Small Business Cashflow, Crisis and Efficiency – Small Business Show 204

The Small business show episode 203 for Wednesday, January 2nd. Happy New Year 2019. Greetings folks and welcome to the Small Business show here at BusinessShow Co, the show that is BFA by, for and about small business here in Durham, New Hampshire, running my small businesses. I'm Dave Hamilton.

And I'm Shannon Gene. Coming to you from South Lake Tahoe this new year. Well, day after New Year's Day, I guess, right?

Yeah.

How are you? Happy New Year, man.

Happy New Year to you too. Yeah, it's, it's, it's good, you know, it. I actually was really happy to get to my desk today, this morning and, and I know you're not home yet and back in your normal environment. Not that you have a normal environment these days, but I guess. Right. You know, I mean, your life's, your life, some changes. Yeah, right. Yeah, it was nice to get back into the routine and it was crazy. Like I actually slept in a little bit. I probably didn't come to my desk until about 8:30. My daughter was leaving for work, so I hung out with her at the house a little bit. But still by noon I was like, I am so far ahead of where I, like where I expected to be. Only because the last couple of weeks have just been crazy. I mean, it's been crazy work wise and like interruptions wise, but also with the holidays and everything, just, you know, it was nice to just have a day and.

Yeah, yeah, I, I always get that way. Yeah. After a few, you know, even a few days on vacation, I start thinking about, okay, this, this is what I got to get done when I get back. And yeah, I can't turn my head off. So I, I am looking forward to getting back in the office even though I'm officially, you know, back to work here today.

Right, right.

Yeah. Heading back home tonight and back in my back of my desk tomorrow. So I'm looking forward to it.

It is really nice to be back at the desk.

Yeah, I agree.

I agree.

I don't know, I don't know what it is about it, but I feel more productive and, and that that's a really big deal for me to, you know, to your point, oh, I got all this stuff done before noon. I, I think like that all the time. And it's like I, I want to be sure by the end of the day when I'm gonna walk back down to my house that I've got all these things done and, and it makes me feel better, you know, and it's, I have a Better evening and more relaxing if I get all this stuff done. And I don't know if you're the same way, but I think that's a, it's an important part of my, I don't know, my technique that I use to kind of keep moving myself forward each day.

Well, that's it. You need, especially as a small business owner and, and if you're like doubly so if you're a solopreneur. Right. You need something to catalyze you every day. And, and that what you just described is, is yet another one of those things because you just need these things to keep going and make sure you're doing the things you're doing and you don't get lazy or complacent or any of those things. Yeah, yeah, for sure.

Yeah, you got it. Yeah. So kind of hack your.

Brain. Yeah.

And yeah, no, it's cool. So do you have any, you know, with your businesses are you know, New Year's resolutions or. Here we're going to do this new things for 2019. Do you guys do that or. You're doing it all the time. So at the end of the year it doesn't matter as much. I mean, how do you handle that?

We're doing it all the time. We're constantly iterating and I think I mentioned back in December, you know, that, that that constant change is here to stay. Right. Like I need to get better about that. In fact, you, you kind of help me with that. So, so that, that certainly is, it is a well timed resolution that coincides almost exactly with the new year upon us in more intentional about that stuff and, and more systematic about it. So. Yeah. Yeah, I like it. Yeah, that's good.

Yeah. I'm kind of the same way and you know, trying to be more efficient. I'm always trying to figure out how to get, you know, especially now like you said over the last year and a half, you know, getting out of a big company and, and back kind of grinding it out on my own and building a couple of companies even though I have a few business partners now, or ramping things back up again, you know, embracing that change and then just working on efficiency all the time. That's, that's mine for 2019 for sure.

Yeah. For me, you know, I, as I mentioned, I. Listeners to the show know I went through with Backbeat, Backbeat Media went through some staffing changes last year. Some that were, that were planned and some that were surprises and you know, all that good stuff and we made it through the year, I mean, it was. It was one of the best years we've ever had, so.

Nice.

Like, things really worked out. Thank you. Yeah. And it feels good. Right. But the question is, like, I know that part of that was just 2018, you know, the economy was. Was. Was great. Like, we saw so many things that were outside of our control. We made a lot of changes, and then a lot of good results happened. The question is, you know, which of those changes mattered for which results? And so. Right. And you'll never really know that answer. No, you don't. But the question is, you know, who. I know I need to expand the staff. There are some things. There's some, you know, some stuff that. That I would like to offload, but the question is how to do that. And I don't want to just rewind to my old formula because it's clear that my old formula needed to be evolved. And I probably should have evolved it, you know, starting five years ago, as opposed to starting five months ago. But that's okay. I've evolved it now. And I'm sort of waiting to see how Q1 is, because Q4 is always really busy for us. So I'm waiting to see how Q1 is and where I need help. Like in Q4, I needed help across the board because it's just insane. Well, that's not really necessarily the right time to make those decisions. So I punted on those decisions. Essentially. I kicked that particular can down the road.

That's probably a good idea.

Yeah. No, I think it was a good idea.

Yeah.

Sometimes it is a good idea to punt, you know, so. For sure. Yeah. It's just like, get it done and. And then. And then reflect, but also be aware of, like, where we actually are as opposed to where Q4 might have misled us to think we were being.

So, yeah, I have. I've made that mistake a number of times where you get involved in some projects and all of a sudden you're just stretched and you have to make a decision between, you know, like in our case, it was, well, do I just put everybody, you know, automatic overtime? We want everybody to work four hours a day or whatever, two hours a day to get through this, this time, or do you add another employee or two? And it's a challenging situation you really have to think about. And I guess it depends if you. If you have a staff that's, you know, wants that extra time, wants to make extra money, or if you're paying commissions, you know, give them an opportunity to make more money. I think that's better to lean towards that rather than being quick to hire because then if things dip back down like you're saying Q1, you're not sure how that's going to be.

Right.

And then you're, you've, you've increased your overhead. You get, you know, more bodies there.

That was it. I didn't want to increase my overhead until, until I know that it's that, you know, that I can sustain it the way I want to sustain it. And that's really the big question.

So, yeah, yeah, there's a fine line between that and there's been a lot of written a lot of articles and books written about too. You know, you should always have. If you have hourly employees, certainly you should be paying some overtime because you should be hitting that ceiling all the time. And, you know, once that overtime number starts to get big enough to account where you're spending more in overtime than you to bring on an additional staff member, then that's your trigger. It's like, oh, look, look how much overtime we're paying, you know, each month. We need to add another body here that can bring in some more expertise and some new ideas and you're going to save money. So it's. You. It's really important to track that. That overtime we used to do, we used to do it all the time. And we also had a little trick, right, because we always had interns that were part of our staffing equation and these, you know, young people that were looking for experience and we had a, you know, relationship with a local technical school and, you know, they were all over it and, you know, it was an unpaid position and they were there for about a hundred hours, 110 hours, I think, and, you know, we would use them to kind of fill in. It was awesome. It worked out great for, you know, over. Shoot over a decade. And then the school had some issues, so we had to kind of stop that program. But it was good. You got to look around if you've got an opportunity to bring interns in. And we've done a show about interns that I'll link in the notes, but it's a good staffing thing too, so. But hey, you had this interesting idea that I wanted to talk about today, and I, I still am not sure my head is wrapped around it, so I'd love to have you explain it to me a little bit.

Yeah, sure.

And because it. And the way you. You phrased to me was using debt as a catalyst to create, you know, massively positive Cash flow and those. Those words together. You're gonna have to. You're gonna have pretzeling to tell me how we're going to use that to create that cash flow. It's an interesting idea, and I really would like to hear more about it.

Sure. Okay. So, you know, the premise is that you. Well, we all know that you want to be bringing in more cash than you are sending out. Right. I mean, unless your goals for your business are to create like a, you know, a cash flow hole to perhaps, you know, divert some income from somewhere else, but that's not going to last very long. Right. So. So in a general sense, I think that's a safe presumption, certainly that you. We have to operate under that presumption for this. So. And this has happened to. To me a couple of times. It's happened to all of us. I think it can happen unintentionally, but I feel like it. You can do it intentionally. And last year, again, I ran into a scenario where I was our cash flow. And so I wound up with what I call some really stupid debt. And it wasn't very much. It was like, you know, whatever, 40 or 50 grand worth of, you know, like.

Like that sounds like a lot to me.

I know, but. But it wasn't like, I know you've been in a position where the number was much bigger than that. Yeah, but. And you've talked about it on the show and you had to figure out a way to pay off a million bucks. Yeah. So anyway, so, you know, and it was mostly like credit card stuff or whatever, you know, corporate credit cards that we have. And it was like, oh, crap, okay. We behind in a way that our cash flow doesn't currently support. And that's what I hate. And so it was like, okay, great. Now that was the catalyst. So it was stupid debt. But it doesn't have to be stupid debt. It can be. It can be smart debt that you take on and intentionally use to grow the business or whatever. This was not that, but, but it, you know, stuff happens. Right. So here we are. Great, no problem. And I've got some lines of credit and things like that, whatever. And it was like, okay, well, we need to change this equation because we're going to the other. We're going the wrong way. And, and, and so one of those changes happened sort of automatically for me. It was like somebody quit and was like, okay, but we were actually already sort of fixing this problem by that point. We were actually already on the turnaround, but it was. It Was kind of a nice jump on the turnaround. Like, oh, I don't have to pay a salary for a little while. Cool. But, you know, so I had this debt, and it was, okay, I need to fix it. And that's. That was the catalyst. It was like, okay, I just need to figure out, I want to pay this off within, you know, three months or whatever. Like, it's just got to go, what do we need to do to business to increase our incoming cash flow so that, you know, within three months, this is either taken care of or easily, you know, covered by what we know we have coming in. And we made some changes to do that. And the cool part is when October came and everything was paid off, it was like, well, wait a minute. Now we're at a pace that's way bigger than our outflows, because part of our outflows are. Right. A big chunk of our outflow was to pay off this debt from far earlier, right? So once we. Once that was gone, it was like, oh, holy crap. Like, now we've got some money on the table here. And, you know, and then, of course, once you have money on the table, you can do smart things with it. Some of that might be, as you like to call it, you know, take a. Take a pot of gold off the table every now and then and that away for yourself, because that's something that, you know, that's part of the reason of running a business for many of us. Sure. But, you know, another part of it is, okay, well, let's. Let's keep it in the business and reinvest it and figure out what can we do to grow faster now that we have more money. Now, usually that means spending more. So now you're increasing your outflows and hopefully not going past your inflows, but you can take on any kind of debt to put yourself in this scenario. And like I said, there's many times where smart debt can put you in that scenario. And by smart debt, I mean, you know, if you need to buy some equipment or whatever that is, and you just. You finance it instead of paying out of it, you know, paying for it out of your cash flow. So that. That. Does that help explain what I'm. What, like my concept here? Because it can be it. Like we. As I said at the beginning of the show, we all need motivators, right? You know, like the things that make you feel productive. And, you know, debt can be a good negative motivator, right?

Massive. Massive motivator.

Massive motivator. Like, I got to get rid of that. And so, boom, you know, you put your foot on the gas, you lean in a little bit and. And then when you come out the other side, you're moving so much faster. And this is, you know, there's a, there's a related thing to this here and it's your competitors, right. When someone, and I've done this to businesses, I've also seen it done to me. When someone starts into your market, right, to compete with you, they need to operate much faster, they need to grow much faster than you to get to where you are. And the problem is when they get there, they're already moving faster than you. Right. Or, you know, or if it's you in that position, you're moving faster than your competitor and you're just going to blow right by him. So, you know this. And it's that whole systems versus goals things. If your goal is to. I'm going to start a business and I'm going to, you know, I'm going to catch up to business A. Well, then what now? Your business B. Right. So you start and you're hustling and you catch up to business A. Do you put your foot on the brakes? No, no. By the time you catch up to business A, you're actually already ahead of them because you're going to blow past them. If you were able to catch them, it means they're not moving as quickly as you are. And so. Right.

So.

So there's all kinds of this stuff that, that these are the ways I hack my own brain and.

Yeah.

Does that make sense?

Yeah, it does. It's an interesting idea. And I would suggest that it's part of that process that, you know, you never really know what you're capable of until you're forced to do it.

That's it.

And, you know, so if you all of a sudden look and you accumulate some debt, whether it's, you know, $10,000 or a million dollars, you start scrambling, go, wow, I've got to figure out how to pay this off. And as we've talked about on the show here before, there was a time over my, you know, pretty long small business career where I made a million dollar mistake. And fortunately, I haven't made very many of them and I've made up for it on the other side. But that was a massive motivator to, you know, and I did not have the cash to pay it off. I mean, there was just no way. And so we did have to change the entire business and we actually wound up, you Know, deciding to merge two companies together, and that was a big part of it. Is that, okay, how are we going to save this money? And sh. You know, we. We moved operations and we came out the other side of it. Never had to declare bankruptcy. You know, it was, interestingly enough, I always commented during the struggle to get it paid off, which is solely on my own shoulders. I had. I was personally on the line for. This is. I always struggle like, well, this is not going to be a, you know, a defining moment of my life, my business life. It's not going to be it. I kept telling myself that because this, as we've talked about on the show before, you get. You get to write your own story. And I'm a big, you know, fan of telling stories. That's why, you know, we do this show. And there's no way I was going to tell the story that, oh, I had all these. I had a couple of great businesses, I made a mistake, and now I'm working for somebody else the rest of my life. There is no way I was going to be able to live with myself that way. And so, you know, you. You're forced to just come up with ways to do it, and we did it. Now, I didn't come out the other side of that. Go ahead.

I was going to argue, and maybe you're. Maybe I'm jumping the gun on you here, but I was going to argue. I think this did become a defining moment in your life.

Exactly. That's where I was headed. Is that the struggle to make the payment and to not, you know, not just, you know, give up and declare bankruptcy or finagle your way out of it to do it. It did become a defining moment in my life, and I always lean back on that going, wow, that was a massive problem that I had back then. And, you know, this was 20 years ago, but. And we came out the other side and I'm really proud of the fact that we were able to do it without, you know, giving up. And so it became a defining moment, but in an entirely different way than I thought. But I will tell you, it probably took me about 10 years before I could talk about it like this because it was so raw and so devastating to my personal and my business finances. But it did make me a much better business person. And, you know, my attorney graduated thank to this day, who helped me get through it all, always said, hey, you know, I want you to. Because we were doing really well and we had some. We had a lot of early success when I was Very young and built a big company, you know, had a huge facility, 30,000 square feet, tons of employees. And it all seems so. I don't want to use the word easy, but it seemed like, wow, this is just the way it works. And my attorney told me really early on, said, hey, you know, most people that are successful screw up along the way and lose everything. And I was like, oh, that's, that's B.S. you know, I don't, I don't think that's true. But of course, now I'm a firm believer in that.

Wow.

Those lessons I learned during that difficult crisis. And you know, you can't create that. It happens and you have to react. And I had a business partner that never came back from it to this day. I mean, he couldn't handle it and he bailed and that was it. And he never came, never started another company like we did. And so it just depends how people react to it. So I, I get your, your, this concept. I think it's great in creating that, the cash flow that's required to pay that off. Now in my case, you know, it was such a long process. Took me about five years to get it paid off.

Right.

And so it's a little bit different. But I, I definitely see it now. You, if you have a, let's call it short term debt, you know that you have to get paid off and you're using, you know, when you get to the end and you've, you've made all these adjustments with your business, whether it's cutting costs here, you know, creating a new revenue stream there, you should.

Have all of the above. Yep.

Yeah, all of the above. You got it. And you, you should have a good increase in your cash flow. And like we talk here, cash is king, man.

Cash flow delta, right? That's what you, I mean, you want, you want to increase your cash flow, but the, the thing, the number that matters most is the delta. Right? What you're bringing in versus what you're sending out and crisis is an excellent motivator. Yeah, it really is. Panic, whatever you want to call it. I mean, you need to be able to kind of buckle down, though, in that moment and not just give up and freak out. And I think some of that is just personality, to be perfectly honest. You know, some people are better at that than others. I'm not. Well, I'm good enough at it, I'll say that. I see people that are better than me. It's like, crap, man. Okay. But, you know, like, I'm good enough at it that I've survived this long. That's right.

That's right. And I would say that you could phrase it that maybe something like this lack of crisis can really create complacency. And what I mean by that is when everything's going smooth, no one's looking typically how to save money, or you may be always looking for new revenue, and I always do that. But when, when there's, you can look at some very successful people and in business and, you know, guys that are very, very wealthy or women that are very wealthy. And in the introduction of crisis, whether it's an enemy that quote, and I'm using, you know, quotes that we're going to go fight against this enemy or we have this crisis that could put us out of business. How are we all going to, you know, come together and, and turn it around? So, so crisis can be, yeah. Tremendous motivator for, you know, your cash flow, your employees, yourself. But you have to learn to turn it. To turn it into a motivator instead of letting it, you know, become a crushing defeat, if you will. And, and that, that's, that's up to you. You know, how you handle it, how you phrase it and how, like, again.

You have to write your own story to your point, right? Like you're in the moment. Okay, so there's this, here's this plot point, right, that you didn't choose, but you get to write your story past it. And there you go. Or maybe you did choose the plot point. You didn't realize it at the time, you know.

Yeah, the thing about the, the debt that I've always struggled with is like, I've always wanted to be able to say, okay, so some of this debt and everything, now we gotta, this is our crisis. We got to pay it off and get, you know, get creative and come together and do it. But I always felt that when there were employees that were not involved in, let's see, how to phrase this, where the debt was acquired and they had no idea, you know, they're not involved in making decisions that, you know, caused the debt to be acquired. Right, right, right. Then, then to go. I've always struggled with phrasing of how you go to them and say, hey, we've got. And maybe you can't. So maybe you have to keep it, you know, internally to your, your management, whoever was involved in, you know, acquire. Acquiring the debt, but at the same time using it to motivate your team and to get stuff out. I've always struggled with how you present it to them in a way where they don't just think, well, I didn't have anything to do with this. You know, why? Why should I do something? So if you're listening to the show and you have some. Some tips for me or us and that we can share with our listeners, we would love to hear, you know, how do you talk about debt with your employees and a crisis, to use it as a tool to motivate your team to come up with, you know, new creative ways to solve those things, you know? You know, talk to us@ feedbackusinessshow.co. we would love to hear your stories and get some advice from you, you know, always willing to listen.

Yeah. You know, and it goes back to our, you know, our favorite. Like, these are the things that become your favorite mistakes. We ask people these questions often. If you look back and dissect all of those, I would say probably 90% at least of those start with crisis. Like, holy crap, we were right. I mean, that's how it goes. But it's a favorite mistake because you learn from it and sometimes it kills your business and then you end up starting another one. Yeah, it can, you know, like, it's how it goes. It's. Yeah.

Well, we're going to talk next week's show. We're going to do on All About Confidence. And I would say here, I'll leave you just with this tidbit is this topic has a lot to do with confidence and success.

Yeah, for sure. All right, folks, thanks for listening so much.

Happy New Year.

Happy New Year. Keep living that charmed life. See you next week. Thanks, Shane.

Thank you, baby.