is the gross profit, because obviously gross profit is what Tara Riley calls over at uh she's a C former CEO of Freshcoat Painters and currently over at Academy for Professional Painting Contractors with Bronan Brandon Lewis.
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She's the uh head consultant over there.
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She calls gross profit mama, so we got to take care of mama, right?
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So we want to incentivize a production manager to want to take care of mama and and have a solid GP.
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So that's another key metric is bonus based off of gross profit.
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And really, not just a production manager, really probably want to bonus as many people as we can off a gross profit.
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Because if everyone's bonus off a gross profit, you'll probably have a pretty good gross profit.
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That includes your salespeople, your painters, your production manager.
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Yeah.
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Yeah.
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No, I was just uh I I love reviews and so do we, you know, because we have over 160 five-star reviews on Google.
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So you should check it out.
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Um, and I I was just checking real quick to see if we had broke a thousand reviews at one of my restaurant locations.
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Yeah.
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And so it's the closest one to a thousand.
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It says 992, 4.8 stars.
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Uh, I pay a dollar a bonus.
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This is in Mexico, so that's 20 pesos.
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Uh, and so I've been paying that over the past yeah, four or five months to incentivize people because I was before, I was like, could just ask for reviews, and they're like, okay.
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And they wouldn't do it.
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And realized they just didn't have the reason to do it.
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Yeah, yeah.
00:16:23.379 --> 00:16:25.379
And I'm like, oh, wait, yeah, I'm gonna pay you.
00:16:25.539 --> 00:16:26.819
And like, okay, go on.
00:16:26.980 --> 00:16:28.259
All right, tell me more.
00:16:28.579 --> 00:16:30.339
And they started asking for the best reviews.
00:16:30.500 --> 00:16:34.740
You're talking about getting photos and and real client testimonials about their experiences.
00:16:34.899 --> 00:16:41.459
That's the best place for painting businesses to reference, like we do here at the Profitful Painter CPA, about other people's opinion.
00:16:41.620 --> 00:16:43.379
Don't trust us, trust the reviews.
00:16:43.459 --> 00:16:44.019
Yeah.
00:16:44.339 --> 00:16:48.019
Yeah, getting getting reviews is super important as a painting business.
00:16:48.179 --> 00:16:57.620
And uh the one one little hack that you could use, which we use at Profitable Painter CPA, um, is and it's true.
00:16:57.779 --> 00:17:06.339
Like what we say, we say, hey, um, your accounting team is bonused based off of Google reviews.
00:17:06.500 --> 00:17:10.579
So it would be great for the accounting team if you if you provided a Google review.
00:17:10.819 --> 00:17:14.579
And which is true, they get a they get a bonus um if they can get a Google review.
00:17:14.740 --> 00:17:18.740
So but you can do the same thing with your with your your your painting crews and stuff.
00:17:18.819 --> 00:17:22.180
And there's a bunch of guidelines for Google, so I don't know the guidelines super well.
00:17:22.339 --> 00:17:31.460
So someone like Michael McLean over at Search Click Grow or Great Guy Brandon Pierpont at Painter Marketing Press probably knows this better than better than me, but um I think this is okay.
00:17:31.620 --> 00:17:38.259
Uh basically saying, like, hey, um, because you can't pay for you can't incentivize, like, hey, I'm gonna I'll pay you for a Google review.
00:17:38.339 --> 00:17:39.539
Obviously, you can't pay the person.
00:17:39.860 --> 00:17:40.259
That's illegal.
00:17:40.579 --> 00:17:41.620
That's definitely not good.
00:17:41.860 --> 00:17:46.019
But you could pay your team for getting, like, bonus them for getting Google reviews.
00:17:46.500 --> 00:17:48.420
You're incentivizing them for asking for them essentially.
00:17:48.500 --> 00:17:48.579
Right.
00:17:48.900 --> 00:17:55.700
And then that the team members can say, hey, like the crew lead or the product production manager can go to the homeowner and say, Hey, you know, did you have a great experience?
00:17:55.860 --> 00:17:56.900
Okay, great, that's awesome.
00:17:57.060 --> 00:18:03.140
Hey, you know, real quick, um, the the the team gets bonused uh based off of getting a five-star Google review.
00:18:03.220 --> 00:18:05.300
Do you think is that something that you could do for them?
00:18:05.780 --> 00:18:13.220
And you know, most people, if they had a good experience, they're gonna be like, oh yeah, they're like, oh crap, the bonus is based off me giving me a five-star Google review.
00:18:13.300 --> 00:18:15.700
That kind of puts some pressure on them to do so to do that.
00:18:15.780 --> 00:18:17.540
Uh and most people will fall through with that.
00:18:17.940 --> 00:18:20.980
You know, I like all those approaches much better than mine.
00:18:21.060 --> 00:18:26.340
Uh when I originally went to my wife and the general manager about, you know, increasing Google reviews.
00:18:26.420 --> 00:18:28.820
I'm like, you guys have been in the same review amount forever.
00:18:29.060 --> 00:18:33.060
I said we should just go to the staff and say, Google reviews, or I'll hire someone else next week.
00:18:33.220 --> 00:18:34.660
They both disagreed with me.
00:18:34.820 --> 00:18:35.540
They said no.
00:18:35.620 --> 00:18:37.540
Um, but I like your I like your approach much better.
00:18:37.780 --> 00:18:38.580
Yeah, yeah.
00:18:38.820 --> 00:18:42.180
I mean, many ways to cut the caveat.
00:18:42.340 --> 00:18:42.740
Yeah, cut it.
00:18:42.980 --> 00:18:46.260
No, well, hey Dale, thank you for that uh caveat there on the Google reviews.
00:18:46.420 --> 00:18:51.060
Um, you know, uh not to put my people on the spot, but I want to talk about sales, right?
00:18:51.220 --> 00:18:53.220
The sales guy or gal, right?
00:18:53.380 --> 00:19:00.100
And and understand really we just talked about the PM and we're talking about really the strains of growth.
00:19:00.340 --> 00:19:05.060
A salesperson could be it usually is the highest paid person in the business.
00:19:05.460 --> 00:19:08.500
And so that's scary, the idea of doing that.
00:19:09.060 --> 00:19:10.260
Walk us through that.
00:19:10.740 --> 00:19:17.220
Yeah, so there's two different types of salespeople, I think, generally good and bad.
00:19:17.380 --> 00:19:24.500
Yeah, or maybe there's a matrix that we should but what I was thinking was there's the hunters and then there's the farmers.
00:19:24.900 --> 00:19:27.380
And I actually talk about this in my book, Profitable Painter.
00:19:27.780 --> 00:19:28.980
We don't have the mayor anymore.
00:19:29.380 --> 00:19:33.300
But I'm laughing because of we've had this conversation about the hunter and the farmer.
00:19:33.620 --> 00:19:34.340
Did we remember?
00:19:34.580 --> 00:19:39.060
You're like hunt, and I'm like, Oh, yeah, I'm more like a shop at the butch marker kind of guy.
00:19:40.180 --> 00:19:40.580
Right.
00:19:40.740 --> 00:19:46.500
So the hunter is best suited for residential repaint.
00:19:46.580 --> 00:19:51.460
Because residential repaint, you have so much volume you have to do to hit you know, million, two million, so much volume.
00:19:51.540 --> 00:19:55.380
So you really need somebody who's gonna go out there every single day and kill what they eat, right?
00:19:55.460 --> 00:19:57.540
They have to go out every single day.
00:19:57.940 --> 00:20:02.500
Yeah, be hungry, get out there, kill something, at least one thing per day, and bring it home, right?
00:20:02.740 --> 00:20:06.740
Uh so that's a hunter's style salesperson.
00:20:06.980 --> 00:20:38.420
Then you have the farmer, which that would be more appropriate for like a B2B commercial uh scenario where you need to the the the sales cycle for those types of engagements with you know high you know being hired by another business or maybe uh government work or industrial, that sort of thing, where you have these long, longer cycles and you have to kind of be more of a farmer where you go visit the the business, bring donuts and coffee, and like build rapport, network, and plant seeds with these people and let it kind of come to fruition.
00:20:38.500 --> 00:20:40.420
That's more of a farmer type position.
00:20:40.740 --> 00:20:45.060
So you gotta first identify what type of salesperson you need.
00:20:45.220 --> 00:20:46.660
Do you need a farmer or do you need a hunter?
00:20:46.740 --> 00:20:48.740
Now, if you're in residential repayment, you need a hunter.
00:20:49.060 --> 00:20:54.260
And then if you're doing B2B or some other similar type, longer sales cycle, you need a farmer.
00:20:54.420 --> 00:21:07.300
And so that's important for the pay structure because the you don't want to pay a hunter like you're gonna like a farmer salary, or you don't want to pay a farmer like a hunter uh because you're gonna screw up the incentives there.
00:21:07.460 --> 00:21:08.500
What do I mean by that?
00:21:08.740 --> 00:21:16.100
So for a hunter, you don't want to give them a big base salary because then they're gonna get fat and lazy, and there's why why do I need to go out today and kill something, right?
00:21:16.180 --> 00:21:18.980
I'm I'm getting this salary, like there's no incentive.
00:21:19.860 --> 00:21:28.500
So you want the hunter to have a very low or no base salary and pay them mostly off of commissions.
00:21:28.820 --> 00:21:35.780
And then for the farmer, because there's such a long sales cycle, you do want to give them a higher base salary.
00:21:36.020 --> 00:21:39.460
So they they they have money to live off of.
00:21:39.780 --> 00:21:47.940
Uh but usually those types of people are are better suited for more um they're more conservative and they'll they want they want that safety net.
00:21:48.020 --> 00:21:50.180
And so they'll have a higher base salary and lower commission.
00:21:50.660 --> 00:21:54.740
Uh so that's the first thing you gotta identify is what type of salespeople do I actually need.
00:21:54.980 --> 00:22:00.340
And then to go with the hunter, uh like I said, very low.
00:22:00.500 --> 00:22:02.580
Oftentimes I recommend no no base salary.
00:22:02.660 --> 00:22:07.700
I think you can you can do straight commission for a residential repaint because you just need so much volume.
00:22:07.940 --> 00:22:16.820
And for the ramp up, I mean, if you want to give it like a draw where you you give them a certain amount of money to get ramped up into training, and then they have to pay you back later, that might work.
00:22:16.980 --> 00:22:21.620
But I think no commission, I'm sorry, no, uh, no base salary works.
00:22:21.860 --> 00:22:29.140
And so typically you want to pay a salesperson eight percent of what they close, and that includes all payroll taxes and everything.
00:22:29.220 --> 00:22:35.460
So you look at the line item for salesperson on your profit and loss, it should be eight percent or lower, uh, with everything included.
00:22:35.780 --> 00:22:44.100
And so but you don't want to just pay a straight commission because that incentivize that incentivizes discounting.
00:22:44.260 --> 00:22:51.940
So you want to pay uh maybe a portion of it straight commission, but then yet uh another substantial portion based off a gross profit.
00:22:52.100 --> 00:22:56.820
So what we found that often works is doing like a three, three and a half percent commission right away.
00:22:56.900 --> 00:23:02.180
They close the job, they get three, three and a half percent you know on their next paycheck commission.
00:23:02.420 --> 00:23:07.540
And then they can get one, two, or three, another thr one, two, or three percentage points.
00:23:08.260 --> 00:23:15.300
If they hit gross profit targets of let's say 45, 50, 55%, depending on what what your targets are for gross profit.
00:23:15.620 --> 00:23:25.220
And so basically half of their potential commission is determined by how did the gross profit land on the job.
00:23:25.300 --> 00:23:26.420
So you have to do job costing.
00:23:26.580 --> 00:23:29.540
One, you actually have to be doing job costing to know this.
00:23:29.700 --> 00:23:33.860
And then two, they don't get paid till after that gross profit is identified.
00:23:34.580 --> 00:23:36.900
And uh they get that other portion of that commission.
00:23:37.060 --> 00:23:46.580
So now they're not incentivized to discount, they are incentivized to close jobs that are profitable, which is key for you as a business owner.
00:23:46.820 --> 00:23:47.140
Yeah.
00:23:47.300 --> 00:23:51.060
So aligning the bonus with the overall objective of the organization.
00:23:51.220 --> 00:23:51.380
Yep.
00:23:51.620 --> 00:23:53.220
Which is a key disconnect oftentimes.
00:23:53.460 --> 00:23:55.140
So um, well, great.
00:23:55.380 --> 00:24:00.900
And so we hit on the roles that I wanted to hit on, so which are oftentimes very, very big topics.
00:24:01.220 --> 00:24:11.060
For the org organizations who are expanding, though, and I oftentimes see folks, so I have I see this oftentimes with our franchisees, they want more locations.
00:24:12.260 --> 00:24:15.620
And the franchisers will oftentimes sell them more locations.
00:24:15.780 --> 00:24:19.380
But when's the right time to get another location?
00:24:19.540 --> 00:24:20.900
It's like I I want to open another location.
00:24:20.980 --> 00:24:21.700
When is that time?
00:24:21.860 --> 00:24:26.420
Number wise, what are we looking at number wise to say this is a good time to copy and paste?
00:24:26.740 --> 00:24:27.540
That's a good question.
00:24:27.860 --> 00:24:37.380
This happens a lot where folks they want to start another location and they haven't really gotten the full benefit of the first location yet.
00:24:37.540 --> 00:24:40.100
Like they're just they're usually in the swamp.
00:24:40.340 --> 00:24:44.580
Like the swamp, we we separate businesses into four different stages.
00:24:44.980 --> 00:24:50.820
Uh startup is zero to three fifty, build is three fifty to one million, and then the swamp is one million to three million.
00:24:51.700 --> 00:24:55.700
And then the final stage is sellable asset, which is three million dollars plus.
00:24:56.580 --> 00:25:10.660
And the least profitable as a percentage of revenue for the business owner is the swamp, which is kind of weird because you would think, oh, yeah, you think you'd be making more money, but it's actually the lowest as a percentage of revenue.
00:25:10.820 --> 00:25:22.500
You're probably making more in dollar amount, hopefully, than when you were in startup, but like uh as a percentage of revenue, the swamp is actually looking at our data, like we go back and look at these trends, it's it's actually the lowest as a percentage of revenue.
00:25:22.580 --> 00:25:24.020
And then it goes up in sellable asset.
00:25:24.100 --> 00:25:24.900
It actually goes up.
00:25:24.980 --> 00:25:29.620
The the business owner is making more dollar amount in profit, but also in percentage than the swamp.
00:25:29.940 --> 00:25:41.700
And the reason why is because in the swamp, you're you're hiring all these people like we were just talking about, and and it's eating away at your margins, and you're you're still optimizing gross profit and getting things efficient and that sort of thing.
00:25:41.940 --> 00:25:48.180
So oftentimes people think that, and they have, they've hit a level of success and they're doing between one and three million dollars in revenue.
00:25:48.260 --> 00:25:55.940
And they're like, man, if I could open another location in the in the town over, I know somebody over there, and they'd be great, general manager, whatever the case is.
00:25:56.180 --> 00:26:05.540
And but they still haven't really optimized and made start making real money in their current location, and now they're gonna split their focus and work on something else.
00:26:05.780 --> 00:26:10.580
So uh you not all the times, but oftentimes with people start bringing that up with me.
00:26:10.660 --> 00:26:16.180
I'm like, dude, you need to just focus on this location and get it, get it to be the set in the sellable asset phase.
00:26:16.340 --> 00:26:25.380
Then we can start diversifying into different locations and stuff, but you're still there's so much that you have to to grow here and and and reap a bunch of profits.
00:26:25.540 --> 00:26:31.220
Like, let's just focus on this, let's get to a higher stage and then we can talk about other locations.
00:26:32.020 --> 00:26:32.340
Yeah.
00:26:32.740 --> 00:26:34.260
No, I don't even remember what your original question was.
00:26:34.580 --> 00:26:34.980
No, I know.
00:26:35.060 --> 00:26:49.300
Doubling locate, you know, I I've done this when I expanded our restaurants, and the only reason I even wanted more locations because the supply line that we had to create in order to generate the existing business was expensive.
00:26:49.460 --> 00:26:50.740
It was a fixed cost, right?
00:26:50.900 --> 00:26:53.140
The travel logistics, everything included.
00:26:53.300 --> 00:26:53.540
Yeah.
00:26:53.700 --> 00:27:05.140
Um, and I was like, man, if we could just expand this into three locations relatively close together, that tripled our ability because what would prevent people from visiting locations before was distance.
00:27:05.220 --> 00:27:06.100
Now we have it next to you.
00:27:06.420 --> 00:27:08.420
For us, it was semantics on how much it costs.
00:27:08.820 --> 00:27:10.420
That's the only reason I ever expanded.
00:27:10.660 --> 00:27:12.100
Well, and and this is a different industry too.
00:27:12.180 --> 00:27:15.940
Like the painting business, your fixed costs are pretty low.
00:27:16.020 --> 00:27:20.100
Like you don't have And there's a Benjamin Moore, Sherman Williams, or supplier, probably right next to you.
00:27:20.180 --> 00:27:21.300
So it's it's there for you already.
00:27:21.540 --> 00:27:21.700
Right.
00:27:21.780 --> 00:27:28.900
And and if you're gonna start another location, you're gonna have to create another set, like you're gonna have to it doesn't really save you that much.
00:27:28.980 --> 00:27:30.180
There's not a lot of shared services there.
00:27:30.340 --> 00:27:31.140
And that's what I was getting to.
00:27:31.300 --> 00:27:35.860
So like you might save a little bit of money, but it's not like a huge savings starting another location.
00:27:35.940 --> 00:27:37.940
You're pretty much just gonna be doubling your overhead.
00:27:38.100 --> 00:27:44.260
Um so it's not, it's not, I think people think it, oh, is I already have all this stuff.
00:27:44.340 --> 00:27:47.460
Like it's gonna be, you know, so much money saved and when I start this new location.
00:27:47.620 --> 00:27:47.940
Not really.
00:27:48.100 --> 00:27:49.780
The biggest thing is it's gonna split your focus.
00:27:49.940 --> 00:28:02.020
You're gonna be focused on starting up this other location that you're not even gonna be physically there because a lot of times you're having somebody else do it, and or you or worse, you're actually doing it and you're leaving somebody else to to run your current business.
00:28:02.340 --> 00:28:09.140
And so your attention gets split either way, and oftentimes they're not optimized profitability-wise.
00:28:09.300 --> 00:28:16.180
And so then their first business starts getting worse and being less profitable, and then their second business is in the startup phase and it sucks too.
00:28:16.260 --> 00:28:19.860
So then they have two crappy businesses instead of just one profitable business.
00:28:19.940 --> 00:28:21.700
So I'll take the one profitable business.
00:28:22.180 --> 00:28:28.980
Uh, you know, I own a portion of my brother's plumbing business, and he is opening a second location in a different state.
00:28:29.140 --> 00:28:32.420
Oh, and I was like, they're in the swamp right now, like three million.
00:28:32.660 --> 00:28:37.300
I was and my advice was just focus on this, don't do that.
00:28:37.460 --> 00:28:43.220
Because, like, you have your challenges right here at home, you're gonna create other challenges, you know, eight hours away from you.
00:28:43.380 --> 00:28:45.140
Um, no, I I like that very much.
00:28:45.220 --> 00:28:49.220
And I always say, don't copy and paste broken things, right?
00:28:49.380 --> 00:28:49.540
Yeah.
00:28:49.940 --> 00:28:50.420
Don't do that.
00:28:50.500 --> 00:28:50.820
Yeah.
00:28:50.980 --> 00:28:52.340
Um, so great.
00:28:52.420 --> 00:28:53.300
I I appreciate that.
00:28:53.380 --> 00:28:58.500
That was a really nice way of saying what I just said is you you're not doing well enough to expand yet.
00:28:58.580 --> 00:28:58.900
Stop it.
00:28:58.980 --> 00:28:59.140
Yeah.
00:28:59.220 --> 00:29:01.620
But it made me think about another thing that I hear oftentimes.
00:29:01.860 --> 00:29:15.700
Just recently I did a consultation with a gentleman who is in San Diego, and he services everything from Chula Vista, which is the border, all the way to Tumecula, which is about a two-hour span, which is you have San Diego County, they have North San Diego County.
00:29:15.780 --> 00:29:16.580
He services all of them.
00:29:17.460 --> 00:29:18.740
What's the right radius?
00:29:18.820 --> 00:29:21.860
Right, because that means you're talking about hours in a car, right?
00:29:22.580 --> 00:29:28.740
Do we ever have those conversations with folks where we're like, hey, listen, I think your most of your cost is built into your travel time?
00:29:28.900 --> 00:29:29.380
Yeah.
00:29:29.620 --> 00:29:30.660
Yeah, great question.
00:29:30.900 --> 00:29:36.260
So the way that I look at this is I look at the line item for vehicle costs on the profit and loss.
00:29:36.820 --> 00:29:40.580
So usually that will that will tell me like what's going on.
00:29:40.660 --> 00:29:47.460
So if I see a the line item for auto costs, if it's between two and three percent, that is that's benchmark.
00:29:47.540 --> 00:29:50.180
Like I'm not concerned about how much they're traveling.
00:29:50.340 --> 00:29:54.500
If it starts being over two, over three percent, this is like, okay, what's going on here?
00:29:54.580 --> 00:29:55.780
What do we what are we doing?
00:29:56.100 --> 00:29:58.100
Sometimes it's like we have a huge fleet.
00:29:58.180 --> 00:30:04.180
Maybe we had higher revenue in the past and now we still have this huge fleet, but we shrank and now we but we're still maintaining all these vehicles.
00:30:04.420 --> 00:30:10.100
And so maybe it's time to sell some of those vehicles or build revenue up again so that it actually makes sense.
00:30:10.180 --> 00:30:16.740
Uh or it's what you said is that we're traveling so much for these jobs, like and we're not charging for it.
00:30:16.980 --> 00:30:26.740
You know, we don't have like a an additional margin to cover that additional um you know, time in in automobile cost to to actually do this job so far out.
00:30:26.980 --> 00:30:31.700
So I don't I don't have a specific it should be this amount of miles away or not, you know.
00:30:32.100 --> 00:30:36.580
Uh but population it's more because I see it on the financials like it's just a line item.
00:30:36.740 --> 00:30:38.660
So that that could be a a rule of thumb.
00:30:38.740 --> 00:30:41.620
If you look at your profit and loss, look at the auto spend line.
00:30:41.780 --> 00:30:46.980
If it's over three percent, you probably should look at what's going on with your vehicles, or maybe you're spreading yourself too thin.
00:30:47.220 --> 00:30:48.820
Especially if people drive their vehicles home.
00:30:48.980 --> 00:30:54.020
I you know, we have uh a few vehicles for uh the restaurant, and I saw the same thing on that exact mic.
00:30:54.100 --> 00:30:56.740
I was like, What's all this vehicle maintenance and fuel cost?
00:30:56.900 --> 00:31:00.020
And it turns out that when you're not paying attention, it becomes a personal vehicle.
00:31:00.180 --> 00:31:00.660
Yeah.
00:31:00.980 --> 00:31:02.900
So I was like, wait, what is this?
00:31:03.060 --> 00:31:03.780
Yeah, yeah.
00:31:04.020 --> 00:31:17.940
That's a great topic, too, is like uh when when you get to the swamp, you know, one to three million or or sell asset, you start having folks using your company funds, you know, to to buy things.
00:31:18.020 --> 00:31:27.380
You need you need people to be able to go to Shrew Wims, buy something, or go to true, you know, Ace Hardware or whatever and and purchase things on your behalf on the company's behalf.
00:31:28.020 --> 00:31:40.420
But oftentimes they're not just buying the you know, the the new ladder or the the paint, they're also throwing in some some candy, you know, just at the register or some drinks, you know.
00:31:40.580 --> 00:31:41.860
No one's gonna notice this.
00:31:41.940 --> 00:31:53.140
It's uh it's just going on the business credit card, they're just gonna see that it came from ace hardware, or you know, they also fill up they use the company's card, uh the company's fuel card to fill up their personal vehicle too.
00:31:53.220 --> 00:31:54.580
So that happens a bunch.
00:31:54.900 --> 00:32:03.060
So this gets into having controls, internal controls in your business, especially when you're over a million in revenue.
00:32:04.100 --> 00:32:11.540
And uh there's a software that I really like called Ramp that makes internal controls really easy for businesses.
00:32:11.780 --> 00:32:16.580
And so basically, what it does is it allows you to have a corporate charge card.
00:32:17.620 --> 00:32:34.100
And any purchases on that corporate charge card, it goes into the software where you can see uh very transparently transparently who purchased it, how much it was, and they have to submit receipts and they get text messages until they submit those receipts, and it will automatically turn off that charge card if they don't submit receipts.
00:32:34.260 --> 00:32:40.420
And you can have a specific policies on these charge cards, like they can only go to certain locations, they can only spend a certain amount of money.
00:32:40.580 --> 00:32:43.300
You can have very specific policies per charge card.
00:32:43.460 --> 00:32:52.900
So it gives you a lot of control and visibility on how your money is being spent, and it integrates really nicely with uh QuickBooks Online to make everything nice and integrated.
00:32:52.980 --> 00:32:56.340
So that's a a pro tip for you know managing.
00:32:56.900 --> 00:33:03.540
I really like that because I've recently started using um the software because you speak about it all the time, right?
00:33:03.700 --> 00:33:04.660
We plug.
00:33:04.820 --> 00:33:11.780
Um, and I like it because I oftentimes have to give people spending ability that are in different states, right?
00:33:11.940 --> 00:33:15.540
But it's for like one particular software, like cap cut, right?
00:33:15.780 --> 00:33:18.180
Giving a marketing individual cap cut, 20 bucks per month.
00:33:18.340 --> 00:33:22.580
And so what I've used this for is actually giving them their 25 bucks per month, right?
00:33:22.660 --> 00:33:24.260
Right, in case there's an exchange rate change.
00:33:24.420 --> 00:33:26.340
And so they sign up for that subscription.
00:33:26.420 --> 00:33:29.780
So for some reason, you know, they ended up terminating, resigning, and leaving.
00:33:29.860 --> 00:33:32.100
I don't have to worry about this, I just cancel the card.
00:33:32.260 --> 00:33:34.500
And so, and then it just stops charging me.
00:33:34.660 --> 00:33:39.380
And that's one thing I've been able to do, like cost control after resignation or turnover, right?
00:33:39.460 --> 00:33:43.380
And so that way you're not just like all of them just reoccurring random double charges on one account.
00:33:43.540 --> 00:33:43.700
Yeah.
00:33:43.780 --> 00:33:45.140
Uh, I found a really cool way to use it.
00:33:45.380 --> 00:33:55.540
Yeah, because they had like virtual cards, you don't even have to give them a physical card, you can just give them a virtual card, which they just get the number and the expiration and the uh the the code there, security code.
00:33:55.780 --> 00:33:57.540
Yeah, it's it's pretty it's pretty good software.
00:33:57.700 --> 00:33:58.500
That's ramp.
00:33:58.660 --> 00:34:02.660
And I I'm not a shareholder or anything, just we're just doing a whole big commercial on ramp right now.
00:34:02.980 --> 00:34:07.220
Yeah, well, I think what's important about ramp that I like about it is it's it's free.
00:34:07.380 --> 00:34:09.380
And I say the word free very loosely.
00:34:09.539 --> 00:34:11.460
You're paying for it through transaction data.
00:34:11.619 --> 00:34:11.860
Yeah, yeah.
00:34:12.099 --> 00:34:12.820
But it's you don't pay for it.
00:34:12.980 --> 00:34:18.980
Yeah, they get paid based off of the corporate charge card, but the the the software itself is there's no additional cost for it.
00:34:19.139 --> 00:34:20.900
So yeah, it's essentially free.
00:34:21.139 --> 00:34:21.300
Yeah.
00:34:22.019 --> 00:34:24.260
We'll let Ramp cut that and use it in their advertising.
00:34:24.500 --> 00:34:30.740
Um you know, break and we've kind of gotten a little bit away from what I originally want to talk about, but they're all great topics and they're related.
00:34:30.900 --> 00:34:33.539
Uh when I I think about receipt capturing, right?
00:34:33.860 --> 00:34:37.619
Talking about Rams always saying you text you for the receipt or it turns off the card.
00:34:38.180 --> 00:34:41.220
When is a uh when is a purchase small enough not to get a receipt?
00:34:41.300 --> 00:34:42.420
Do I need a receipt for everything?
00:34:42.579 --> 00:34:46.900
I think that sometimes receipt control and best practices is something I get asked a lot about.
00:34:47.059 --> 00:34:49.780
Like what are what's a good rule of thumb for that?
00:34:50.340 --> 00:34:56.660
So depending on what you're we're talking about, do you need a receipt for IRS deduction?
00:34:56.900 --> 00:35:05.220
Is if that's the question, you know, the the super conservative answer to that would be you need a receipt for every single transaction.
00:35:05.460 --> 00:35:07.860
Now, in reality, we're gonna say that.
00:35:08.019 --> 00:35:11.139
Yeah, in reality, do you actually need a receipt for every single transaction?
00:35:11.300 --> 00:35:11.780
Probably not.
00:35:11.860 --> 00:35:24.820
The IRS will take your bank statements and if they see like uh you know they went to lows a bunch of times and stuff, they'll probably take the the credit card and the and your bank statement as as proof that you purchased things.
00:35:25.220 --> 00:35:32.180
So uh now that's not a full proof plan, but in reality, that's probably probably gonna be sufficient.
00:35:32.420 --> 00:35:37.460
Um the the but there are a couple of items that the IRS looks at more closely.
00:35:37.620 --> 00:35:39.140
One is meals.
00:35:39.620 --> 00:36:02.019
So if you're going to McDonald's or wherever every single day, they're probably not going to let you take that as a deduction unless you have receipts for that, because they don't know if you're just going and buying a bunch of Big Macs for yourself and just eating them alone in your car, or are you meeting your team and buying Big Macs for all your team, or are you meeting a customer there to discuss a sales proposal or whatever?
00:36:02.180 --> 00:36:11.140
So that's why you need a receipt for meals because you so you take the receipt of the meal or uh and then write on the the receipt, like met with team to discuss uh projects.
00:36:11.380 --> 00:36:16.660
So the reason on the receipt, and then you take a picture and say that receipt.
00:36:17.060 --> 00:36:18.660
And that's so meals is one.
00:36:18.740 --> 00:36:20.100
The second one is vehicles.
00:36:20.260 --> 00:36:25.380
So taking mileage, you want to have a contemporary I can't say that word.
00:36:25.460 --> 00:36:27.140
Uh, you want to have a mileage log.
00:36:27.460 --> 00:36:37.460
Uh you want to have a mileage log that shows how much miles you're um driving every day, and then whether it's business or personal, which is gonna be a pain in the ass if you are doing this manually.
00:36:37.540 --> 00:36:45.620
That's why there's apps out there like mile mileage IQ that you can use to basically swipe left or right, whether it's business or personal, and it it figures that out.
00:36:45.780 --> 00:36:52.260
So um, so mileage or sorry, vehicles, meals, and travel.
00:36:52.340 --> 00:36:54.340
That's the third one that the iris looks at.
00:36:54.420 --> 00:36:59.140
So if you're going to conferences like the PCA, we're actually on our way to the PCA uh event in where are we going?
00:36:59.380 --> 00:36:59.700
Nashville.
00:36:59.940 --> 00:37:00.260
Nashville.
00:37:00.500 --> 00:37:07.620
So we gotta keep our receipts for that so we can prove that we actually went there and what what was what was it for?
00:37:08.340 --> 00:37:09.860
So that's a big piece as well.
00:37:10.019 --> 00:37:17.540
Now, all the other ones, like I said, credit statements, um, bank statements will probably suffice for an IRS audit.
00:37:17.860 --> 00:37:28.660
But going back to what we were talking about before, if you have people making purchases on behalf of your business, you want receipts from them to make sure that they're not misusing company funds and stealing from you.
00:37:28.900 --> 00:37:30.660
Adding the candy bar and the coffee and stuff.
00:37:30.820 --> 00:37:31.620
Right, all that stuff.
00:37:31.780 --> 00:37:35.300
So so for your employees, yeah, definitely make them give you receipts.
00:37:35.380 --> 00:37:39.540
And it's and the receipts are mainly for you to validate that they're not wasting your money.
00:37:39.860 --> 00:37:46.740
You know, that's one thing that I've it's a 2027 goal for me, personal improvement, uh, to capture all receipts.
00:37:46.980 --> 00:37:58.500
I've started getting better at it and I started using ramp on myself to text me and remind me, uh, is this more for my wife as well, who's really she likes to text me photos of the receipts, like it's my job to upload them or something.
00:37:58.900 --> 00:38:00.100
Like, what are you doing?
00:38:00.500 --> 00:38:02.019
Um I think it's good practice.
00:38:02.100 --> 00:38:04.820
I I just believe that you know good diligence goes a long way.
00:38:04.980 --> 00:38:05.140
Yeah.
00:38:05.300 --> 00:38:07.700
And so, and so appreciate that.
00:38:07.940 --> 00:38:15.700
I think my last thought process here is um as we're getting towards like the finance and we talk about key people and towards the beginning of our conversation.
00:38:15.940 --> 00:38:19.540
I think the most key individual and organization is oftentimes the owner.
00:38:19.700 --> 00:38:26.980
And so, and one thing we never think about, I painfully think about it because I'm a morbid individual, but we talk about like um succession plans, right?
00:38:27.220 --> 00:38:32.500
So if Daniel were to be hit by a bus right now driven by Cody in the parking lot of the smaller, yeah.
00:38:33.380 --> 00:38:35.060
Right, what what's happening?
00:38:35.220 --> 00:38:37.060
Like, how does the company go on?
00:38:37.140 --> 00:38:38.820
And should people think about that?
00:38:40.180 --> 00:38:43.940
Yeah, I would I would definitely say to definitely give it some thought.
00:38:44.100 --> 00:38:46.500
You gotta think about your family, gotta think about your business.
00:38:46.740 --> 00:38:50.580
Um, you know, I think we behave like we're gonna live forever.
00:38:51.700 --> 00:38:54.900
I'm talking to myself mostly, but I was like, am I really gonna die?
00:38:55.060 --> 00:38:55.860
I've been here so long.
00:38:56.100 --> 00:39:01.780
But yeah, unfortunately, uh we will come, we will pass away at some point, and we don't know when that's gonna happen, of course.
00:39:02.019 --> 00:39:11.140
So we should do things to set up our our business and our lives in a way that will set up our family and our loved ones, you know, in the best way possible.
00:39:11.380 --> 00:39:14.980
And so uh some things that we often talk about with our clients.
00:39:15.060 --> 00:39:20.180
That we actually just I just met with um one of our painting business owners a couple weeks ago.
00:39:20.340 --> 00:39:22.019
He's actually in the sellable asset stage.
00:39:22.100 --> 00:39:25.140
He's killing it, he's doing over four million this year in revenue.
00:39:25.300 --> 00:39:28.180
He wants to double in the next year to get to 10 million.
00:39:28.340 --> 00:39:32.980
And he's I think he's about 45 or so, a little older, a little older than me.
00:39:33.060 --> 00:39:38.420
He has a a couple daughters, he's married, and he's making a good amount of money.
00:39:38.500 --> 00:39:42.900
Uh, but right now everything is titled in his personal name.
00:39:43.780 --> 00:39:54.180
So his business is in his name, his real estate, his property he owns, he has some uh some personal property and assets there that are titled in his name.
00:39:54.420 --> 00:40:01.620
So basically, you could do an pretty easily uh do an asset search on property search on his property to know that he owns it.
00:40:01.940 --> 00:40:05.300
You could go to the Secretary of State's website to know that he owns that business.
00:40:05.540 --> 00:40:14.340
So he's he's very um publicly seen, like, you know, which is not good that for privacy concerns, but also uh all these assets are everywhere.
00:40:14.500 --> 00:40:20.420
So um now most people know what a will is and how it is helpful for when you pass away.
00:40:20.660 --> 00:40:25.220
But and that's a good first step, but it's not it's not the only step you should take.
00:40:25.380 --> 00:40:38.580
You should also take a look at doing a revocable living trust, which is basically you set up a trust, which is just a piece of paper with instructions on it, and you have the trust own your different assets, so your business, your, your real estate, any title property.
00:40:38.820 --> 00:40:40.420
Have the trust own that.
00:40:40.980 --> 00:40:55.140
And the in the revocable living trust, when you pass away, the assets that are owned by the revocable living trust will go to your your loved ones and family members based off of the instructions immediately.
00:40:55.300 --> 00:41:00.100
So there's no probate process, which if you have a will, you have to go to probate.
00:41:00.340 --> 00:41:07.220
If you only have a will, you have to go through probate process, which is a really annoying process of a judge decides where all your assets go.
00:41:07.300 --> 00:41:10.260
It's super annoying, super drawn out and long and just terrible.
00:41:10.500 --> 00:41:12.420
So don't do that to your family.
00:41:12.580 --> 00:41:17.860
Make sure you're you have a at least a revocable living trust set up, which has no impact on your tax situation.
00:41:17.940 --> 00:41:29.060
It's not going to help you for taxes, but it will help you for when you pass away, easily transfers your assets to your loved ones, assuming all the property is titled in the trust's name.
00:41:29.220 --> 00:41:39.220
And then two, as a side benefit, which is really helpful, um, especially if you're in that sellable asset phase where you're hitting some levels of success, is that it adds a layer of privacy.
00:41:39.300 --> 00:41:49.380
And I think you you texted me the other day, you named uh your Well I'm not gonna name it on the podcast, but I wasn't gonna say No, it was I'm in the process of ABC Trust or something.
00:41:49.620 --> 00:41:52.980
Yeah, I'm in the process of moving uh things from Nevada.
00:41:54.260 --> 00:41:56.019
It's gonna help me on the podcast.
00:41:56.340 --> 00:41:59.780
No, um, but yeah, the point you're making is put it in funny names.
00:41:59.940 --> 00:42:05.780
And I thought about that because I've I previously used like, you know, name holding ink and things like that.
00:42:05.940 --> 00:42:07.380
Um, but I've gotten smart over here.
00:42:07.540 --> 00:42:10.740
But I'm moving things from Nevada to Florida, and I was like, what's a funny trust name?
00:42:10.820 --> 00:42:12.980
And so I just picked the funniest one I could find.
00:42:13.300 --> 00:42:13.700
Right.
00:42:13.940 --> 00:42:15.940
That Mickey Mouse Trust or something like that.
00:42:16.580 --> 00:42:19.140
Uh but name it something that doesn't connect to you.
00:42:19.220 --> 00:42:21.460
If you really like Mickey Mouse, don't name it Mickey Mouse Trust.
00:42:21.780 --> 00:42:24.340
Something completely uh not connected to you at all.
00:42:24.580 --> 00:42:26.180
I have no money, don't sue me trust.
00:42:26.420 --> 00:42:26.900
Yeah.
00:42:27.220 --> 00:42:33.940
So but when you do that, when people do a property search or they look up your business, then they just see this Mickey Mouse trust.
00:42:34.019 --> 00:42:35.700
Okay, I don't know what that means.
00:42:35.860 --> 00:42:36.900
Uh whatever.
00:42:37.060 --> 00:42:37.300
Okay.
00:42:37.380 --> 00:42:38.660
So I don't know who owns that.
00:42:38.820 --> 00:42:40.740
So it just adds a layer of privacy.
00:42:40.900 --> 00:42:52.100
So it's not only good for end-of-life like estate planning purposes, but it's also great for just adding some layer of private privacy to you now, which protects you and your family from litigation.
00:42:52.260 --> 00:42:59.540
Like the the first step of getting sued doesn't happen in the courtroom, it happens with a Google search.
00:42:59.940 --> 00:43:05.860
So people look to see what your assets are, see if it's worth pursuing the this you know, loss of it.
00:43:06.019 --> 00:43:12.660
You know, I think that I never in my life thought I would be spending so much time on um getting sued.
00:43:13.060 --> 00:43:14.900
Yes, I've been sued several times.
00:43:15.060 --> 00:43:17.220
But anyone who's done anything could get sued.
00:43:17.300 --> 00:43:17.540
It happens.
00:43:17.700 --> 00:43:17.860
Right.
00:43:17.940 --> 00:43:19.940
Yeah, it's just one of those things that hit certain levels of success.
00:43:20.019 --> 00:43:20.980
It's just something you gotta deal with.
00:43:21.300 --> 00:43:32.980
But you know, real conversations that we're having just with lawyers recently is like we have people who work in our homes and our businesses and things sign NDAs because they know a lot of stuff about us.
00:43:33.140 --> 00:43:40.980
And if and until you start protecting assets, you don't understand how vulnerable you are with people knowing things about you.
00:43:41.460 --> 00:43:44.980
And that is an uncomfortable conversation I never thought I'd would be having.
00:43:45.220 --> 00:43:57.860
Like, oh my God, like this woman who works in our house all the time, or your personal assistant who has access to credit cards and email accounts and sees all your information, your conversations, those are things that are very vulnerable, close positions.
00:43:57.940 --> 00:44:01.140
And you have to prepare yourself by thinking in advance.
00:44:01.380 --> 00:44:05.220
Because when it happens so you didn't think about it, you'll you'll be taken by surprise.
00:44:05.300 --> 00:44:10.580
Because I've been I've been sued by people who are close to us, and you're like, wow, I didn't think that would ever happen.
00:44:10.660 --> 00:44:11.220
And it does.
00:44:11.380 --> 00:44:12.019
Yeah.
00:44:12.260 --> 00:44:13.700
Yeah, especially in the United States.
00:44:13.780 --> 00:44:16.019
It's uh from what I hear, very litigious society.
00:44:16.100 --> 00:44:27.620
So you gotta, you gotta think about this stuff, um, especially as an entrepreneur, because it's just it's just part of the game, and which is why you need to be profitable.
00:44:27.860 --> 00:44:30.260
You need to be a profitable painter, but not a CPA.
00:44:30.340 --> 00:44:31.220
You don't need to be a CPA, yeah.
00:44:31.300 --> 00:44:33.060
You don't need to be that CPA, we'll take care of that for you.
00:44:33.220 --> 00:44:47.140
But profitable for sure, because I think a lot of folks underestimate how much risk they're taking on by owning a business, with you know, the risk of being sued, you know, by employees, by customers, who knows what.
00:44:47.380 --> 00:44:51.300
All and then also something just a downturn in the economy, just losing money.
00:44:51.460 --> 00:44:56.980
So you you gotta make sure you gotta protect your margin, make sure you're profitable because you're taking on a lot of risk.
00:44:57.140 --> 00:45:00.900
So you know, it's actually quite something frequently I hear from painters.
00:45:01.060 --> 00:45:03.060
Well, I sometimes only wonder why I run a business.
00:45:03.140 --> 00:45:05.220
I could make more money with less stress working somewhere else.
00:45:05.300 --> 00:45:20.580
And I tell you, um, as someone who's started businesses and sold them and now work for you, I can say that I my name is Cody Hall, and I approved this message because I, you know, and you know me personally, I've been getting rid of assets so that I don't have to think about them or manage them.
00:45:20.740 --> 00:45:26.900
And I just there's this one point in time where I was like, yes, yes, yes, yes to everything risk-wise because I have all this control, and you're like, wow, I have all the control.
00:45:27.060 --> 00:45:28.260
You have all the stress.
00:45:28.820 --> 00:45:33.060
And so, you know, while I wanted the transition to a close here, it popped in my head.
00:45:33.300 --> 00:45:34.900
What do you say to someone who says that to you?
00:45:34.980 --> 00:45:35.780
You know what, Daniel?
00:45:35.860 --> 00:45:37.380
I don't understand why I run a painting business.
00:45:37.460 --> 00:45:39.780
I have all this stress, I'm not making any money, right?
00:45:39.860 --> 00:45:41.700
And so I should just go paying for someone.
00:45:41.780 --> 00:45:44.900
And I mostly hear this from folks in that zero to 350, that startup phase.
00:45:45.060 --> 00:45:45.300
Yeah.
00:45:45.460 --> 00:45:50.180
Actually, I it's funny you say that because literally just got on a call with a painting business owner.
00:45:50.260 --> 00:45:53.860
He's doing 850 just a couple weeks ago.
00:45:54.580 --> 00:45:56.740
And he's he's actually really profitable.
00:45:56.820 --> 00:46:05.460
He his discretionary earnings, which is your net profit plus owner salary, is about 26, 27%, which is pretty close to what we'd recommend.
00:46:05.540 --> 00:46:09.060
We recommend for him for him and then what roles he has, about 30, 33%.
00:46:09.380 --> 00:46:11.780
So he's pretty close to on target for what we'd recommend.
00:46:11.940 --> 00:46:15.300
But he's he actually grew this within a couple of years.
00:46:15.460 --> 00:46:19.060
He's I think he's in year two, which is crazy, and he's already at 850.
00:46:19.220 --> 00:46:33.220
Maybe it's year three, but regardless, he's doing really well, but he's burnt out because he tried to hire admin, he had one, it's like not he had fired one, then he's has one now, but they're not doing a lot to help him just like speed lead stuff.
00:46:33.380 --> 00:46:35.620
He hasn't gotten a production manager or salesperson yet.
00:46:35.700 --> 00:46:41.460
So he's doing a lot of roles and he's doing a lot of revenue for for not having someone to help him with that.
00:46:41.780 --> 00:46:46.340
So uh he and he's just like, man, it's he's so stressed.
00:46:46.420 --> 00:46:51.060
He's just like, man, I just want to sell this thing, and just I'm like, I have some bad news for you, it's not gonna be worth anything.
00:46:51.220 --> 00:46:54.420
It's like it's you're not at the you're not at the point to sell yet.
00:46:54.500 --> 00:46:59.300
It's you really uh, I mean, unless you just absolutely hate it, you can't stand it, sure, get rid of it.
00:46:59.540 --> 00:47:03.460
But you you're you've gotten he's kind of hit a certain level, he's at a certain level.
00:47:03.540 --> 00:47:10.420
He hasn't beat this boss of hiring, you know, a good admin to help him and then then a production manager to get him to like 1.5 million.
00:47:10.580 --> 00:47:12.980
He's kind of at this boss and he hasn't been able to beat it.
00:47:13.060 --> 00:47:17.140
And now he just wants to kind of tap out and like do he's like, hey, I I think I could be a coach.
00:47:17.300 --> 00:47:19.300
I could help he's he sees the grass is greener on the other side.
00:47:19.460 --> 00:47:23.460
Like, dude, you're you're trying to switch to another entrepreneurial thing.
00:47:23.540 --> 00:47:24.500
Because that was my first question.
00:47:24.580 --> 00:47:26.820
Like, do you oh you don't do you not want to be an entrepreneur anymore?
00:47:26.980 --> 00:47:28.420
He's like, No, no, I I like it.
00:47:28.500 --> 00:47:30.100
I'm like, well, this is the whole thing, dude.
00:47:30.180 --> 00:47:35.300
You you have to you gotta push through these different like inflection points.
00:47:35.460 --> 00:47:37.460
Yeah, well, it people want to jump ship all the time.
00:47:37.620 --> 00:47:49.620
I see all the time with our relationships where they have like a quasi-successful painting business, and they're like, Man, if I just become a franchise, I don't have to run the painting business every day, but I've done this well, and if I gotten this quick enough, I can just tell someone else how to do it.
00:47:49.700 --> 00:47:49.860
Yeah.
00:47:49.940 --> 00:47:51.220
And so, yeah, very common.
00:47:51.380 --> 00:47:58.660
Well, you know, Daniel, I uh we've had so many good conversations about the numbers here and we know why growing is expensive.
00:47:58.740 --> 00:48:01.460
And so I appreciate you for including me on this podcast.
00:48:01.540 --> 00:48:02.980
This has been an exciting topic round.
00:48:03.300 --> 00:48:03.780
Yes, sir.
00:48:03.940 --> 00:48:04.660
Glad to be here.
00:48:04.980 --> 00:48:07.860
And with all the listeners, we will see you next time.
00:48:08.420 --> 00:48:08.980
Ciao.