April 8, 2025 • 30 mins
Cash flow issues can quietly erode business success, but solutions are within reach. This episode uncovers the #1 overlooked issue draining cash flow—underpricing—and provides actionable strategies to address it. Learn how to set accurate pricing based on real costs, including labor, materials, and hidden expenses such as non-billable hours. Explore the dangers of emotional purchases, the importance of knowing exact costs, and strategies to avoid the common mistake of competing on price. Take control of cash flow and establish a foundation for financial stability and growth. Join host Adam Sylvester and Paul Maskill of Blue Collar Business Advisors.
New to Jobber? Masters of Home Service listeners can claim an exclusive discount for Jobber at https://bit.ly/4d0KAEh
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
A lot of times we just, well, it's justa few percentage points here and there,
but as you scale your business,5% of 3 million bucks,
it'd be nice to have 150 grand atthe extra just because you charged
accordingly.
Welcome to Jobbers,masters of Home Service,
a podcast for home servicepros by home service pros.
We're in Las Vegas and today we'retalking about the number one overlooked
issue, draining your cashflow.I'm your host, Adam Sylvester.
(00:24):
Today's guest is Paul Maskell.Paul, welcome to the studio. Thanks.
Adam. How's it going?
Great. I'm glad. Glad we're doing this.
Excited to be here. Excitedto dive into cashflow.
One of your favorite words is cashflow.
Why is.
That? Yeah, I mean,
it's the lifeblood of any businessand it's lifeblood of life.
If you don't have cash in thebank, life is really stressful.
(00:45):
You probably have a lot of debt.
You probably don't have a lot of equityand you can't sleep well at night.
So when you have a business that hasenough cash in the bank that allows you to
not only sleep well at night,
but then invest that cash to start toscale your business, to achieve the goals,
everybody had a goal whenthey started their business.
I want to do X amount of dollars.I want to travel this long.
I want to buy real estate.And they rarely achieve it,
(01:05):
and it's not because they'rebad at the service they provide.
They're actually really goodat the service they provide,
but they're bad at managing cashflow,and that's not a knock on them.
They're just, they're not built for that.
They were built to be the electricianor they were built to be the landscaper.
So when we can help them, in my opinion,
so many trades business owners are soclose to having that breakthrough of like,
wow, I'm making the money I thought Icould make when I started this thing,
(01:28):
and we just need to tweaka few little things.
Yeah, that's what well said, Tara, ouraudience, who you are, what you do,
what your background is,all that kind of stuff.
Yeah, so I've got aninteresting background, Adam.
So originally I got a finance degreefrom the University of Michigan.
Adam and I were just talking aboutthat he's got a Buckeye family,
but we won't go into sports.
But I thought I was going to climbthe corporate ladder to be honest.
So I moved to Chicago in 2007and worked for a big bank,
(01:51):
and my goal was to get to thecorner office after 40 years.
Then 2008 happened, and 2008 wasnot a good time for a lot of people.
Me personally,
I was grateful for 2008 because it mademe realize that I don't want to work for
somebody else and have my livelihoodbeing based on what somebody in the
boardroom's decisionsthey're making. Like, Hey,
we got to cut 10,000 people in order tostay afloat, go pick out 10,000 numbers.
(02:14):
So I realized real quickly that workingfor somebody else just wasn't my thing.
So since 2010,
I've scaled and sold four differentbusinesses in the Raleigh area,
most recently electrical company,
and now I'm in a position where I canleverage my finance experience with my
experience in the trades.
I've spent the last six or seven yearsin the trades to really help business
owners with cashflow. So Ioffer outsource CFO services.
(02:36):
What that means is basically helpingthem figure out what does success look
like, putting a number to it,
using numbers to make those decisionsso they have a financially healthy
business so they can sleep well at nightand really be their financial guide so
they can create thecashflow we're looking for.
That's great. Okay, awesome.So let's get into it.
What do you think is the number one driverin this conversation about cashflow?
(02:57):
Yes. I think the number one driver,
if you think of the first timemoney comes into your business,
that's where we start. If westart off on the wrong foot,
it's really hard to catch up. So wheredoes money come into the business?
It's when we sell something.When we sell something,
it's based on the price we give. Andmost of the business owners I talk to,
they actually don't have a methodical ormathematical way of figuring out their
(03:19):
pricing. They just have, well,that's what we've always charged,
or Adam down the street chargesthis, so we're a little bit less,
or Ben over here, hecharges a little bit more,
but I think he gives a little bitbetter service. So we don't really have,
most contractors are stillcharging prices of like, well,
that's all he needed to make whenI did this thing on my own. Yeah,
(03:39):
because when we.
Start out,
a lot of times we think the employerI was working for was charging clients
way too much, and I didn't like that.
So I'm going on my own andI'm going to charge half.
There is a reason thatwe're charging that much.
There is, and I think a lot of that goesdown to just being fully transparent.
So when you are operatingcompany, you start build a team,
they're inevitably goingto see that price of,
(04:00):
I can't believe we charged $3,000 forthat and I only made 300. That's insane.
But the other 2,700wasn't going to the owner.
But a lot of times we as business ownersfeel like we can't unveil what's behind
the curtain. We can't go talk tothe Wizard of Oz behind the door,
but when we start to share allthe numbers with our team to them,
(04:20):
then it starts to make a lot of sensethat they start to believe in the price
more. They're able to sell more becausethey're like, now it makes sense.
That's why we charge what we arecharging. And the guy that said,
the person I worked for was chargingway too much, I'm going to charge half.
Eventually they're like,man, now I realize why he was doing what he was doing.
It wasn't because he was greedy.The cool thing about economics,
(04:41):
especially in North America is that ifyou aren't charging a price that people
are willing to pay, you'regoing to go to business.
So there's nobody out there rippingsomebody off from a price standpoint. Now,
they might be unethically selling things,however, if the price is too high,
the market's going to determine no one'sgoing to pay that and you're going to
go out of business.
That's true. Yeah. At somepoint the market reels you in.
(05:01):
I think that a lot of times people startoff on their own and they do have less
overhead and they do haveless expenses overall,
and so they can charge a little bit less,
and in some ways that can be ahealthy way to beat your competition.
But what happens is they don't raisetheir prices over time. So they're still,
what you said earlier,
they're still charging when theycharge the first day in year three,
and they're wondering why theydon't have any money in the bank.
(05:23):
And that's totally true because they'realso pricing it usually based on how
quick will it take them to do something.
But you're the master plumber or you'vebeen doing landscaping for 30 years now
the people you're hiring haven'tnot as efficient as you are.
So they also don't take that into account.
And that's going back towhat's driving revenue.
Pricing is there's so many inputs thatgo into it that if we don't get it right,
(05:46):
it goes back to building a house.
What's the most important inthe house is the foundation.
Pricing is your foundation whenyou're building your business,
if you get that wrong, it really doesn'tmatter what you build after that.
A lot of business owners think,well, if I just keep growing,
my revenue will solve allthe problems. However,
if it's bad revenue coming in, the biggerthat gets, the bigger the bottom gets,
(06:07):
and the bottom is the problem.
So revenue's not going to solve it unlessit's the right revenue that's coming
in price.
So how do we create a firm foundationof pricing? How do we do this?
The first thing is just need to understandhow things need to be priced in order
for you to achieve thegoals you're looking to do.
And we can't call around to other peopleand be like, well, Adam charges this,
or Ben charges this, or Joe charges this,and then the big company charges this.
(06:31):
That'd be like Ruth's Chriscalling Applebee's and saying,
how much do you charge for that 12 ounceribeye? Dang, Applebee's charges 14.99.
How are we going to charge $90?There's no way we can charge $90.
We got to charge 13. But it'stwo different experiences,
even though it's the same quoteunquote thing that you're selling.
So we can't compare ourselves to others.Every business has different goals.
They're looking to hire differentpeople. The chef at Ruth's,
(06:52):
Chris is making a lot more moneythan the chef at Applebee's.
So we really got to figure out whattype of business do we want to build?
What type of people do we want to hire?
Do we want to hire people that arelooking for careers or are we just looking
for the cheapest hourly person?
So when we look at pricing and wecan kind of dive into it as we go,
but we need to figure out whatare all the inputs that go in.
So basically what is all the cost ofsales or the cost of goods sold that we
(07:15):
need to pay in order to deliver theservice that we're promising our customer.
For the home service industry, whichyou've been in for a long time,
what are some of thecommon inputs for pricing?
So I mean, the two main ones areobviously labor and material.
So a lot of times I will be working withcompanies and I look at their payroll
and there's no labor intheir cost of goods sold.
(07:36):
So just to make it super simple,
you have your revenue minus your costof goods sold equals your gross profit.
All of your labor out in the fieldshould be in cost of goods sold.
I see a lot of companies books where allof their payroll just flows into below
your gross profit. We don't know who'slabor, we don't know who's the owner,
we don't know who's the office staff.
(07:56):
So if we know exactly what we're payingfor labor and we know what our materials
are, those are the two main ones. Now,
there's a lot of otherthings that go into that.
What if we have to pull permits or whatif we have to rent equipment or what if
we have to have somemaintenance on that equipment?
All those things kind of play into that,but if you can just get labor material,
you're probably ahead of mostof the competition out there.
(08:17):
Yeah. Okay. So when we'retalking about pricing,
make sure we're priced enoughand we consider some of those inputs that you just
talked about. Obviously laboris a humongous variable,
slow people, fast people,all that kind of stuff.
Are there any other things that theyshould be looking out for aside from the
rent costs and the small little things,
(08:38):
anything else that areglaring problems for people?
I think the biggest problem, Adam,speaking of labor, is non-billable time.
So whoever's setting the pricing mightsay, well, this is a four hour job,
so if I pay so-and-so $25 anhour, my labor is a hundred bucks.
There's a lot more to thatbecause those four hours,
you're probably paying six to eighthours for, because there's drive time,
(09:00):
there's setup time, there'soffice time, there's lunchtime,
there's all these times where they'reactually not turning the wrench,
and we need to account for that and weneed to build that into our pricing.
So most companies when they actuallystart to do it and jobber contract this,
if you're using jobber properly,
it'll show you exactly how long were theyon site for the week or for the day or
per job. And then we canreally start to realize, wow,
(09:21):
I paid this guy 40 hours this weekand he was only on site for 20,
which is fairly average to build outyour pricing, we want to be conservative,
we want to assume probably half thetime out of a workday, your technicians,
your people out in the fieldaren't actually delivering service because they're
driving to get material or they're inthe shop loading up or they're unloading
at the end of the day. All thosethings we need to account for,
(09:44):
and a lot of times that'swhere we get stuck.
Okay. A question for you. I'm curiouswhat your thoughts are on this.
Let's go back to that example, thefour hour job, 25 hour dollars an hour.
Let's say you charge a hundreddollars an hour for your guys' time.
Should our listeners say, well,
that job's actually going to takeeight hours and charge eight times 100,
which is $800,
(10:05):
or should we actually increaseour charge rate to $300 an
hour for.
Just job site.
Time? You have a preference on that?
Yeah, so I think to kind of answerit in a roundabout way, first,
I would not share your labormaterial with your customer.
You don't want to go toyour customer and say, Hey,
this is a four hour job and wecharge a hundred dollars an hour,
so it's going to be around $400. Thenthey're going to start to wonder.
(10:27):
They're also then going tostart watching the clock,
and then they're going tostart watching your technician.
That guy took six breaks,he took a long lunch.
This really should have only tookit two hours. So however you do it,
what we want to present to thecustomer is just the fixed price.
The final number? Yeah, final number. Hey,
it's going to be $1,200 to doa spring cleanup for your yard.
(10:48):
How you get there, thecustomer doesn't need to know,
just like when they go spend $90 at RuthChris, they're not saying, Hey, Adam,
what's the labor material on this stake?
They're buying the entire experience andthey're buying the end result of what
they're looking for. So whenit comes to that, to me,
the key is to figure out what is youractual labor material for that job,
and then figure out what type ofgross profit you're trying to achieve.
(11:08):
And then you can do the math from there.
If you're trying to achieve a 50% grossprofit, if you're all in labor material,
all your cost of goodssold is $800. In theory,
it should be about $1,600 for that job.
If you're aiming for a50% gross profit margin.
It's 50% pretty healthy.
My end goal with my clients is 60%.However, I see a lot of people under 50.
(11:28):
So our first kind of babystep is let's get it to 50.
And mainly just from a mindset of showingthe owner that it's okay to charge
more and then it starts towork and they're like, man,
it's actually working and peopleare willing to pay the price.
And then we just kind of stairstep up. End goal, in my opinion,
is 60% for most things.Now, if it's a more,
do you want to call it a commodity likecutting grass where the 10-year-old down
(11:49):
the street can also cut grass? Yes,50% is probably more realistic,
but if you have lawn and landscaping,
landscaping should be higher because the10-year-old is not going to be digging
out beds and they're not going to bethrowing stone around and moving boulders
and they don't know how to plantplants and all that kind of stuff.
So depending on how much ofa commodity your service is,
(12:10):
I would say 50% is definitelybare minimum. Ideal goal,
if we don't get there and we get to 48%,
it's still probably betterthan most of the companies.
Out there. If you're aiming for60%, that means that your expenses,
your labor and materials are 40% total.
That means your labor is about 25and then your expenses and your labor
materials are about 15. To me,that's a very healthy gross profit.
(12:31):
It is, and that's really kind of the goal.
I work with a lot of clientson building in performance pay.
So performance pay is justpaying your technicians,
your people out in the field,
incentivizing them to get it done inthe time that you estimated this job,
you get done. We see it every day.Listeners see it every day. You say, Hey,
this is a four day job, and theguys look at it and be like,
(12:52):
I think we can milk this till Friday.And we'll just tell boss, man, Hey,
we need a little bit more time.We need a little bit more time.
And then magically at threeo'clock on Friday, it's done.
They put in their 40 hoursand they're out of there.
So a lot of times when we'relooking to build in performance pay,
kind of that all in laborideally is around that 25%. Mark.
Paul,
I'm going to pause our conversationfor just a moment to talk about jobber.
(13:12):
Why do you think it's important for ourlisteners who may just be using pen and
paper and still haven't madethe jump to a full software,
why is it important for themto use a software like Jobber?
Yeah, I mean,
it's really hard to make decisions basedon numbers if we don't have numbers and
Jobber tracks all of that for you,exactly how long they're on every job,
exactly how long that job took,so we know even for the future,
(13:34):
how should we start pricingthis thing going forward.
And then from a financial standpointwith the way Jobber integrates,
not only with QuickBooks but a lot ofother things, we can take that data,
we can take the revenue and we can reallyget a good idea of what's going on in
the business versus pen and paper oreven just Google Sheets and Google Docs.
Those things never get updated, nevergets used, it gets thrown in the corner,
(13:54):
and then we're operating backto what we harp on all the time,
which we're making decisions basedon emotion ego instead of numbers,
because we don't have that one hubthat's taking care of it for us.
I totally agree. If our listenersare still using pen and paper,
they need to make thejump today. If that's you,
then you need to start using jobbertoday. Go to jobber.com/podcast deal,
get an exclusive discount for new usersand get all your metrics into one place
(14:16):
and start making data drivendecisions today with Jobber.
What else do we need to do tomake sure our pricing is spot on.
What we talked about? One is thatthe non-billable time is huge.
Another thing to think about in labor,
which a lot of times we ignore is allof the other burdens when it comes to
hiring employees. So yourpayroll tax, your workers' comp,
if you're offering paid timeoff, if you're offering a 401k,
(14:39):
all that is compensation to your employee.
That is stuff that we're paying todeliver the service we're talking to.
So when it comes to, a lotof times we just, well,
it's just a few percentagepoints here and there,
but as you scale your business,5% of 3 million bucks,
it'd be nice to have 150 grand atthe extra just because you charged
accordingly.
And the burden cost can be fiveto 8% depending on where you live.
(15:03):
And suddenly that brings you from a 60%gross profit to 55 just like that. Bam.
It's like, oh, I wasn't counting on that,
but it's there and we haveto count that kind of stuff.
And I would say kind of on that note,
when even just looking at materials aswe're looking at what inputs go into
cost, a good sold is a lot oftimes the owner's like, I dunno,
that's around 20 bucks. Is it around20 bucks or is it 20 bucks? Right.
(15:25):
And I see a lot of companies wherethey're just kind of spitballing all these
prices out there, whereas you shouldgo to your vendors and be like,
can I get an exact price of everythingthat we buy from you on a regular basis?
And then also when you're quotingwhoever's doing it, it's not like,
I think it's about seven yards.If we're putting down multiple,
is it about seven or is it seven?
Because.
If we're off by one yard, everyjob that's going to add up.
(15:47):
So knowing your material thing.
And then I would say oneother thing that's kind of a caveat that I see a lot of
business owners in states where youhave to charge sales tax on everything.
So if you go out and sell a job and youhave to charge sales tax on everything,
make sure you're not paying sales tax onthe material you are buying because now
you're essentially paying sales tax twice.
(16:08):
So if you're charging salestax on the end product,
say you're a landscape company in astate that has to charge sales tax on all
the plant material thatyou're putting in the ground,
if you're charging sales tax on that,
you should not be payingsales tax when you buy it.
And a lot of times businesses, I don'thave time to deal with that, whatever,
I'll pay the extra 7% on the material.
It's really simple and it's totally legalbecause otherwise the state is making
(16:32):
sales tax twice on one product,which they'll gladly take it,
but they're not entitled to it.
One thing that you said when you startedoff the show was cashflow is obviously
king and we have to makesure we guard our cashflow.
And the number one thing that goesinto cashflow is the number at the top
revenue, which is price.
And so if we're not supposed tocompare our prices to our competitors,
(16:56):
that's just a race to the bottom andwe need to make sure that we are not
being lazy with like, oh, it's aboutthis, it's about that, it's about that,
it's about that. None of that.
What are some other things that companiesthat you've seen companies do that are
just like, we need to change this day one?
Yeah,
I think it's what are you paying yourpeople from a compensation standpoint,
(17:16):
and do they have any incentives to achievethat? So I talk to people every day.
It's like, well,
what do you pay your technicians 80grand a year and do they have any
incentives? Is there anythingholding them accountable?
A lot of times we just kind of pullnumbers out of there. It's like, I dunno,
they've been here a long time.They always ask for a raise.
We're just going to keep giving it to'em. But we need to be able to one,
factor that into our pricing, but two,
we need to hold them accountable andthey need to know what the standards are
(17:39):
for that. So if you're goingto make 80 grand a year,
you need to know exactlywhat the expectations are.
In order to continue to earn80 grand at our company,
you need to be able to dothis, that, and the other.
You need to be able to close at this rate.
Your average ticket needs to be ablethis or your productivity needs to be,
this quality needs to be quality. Nocallbacks. You're getting Google reviews,
people mentioning your name.
(17:59):
So a lot of times we just kind of comeup with what we're going to pay our
people, but there's no accountabilityin it. And there really is like, well,
what do I need to do to make more money?It's like, well, I don't really know.
Whereas if you look at anywhere else,especially sports, it's like, well,
how do I make more money? Well,you get better at what you do.
You get more productive, you generatemore revenue, you fail less and less.
All those things. We need to build thataccountability into our team as well.
(18:23):
So that way when you also bringin somebody, they're like, well,
I'm only making $15 an hour.How do I get to $30 an hour?
If you have that all mappedout, you have job descriptions,
you have report cards or scorecards,
you have everything in place andyou have the training in place,
then you can tell that person, Hey, Joe,
we're going to bring you in$15 an hour as an apprentice,
but here's the path you can takeand you can build a career here.
(18:44):
You can go all the wayup to general manager.
The next step is to not be an apprentice,
to be an assistant technician or whatever.So when we have all that in place,
it becomes a lot less stressful becausenow you let your team dictate where
they're going to go instead ofthem always asking for raises.
Yeah, well said. Okay,so talk about cashflow.
I want to flip around a little bit andtalk about expenses because expenses have
(19:06):
a huge impact on cashflow because youcan just spend all your money in one day
if you really wanted to.
What are some mistakes that companiesmake that you see around buying stuff?
People like to buy stuff and people inthe trades to buy shiny new things They
do. Yeah, a lot of times like, man,did you see that new skid steer? Like,
oh man, did you see that new Durangogot to have all these things,
(19:27):
got to have that big newwhite contractor's truck.
So what I look at beinga financial person,
is that thing generating income?
Is there a return on that investmentor is it a cost? If it's a cost,
we should probably get rid of it.
Every dollar you spend out of your companyshould be generating something. Now,
(19:48):
one of the things that frustrates methe most is nobody likes paying taxes.
I don't like paying taxes. I'm sureAdam doesn't love paying taxes. However,
that's part of life. I talk to alot of people, I'm like, well, yeah,
I just bought a whole bunch of new stuff,
then I can write it off and Idon't have to pay taxes. But okay,
so you paid less taxes thisyear. Now come January 1st,
(20:09):
all of a sudden you're left with allthis brand new shiny stuff that's just
sitting around,
or you're just driving it to thegrocery store or whatever it is.
And you're way less cash.
And you have way less cash, and you'vegot an eight year payment on that at 12%.
So instead of giving thegovernment $20,000 for your taxes,
you're going to spend a hundred thousanddollars plus interest on this vehicle
that you didn't need at all, butyou didn't want to pay taxes.
(20:32):
It's not a good plan.
Not a good plan.
And at the end of day it comesback to what are the goals? Well,
I want to have a businessthat I can sell one day,
or I want to have a businessthat can run without me.
Those are usually the two mainthings I talk to people about.
I want to get out of the dayto day and I want to sell it,
or I want to get out of the day today and just run it from the beach or
whatever it might be.
The only way to do that is to have abusiness that produces consistent positive
(20:55):
cashflow that's making a profitthat's running like a machine.
And it's hard to run a machine whenyou're making bad financial decisions.
Just you're spending a hundred grand tosave 20 grand. I don't know about you,
but I don't like to put a hundredthousand dollars in machin and get 20 out.
That's a recipe to run outof money pretty quickly.
Paul, one of my biggest annoyancesin running a business is those,
(21:16):
because we pay payroll every two weeks.
And so there's like two months everyyear that has three payrolls. And man,
do I hate, my God, my technicians loveit. They get paid three times a month,
but I just hate it. Any tipson how to, not just payroll,
but how do you accommodate bigsurges and expenses this month
(21:36):
and then a couple months later you haveanother big surge? Any tips on how to.
Plan for.
That?
Here's the cool thing. The calendaris out from now until the end of time.
So when it's coming, but it's alwaysthe surprise. You're like, oh man,
it's July and we got three payrolls.Oh, I didn't think about that.
But we knew about that when westarted our business 10 years ago.
We knew July is going to havethree payrolls in whatever, 2025.
(21:59):
So the key is to actually forecast.
So a lot of people will create abudget on December 31st or January 1st.
This is what we want to do thisyear, and then come January 5th,
they forgot about that budget.They're out fighting fires.
But when you actually havea forecast and projection,
we know that's comingso we can plan ahead.
And that's a lot of the things that I dowith my clients is doing that cashflow
forecasting projections.
(22:20):
We know twice a year payroll isgoing to be higher in that month.
We've got a plan for it. Also,
if you're doing performance pay alittle bit with performance pay,
it kind of equals it out because thosepeople are still producing where a lot of
times we get stuck is, well,the revenue's not any better,
But we're paying for threepayrolls twice a year,
or even people that are weekly.
(22:41):
There's going to be however many fourmonths every year where we're paying an
extra fifth payroll orwhatever it might be.
So that's the way to do is youactually have to plan, right?
We have to plan for this, wehave to strategize for it,
and we have to put money aside forit. Whereas most business owners,
they're running their businesson a day-to-day basis of how much money's in the
bank, can I buy this thing? I thinkso. I think we can buy it today,
(23:05):
not thinking, oh man, nextmonth we've got three payrolls.
Yeah,
and next month we have to pay our entireyears of insurance next month or in the
beginning of the season, we have to buyall this material for the whole year,
mulch and plants and all that. So thisgoes into my next question for you,
which is emotion. So much of cashflowis baseline around our emotion.
That's something you justsaid a second ago is,
is there enough money inthe bank technically yes.
(23:27):
Then let's go ahead and buy it.And that's an emotional purchase.
How do you go about coachingyour clients to say,
let's not make emotional purchases,
let's make purchases that we need to makethat are important and let's plan for
them, and how do you do that?
Yeah, I mean,
you really have to remove yourego and remove your feelings
from this business and look at it justas it's a machine that produces money,
(23:50):
and what's the best way to make thatdecision is letting the numbers dictate
and having kind of delayed gratification.
A lot of times we want things nowand we're not willing to wait,
and then when that timecomes, we'll be like, man,
I should have just waited sixmonths. Six months goes by so fast,
could have waited for it.
So a lot of times it's justhaving that delayed gratification.
It also goes into like, don't worryabout what other people are doing.
(24:11):
There's a part of you that wants to buythat new shiny thing because you saw
somebody else have it. And tome, I don't really care. Right?
Warren Buffett still drives a crappycar. He stills in the same house.
He's done 50 years and he's prettywealthy because he doesn't care what other
people think. He runs his race and helets the numbers make the decision.
So owning a business is no different.
(24:31):
Something that helps me is thinkingabout who else has this impact?
And so if you're marriedand you're husband or wife,
if you go buy this big huge thing thatyou're really excited about and then they
find out they're assuming they'recompletely removed from the business,
what are they going tosay? Oh, okay, cool man.
Does it impact your kid's college fundbecause everything you buy in your
(24:52):
business impacts your kid's collegefund. And you can ask a simple question,
should this, do I want this?
Is this enough and important enough toimpact my kid's college fund? Yes or no?
Yeah.
And it's so true because at some pointyou were going to come home and complain
about there's not enough money in thebank or business is stressing you out and
your spouse or your kids going to be like,
but you have a 2025 truck in the driveway.
(25:14):
Did you really need that orcould you just drove the 2021?
So it all comes back to becauseday, it's your business,
all the money in there you're responsiblefor, and to your point, when it flows,
whatever's left, that'sreally what we have.
And if there's not enoughfor your kids' college fund,
you're going to look atit and be like, yeah,
I probably shouldn't buy that truck.
So a lot of times it's just even justtaking 24 hours before you make that
(25:34):
decision of, do I really need this?
Is it going to help myteam generate more revenue?
Am I going to pause return on this? Alot of times the answer could be yes.
If you're renting a skid steer every weekand you're paying $500 a week to rent
that thing, it probably makes sense tobuy one because you use a lot of times.
But sometimes you use a trencheronce a year and you're like,
I think it'd just be nice to have one,so we don't have to go to HERC Rentals.
(25:56):
But it really isn't nice to haveone sitting around for 362 days
Costing you money because the moneyyou spend on that could be invested
somewhere else.
For me, in landscaping lawn care,
it's the leaf vacuum that's used likesix weeks out of the year to suck up
leaves, and I've never bought one. Wejust rent one and it's the way to go.
I love that. The last questionabout managing money and cashflow,
do you have any tips for your listenersand for your clients about how to manage
(26:20):
money in bank accounts? Do youhave multiple bank accounts?
Do you have one operating account?Can we talk about that for a minute?
Yeah, that's a great question and Iwould recommend everybody read the book.
Profit First.
Profit First by Mike Mitz is aphenomenal simple system to set
aside bank accounts to makesure your numbers are right.
And just to give you guys a backstoryof what it is is you're going to have a
(26:41):
bank account for operating expenses.
You're have a bankaccount to pay your taxes,
you're going to have a bank accountto pay. If you have sales tax,
you're going to have a sales tax account,
you're going to have a bankaccount for your personal pay,
and you can get really granular.
Some people have just ones for payrolland they put payroll money in there.
And what it does initially,when you set this up,
if you're not able to set up profit first,
(27:02):
it's immediate red flag saying something'soff with the money in your business,
and you don't have enough cash on handto actually be a healthy business.
Because what it does, andI love how you said that,
what it also does is it takes money outof your operating account and puts it
other places.
If you are that kind of person whomakes decisions on how much money is the
(27:22):
account,
there's not as much in there anymorebecause you've dispersed it already to
other accounts. So insteadof having $25,000 in there,
you might only have eight because you'resaving for taxes and saving for all
these different things. You're like,oh, we don't have the money. Now,
that isn't a great way to judgeon whether you should buy stuff,
but if you are doing it thatway, it can help mitigate your,
because you look at it and say, well,
I really only have 8,000 in here becauseI've already dispersed it to the other
(27:46):
accounts.
And you operate yourbusiness more efficiently,
which serves your teammates better,
because if you're not taking care ofyour money and being a steward of your
money, you're doing a disservice toyour team. If you run out of money,
now they got to go find another job too,
and we don't want to bein that position. So yeah,
it really just allows you torealize when you start to do it,
(28:06):
of how much money do we actually needto produce the results and the promises
that we're looking to deliver?And usually it's a lot less.
It takes time to get there, but if youhaven't read the book Profit First,
highly recommend it tojust start the process.
I think there's even an example inthe book that he talks about a tube of
toothpaste.
If that's your only tube of toothpasteand you haven't gone to the store buy
(28:26):
one, you're like you're squeezingthat thing, pulling that thing,
pushing down in that thing to get thatlast drop of toothpaste out of there.
Some people cut it open and use it,whereas if you have another one,
you're just like, nah, once it's too hard,
I'm just going to chuck itand go onto the next one.
So I think that's ananalogy he uses in the book,
and it really is a true analogybecause all of a sudden,
once we're out of money, you're like,you start looking back and like, yep,
(28:48):
that's a thousand. That's a thousand,that's a thousand. You add it up,
you're like, I didn'tmake all those decisions.
We'd probably have a couplehundred thousand extra in the bank.
Paul, this is a great conversation.I really appreciate your insights.
I'm going to boil it down tothree actionable items here.
Number one is you need to price your jobs,
which means you also need to price inall of the hidden costs of the job,
non-billable time,travel time, office time,
(29:10):
all of the stuff that goesinto producing your service.
You have to account for all that stuff.
Number two is know exactly what yourmaterials cost is. None of this like, oh,
it's about 20 yards, or it's about this.
No know exactly because all those aboutsadd up to a really big costly number.
And number three is avoidemotional purchases. We're in this for the long term.
(29:31):
We're business owners. We have to besmart. We be wise and ask yourself,
does this impact myfamily in the wrong way?
Is this going to sit around fornine months and never get used?
Rent stuff if you need to, butavoid emotional purchases. Paul,
that was great. Thanks for being here.
Thanks, Adam. Appreciate it. Enjoyed it.
How do people find out more about you?
Yeah, so if you want tolearn more, reach out.
Just go to the blue collaradvisors.com and reach out to me there.
(29:54):
Cool. I've got some notes here I'm goingto take away and implement right away.
I'm.
Business.
So thanks for being here. Perfect.Love it. And thank you for listening.
I hope that you heard something todaythat will help you improve your cashflow.
I'm your host, Adam Sylvester.You can find me@adamsylvester.com.
Your team and your clients deserveyour very best, so go give it to 'em.
A lot of times we just, well, it's justa few percentage points here and there,
but as you scale your business,5% of 3 million bucks,
it'd be nice to have 150 grand atthe extra just because you charged
accordingly.
Welcome to Jobbers,masters of Home Service,
a podcast for home servicepros by home service pros.
We're in Las Vegas and today we'retalking about the number one overlooked
issue, draining your cashflow.I'm your host, Adam Sylvester.
(00:24):
Today's guest is Paul Maskell.Paul, welcome to the studio. Thanks.
Adam. How's it going?
Great. I'm glad. Glad we're doing this.
Excited to be here. Excitedto dive into cashflow.
One of your favorite words is cashflow.
Why is.
That? Yeah, I mean,
it's the lifeblood of any businessand it's lifeblood of life.
If you don't have cash in thebank, life is really stressful.
(00:45):
You probably have a lot of debt.
You probably don't have a lot of equityand you can't sleep well at night.
So when you have a business that hasenough cash in the bank that allows you to
not only sleep well at night,
but then invest that cash to start toscale your business, to achieve the goals,
everybody had a goal whenthey started their business.
I want to do X amount of dollars.I want to travel this long.
I want to buy real estate.And they rarely achieve it,
(01:05):
and it's not because they'rebad at the service they provide.
They're actually really goodat the service they provide,
but they're bad at managing cashflow,and that's not a knock on them.
They're just, they're not built for that.
They were built to be the electricianor they were built to be the landscaper.
So when we can help them, in my opinion,
so many trades business owners are soclose to having that breakthrough of like,
wow, I'm making the money I thought Icould make when I started this thing,
(01:28):
and we just need to tweaka few little things.
Yeah, that's what well said, Tara, ouraudience, who you are, what you do,
what your background is,all that kind of stuff.
Yeah, so I've got aninteresting background, Adam.
So originally I got a finance degreefrom the University of Michigan.
Adam and I were just talking aboutthat he's got a Buckeye family,
but we won't go into sports.
But I thought I was going to climbthe corporate ladder to be honest.
So I moved to Chicago in 2007and worked for a big bank,
(01:51):
and my goal was to get to thecorner office after 40 years.
Then 2008 happened, and 2008 wasnot a good time for a lot of people.
Me personally,
I was grateful for 2008 because it mademe realize that I don't want to work for
somebody else and have my livelihoodbeing based on what somebody in the
boardroom's decisionsthey're making. Like, Hey,
we got to cut 10,000 people in order tostay afloat, go pick out 10,000 numbers.
(02:14):
So I realized real quickly that workingfor somebody else just wasn't my thing.
So since 2010,
I've scaled and sold four differentbusinesses in the Raleigh area,
most recently electrical company,
and now I'm in a position where I canleverage my finance experience with my
experience in the trades.
I've spent the last six or seven yearsin the trades to really help business
owners with cashflow. So Ioffer outsource CFO services.
(02:36):
What that means is basically helpingthem figure out what does success look
like, putting a number to it,
using numbers to make those decisionsso they have a financially healthy
business so they can sleep well at nightand really be their financial guide so
they can create thecashflow we're looking for.
That's great. Okay, awesome.So let's get into it.
What do you think is the number one driverin this conversation about cashflow?
(02:57):
Yes. I think the number one driver,
if you think of the first timemoney comes into your business,
that's where we start. If westart off on the wrong foot,
it's really hard to catch up. So wheredoes money come into the business?
It's when we sell something.When we sell something,
it's based on the price we give. Andmost of the business owners I talk to,
they actually don't have a methodical ormathematical way of figuring out their
(03:19):
pricing. They just have, well,that's what we've always charged,
or Adam down the street chargesthis, so we're a little bit less,
or Ben over here, hecharges a little bit more,
but I think he gives a little bitbetter service. So we don't really have,
most contractors are stillcharging prices of like, well,
that's all he needed to make whenI did this thing on my own. Yeah,
(03:39):
because when we.
Start out,
a lot of times we think the employerI was working for was charging clients
way too much, and I didn't like that.
So I'm going on my own andI'm going to charge half.
There is a reason thatwe're charging that much.
There is, and I think a lot of that goesdown to just being fully transparent.
So when you are operatingcompany, you start build a team,
they're inevitably goingto see that price of,
(04:00):
I can't believe we charged $3,000 forthat and I only made 300. That's insane.
But the other 2,700wasn't going to the owner.
But a lot of times we as business ownersfeel like we can't unveil what's behind
the curtain. We can't go talk tothe Wizard of Oz behind the door,
but when we start to share allthe numbers with our team to them,
(04:20):
then it starts to make a lot of sensethat they start to believe in the price
more. They're able to sell more becausethey're like, now it makes sense.
That's why we charge what we arecharging. And the guy that said,
the person I worked for was chargingway too much, I'm going to charge half.
Eventually they're like,man, now I realize why he was doing what he was doing.
It wasn't because he was greedy.The cool thing about economics,
(04:41):
especially in North America is that ifyou aren't charging a price that people
are willing to pay, you'regoing to go to business.
So there's nobody out there rippingsomebody off from a price standpoint. Now,
they might be unethically selling things,however, if the price is too high,
the market's going to determine no one'sgoing to pay that and you're going to
go out of business.
That's true. Yeah. At somepoint the market reels you in.
(05:01):
I think that a lot of times people startoff on their own and they do have less
overhead and they do haveless expenses overall,
and so they can charge a little bit less,
and in some ways that can be ahealthy way to beat your competition.
But what happens is they don't raisetheir prices over time. So they're still,
what you said earlier,
they're still charging when theycharge the first day in year three,
and they're wondering why theydon't have any money in the bank.
(05:23):
And that's totally true because they'realso pricing it usually based on how
quick will it take them to do something.
But you're the master plumber or you'vebeen doing landscaping for 30 years now
the people you're hiring haven'tnot as efficient as you are.
So they also don't take that into account.
And that's going back towhat's driving revenue.
Pricing is there's so many inputs thatgo into it that if we don't get it right,
(05:46):
it goes back to building a house.
What's the most important inthe house is the foundation.
Pricing is your foundation whenyou're building your business,
if you get that wrong, it really doesn'tmatter what you build after that.
A lot of business owners think,well, if I just keep growing,
my revenue will solve allthe problems. However,
if it's bad revenue coming in, the biggerthat gets, the bigger the bottom gets,
(06:07):
and the bottom is the problem.
So revenue's not going to solve it unlessit's the right revenue that's coming
in price.
So how do we create a firm foundationof pricing? How do we do this?
The first thing is just need to understandhow things need to be priced in order
for you to achieve thegoals you're looking to do.
And we can't call around to other peopleand be like, well, Adam charges this,
or Ben charges this, or Joe charges this,and then the big company charges this.
(06:31):
That'd be like Ruth's Chriscalling Applebee's and saying,
how much do you charge for that 12 ounceribeye? Dang, Applebee's charges 14.99.
How are we going to charge $90?There's no way we can charge $90.
We got to charge 13. But it'stwo different experiences,
even though it's the same quoteunquote thing that you're selling.
So we can't compare ourselves to others.Every business has different goals.
They're looking to hire differentpeople. The chef at Ruth's,
(06:52):
Chris is making a lot more moneythan the chef at Applebee's.
So we really got to figure out whattype of business do we want to build?
What type of people do we want to hire?
Do we want to hire people that arelooking for careers or are we just looking
for the cheapest hourly person?
So when we look at pricing and wecan kind of dive into it as we go,
but we need to figure out whatare all the inputs that go in.
So basically what is all the cost ofsales or the cost of goods sold that we
(07:15):
need to pay in order to deliver theservice that we're promising our customer.
For the home service industry, whichyou've been in for a long time,
what are some of thecommon inputs for pricing?
So I mean, the two main ones areobviously labor and material.
So a lot of times I will be working withcompanies and I look at their payroll
and there's no labor intheir cost of goods sold.
(07:36):
So just to make it super simple,
you have your revenue minus your costof goods sold equals your gross profit.
All of your labor out in the fieldshould be in cost of goods sold.
I see a lot of companies books where allof their payroll just flows into below
your gross profit. We don't know who'slabor, we don't know who's the owner,
we don't know who's the office staff.
(07:56):
So if we know exactly what we're payingfor labor and we know what our materials
are, those are the two main ones. Now,
there's a lot of otherthings that go into that.
What if we have to pull permits or whatif we have to rent equipment or what if
we have to have somemaintenance on that equipment?
All those things kind of play into that,but if you can just get labor material,
you're probably ahead of mostof the competition out there.
(08:17):
Yeah. Okay. So when we'retalking about pricing,
make sure we're priced enoughand we consider some of those inputs that you just
talked about. Obviously laboris a humongous variable,
slow people, fast people,all that kind of stuff.
Are there any other things that theyshould be looking out for aside from the
rent costs and the small little things,
(08:38):
anything else that areglaring problems for people?
I think the biggest problem, Adam,speaking of labor, is non-billable time.
So whoever's setting the pricing mightsay, well, this is a four hour job,
so if I pay so-and-so $25 anhour, my labor is a hundred bucks.
There's a lot more to thatbecause those four hours,
you're probably paying six to eighthours for, because there's drive time,
(09:00):
there's setup time, there'soffice time, there's lunchtime,
there's all these times where they'reactually not turning the wrench,
and we need to account for that and weneed to build that into our pricing.
So most companies when they actuallystart to do it and jobber contract this,
if you're using jobber properly,
it'll show you exactly how long were theyon site for the week or for the day or
per job. And then we canreally start to realize, wow,
(09:21):
I paid this guy 40 hours this weekand he was only on site for 20,
which is fairly average to build outyour pricing, we want to be conservative,
we want to assume probably half thetime out of a workday, your technicians,
your people out in the fieldaren't actually delivering service because they're
driving to get material or they're inthe shop loading up or they're unloading
at the end of the day. All thosethings we need to account for,
(09:44):
and a lot of times that'swhere we get stuck.
Okay. A question for you. I'm curiouswhat your thoughts are on this.
Let's go back to that example, thefour hour job, 25 hour dollars an hour.
Let's say you charge a hundreddollars an hour for your guys' time.
Should our listeners say, well,
that job's actually going to takeeight hours and charge eight times 100,
which is $800,
(10:05):
or should we actually increaseour charge rate to $300 an
hour for.
Just job site.
Time? You have a preference on that?
Yeah, so I think to kind of answerit in a roundabout way, first,
I would not share your labormaterial with your customer.
You don't want to go toyour customer and say, Hey,
this is a four hour job and wecharge a hundred dollars an hour,
so it's going to be around $400. Thenthey're going to start to wonder.
(10:27):
They're also then going tostart watching the clock,
and then they're going tostart watching your technician.
That guy took six breaks,he took a long lunch.
This really should have only tookit two hours. So however you do it,
what we want to present to thecustomer is just the fixed price.
The final number? Yeah, final number. Hey,
it's going to be $1,200 to doa spring cleanup for your yard.
(10:48):
How you get there, thecustomer doesn't need to know,
just like when they go spend $90 at RuthChris, they're not saying, Hey, Adam,
what's the labor material on this stake?
They're buying the entire experience andthey're buying the end result of what
they're looking for. So whenit comes to that, to me,
the key is to figure out what is youractual labor material for that job,
and then figure out what type ofgross profit you're trying to achieve.
(11:08):
And then you can do the math from there.
If you're trying to achieve a 50% grossprofit, if you're all in labor material,
all your cost of goodssold is $800. In theory,
it should be about $1,600 for that job.
If you're aiming for a50% gross profit margin.
It's 50% pretty healthy.
My end goal with my clients is 60%.However, I see a lot of people under 50.
(11:28):
So our first kind of babystep is let's get it to 50.
And mainly just from a mindset of showingthe owner that it's okay to charge
more and then it starts towork and they're like, man,
it's actually working and peopleare willing to pay the price.
And then we just kind of stairstep up. End goal, in my opinion,
is 60% for most things.Now, if it's a more,
do you want to call it a commodity likecutting grass where the 10-year-old down
(11:49):
the street can also cut grass? Yes,50% is probably more realistic,
but if you have lawn and landscaping,
landscaping should be higher because the10-year-old is not going to be digging
out beds and they're not going to bethrowing stone around and moving boulders
and they don't know how to plantplants and all that kind of stuff.
So depending on how much ofa commodity your service is,
(12:10):
I would say 50% is definitelybare minimum. Ideal goal,
if we don't get there and we get to 48%,
it's still probably betterthan most of the companies.
Out there. If you're aiming for60%, that means that your expenses,
your labor and materials are 40% total.
That means your labor is about 25and then your expenses and your labor
materials are about 15. To me,that's a very healthy gross profit.
(12:31):
It is, and that's really kind of the goal.
I work with a lot of clientson building in performance pay.
So performance pay is justpaying your technicians,
your people out in the field,
incentivizing them to get it done inthe time that you estimated this job,
you get done. We see it every day.Listeners see it every day. You say, Hey,
this is a four day job, and theguys look at it and be like,
(12:52):
I think we can milk this till Friday.And we'll just tell boss, man, Hey,
we need a little bit more time.We need a little bit more time.
And then magically at threeo'clock on Friday, it's done.
They put in their 40 hoursand they're out of there.
So a lot of times when we'relooking to build in performance pay,
kind of that all in laborideally is around that 25%. Mark.
Paul,
I'm going to pause our conversationfor just a moment to talk about jobber.
(13:12):
Why do you think it's important for ourlisteners who may just be using pen and
paper and still haven't madethe jump to a full software,
why is it important for themto use a software like Jobber?
Yeah, I mean,
it's really hard to make decisions basedon numbers if we don't have numbers and
Jobber tracks all of that for you,exactly how long they're on every job,
exactly how long that job took,so we know even for the future,
(13:34):
how should we start pricingthis thing going forward.
And then from a financial standpointwith the way Jobber integrates,
not only with QuickBooks but a lot ofother things, we can take that data,
we can take the revenue and we can reallyget a good idea of what's going on in
the business versus pen and paper oreven just Google Sheets and Google Docs.
Those things never get updated, nevergets used, it gets thrown in the corner,
(13:54):
and then we're operating backto what we harp on all the time,
which we're making decisions basedon emotion ego instead of numbers,
because we don't have that one hubthat's taking care of it for us.
I totally agree. If our listenersare still using pen and paper,
they need to make thejump today. If that's you,
then you need to start using jobbertoday. Go to jobber.com/podcast deal,
get an exclusive discount for new usersand get all your metrics into one place
(14:16):
and start making data drivendecisions today with Jobber.
What else do we need to do tomake sure our pricing is spot on.
What we talked about? One is thatthe non-billable time is huge.
Another thing to think about in labor,
which a lot of times we ignore is allof the other burdens when it comes to
hiring employees. So yourpayroll tax, your workers' comp,
if you're offering paid timeoff, if you're offering a 401k,
(14:39):
all that is compensation to your employee.
That is stuff that we're paying todeliver the service we're talking to.
So when it comes to, a lotof times we just, well,
it's just a few percentagepoints here and there,
but as you scale your business,5% of 3 million bucks,
it'd be nice to have 150 grand atthe extra just because you charged
accordingly.
And the burden cost can be fiveto 8% depending on where you live.
(15:03):
And suddenly that brings you from a 60%gross profit to 55 just like that. Bam.
It's like, oh, I wasn't counting on that,
but it's there and we haveto count that kind of stuff.
And I would say kind of on that note,
when even just looking at materials aswe're looking at what inputs go into
cost, a good sold is a lot oftimes the owner's like, I dunno,
that's around 20 bucks. Is it around20 bucks or is it 20 bucks? Right.
(15:25):
And I see a lot of companies wherethey're just kind of spitballing all these
prices out there, whereas you shouldgo to your vendors and be like,
can I get an exact price of everythingthat we buy from you on a regular basis?
And then also when you're quotingwhoever's doing it, it's not like,
I think it's about seven yards.If we're putting down multiple,
is it about seven or is it seven?
Because.
If we're off by one yard, everyjob that's going to add up.
(15:47):
So knowing your material thing.
And then I would say oneother thing that's kind of a caveat that I see a lot of
business owners in states where youhave to charge sales tax on everything.
So if you go out and sell a job and youhave to charge sales tax on everything,
make sure you're not paying sales tax onthe material you are buying because now
you're essentially paying sales tax twice.
(16:08):
So if you're charging salestax on the end product,
say you're a landscape company in astate that has to charge sales tax on all
the plant material thatyou're putting in the ground,
if you're charging sales tax on that,
you should not be payingsales tax when you buy it.
And a lot of times businesses, I don'thave time to deal with that, whatever,
I'll pay the extra 7% on the material.
It's really simple and it's totally legalbecause otherwise the state is making
(16:32):
sales tax twice on one product,which they'll gladly take it,
but they're not entitled to it.
One thing that you said when you startedoff the show was cashflow is obviously
king and we have to makesure we guard our cashflow.
And the number one thing that goesinto cashflow is the number at the top
revenue, which is price.
And so if we're not supposed tocompare our prices to our competitors,
(16:56):
that's just a race to the bottom andwe need to make sure that we are not
being lazy with like, oh, it's aboutthis, it's about that, it's about that,
it's about that. None of that.
What are some other things that companiesthat you've seen companies do that are
just like, we need to change this day one?
Yeah,
I think it's what are you paying yourpeople from a compensation standpoint,
(17:16):
and do they have any incentives to achievethat? So I talk to people every day.
It's like, well,
what do you pay your technicians 80grand a year and do they have any
incentives? Is there anythingholding them accountable?
A lot of times we just kind of pullnumbers out of there. It's like, I dunno,
they've been here a long time.They always ask for a raise.
We're just going to keep giving it to'em. But we need to be able to one,
factor that into our pricing, but two,
we need to hold them accountable andthey need to know what the standards are
(17:39):
for that. So if you're goingto make 80 grand a year,
you need to know exactlywhat the expectations are.
In order to continue to earn80 grand at our company,
you need to be able to dothis, that, and the other.
You need to be able to close at this rate.
Your average ticket needs to be ablethis or your productivity needs to be,
this quality needs to be quality. Nocallbacks. You're getting Google reviews,
people mentioning your name.
(17:59):
So a lot of times we just kind of comeup with what we're going to pay our
people, but there's no accountabilityin it. And there really is like, well,
what do I need to do to make more money?It's like, well, I don't really know.
Whereas if you look at anywhere else,especially sports, it's like, well,
how do I make more money? Well,you get better at what you do.
You get more productive, you generatemore revenue, you fail less and less.
All those things. We need to build thataccountability into our team as well.
(18:23):
So that way when you also bringin somebody, they're like, well,
I'm only making $15 an hour.How do I get to $30 an hour?
If you have that all mappedout, you have job descriptions,
you have report cards or scorecards,
you have everything in place andyou have the training in place,
then you can tell that person, Hey, Joe,
we're going to bring you in$15 an hour as an apprentice,
but here's the path you can takeand you can build a career here.
(18:44):
You can go all the wayup to general manager.
The next step is to not be an apprentice,
to be an assistant technician or whatever.So when we have all that in place,
it becomes a lot less stressful becausenow you let your team dictate where
they're going to go instead ofthem always asking for raises.
Yeah, well said. Okay,so talk about cashflow.
I want to flip around a little bit andtalk about expenses because expenses have
(19:06):
a huge impact on cashflow because youcan just spend all your money in one day
if you really wanted to.
What are some mistakes that companiesmake that you see around buying stuff?
People like to buy stuff and people inthe trades to buy shiny new things They
do. Yeah, a lot of times like, man,did you see that new skid steer? Like,
oh man, did you see that new Durangogot to have all these things,
(19:27):
got to have that big newwhite contractor's truck.
So what I look at beinga financial person,
is that thing generating income?
Is there a return on that investmentor is it a cost? If it's a cost,
we should probably get rid of it.
Every dollar you spend out of your companyshould be generating something. Now,
(19:48):
one of the things that frustrates methe most is nobody likes paying taxes.
I don't like paying taxes. I'm sureAdam doesn't love paying taxes. However,
that's part of life. I talk to alot of people, I'm like, well, yeah,
I just bought a whole bunch of new stuff,
then I can write it off and Idon't have to pay taxes. But okay,
so you paid less taxes thisyear. Now come January 1st,
(20:09):
all of a sudden you're left with allthis brand new shiny stuff that's just
sitting around,
or you're just driving it to thegrocery store or whatever it is.
And you're way less cash.
And you have way less cash, and you'vegot an eight year payment on that at 12%.
So instead of giving thegovernment $20,000 for your taxes,
you're going to spend a hundred thousanddollars plus interest on this vehicle
that you didn't need at all, butyou didn't want to pay taxes.
(20:32):
It's not a good plan.
Not a good plan.
And at the end of day it comesback to what are the goals? Well,
I want to have a businessthat I can sell one day,
or I want to have a businessthat can run without me.
Those are usually the two mainthings I talk to people about.
I want to get out of the dayto day and I want to sell it,
or I want to get out of the day today and just run it from the beach or
whatever it might be.
The only way to do that is to have abusiness that produces consistent positive
(20:55):
cashflow that's making a profitthat's running like a machine.
And it's hard to run a machine whenyou're making bad financial decisions.
Just you're spending a hundred grand tosave 20 grand. I don't know about you,
but I don't like to put a hundredthousand dollars in machin and get 20 out.
That's a recipe to run outof money pretty quickly.
Paul, one of my biggest annoyancesin running a business is those,
(21:16):
because we pay payroll every two weeks.
And so there's like two months everyyear that has three payrolls. And man,
do I hate, my God, my technicians loveit. They get paid three times a month,
but I just hate it. Any tipson how to, not just payroll,
but how do you accommodate bigsurges and expenses this month
(21:36):
and then a couple months later you haveanother big surge? Any tips on how to.
Plan for.
That?
Here's the cool thing. The calendaris out from now until the end of time.
So when it's coming, but it's alwaysthe surprise. You're like, oh man,
it's July and we got three payrolls.Oh, I didn't think about that.
But we knew about that when westarted our business 10 years ago.
We knew July is going to havethree payrolls in whatever, 2025.
(21:59):
So the key is to actually forecast.
So a lot of people will create abudget on December 31st or January 1st.
This is what we want to do thisyear, and then come January 5th,
they forgot about that budget.They're out fighting fires.
But when you actually havea forecast and projection,
we know that's comingso we can plan ahead.
And that's a lot of the things that I dowith my clients is doing that cashflow
forecasting projections.
(22:20):
We know twice a year payroll isgoing to be higher in that month.
We've got a plan for it. Also,
if you're doing performance pay alittle bit with performance pay,
it kind of equals it out because thosepeople are still producing where a lot of
times we get stuck is, well,the revenue's not any better,
But we're paying for threepayrolls twice a year,
or even people that are weekly.
(22:41):
There's going to be however many fourmonths every year where we're paying an
extra fifth payroll orwhatever it might be.
So that's the way to do is youactually have to plan, right?
We have to plan for this, wehave to strategize for it,
and we have to put money aside forit. Whereas most business owners,
they're running their businesson a day-to-day basis of how much money's in the
bank, can I buy this thing? I thinkso. I think we can buy it today,
(23:05):
not thinking, oh man, nextmonth we've got three payrolls.
Yeah,
and next month we have to pay our entireyears of insurance next month or in the
beginning of the season, we have to buyall this material for the whole year,
mulch and plants and all that. So thisgoes into my next question for you,
which is emotion. So much of cashflowis baseline around our emotion.
That's something you justsaid a second ago is,
is there enough money inthe bank technically yes.
(23:27):
Then let's go ahead and buy it.And that's an emotional purchase.
How do you go about coachingyour clients to say,
let's not make emotional purchases,
let's make purchases that we need to makethat are important and let's plan for
them, and how do you do that?
Yeah, I mean,
you really have to remove yourego and remove your feelings
from this business and look at it justas it's a machine that produces money,
(23:50):
and what's the best way to make thatdecision is letting the numbers dictate
and having kind of delayed gratification.
A lot of times we want things nowand we're not willing to wait,
and then when that timecomes, we'll be like, man,
I should have just waited sixmonths. Six months goes by so fast,
could have waited for it.
So a lot of times it's justhaving that delayed gratification.
It also goes into like, don't worryabout what other people are doing.
(24:11):
There's a part of you that wants to buythat new shiny thing because you saw
somebody else have it. And tome, I don't really care. Right?
Warren Buffett still drives a crappycar. He stills in the same house.
He's done 50 years and he's prettywealthy because he doesn't care what other
people think. He runs his race and helets the numbers make the decision.
So owning a business is no different.
(24:31):
Something that helps me is thinkingabout who else has this impact?
And so if you're marriedand you're husband or wife,
if you go buy this big huge thing thatyou're really excited about and then they
find out they're assuming they'recompletely removed from the business,
what are they going tosay? Oh, okay, cool man.
Does it impact your kid's college fundbecause everything you buy in your
(24:52):
business impacts your kid's collegefund. And you can ask a simple question,
should this, do I want this?
Is this enough and important enough toimpact my kid's college fund? Yes or no?
Yeah.
And it's so true because at some pointyou were going to come home and complain
about there's not enough money in thebank or business is stressing you out and
your spouse or your kids going to be like,
but you have a 2025 truck in the driveway.
(25:14):
Did you really need that orcould you just drove the 2021?
So it all comes back to becauseday, it's your business,
all the money in there you're responsiblefor, and to your point, when it flows,
whatever's left, that'sreally what we have.
And if there's not enoughfor your kids' college fund,
you're going to look atit and be like, yeah,
I probably shouldn't buy that truck.
So a lot of times it's just even justtaking 24 hours before you make that
(25:34):
decision of, do I really need this?
Is it going to help myteam generate more revenue?
Am I going to pause return on this? Alot of times the answer could be yes.
If you're renting a skid steer every weekand you're paying $500 a week to rent
that thing, it probably makes sense tobuy one because you use a lot of times.
But sometimes you use a trencheronce a year and you're like,
I think it'd just be nice to have one,so we don't have to go to HERC Rentals.
(25:56):
But it really isn't nice to haveone sitting around for 362 days
Costing you money because the moneyyou spend on that could be invested
somewhere else.
For me, in landscaping lawn care,
it's the leaf vacuum that's used likesix weeks out of the year to suck up
leaves, and I've never bought one. Wejust rent one and it's the way to go.
I love that. The last questionabout managing money and cashflow,
do you have any tips for your listenersand for your clients about how to manage
(26:20):
money in bank accounts? Do youhave multiple bank accounts?
Do you have one operating account?Can we talk about that for a minute?
Yeah, that's a great question and Iwould recommend everybody read the book.
Profit First.
Profit First by Mike Mitz is aphenomenal simple system to set
aside bank accounts to makesure your numbers are right.
And just to give you guys a backstoryof what it is is you're going to have a
(26:41):
bank account for operating expenses.
You're have a bankaccount to pay your taxes,
you're going to have a bank accountto pay. If you have sales tax,
you're going to have a sales tax account,
you're going to have a bankaccount for your personal pay,
and you can get really granular.
Some people have just ones for payrolland they put payroll money in there.
And what it does initially,when you set this up,
if you're not able to set up profit first,
(27:02):
it's immediate red flag saying something'soff with the money in your business,
and you don't have enough cash on handto actually be a healthy business.
Because what it does, andI love how you said that,
what it also does is it takes money outof your operating account and puts it
other places.
If you are that kind of person whomakes decisions on how much money is the
(27:22):
account,
there's not as much in there anymorebecause you've dispersed it already to
other accounts. So insteadof having $25,000 in there,
you might only have eight because you'resaving for taxes and saving for all
these different things. You're like,oh, we don't have the money. Now,
that isn't a great way to judgeon whether you should buy stuff,
but if you are doing it thatway, it can help mitigate your,
because you look at it and say, well,
I really only have 8,000 in here becauseI've already dispersed it to the other
(27:46):
accounts.
And you operate yourbusiness more efficiently,
which serves your teammates better,
because if you're not taking care ofyour money and being a steward of your
money, you're doing a disservice toyour team. If you run out of money,
now they got to go find another job too,
and we don't want to bein that position. So yeah,
it really just allows you torealize when you start to do it,
(28:06):
of how much money do we actually needto produce the results and the promises
that we're looking to deliver?And usually it's a lot less.
It takes time to get there, but if youhaven't read the book Profit First,
highly recommend it tojust start the process.
I think there's even an example inthe book that he talks about a tube of
toothpaste.
If that's your only tube of toothpasteand you haven't gone to the store buy
(28:26):
one, you're like you're squeezingthat thing, pulling that thing,
pushing down in that thing to get thatlast drop of toothpaste out of there.
Some people cut it open and use it,whereas if you have another one,
you're just like, nah, once it's too hard,
I'm just going to chuck itand go onto the next one.
So I think that's ananalogy he uses in the book,
and it really is a true analogybecause all of a sudden,
once we're out of money, you're like,you start looking back and like, yep,
(28:48):
that's a thousand. That's a thousand,that's a thousand. You add it up,
you're like, I didn'tmake all those decisions.
We'd probably have a couplehundred thousand extra in the bank.
Paul, this is a great conversation.I really appreciate your insights.
I'm going to boil it down tothree actionable items here.
Number one is you need to price your jobs,
which means you also need to price inall of the hidden costs of the job,
non-billable time,travel time, office time,
(29:10):
all of the stuff that goesinto producing your service.
You have to account for all that stuff.
Number two is know exactly what yourmaterials cost is. None of this like, oh,
it's about 20 yards, or it's about this.
No know exactly because all those aboutsadd up to a really big costly number.
And number three is avoidemotional purchases. We're in this for the long term.
(29:31):
We're business owners. We have to besmart. We be wise and ask yourself,
does this impact myfamily in the wrong way?
Is this going to sit around fornine months and never get used?
Rent stuff if you need to, butavoid emotional purchases. Paul,
that was great. Thanks for being here.
Thanks, Adam. Appreciate it. Enjoyed it.
How do people find out more about you?
Yeah, so if you want tolearn more, reach out.
Just go to the blue collaradvisors.com and reach out to me there.
(29:54):
Cool. I've got some notes here I'm goingto take away and implement right away.
I'm.
Business.
So thanks for being here. Perfect.Love it. And thank you for listening.
I hope that you heard something todaythat will help you improve your cashflow.
I'm your host, Adam Sylvester.You can find me@adamsylvester.com.
Your team and your clients deserveyour very best, so go give it to 'em.
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