Profit Isn't Enough, The Cash Flow Truth No One Talks About Ep. #478

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.