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You can be profitable and still go out of business. In this episode, John breaks down the three pillars every business must master: true operational costs, customer acquisition cost, and cash flow. Learn why timing of money matters just as much as profitability.
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You could have your pricing dialed in, you could have great marketing, and you could
still go out of business.
Why?
Because profit doesn't keep you alive, cash flow does.
Today, we're going to break down the three pillars that actually determine whether your
business survives, and those are true operating cost, your customer acquisition cost, and
the one that kills more businesses than anything else, cash flow.
Today's episode is brought to you by Yard Book, the all-in-one CRM for your long-care
business.
And as an exclusive partner of this podcast, you can get started today and begin simplifying
your business and maximizing your profits.
Sign up now at YardBook.com.
The link is in the show notes.
Time now for Profits with Pageak, any central podcast for you in the green industry who are
looking to unlock the full potential of your business.
Posted by John Pageak, your sort of mind financial coach, the show features in-depth discussions
with successful entrepreneurs, thought leaders, and industry experts providing practical
advice and proven strategies on financial planning, operations, marketing, and sales.
Profits with Pageak has valuable insights and action steps that you can implement today
for creating long-term success.
Now, here's John Pageak.
Welcome to Profits with Pageak, the podcast where we talk business strategies and financial
insights for the green industry.
I'm your host, John Pageak, and today we're going to be talking about something that
separates businesses that look successful from the ones that actually survive.
Because I've seen it too many times.
Guys are doing big numbers, they're running full routes, and they're broke.
Or worse, they might be going under.
So here's the trap.
Most business owners focus on how much did I sell or how busy am I?
But they ignore what it actually costs to run the business.
They ignore what it costs to get customers, and whether the money is even there when
the bills are due.
You could get the first two right, but if your timing is off, you're done.
So the first pillar is true operational costs.
This is your foundation.
It's not guessing, it's not ballpark numbers.
It's the real cost to operate your business.
And I mean, we're talking about fully burden labor, your fuel, your equipment payments and
repairs, insurance, software taxes, and owner pay, and you know, all the things it takes
for you to keep the doors open on your business.
And here's where people mess this up, they calculate the expenses, but they don't calculate
the cost per hour or cost per stop.
So they end up pricing work that covers some of the expenses, they ignore others.
And a lot of times they just leave nothing for profit.
And here's the reality check.
If you don't know your true operational costs, you're not pricing, you're gambling.
And once you know what it costs to run your business, now we ask the question, what
is it cost to grow it?
And this is when we come into pillar 2, the customer acquisition cost, CAC, the CAC, okay?
This is what it costs to make the phone ring.
And in this category, in this pillar, everything counts, your Facebook ads, your Google ads,
your mailers, your yard signs, your door hangers, website costs, and even your time.
So let's say it costs you $120 to get a new customer.
Well, let's find if the customer's worth much more than that.
Let's just say $800 to say $1,500 over time, maybe in a season, right?
But if they only buy one service and it's say $110 for the service, you just paid to work.
So you have to have a good balance of, you have to understand and record what your CAC is.
And CAC isn't bad, you know, it's just when you don't, when you don't track it,
because when you don't track it, you overspend on bad marketing.
You under invest in good marketing, and you really can't scale unless you understand how much
it costs to get a new client in the door. So let me hit this real quick.
This is exactly why knowing your numbers matters.
And you might be thinking, man, that's a lot of tracking.
And yeah, it is. But this is how real businesses are built.
And again, you know, budgets are not there to restrict you.
They give you permission to spend the right way.
And when you know your break even and you know your CAC, your CAC,
you can spend aggressively without fear.
And if you want to help building that system, check out budget's break evens of bottom lines
at johnpagiac.com. Now, here's where most businesses die, even if they get the first two pillars
right. And it's pillar three, the cash flow. That's the lifeline of your business.
This is the oxygen of your business. It's not profit. It's not revenue. It's cash flow.
And the reason I say this is because you could be profitable on paper and still go bankrupt.
And why? It's because of timing. You know, let's just say, you know, you land a big job.
You know, you spend 5,000 on materials and labor. And you didn't get a, you don't get paid for
30 days. You know, meanwhile, your payrolls do Friday. The fuel is due today. You know,
the trucks need fuel. Insurance is due next week. Now, on paper, you know, you're profitable
because these jobs are going to pay for all that. But you're actually broke. You don't act,
you don't have the money because your bills don't coincide with the cash flow that's coming
into your business. And the hard truth is, you know, cash flow problems don't show up on your
PNL right away. They show up when you can't make payroll when you start floating expenses on
credit cards. And essentially, you're kind of robbing Peter to pay Paul. And even healthy businesses
can collapse if the, you know, if cash in doesn't match the cash out. And I want to share a little
bit about my personal experience with this. You know, when I started to focus on cash flow,
it changed how I ran everything. You know, my first business was, even before my business,
when I was working for another company, my boss was experiencing the same things. We had dozens
of clients that were, you know, 30, 60 days, 90 days past due. And we're, for some reason,
we're still servicing their property. But, you know, I looked at that and when I started my second
business and looked back at it, I said, I'm not going to deal with this. You know, I started doing
prepay only, which essentially was like a deposit upfront. You know, they were still getting
billed monthly, but they were paying at the front end instead of the back end. You know, when we
were doing some project work, you know, we had tighter payment terms. And when I mean by that is,
you know, we would collect a deposit and then we would have, you know, 20% due at,
you know, one certain point in the job about halfway through to collect another 20%
and so on and so forth until the very end where we would have it to where basically we would just
have 10% was due. And when we did that, it's like all the, you know, everything was basically paid for
and, you know, that last payment was part of our profits. You know, I made sure by, you know,
if we split it into five payments that are fourth payment included, you know, part of our profits
and the fifth one was pure profit. So that way, in case we did get burned, at least all the
foundational things were paid for. Of course, we want to make sure we gather 100% of the profits,
but at the same time, you know, when we were doing project work like landscape installs and
things like that, then we would get paid and we could guarantee it. Back when I was getting my
long-care business off the ground, I was juggling routes, invoices and customer notes with paper
and prayers. It was chaos until I found yard book. Yard book gave me the structure. It helped me
track chemicals route efficiently, invoice faster and most importantly, it helped me grow a
profitable business. If you're tired of duct taping your systems together, go to yardbook.com
and sign up for free. And if you're ready to go premium, use promo code paycheck to get your
first 30 days on me. Then we, you know, kind of moved into recurring billing models and, you know,
when we started to change a little bit, we started to realize, you know, the prepaying was okay,
but if we would actually charge a card on file at the time service was completed, man, that
did wonders for our cash flow. And I'll tell you what, it wasn't, at that point, we were not in survival
mode. We were in thrive mode. And I'll tell you what, you know, survival is not about how much you
make. It's about how much you get paid. And if we were getting paid, you know, actual money,
we're charging it out and within two to three days, we're getting the payment actually coming into
our bank account. That is lovely. I'll tell you, I'm never going back, you know, especially with
the fertilization, we control services that we offer. We did this with mowing, we did this with
fertilization, we control, there's other services that we, we offered like that. Getting that
money in as quickly as we were doing the work made it, made all the difference. And I know some
of you are still building on a monthly basis. And I'm not trying to tell you you have to do this,
okay. But I'm just sharing my personal experiences. You know, we never have to worry about payroll
anymore. All our operational expenses are paid because we have literally, you know, out of the
four days that we work Monday through Thursday, we basically have money flowing in every single day.
And it's great. So here's the thing. I kind of want you to take a look to dial in your true costs,
you know, know your real cost per hour and per service because, you know, if you're doing several
different services, your mowing costs per hour are going to be different than your fertilization
we control per hour, as well as like aeration and an overseeding. You know, every single service
that you have is probably going to have a separate hourly rate. And a lot of guys just, you know,
they, they, they just say, Oh, you know what? I'm just going to say across the board, we need this
much an hour. But there are some services that are just going to be more profitable. They may be
in a higher demand. And people are willing to pay more for them. So I think it's a better idea
to look at each of the service offerings that you have and consider them their own division because
I guarantee you a lot of them, they may use some of the same equipment and everything, but
they're different. So why charge the same for everything? Charge out differently. Track your,
your CAC, your CAC, every dollar that you spend to acquire a customer because, you know, we talk
about what our true operational costs are and we track every single thing that goes in there.
When you're in your marketing phase, make sure you're tracking how much, how many dollars you're
spending on the marketing. And then let's just say it's a new potential client. They reach out to
you and you're talking to them, you say, how did you find us today? And they say, well, we've got
postcards and we've got, you know, we saw you on Google, you know, Google business page,
you know, website, whatever, MIP. But the thing is, it's like, it takes more than just one time
for somebody to see you. A lot of times they need a ton of touches. A lot of different marketing ads
have to hit them before they're interested. Some people, maybe they just go on Google and check
the first person that they call the first one on the box. But, you know, a lot of times,
you know, it takes more than just that to acquire a customer. And then I also want you to take a
look at your cash flow, control your cash flow. You can, don't be a naysayer. You can do this. I
know because I have done it myself. You know, 25 years ago, 30 years ago, whatever it was when I
worked for another company, I watched as my boss would literally turn me into a collector instead
of a, you know, mowing tech, you know, I would literally have to take time out of my day,
which he was paying me for, to go knock on doors and try to get payment from these people that were
there. He would go out, you know, he had another job. He was, you know, he was not just, you know,
this was a part-time thing for him. And he would literally set it up to where, you know, he,
honestly, back then, you know, knowing what we know now, he was almost designed for failure,
because people could get away with months of not paying him. And all the while, he's still
putting the bill for all the daily expenses that he incurred. So you can take control of your cash flow.
You can shorten your payment cycles instead of every month. I mean, you could do it on a weekly
basis or a daily basis like we do because our services are based, you know, we might see a customer
once a month. So why wait a whole month to get paid? We just charge out immediately. And even when
we were doing mowing, you know, we were charging every single week, every day for our mowing clients.
And you might say, well, oh, you know, instead of making four payments a month, you know,
it's more convenient for them to make one payment. Well, the thing is, we didn't even, we just
put it on autopilot. We would gather a card on file and charge it as everything was done.
Oh, well, I can't do that. You're giving yourself self-limiting beliefs, okay? When you talk
like that, you're, you don't believe it. So you're going to make it true. I took the chance. I
went out. We had a lot of clients and we had very little kickback on that when we started to
grandfather people in. There were certain clients that we had on our, our list that already said,
you know, what I still prefer to do the prepay. I like it better that way. And we said no problem.
But all of our new clients, they had to have a card on file. And that vetted a lot of people out.
I would tell you, anybody that was kind of a problem or potential problem, it would weed them out.
They're like, oh, I'm not going to do that. Okay, no problem. Have a good day.
And they're like, well, wait, wait, wait. What's, I'm like, no, that's how we do it. We decided we
did not want to have to chase money anymore. We decided that this is what is going to be best for
our business and for our clientele. Because if we get paid on time, we're going to be showing up
and doing the service with a smile. No more chasing money, okay? You know, if you're not in maintenance
and you're definitely, you know, let's say you do project work, make sure you're getting those
deposits. Make sure that if it's a multi-tiered, you know, payment system that, you know, say you do
a $30 percent deposit, 20 percent is due when materials are delivered, you know, halfway point,
you get another 20 percent, another 20 percent, you know, at another pre-determined time.
And then the final payment when you're doing your walkthroughs and making sure everybody's happy,
you know, that's when the final 10 percent is due. That method works pretty well. I mean,
you could even shorten it to a four step towards I would do like a 30, 20, you know, 25, 25,
but regardless, you know, you determine how you're going to get paid. And wouldn't you do this,
you're just basically aligning your income with your expenses so that no matter what,
you're not waiting like a 30 or 60-day period of time to get paid. You're getting paid on a
regular basis. It's going to match up with the bills that you have. Make sure that you never,
you know, are scrambling to pay payroll or pay the phone bill or whatever else fits in there.
So here's the truth. You don't have a business until you control what it costs to operate,
what it costs to grow, and how much cash moves through your company. So a little challenge for you,
you know, I like giving you some challenges is look at your next 30 days. Will you have enough cash
on hand to cover everything coming out? And if that question makes you uncomfortable,
that's exactly where you need to start. So I want to thank you for listening today. I hope you
had a great time. I enjoyed talking about these things because I'm weirdo and I'm a nerd. But
it's helped build my successful business and I've helped many others grow and develop their
businesses. So as always, I want to say God bless. Keep pushing through and we'll catch you on
the next one. Thank you once again for listening. If you've enjoyed the show, please leave a review
and share it with fellow business owners. Your support means the world to me and helps keep the
show going strong. I want to give a special shout out to our friends at Yardbook. Their continued
support has been instrumental in bringing this podcast to you week after week. If you haven't
checked them out yet, visit Yardbook.com and see how they can give you the tools to streamline and
manage your long care business. Also, don't forget to explore the resources and upcoming events that
I've collected just for you in the show notes. These are curated to help you stay ahead in your
business with the latest tips, tools, and networking opportunities. Whether it's a new tool,
an insightful article or an event you don't want to miss, I've got you covered. Until next time,
keep pushing through and God bless.
