Latest / Home Service Millionaire with Mike Andes / Why We Created the Augusta Executive Model

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Why We Created the Augusta Executive Model · Home Service Millionaire with Mike Andes

0:00
I'm an existing owner in Augusta.
0:01
Maybe I'm a huge follower of yours, a fan.
0:04
Maybe I use homework, some sort of web design, whatever it is.
0:06
And I consider myself, you know, the little guy.
0:09
Like I'm self-made.
0:10
I started, I pulled myself up for my bootstraps.
0:13
Mike, the executive model feels like you're kind of abandoning us.
0:16
Maybe Augusta is the right move for me one day.
0:18
How can I almost kind of guarantee that I won't get squeezed out if I'm still a little guy growing inside of Augusta?
0:25
What's the level of return that I get when I put a million dollars in, when I put a hundred grand in, what happens on the other side?
0:31
But there's in the past been too many variables for us to accurately be able to say what that is.
0:35
It's because they're moving so fast that they're okay with losing on the fringes.
0:41
freak out over my customer acquisition costs when I go to Texas.
0:43
It's a sacrifice or regret you choose.
0:46
Join Augusta, build it on your own, like figure out the system, grow it, go through those growing pains or regret not doing that.
0:54
And when we IPO, like you miss out on that multiple.
0:56
There's a certain level of confidence that that's not disappearing tomorrow.
0:59
And so for a lot of people, they still would see me as like the influencer.
1:02
If he gets set by bus, the whole thing is done.
1:04
Welcome back.
1:05
Another episode.
1:05
The C-Suite Unfiltered was Mike Andes.
1:08
How are we doing this Friday morning?
1:10
all right awesome we'll get straight into it uh we have some new owners here for training this week very exciting in augusta i guess at the time of release they'll already be back home probably starting their locations a very exciting time for us this is kind of when we ramp up and a lot more people are getting interested in joining augusta maybe existing owners thinking about their expansion plans for the future right going into q3 q4 starting to be a little bit more profitable maybe stacking cash thinking about how to deploy that appropriately
1:35
And I thought, kind of makes sense, maybe we talk a little bit about Augusta and some of the stuff we've been doing for our owners in terms of development, in terms of expansion planning, and something that we've loosely talked about and we don't bring it up a lot because I never want this to ever be like a sales pitch, even though I am a sales guy.
1:50
But I did want to talk a little bit about what we have at Augusta called the executive model.
1:55
And that's something that you kind of created a couple of years ago.
1:57
We have a few currently in operation inside of Augusta.
2:00
And I want to zoom in and talk about like what that is.
2:03
Why did you create it?
2:04
Not from a sales pitch perspective, but ultimately from a understanding the model of Augusta as our owners continue to scale and grow.
2:11
So let's just start right at the top.
2:12
If anyone listening does not know what the executive model is, let's define it.
2:16
Augusta has two options to join.
2:20
One location, grow, scale, profit, right?
2:23
Very simple.
2:24
The executive model is a little bit different.
2:26
So why don't you go ahead and define what the executive model is?
2:29
Yeah, in essence, it's six territories.
2:31
And you have to open them all up within three years.
2:34
So whether you start your first one and then go a little faster after that, or if you just do two a year.
2:40
But realistically, why we started it was because if you compare Augusta against any other franchise,
2:47
if you're starting one location, you really don't want to deploy more than $200,000 to $250,000.
2:51
Even if you're going to ramp it up fast, you don't want to spend more than that because it just becomes inefficient use of capital.
2:57
Your return on invested capital is what you're looking at as an investor.
3:00
And so if I'm going to spend $500,000 a year and get that business to a million dollars and have a $200,000 profit, then I'm going to spend more than $200,000
3:09
You're like, that's a good business.
3:10
It is a good business, but it took 500 grand.
3:12
And so it's usually an inefficient use of capital to grow on one location that fast.
3:18
And so if you compare us to any other franchise, you can't really spend more than a few hundred thousand dollars in a year.
3:25
Most people that have money when it comes to investors, they're trying to deploy that money quickly and get, you know, put it out with their soldiers and have the soldiers come back with more soldiers.
3:33
And if you compare like Anytime Fitness, for example, in our markets, up $900,000, a million dollars to ramp one up.
3:40
If you look at a Jack in the Box or a Wendy's or any of these other franchises, a million to $2 million.
3:45
And it attracts private equity or the investor types, even though their return invested capital is lower, it's because they can deploy so much money so quickly.
3:55
And so our goal is to be able to say, hey look, if you want to start one location, kind of more like the Chick-fil-A model, or you're there all the time, great, you can do that.
4:03
Also, if you have a significant amount of capital, we can also have you here and you can deploy that money more efficiently.
4:09
And in my opinion, if you have six locations, you started from day one.
4:12
Say you invested $1.5 million just for the sake of example.
4:15
That compared to investing $1.5 million in a jack-in-the-box, the return invested capital is significantly better at Augusta in terms of the revenue that you will get as well as the profit in the three and five-year forecast.
4:27
Mm-hmm.
4:27
Okay, let me cut you off right there before anyone clicks off the video.
4:30
We promise this is not a sales pitch.
4:32
So let me play devil's advocate here.
4:35
I'm an existing owner in Augusta.
4:36
Maybe I'm a huge follower of yours, a fan.
4:39
Maybe I use homework, home service, web design, whatever it is.
4:41
And I consider myself, you know, the little guy.
4:45
Like I'm self-made.
4:46
I started, I pulled myself up for my bootstraps.
4:49
All great qualities.
4:50
We love you.
4:51
We're huge fans of small business owners in Augusta.
4:53
Mike, the executive model feels like you're kind of abandoning us.
4:56
You know, I started the business myself.
4:58
I don't have $500,000 to invest, but like maybe I want to join Augusta.
5:01
Maybe if you're an existing owner, you're like, hey, like there weren't as many financial requirements when I joined.
5:06
How should I or they respond to this shift that you're making?
5:11
I think hubris gets in the way of many of us improving our lives.
5:15
I was thinking about this this morning, like it's a common phrase, but like entrepreneurship is the ultimate self-improvement plan.
5:20
But like the only way for us to make Augusta Nation a group of the best operators and a community of people that are all excellent is to bring in the caliber of individuals that have a million dollars to spend.
5:32
Hmm.
5:32
Like, you're like, well, they're trust fund babies.
5:34
Well, most of them are.
5:35
Most of them did build a really successful business.
5:37
They had an exit.
5:39
They're wanting to get out of an industry that's been disrupted by AI.
5:41
They wanted to get into an industry that is not going to be disrupted by AI.
5:46
They have plenty of liquid funds.
5:47
They need to move quickly.
5:48
They're going to hire multiple GMs.
5:50
that type of person is going to have the 21 stages of success that we talk about for technicians, managers, and owners.
5:56
They're going to dial through that so quickly and create so much opportunity for other technicians to move inside of those stages of success because they have the capital to move quick.
6:06
Whereas an owner that's starting from very small, it might take them five years before they're looking for a GM.
6:11
So they might have to lose quite a few of their best technicians simply to the fact that they can't provide that next step.
6:17
Whereas someone with that kind of caliber and capital can scale very quickly.
6:21
And I would say to anyone inside the community of Augusta, that type of individual in our community pulls everyone up.
6:27
Because when you start seeing the person next door that goes from zero to a million in a year and it took you five or six years to get there, that should be inspiration.
6:36
It should not be looked as competition.
6:38
And so I think that it's going to be a rising tide flight to all boats in the fact that we have higher caliber,
6:43
well-capitalized individuals joining and seeing what fast actually looks like and still following the model, just doing stages one through four in a matter of six months instead of six years.
6:54
And we've always talked about a much more capital conservative route of you grow to 500,000, you raise prices, you do that for two or three years, you get to $800,000, a million dollars in annual revenue, $200,000 in profit, and then you go get your second location.
7:08
And that usually takes five to six years if you're just using the profits of your first location.
7:13
And that's fine.
7:14
That's how most people should grow.
7:16
But there's another caliber person that is gonna step in.
7:17
They're like, no, no, no.
7:19
I need to get to a million the first year.
7:20
I'm gonna raise prices then.
7:22
And I'll be starting the second one within 12 months.
7:25
And that's really, I believe...
7:28
that type of individual next door to you in Augusta Nation brings you up.
7:32
Whether it be advertising and the spillover from a lead's perspective, but also just seeing that caliber, seeing the way they hire.
7:38
Like when you go to have, even when we're doing Texas, part of this is the whole Texas trip is to demonstrate this exact thing.
7:44
Because like when we go to Texas, I'm going to go get four vans from day one, and we're going to be hiring three people like right away when I have no customers.
7:51
Mm-hmm.
7:51
Because I have the confidence that I'm going to hit the ground running and spend a lot of money on marketing and scale quickly.
7:56
And that's a very different mindset than someone who has $50,000, they get one vehicle, one employee, and they deploy a small budget.
8:02
Mm-hmm.
8:03
And I think to make the comparison, you're saying, hey, I'm going to purchase four vans.
8:06
I'm going to have three employees and I'm going to have zero customers.
8:09
It's the same thing that someone does when they invest in a Taco Bell.
8:12
They have to build out the whole structure and they have to buy all the equipment and they have to bring the employees in and then they have to train them.
8:18
It's like the town I live in just got a Chipotle.
8:20
You know, we're a little behind up here.
8:22
We're a little slow up here, give us some grace.
8:25
But they just got Chipotle and I drive by it every day.
8:28
It's just like on my commute.
8:29
And I saw every day for two weeks before it was open, there were people in there working, they were making food, they're in uniform, they're having team meetings.
8:35
And it's like that profile understands that I have to spend a month just training and hiring and getting these employees on board.
8:42
Yes, there is a sunk cost of like they're making food that isn't getting served to customers.
8:46
And I'm assuming, you know, they eat it, they take it home, whatever.
8:48
But like that is an investment that like I'm not generating any money, but I know as soon as we open, we'll have a line out the door for the Chipotle.
8:54
And so you're saying like Augusta has effectively proved that you feel that you understand the math behind it, the target customer acquisition cost, the scalability that you can say, OK, let's invest this lump sum and scale at a quick rate.
9:07
So.
9:08
I guess the question is, it's not a different business model, it's just a different entry point?
9:13
It's a speed at which you do the model.
9:15
So when we look at stages one through seven of the stage of success, someone's going to go through one through five in six months versus six years.
9:22
It's just a speed game and money does allow you to move faster.
9:25
Back to your Chipotle example, because I've had someone ask me about this the other day.
9:29
Because the argument for being able to spend, say, $1.5 million on a Jack a Box, because Chipotle is not franchised.
9:35
but like let's say Jack in the Box or Wendy's, I'm just using those popular names.
9:39
If you were to, yes, the day you open, you do have immediate revenue.
9:42
That is the advantage of using a well-established brand, and most of the money you're spending on that franchise is for that.
9:49
When you open up, everyone knows who you are.
9:51
You're not opening up Mike's sub shop.
9:52
Oh, I guess Mike's is a bad example right now.
9:55
You're not opening up Lee's sub shop or Lee's Tex-Mex.
9:58
There you go, that's not bad.
9:59
Sounds good, rolls off the tongue.
10:00
I would like it.
10:01
You know, Lee's Tex-Mex might not have the line out the front door the first day, whereas the Chipotle does.
10:07
What I would say though is if you look at how long that Chipotle has been in development and money has been invested into it, it's actually been six to 12 months.
10:15
Probably longer that one.
10:16
But like in general, if you're building out a store, it takes six to 12 months of like loss, loss, loss, loss, loss.
10:23
Okay, we opened day one.
10:24
Finally, we're making revenue.
10:25
Maybe a couple months in, we're profitable.
10:28
That's excellent, and I believe the same thing can be done in home services if you move at that same rate.
10:32
Because they invested the 1.5 million before they opened up the door.
10:36
If you're willing to invest a significant amount of capital in home services, and you know your customer acquisition cost, and you know your lifetime value, you should be able to, with confidence, scale, and yes, you're gonna burn money for six to 12 months, but I believe that the unit economics after that 12 month marker is actually better than a fast food restaurant and most other businesses,
10:55
But no one looks at home services typically in the way that I deploy capital, I move quickly.
11:00
They look at it as like, I'm a contractor, I get started, I take the profits, I invest back into the business.
11:06
And so I believe we've been able to build a model with the Augusta leads to be able to have a dependable customer acquisition cost and someone else to handle that.
11:13
The website, command center, the elements that usually slow down the ability to move fast, we've tried to remove all of that.
11:21
Because typically if you're trying to like, I'm going to blitz the market, okay, the number one question I'm asking you like,
11:25
Do you have a very good ads person?
11:27
So having Augusta Leeds, I can take that off the table.
11:29
If I'm trying to scale quickly at home services, I also need like, okay, so you're going to scale fast.
11:33
Who's going to answer the 400 phone calls a day if you're putting that much money into ads?
11:38
Well, I have command center.
11:39
And so the whole objective of the franchise is to remove all those little bottlenecks that usually can cause someone to slow down and reduce it down to, you need to deploy capital against advertising.
11:49
And that's,
11:50
getting the demand and then the supply side is you've got to go find employees you got to train them up and that's why the past six to 12 months nick and i've been so focused on like the tech onboarding process the orientation system we're going to record the entire one that i'm doing in texas for all everyone to use uh and it's going to be like a full day and you're seeing more and more owners using that because that's the actual ball like if you have sufficient capital mm-hmm
12:13
So what you're basically saying is the Augusta business model has allowed potentially for an investor profile, someone that's looking at the executive model, all these little bottlenecks that traditionally have existed in home services that rely so heavily on the owner or operations manager.
12:28
Augusta has removed a lot of those constraints, allowing them to focus on what specifically.
12:32
So what are they then focused on?
12:34
If you can answer 400 calls a day, if you can manage all their lead flow and generate consistent, high quality customer acquisition, like what are they then doing?
12:43
you have to find great team members, and you have to train them, and you have to build a culture.
12:47
And if that's the only thing you focus on, I have a, there's a higher probability it'll be done well, because that's the actual constraint of home services.
12:53
If the service doesn't done, is it not done well, you eventually run out of customers.
12:57
Like there'll be high churn, you will not be able to retain customers, the model breaks apart.
13:01
And so you have to focus on your team, and building them up, and creating a full onboarding day, training them, having a sequence, making sure there's days that they are,
13:10
hands-on doing training out in the field.
13:12
And we dropped the ball in that area a lot of times because the owners had to focus on all these other elements of like, I'm gonna go run my own ads and I've gotta like do all this.
13:20
And a lot of times capital constraints force them to do things that are like, they have to keep their hands on everything.
13:26
And so when someone has capital, like this is not a new model.
13:29
This is what private equity has done for years.
13:31
And that is they come into a market, they have a lot of capital.
13:34
And so they just jump steps.
13:36
And so we're trying to create that same thing for a, a, an owner to use.
13:40
And that is everything is here.
13:42
You plug it into this and you can, you can scale quickly without having to build an office.
13:46
We'll have to get getting a shop space.
13:47
Like when we go to Dallas, we're not getting a shop space.
13:50
I don't have to get an admin person.
13:51
I have to get all these other little things that usually would slow down a business owner.
13:54
And that's what private equity does.
13:56
And typically people think of private equity when it comes to software or other
14:01
industries, I believe home services is a perfect opportunity to scale quickly.
14:05
It doesn't have to be private equity.
14:06
It just needs to have the resource.
14:08
They just need to have the resources and then there needs to be systems in place that they can deploy their capital.
14:12
Because all private equity is looking for is a return on invested capital.
14:15
And so when we create a model where we remove all that friction, that is how you look at the model.
14:21
what's the level of return that I get when I put a million dollars in, when I put a hundred grand in, what happens on the other side?
14:27
But there's, in the past, been too many variables for us to accurately be able to say what that is.
14:32
But now, with having Augusta Leads, having Command Center, having the model tuned, I believe that it's just a better model to spend money if you're an investor.
14:42
All right, real quick, I realized that Lee, although he's a great salesperson, forgot to make a call to action.
14:48
So I'm going to do it here for you down below.
14:50
If you'd like to join Augusta or get information about it, you can actually book directly to Lee's calendar in the link of the description.
14:56
And
14:57
And he can go over with you your market, whether or not it can even sustain an executive model or if the growth model is a better fit for you.
15:04
And we're gonna look at your market in terms of demographics, what the average age, income, et cetera is.
15:10
But more importantly, make sure that joining us would actually help you get to your goals faster and allow you to be able to scale a business that can run without you.
15:16
So down in the description, book call, it's one-on-one with Lee, he'd love to help you.
15:21
All right.
15:21
Back to the episode.
15:22
Yeah.
15:22
And I'm by no means an economist, so I'm not even going to pretend I understand this.
15:26
But what I was Googling, I promise I wasn't texting, but I was Googling is the term velocity of money.
15:31
And it's almost like and I know it's more of a macroeconomic term, but it's almost like the investor profile understands that concept more clearly on the micro level.
15:41
That like if I can move money quickly in terms of investment, in terms of ad spend, in terms of getting those customers on board or getting those employees on boarded, like the return back to me, the growth back to me will be that much quicker.
15:53
Is that effectively what you're saying?
15:54
Like it's the confidence in that velocity.
15:57
Yeah, like my customer acquisition costs when I go to Texas, I will be okay with more than twice as much as I usually am.
16:02
But I'm trying to do, usually takes four, five, six years for someone to build a million dollar business.
16:07
I'm trying to do it in like less than six months.
16:09
And so my customer acquisition costs will be higher.
16:12
And so a lot of times private equity gets a bad name for a waste, and it's because they're moving so fast
16:17
that they're okay with losing on the fringes.
16:20
And so my customer action cost is not gonna be great.
16:21
People are gonna freak out over my customer action cost when I go to Texas, but they're also gonna have to look at like, okay, he's spent $130,000, and a year later, that location's gonna do a million dollars in revenue, and he's gonna turn the profit lever on in one email, he's gonna make 150 grand extra per year by raising prices 15%.
16:39
And then it'll click for some people, I think.
16:42
Yeah.
16:43
Only 15%.
16:43
I'm being conservative.
16:47
I love the people of Dallas, Texas, but I think a 25% increase, maybe, maybe.
16:53
So kind of getting back to the comparison of, you know,
16:57
what the executive model is for versus like kind of the original, a one owner, one location scaling.
17:03
As you mentioned, like as you kind of go after this investor profile, they are making that comparison of, okay, Augusta might be a good brand.
17:12
I might like Mike.
17:13
I might like, you know, I might know one of the owners.
17:16
Like I have two people that I'm currently talking to that are like our personal friends with owners in Augusta.
17:20
that have very, they're very high net worth individuals.
17:23
And they're like, hey, I like what you guys are doing, but like, I'm comparing this investment opportunity with just leaving this chunk of change in the market.
17:30
Or like literally had that conversation on Tuesday, like, hey, I'm just deciding if like pulling a million dollars out of my portfolio and putting it into Augusta is a better return on invested capital than just leaving it in the market or my other investment opportunities.
17:42
So kind of comparing, let's go more apples to apples, the brick and mortar franchise, QSR, a gym, like an anytime fitness, you know very well the economics of building on anytime fitness as an owner.
17:54
In Augusta, that capital, is it more of an efficient deployment method?
17:59
Like, do you feel like because you're like putting it directly into or you're putting it into direct response marketing, you're putting into assets, you're putting it into assets.
18:05
that actually hold some value.
18:07
Like you have mowers, you have equipment, I know they depreciate quickly, but like is it a more effective deployment method, would you say?
18:13
I wouldn't say it's more effective.
18:15
Like when you're looking at having a large amount of capital and like investable assets, you're trying to diversify.
18:22
And I think for anyone right now that's invested deeply into the stock market, you have to ask yourself like, okay, if this is an AI bubble and the market could collapse,
18:31
What do I want to have more control of?
18:33
And, you know, when you have a collapse, usually it takes years to recover from.
18:38
And so most people are, like, most good investors right now are, like, looking at what's happening in the market, like, oh, man, we're at all-time highs.
18:44
Some of these evaluations are insane.
18:47
But then you also, like, then on the other side, you're like, man, a lot of these companies are making record profits.
18:52
That wasn't happening in 2000.
18:55
And so, but there's...
18:58
Do I want all my eggs in that basket or do I want to go take a vehicle that also is much more tax friendly because I can depreciate things.
19:05
I can accelerate depreciate things and I can immediately affect my tax bill for this year.
19:11
Like no matter what you do, it's very difficult in a rising stock market to get losses to claim on your taxes.
19:17
And so what we see a lot of times happen in December is people are starting new locations.
19:20
It's to wipe out taxes from this year.
19:23
And that's something you can't do as efficiently in terms of taxes.
19:27
And you can't build your asset or your net worth the same way in the stock market as you do in business.
19:33
For example, if I buy $150,000 worth of stocks today, and let's say the next 10 years are a tear, like 15% average, they're going up.
19:42
Okay.
19:42
So what did I say?
19:43
A hundred grand you put into business?
19:44
A hundred grand.
19:45
Okay.
19:45
A hundred grand in the stock market in what?
19:47
Seven years, it's going to be double.
19:49
So it's going to be 200 grand.
19:50
um excellent like that's a tear of a 10-year period 15 on average per month per year okay if i put that same hundred grand into my business though and let's just say it's a slower growth business so it's okay 500 000 the first year 800 000 the next year i put in a profit mode in year three but that thing's printing 150 to 200 000 in profits that is like more than the original amount
20:14
every year being printed and because of depreciation, because of accelerated depreciation, I can play a lot of tax games to basically wipe out any sort of gains and more importantly, now that business that I put 100 grand into is potentially worth a million and everyone forgets about enterprise value.
20:35
You're like, well, the stock market doubled.
20:37
Well, that 100 grand you put in your business, is it worth more than 200 grand now?
20:41
No one thinks about enterprise value or the asset value of the business.
20:45
And so this is why, since day one of Augustine, I feel like we're just approaching theirs now, is we've created a model where the franchise, private equity or investors are looking at the existing people that are building in certain areas and like, okay, I just wanna buy them out.
20:59
I don't wanna do the initial stuff, I wanna buy them out because I wanna have predictable cash flows from day one.
21:03
And once you get there, now we all have enterprise value.
21:06
Now we actually have something that everyone can look around and say, oh, my location's worth 500 grand, my worth 800 grand, my worth a million based upon this valuation that is predictable in the market because people are buying Augusta locations.
21:18
And so I think when you look at enterprise value, a double in seven years, not bad.
21:22
I think most people with a decent model can spend 100 grand on their business and have a whole lot more than a $200,000
21:30
net worth or valuation business, enterprise value in seven years.
21:34
But we don't ever see that.
21:35
We always just look at the cash flow and that's fine until you build an asset that actually can be sold and can be transacted.
21:42
And so by getting other investor types in, a lot of times they will do this.
21:45
They're like,
21:46
Great, I have a million dollars.
21:46
I'd rather just go buy a few locations instead of going and starting my own thing.
21:50
I just want predictable cash flows.
21:51
I want to see what those have been for the past three years and I'd rather just buy them at a higher multiple.
21:55
Mm-hmm.
21:56
Interesting.
21:57
So do you feel that there will be, and I think we've loosely touched on this in previous pods, that a lot of franchises as they start to mature, there is what they call like consolidation of locations where you get these larger players and their existing owners and outside potential new owners
22:13
We're like an existing owner.
22:14
And I'm thinking of one down in the great state of Texas who like he is basically laid on his plan for me.
22:19
Like, hey, the goal is like whatever Terry's territories I don't own over the next 10 to 20 years.
22:24
My goal would be to buy those out eventually.
22:27
So to anyone in Texas, just FYI.
22:30
but he understands that consolidation of like, this is the money in, this is the money out, and it might make sense to just purchase something that's already cash flowing in a higher multiple, even if I can't get it on the ground floor.
22:39
And so you think that's the natural evolution for Augusta as well, it sounds like, am I correct in that?
22:45
There's a follow-up to that.
22:46
Yeah, established franchises, most of them kind of know, once you get a certain revenue marker, which usually is over 3 million, and you have at least two or three locations, what those sell for on the market.
22:56
So if I'm an existing owner, maybe you're someone out there, you're like, hey, I'm interested.
23:00
I'm still a little guy.
23:01
I'm still pulling myself up by the bootstraps.
23:02
Maybe Augusta is the right move for me one day.
23:05
How can I almost kind of guarantee that I won't get squeezed out if I'm still a little guy growing inside of Augusta?
23:12
Does that make sense?
23:13
Well, in that case, if you got, quote, squeezed out, you'd be getting a huge payday.
23:18
Yeah.
23:18
Right.
23:19
Worst case.
23:20
Yeah.
23:21
So there's never a moment where we're, there's this notion online that I buy out locations.
23:26
Yeah.
23:27
I never do that.
23:27
Yeah.
23:28
So we don't have any plans to do that.
23:31
The model inside of the Texas area is for us to prove what we're talking about right now.
23:36
and just document all of it the same way that three years ago, I documented the first month of starting a location.
23:41
This is the first six months of scaling a very fast growing location, exactly what we're talking about.
23:47
And if you're outside looking in, and maybe you are that investor profile, or you are thinking about an executive model, should it give you confidence that we are going to one, demonstrate that, or you're going to demonstrate that in Texas?
23:57
And two, we are moving in that direction of like multi-unit ownership.
24:01
Yeah, like I think we, my objective for Augusta Nation is to take people that, then when we think about technician, becoming a manager and becoming an owner and like moving to the stage of success, I think the owners, I want them all to be very successful and wealthy
24:17
and I want in 20 years for them to be retiring, I want them to have an exit plan.
24:21
Like most people, again, the 20 years of home services, they have no way to sell the business because there aren't systems in place, there isn't an established multiple, there's no way to, investors aren't thinking about buying their business, the only way to potentially sell is a competitor's wanting to move in your market.
24:35
And so you're gambling.
24:37
And so my objective is to create a solid exit strategy for our owners and the ones that joined five, six years ago, for the first ones, in 15 years, they're gonna want out.
24:45
And so we have to establish the systems that when other people come in, that here's the enterprise value, here's the recurring revenue, here's the established cash flows, here's what they have been selling over the past year, this is the multiple, and be able to make sure that they can sell.
25:00
Whether it be selling to their competitor, selling to private equity, if they have a chain of 10 or 15 of these, they've become absolutely targets for private equity to move into.
25:08
Like, will you allow private equity to buy out the franchise?
25:11
No.
25:12
That's the franchisor.
25:13
But the franchisees, I'm okay with it because they're within our legal constraints.
25:19
So I can still make sure that they follow certain guidelines.
25:21
And there are small private equity firms out there that are really targeting home services.
25:25
And they would love to buy a chain of 10 or 15 that are doing, let's call it $12 to $14 million in revenue and $3 million in cash flow.
25:35
They would love to buy that business.
25:36
And they would love to pay someone $10 million for it.
25:39
But we have to create the systems that they have the confidence to that when they move in and they spend another five million and expand, they know exactly what that model looks like.
25:49
And by doing that, it increases the enterprise value for all the owners, because not only because someone could buy you out, because now you have something to benchmark against the entire time.
25:58
And I think it will encourage a lot of people when they're going through the thick of it and you're growing.
26:02
A lot of times you're investing all the money back in.
26:04
But what you don't see is enterprise value going up.
26:07
And so I've encouraged a lot of people in the home service boardroom recently is take track of your revenue, your profit, but also what's your enterprise value?
26:16
And I don't care really, there's all sorts of mechanism.
26:18
We talk about seller discretion earnings as a way to use that as a multiple when you're still an owner operator.
26:23
However,
26:24
Have that established so that as you grow the business and you have a revenue and you have earnings, you actually know what is the value of this asset you're building.
26:33
And we don't have that established because we don't have money moving into Augusta.
26:37
We don't have people buying out, investor types joining.
26:40
When you do, and once you've established return on invested capital, ROIC, for initial owners, and then five or 10 years later, they're exiting, that's when you establish enterprise value for the network.
26:50
And that's my objective.
26:51
Okay.
26:52
So if I'm that investor profile, I'm listening to this.
26:54
Let's just go down a hypothetical road here.
26:56
Does it make sense to join today while you're still building the mechanism?
27:01
Or does it make sense to almost just sit and wait, let my money float in the market or my other investments, and then go the buyout method?
27:08
It just depends on the type of person you are.
27:11
If you talk to a lot of established franchises where they've sold all their territories, the ones that are doing the best are the ones that joined early, went through the kinks and the bumps, but they got the best territories.
27:22
It's location, location, location.
27:24
Right?
27:24
And so right now we have a pretty open market for territories, but in 10 years, if we have 800 locations, that's not going to be the case.
27:31
Those people will be joining with everything much more smoothed out and enterprise value will be established and like Augusta Leeds will be purring.
27:37
All those things will be ironed out, but the territories will likely have been purchased out.
27:41
And those territories now, their value goes through the roof because when investors want to join, they're going for those target markets.
27:48
And that's really part of the inception behind the executive model.
27:50
If someone does have the capital to join at that level, they are effectively securing the most premium territories.
27:56
They're getting six.
27:57
And that was the first executive model.
27:59
You know, and I don't think he would mind me mentioning where he's located is Omaha, Nebraska.
28:03
And he basically said, Hey, if I'm committing and joining us and investing in this, like,
28:07
I want security that no one else will operate in Omaha, Nebraska.
28:09
I'm like, great, we can make that happen.
28:11
And then we went down the executive path and that's worked for him.
28:14
So now he has a security knowing that no one else will be in a market in Omaha, Nebraska or the suburban areas of Omaha.
28:20
And he can just focus on growing his locations.
28:23
He doesn't need to worry about someone else coming in and buying them or another investor.
28:25
It's like, I got it locked up.
28:27
Now I can just grow the thing.
28:28
And that is kind of the idea behind the executive model, I guess.
28:31
Yeah, and for someone like Jordan, there's a lot of experience, maturity, and investor type tendencies.
28:42
So when he joins and when he and I talk, it's not like he's just growing this year.
28:47
He has a very, very, this is the 10-year plan.
28:50
At five years, we want to be QSBS eligible, so we're going to switch to a C Corp.
28:55
And that way, when I sell five years later, I will be able to do it.
28:59
Ten million dollars of it tax free.
29:01
It's like he's thinking very differently and he's preparing the business to sell in 10 years.
29:06
And so it's just a very different mindset than like I'm starting.
29:09
I want to grow and like we'll see where we go.
29:11
Maybe start another location.
29:12
Like this is a very different track.
29:14
And he will be pouring all the money in probably for the next eight years before then optimizes it to sell.
29:19
And so that mindset is the type of mindset you want to be around, regardless of where you're at in your entrepreneurial journey.
29:25
And, and one of the things I talked to him about is like, you want to wait till we're public.
29:30
So the moment we go public, you get this massive like advertising of the franchise.
29:34
And then that's when investors, private equity, etc, has all the eyes on it.
29:38
Like my Jersey Mike's, all of their franchisees are super thrilled about IPO.
29:41
He's always on that all this money is coming in.
29:44
And everyone wants to buy their locations.
29:46
Because there's a huge amount of awareness.
29:49
And so I am thrilled for the day, not only when we go public, but so that way over the few years after that, that's the exit strategy for our current owners.
29:55
The people joining now to answer your original question, the ones that are joining now and building with us on the systems and ironing things out, they'll be the ones that when the bell rings, they're getting offers for very, very good multiples.
30:06
Because now there's a private company or a publicly traded company with public financials behind the franchise.
30:12
And it's hard to find that type of franchise in home services.
30:15
That doesn't exist.
30:16
Yeah.
30:18
Fair.
30:18
It's a sacrifice or regret you choose.
30:21
You could sacrifice some capital now, join Augusta, build it on your own, like figure out the system, grow it, go through those growing pains or regret not doing that.
30:30
And when we IPO, like you miss out on that multiple.
30:32
And that for some people, that's the better route, because it's more conservative and making sure that they do see our financials beforehand.
30:39
It is a publicly traded company.
30:40
There's a lot of credibility.
30:41
That's why someone's okay with a lower return on invested capital from a company like KFC, which is...
30:47
It's a horrible fast food franchise.
30:49
But they're okay with a very low return invested capital because they have the backing of Yum Brands, which is a publicly traded company and it's across the entire world with multiple brands.
30:59
So there's a certain level of confidence that that's not disappearing tomorrow.
31:04
And so for a lot of people, they still would see me as like the influencer.
31:07
If he gets set by a bus, the whole thing is done.
31:08
When you go public, that's a very different story that's being told.
31:11
And so for other people, they want the more safe approach.
31:15
And I don't blame them.
31:17
They're also the type of person that's probably going to keep their money in the S&P 500 until then.
31:21
And it's just...
31:23
investing and growing your money in general, you are always analyzing risk.
31:28
And yeah, so there's higher risk if you join in earlier days in a franchise.
31:31
Like if someone joined, I was talking to an owner yesterday, the other day about this.
31:34
They came during the first, I think 50 or 60 locations.
31:37
And then he came recently again for training.
31:40
And he's like, dude, it's totally different.
31:42
It's like three or four years later.
31:44
And so like,
31:45
the person who joined three or four years also had like the franchise view was like a third of what it is today and like there was a lot of things that didn't exist though we didn't have a gust of leads there's a lot of elements of like the dashboard looked very different i mean everything website coaching preferred vendors all of it has accelerated rapidly and so it's just like what level of risk do you want to have and i think that we're moving in the right direction and
32:09
like our number one core value is constant improvement.
32:12
It's like, I always, when I get like, we gotta get all this stuff done, it's like, no, like, number one core value is just, today needs to be better than yesterday, tomorrow needs to be better than today, and that's it.
32:22
I love that mentality.
32:23
So what do you say, this is kind of my like, summation question for this conversation around the executive model, it's like, is the executive model a sign that Augusta is changing or a sign that what Augusta's built is working?
32:41
I think neither.
32:43
Oh, I love this.
32:44
I reject the premise.
32:47
Worst podcast interview response ever is, I reject the premise.
32:52
Okay, please.
32:55
I think it's that we're living by our values.
32:56
Like constant improvement means that we have to improve the skillset of the team.
33:00
We have to improve the skillset of the owners.
33:02
We have to improve the training.
33:03
We have to improve our tech stack.
33:04
We have to improve our capitalization.
33:05
We have to improve our training for new owners, new technicians.
33:09
And we have to deliver on the promise of changing level of professionalism in the industry.
33:12
I think we're closer to that.
33:14
And that's the only thing I think we're doing.
33:16
I think we're living by our core values and we are getting closer to our mission.
33:19
Hmm.
33:21
I'm trying to think of a good follow-up for that, honestly.
33:23
That's good.
33:24
I mean, you know, hypothetically, we could end it there, but I feel like that's such a rabbit trail we could go down.
33:30
Yeah, I like that.
33:31
I don't really have anything.
33:32
Maybe we just end it there.
33:33
You know, you don't, you don't, you can't make a, what is it, you can't put lipstick on a pig?
33:37
But that wasn't a pig, you know?
33:40
That was the Mona Lisa.
33:43
I can't put lipstick on the Mona Lisa.
33:45
So, which is a conspiracy.
33:46
She doesn't have any lips.
33:47
So you couldn't even put lipstick on her.
33:48
Anyways.
33:50
We're off the rails here.
33:52
Yeah, that was too technical for me.
33:55
I need that like dopamine release.
33:57
Well, no, I appreciate you going down that rabbit trail with me.
34:00
Do you have any non-financial advice for the people?
34:03
You go ahead.
34:04
I really didn't have anything prepared.
34:05
None.
34:06
You went to the fair, bro.
34:07
You should have all sorts of ideas.
34:08
I went to the fair, but yes, we have a county fair.
34:10
That's cool.
34:10
But I don't have like advice on it.
34:12
Dude, the best thing about the fair is ideas, bro.
34:14
You get there, you see all sorts of marketing.
34:16
Yeah, that's true.
34:17
I haven't been to the fair in years.
34:18
But if I wanted to go, like that was my favorite part.
34:20
I just walk down the aisle, see all the booths, go outside, look at all the people selling food.
34:26
Mm-hmm.
34:27
I just get lots of ideas.
34:28
I go with like 10 ideas usually.
34:29
Really?
34:30
Oh, yeah, dude.
34:30
Like how they do the funnel cakes, like all sorts of stuff.
34:33
Yeah.
34:33
Like the efficiency.
34:34
It all just feels kind of money grabby, though.
34:36
Yeah, that's what's so great about it.
34:37
Yeah, fair, fair, fair, fair.
34:38
So much of people that they only do the same thing.
34:41
Like they make the funnel cake the same way every single time.
34:43
Okay, okay.
34:44
Here you go.
34:44
I was just laughing for you.
34:45
No, I appreciate that.
34:46
Okay, this is not financial advice.
34:48
This is Lee's not financial observations.
34:50
Fair advice.
34:52
So this is a great point.
34:53
So what they did is there was an upsell attached to a higher priced product.
35:00
So the upsell was cheap.
35:01
So here's what it was.
35:03
There was a stand that was a dirty soda stand.
35:05
You heard of dirty soda?
35:06
Yeah, I've heard of it.
35:07
So they put like cream in it or like coconut flavoring.
35:09
It's crazy.
35:11
It's great.
35:12
So, you know, my wife loves a good soda.
35:14
So I was like, oh, surprise, I'll get her a dirty soda.
35:16
To go there, the regular cup is eight bucks.
35:20
Okay.
35:20
Oh, yeah.
35:20
Wow.
35:21
Eight bucks for like a 16 ounce.
35:22
But then they had like this like cute little like bucket cup, whatever.
35:26
That was $10, $2 more.
35:28
But here's how they get you.
35:29
They're like, oh, but if you get the bucket, you get a refill for $6.
35:33
So they're selling double.
35:35
That's so much math.
35:36
Yeah, but the way they pitched it was really good.
35:38
So the upsell was attached to the more expensive product.
35:41
Interesting.
35:41
But it almost makes you want to buy the more expensive product because you're like, oh, I can get a refill for six.
35:46
And the original price was just eight.
35:48
So I'm really getting a deal.
35:50
I wonder what percentage goes to eight.
35:52
I think most people would actually go with eight.
35:54
When was the last time you wanted to have a set of refill of a dirty soda?
35:59
Oh never.
35:59
Yeah, that's awesome.
36:00
Well I'm not as much of a soda drinker.
36:02
Because it makes the $8 and be like, I'm taking the cheaper option.
36:06
Even though it's still a crazy price, it's still cheaper than $10.
36:09
But I think where they get you is if you're at the fair, it's hot all day.
36:12
I can get that refill for six.
36:13
Oh, you can come back.
36:14
You can get the refill for six.
36:15
So you got to hold their cup around the entire fair.
36:17
And their logo was great.
36:19
Of course.
36:19
They had the logo.
36:19
I can't remember what it was.
36:20
But on the...
36:21
So like they had the logo.
36:22
And on the outside of the circle of the logo, it said, if found empty, please refill.
36:26
I was like, I like that.
36:28
That's good.
36:28
You were like digging through the trash bins trying to find it.
36:31
Dude, my brother and sister-in-law, their family keeps all their cups from the Seattle Mariners games.
36:36
Oh, I do too.
36:37
You do?
36:37
Yeah, I'm a savage.
36:38
Oh my goodness, because you get free refills for life as long as you have the cup.
36:42
Oh yeah, I don't do that.
36:42
I don't do it for the refills.
36:43
I just like to have them.
36:45
Yeah, so when my wife and I got married, I overindexed my life on sports way too much.
36:53
And I lived in Chicago for a while, so I could go to Chicago games, and Cincinnati wasn't far, Milwaukee wasn't far.
36:59
So I got married, and I had a stack of Mariners Cups, Cubs Cups, Brewers Cups.
37:06
Name a team I had Cups.
37:08
And my wife was like, you can keep five.
37:11
And so I think I kept five Mariners cups.
37:13
Well, because the Mariners cups, as long as you keep it, you can come back and always refill.
37:17
I think, but I don't do that.
37:19
I just like the cups.
37:20
Yeah, their cups are literally wearing off all the paint on the side because they literally bring them into the game for years.
37:27
I should take a picture of the cups I have at home and put it up to the team.
37:31
So I didn't really have any non-financial advice.
37:33
My non-financial advice is throw away your cup after a few uses because it's not meant.
37:39
For multiple uses.
37:40
And the paint chipping off is a good sign, you need a new cup.
37:43
Yeah, fair enough.
37:44
Pay the $5, sell a new cup.
37:46
Fair, I appreciate that.
37:47
And on your way out, with the nachos, and with the soda, get yourself an executive franchise today.
37:53
There you go, I like that.
37:54
I was trying to tire.
37:55
No, that's great.
37:56
What is your go-to stadium food?
37:58
Because you did go to a Mariners game not that long ago.
38:00
Yeah, I don't get food.
38:01
But you're like, yeah, I know, I see.
38:03
If I had to, I'd just get their, they get like the sausages.
38:06
Yeah, track your macros.
38:08
Yeah, just for me.
38:10
Everything else there is garbage.
38:11
Yeah.
38:11
No, I'm not a big, like, stadium foodie.
38:14
I go for the game.
38:15
Yeah.
38:16
I'm there for the game.
38:16
I've been with some people where, like, four or five times in the game they're going out and getting food.
38:20
Oh, yeah.
38:21
And they spend more on the food than the ticket.
38:22
I'm like, dude, we could have sat down, like, right next to the home plate for the math.
38:26
Yeah.
38:26
We're spending on food.
38:27
All right.
38:28
Well, that went off the rails.
38:30
Like and subscribe.
38:31
Thanks for listening.