Dein Cashflow Problem ist ein Erwartungsproblem

0:00My name's Steven. I sell remodeling services to commercial property owners and tenants. We do about $2 million a year. We'll do $2 million this year. And I'd like to do $100 million by 2025. I'm stopped >> 2025? $100 million. >> From two from two? Okay. I mean, hey, no, it's all good. It's all good. It's all good. >> the end of 2025, at the by the end of 2025. I'm stopped by the lack of capital. So, I currently take residential remodels to fund commercial contracts due to net 90 waiting terms. Okay.

0:30>> And slowed drastically due to extremely high interest rates on loan shark short-term lending and high overhead costs. >> Okay. And so, the thing that's stopping you is cash flow? Yeah. Okay. Okay. Um man, the thing that threw me was the $100 million thing. Um >> [laughter] >> Just and I I I want to be I want to be clear like I'm all for it for for thinking big. The it's it's it's real I don't know of a single business in your space that's going from two to 100 in 13 months.

1:00Uh and so, the the reason I bring this up is because sometimes you can shoot yourself in the foot for a decade because you're trying to go from two to 100 in 12 months. And every strategy that you try and go from two to 100 fails because you want to do it in 12 months. But if you did it in 10 years, you'd for sure hit it. Does that make sense? >> Got it. So, it's a >> So, just as a just as a as a as a frame shift. Um in terms of the cash flow, so you have these you have these commercial remodels. So, that's like a building like this, correct? Or is Correct.

1:26>> Okay. So, you do you you remodel these these types of buildings, but then you do residential because cash flow is faster. Yeah, correct. >> For those pieces. Okay. So, um And I'm guessing you said that you've maxed out your lending. Well, lending isn't exactly available to me and the lending that is is extremely high interest rates, like >> Yeah. Yeah. Um So, it sounds So, the the biggest thing with this type of business is like you can solve it with payment terms.

1:58And so, this is where like the sale has two components to it and everybody who's had a sales team before knows what I'm talking about, which is like it's one thing to close the sale. It's another thing to actually [ __ ] collect the money. Right? Like they said yes. It's like Oh, so you have the car and they ran it like Oh, no, he'll be back with the car, but he said yes. And you're like All right. Like let me explain how sales work. Uh and so, I think that I actually had to fix this with a I referenced this to a guard services business. And so, it's like industry average in that business, for example, to um to pay like net 30. So, the guard does his work and then they remit payment, right? And so, basically what I'd recommended for them was to say, "Hey, we just bill quarterly up front." So, we bill and then you get three months of service and then we bill. So, they're always three months ahead of cash flow requirements. Now, I can understand that there's industry industry standards and norms, but part of that is why you want to be better.

2:51So, that like if I'm looking at two contractors and one has, you know, slightly different payment terms, but I really want to be with that guy more, then I'm going to go with that guy. And if you think that you're a commoditized service, then I think you're missing the boat, right? Like you want to show how you're not the same as everyone else. And so, I actually think this is a sales issue when it comes to payment terms more than everything else. And so, you can obviously solve this thing with like AR lending and things like that, but it's probably a payment terms and sales thing, which is like what would it take?

3:20And sometimes I ask that question in the sale. What would it take for for you to put that, you know, half down? So, I've I've only been in business for about a year and a half. >> Okay. >> Um so, most of these super large clients are I'm foot in the door. So, whenever I walk into a place like Amazon and they say that they're going to give me a job to, you know, remodel a warehouse, um I I don't know I don't know how to tell them that they need to pay me not on their terms, but on mine. >> Yeah.

3:45Well, I mean, if you go if you go hunt whales, then you will be on like you'll be you'll be catering to to their terms, right? Um But again, I actually think what I said at the very beginning was the main thing. You are cash flow constrained because of the arbitrary expectation of growth that you're putting on yourself. That's So, like basically, do you actually have a problem or do you have a problem based on the time limit that you've created for yourself?

4:10Does that make sense? Mhm. So, basically, the business is growing. You've been doing this for like whatever a little bit more than a year, right? So, going from zero to that in in 12 or 14, whatever it was, months is a is a big W, man. Um and I think that like you just keep doing that, you'll be just fine. It's just that like you need to let some of that gross profit that you've booked out that's in AR fall through. And I think like if the business model fundamentally works in terms of profitability, so I'm not I can't have time to dive into that, but in terms of looking at the gross margins, which hopefully you have done, if the margins work, then it's just like cash flow comes to timing. And as long as you're not like worried about losing losing your ass, cash flow constrained businesses, the only limit to those businesses it is the rate of growth provided the gross margins have been set up properly.

5:00And so, that's why I said originally, I do actually think the biggest problem is the expectation thing. Because if I said you can get to $100 million in 10 years, would you want to do it? Sure. Yeah, then I think you'll be fine, dude. Like you went from zero to $2 million. You got to let some of that money flow through and then you'll be like, all right, well, if I grow at I mean, just look This is The nice thing is that this is an Excel sheet problem. And so, it's not a real problem. Like you can solve for what like I told that story yesterday about cash flow projections. You can just solve for how much cash flow do I have? How much does it take me to get a new customer? What's the average value per customer? Okay, how much can I expect out to grow? If I grow at 30%, I'm going to go negative on cash flow. If I grow at 10, I'm upset at myself cuz my father never was happy that I did a good job. And so, at 20% though, I make money and my father doesn't talk to me. And so, that's probably a nice sweet spot.

5:43>> [laughter] >> Does that make sense? Thank you very much. >> Yeah. If you are a business owner and you are not growing as fast as you'd like, I'd like to give you a free gift. So, my team and I put together the $100 million scaling road map, which is basically 200 hours of us looking over all the portfolio companies we've had and what stages of growth they went through and more importantly, where they got stuck and how they got past it. And so, we broke it into these 10 stages and we made this little kind of quiz thing where if you put in your business information, it'll tell you where you're at and the most important part for you, what to do for each of functions of the business across product, marketing, sales, customer success, recruiting, IT, human resources, and finance. And so, no matter what you're struggling with, someone else has already struggled with it and solved it. And so, I'd like to give you this thing absolutely free. You can go to acquisition.com/roadmap, plug in your business information, and if you want us to actually help you de-constrain the business and you're trying to scale, we'd love to help you out. On the thank you page, you can book a call with my team and we will look at your business, see if we can help, and if we can, we'll invite you out to Vegas and we'll do this in person live.