BFC EP #016 - 7 Strategies to improving cashflow with Den Lennie

Well, g' day folks. It's Den Lanney here, host of the Video Business Accelerator podcast, coming to you back in Sydney this week. Last week I took my wife to Uluru, which is Ayers Rock in the middle of Australia, and what an amazing experience that was. And you know, one of the things that struck me while I was there was, well, two things actually. One was, you know, it's great to take time out, whatever you do, and actually take time away from your business to appreciate the fruits of your labor.

But of course, one of the things.

That you need to be has to have in place for that is solid cash flow. And that's often a bugbear for many business owners is that cash comes in, cash comes out, there always seems to be something to pay for. So this week, in this episode, we're going to delve into.

Techniques for really preserving cash flow and how to make sure you can use your cash flow effectively. Now, one of the things we do in the video Business Accelerator was very.

Very busy there last week.

We brought in six new members into our community last week, which is really exciting, from clients doing a few hundred thousand a year to clients doing several million a year. So it's really fascinating mix of different businesses at different stages in the Video Business Accelerator just now.

But one of the things we do.

One of the first.

Episodes or episodes, the first modules that is available to new members is how to land a client in 30 days. And, and we actually have a fast cash generation script. So oftentimes when I speak to members as creators, we can be a little bit shy about getting on the phone or, you know, speaking to even existing clients. So we've actually created some scripts that can act as a framework to help you overcome that confidence, lack of confidence around calling clients. But yeah, look, there's lots of exciting things happening in the community just now and if you are interested in learning more about it, then do check us out on videobusinessaccelerator.com it really is a community of.

Serious business owners who want to up their game without the need of becoming ad experts. You still focus on being a video producer, but we just use different techniques to, to help you get more clients and more out of your existing clients and help you create structure. One of the things that really struck me while I was in Uluru was I was able to take four days off without worrying because the business is systemized. I have a team in place and we have, we have solid cash flow. And actually we're going away again this weekend because we're thinking about moving up.

The coast to Queensland.

So we're again off for four days this weekend. And so when you're able to take that kind of time out of the business but still run effectively and efficient, that's something that I think if you're not able to do at the minute, then I'm sure we can help you with that. Inside the Video Business Accelerator. So look, this episode is all about cash flow. I hope you enjoy it. And this episode is brought to you by the Video business accelerator. That's videobusinessaccelerator.com so if you want to up your game and your business, then do get in touch and let's see.

If we can do some business together. Over to the podcast.

You're listening to the Business for Creators podcast, where each week we uncover the secrets to balancing creativity and business all in the one place with your host, me, Dan Lenny.

G', day, guys. Welcome to this episode of the Business for Creatives podcast. I am Dan Lenny. I am recording this from my mobile production Sweet Stroke Camper van the northern New South Wales borders. It's 28 degrees outside, it's beautiful. And it's a Sunday. And I decided to record some podcasts so I can get ahead of myself this week. I wanted to talk about some responses I got actually to.

A video I did a while back on not buying Gear. The video was basically, you know, there's no reason to buy gear, really. You can lease it rather than spending your cash flow on it. And it was interesting because this one got quite a lot of response. And it was one particular guy called guy called Chris Schwager, who's a video marketing and production specialist, changing the way businesses use video. And he was kind enough to say he loved the show. And so what I often do in these situations and you can test me on this, if you see a video and I ask you what would you love to hear on the show, I'll generally kind of turn it into a podcast because, you know, I want to get up to an episode a week, which is360, sorry, 52 weeks, 52 episodes a year. We're currently at 26 and creating content. It's always better to make the content if I know there's something specifically somebody wants to learn about. But.

He commented that we employ a lot of freelancers and I think they'd benefit from learning more practical tips to help them get out of the rut, provide some basic sales and marketing marketing practices so they can build predictable cash flow and a sustainable business. And he Said he loved the show. So thanks, Chris, I appreciate that. And hopefully you listen to this. I'm going to do a bit on this today. Cash flow is one of these things that never gets taught at film school, actually, which is kind of weird, but you know, there's the profit and loss in the business, which of course is an important number. But the more important number is probably cash flow. How much cash can you actually access today to go and do something with tomorrow? And the biggest advantage of having cash in the bank is it allows you to make better decisions, especially when it comes to around money. And by that I mean if someone wants to hire you for a job and you've got no work coming in and no cash in the bank, you're probably more likely to take that job no matter what the price. Whereas if you are cash rich and don't need the work, you can afford to be a little more bold with your pricing and be in a literally in a position where if you didn't want to take the job, you could price it such that if they took it, you make a bit of money and if you didn't, not, not a big deal. So cash gives you options.

And when you're in the position where you can walk away from the job, you to some degree have a lot of the power. So the person who has the power is the one that can walk away. So if you're needing the work, then you know you're going to be more likely to take the job no matter what, even if it's a little less than you want to work for. So today I wanted to talk about the importance of cash flow. Now, before we get into that.

The easiest way to overcome cash flow issues is to just have more work coming in more consistently and a system for generating work. If you've got lots of work coming in all the time, then the cash is going to be rolling in all the time. So think about that before we get into this. So, you know, I often hear filmmakers talking about how they can't afford X or they can't afford Y.

But as soon as a new camera comes out or a new laptop or new phone, the first thing to do is go and buy it. Now, I've been as guilty of this as anyone having done this in the past. But one of the things I've Learned in my 10th year of running a business is that cash is the oxygen for your business. So you really try and hang on to it as much as possible. In fact, more businesses go broke due to lack of cash, rather than lack of profit. Many businesses can be profitable on paper but not actually have enough cash to pay the bills. Now here's an experiment. Try paying your bills with profit and just let me know how you get on. Exactly. Not a chance. Profit is actually worthless. But when you have cash in the bank, and by that I mean surplus cash, after you've allowed for your bills, tax and other liabilities, if it's in the bank, it gives you a lot of options. It allows you to make choices. Now the most notable is that when you have a solid positive cash flow in the bank, you don't feel like you have to say yes to every job that comes in. In fact, as I said before, you can be bolder with your pricing, knowing that you don't need the job to pay the bills. And cash also allows you to deal to do deals with crew, which can increase your profit. And what do I mean by that? Well, if you've got a job that say more than three days, it's a five day job for a cameraman. You could offer a deal price to someone in return for immediate payment. So let's someone's charging, we'll call it 350 groats a day to be nice and international. That would be 1050 groats for three days. And you could say, listen, I've got 950 groats for this job. I realize it's not quite the full rate, but I can pay you on the day you submit your invoice. If you literally finish on the final day of the job, submit your invoice, I'll pay you straight away. Now this is leverage as a producer, and I always suggest adopting a producer mindset is you want to leverage your position of cash to do better deals. Now, they might be charging a higher rate of work for a corporation, but it's likely they'll be waiting at least 60 to 90 days to be paid. I actually once waited 86 days to be paid 67,000. That's almost a hundred thousand dollars. And I can tell you that that impacts on your cash flow. But it didn't send me under and I paid everyone up front. I just had to wait for my money. This would have sent many businesses broke. So I write to this to you, I say this to you from personal experience of the importance of cash flow. Cash gives you options and options are what you want. Business, you never want to feel like you've got no choice.

So I now want to give you seven tips to improve your cash flow. These are practical strategies that you can employ and deploy to improve your cash flow. Number one, stop waiting for the phone to ring and call all your current and last clients. This is the single most profitable and cash generating thing you can do. Get in touch with all your previous clients, call them up and say, hey, how are you going? Or how are you doing.

What'S been going on? And have an actual relationship with them that will generate business which will generate cash flow. Number one, talk to them about what's been going on in your life and what's going on now and how your new knowledge can help them reach their goals faster. Ask them questions, Ask them how their business is going. How did the last set of films impact their business? What kind of response did they get if they don't have a good answer? You could say, is this because you're struggling with distribution? And that's something we can help you with because we realize that making videos on their own isn't enough and you need to think about a distribution strategy. Now, if that's something you want to do, certainly that's an avenue you can go down. Go to your clients, ask them how they're doing, invite them out for a coffee, get face to faces with them. One of our clients recently in the Creative Business Accelerator program did this and he'd been struggling for work for three months. And this very first exercise was the Cash Flow Generation exercise where he contacted all his clients and we've got a script for it inside the Creative Business Accelerator. And it was a pretty challenging week for him because he had to ring them all up and he rang them all and some weren't available, some of them were, and some of them didn't want to speak to him and so on. Said call back next week. But within one month, within 30 days, his calendar was full. So stop waiting for the phone to ring. Call your clients, call them repeatedly until you get hold of them and make sure you check in on them. No one will object if you're genuine and you're trying to help. Now, there is a caveat. Don't try and sell them something. Just check in, see how it's going, See how business is. How are the videos you've already made for them working and what are their plans going forward for making more content? Number two, do an audit of your expenses. This audit can extend to all of the tools you use. It's like an app order or a digital app order. Anything from Adobe through to a whole host of other plugins and business tools that are charged monthly. What tools or apps are you not Using or have you doubled on? For example, when I did this order, I realized I had Click Funnels. I also had another app called LeadPages and another provider for landing pages called Unbounce. Now, that's three different bits of software that essentially do the same thing. I didn't need all three for a period. I was trying one against the other, which is okay. But what I realized I was doing was I was paying $100 a month for each app. That meant I was spending $300 a month on apps when I actually only needed one. So I got rid of the Click Funnels, got rid of Lead Pages, and then I just use Unbounce, and that's okay when you're testing. However, we sometimes forget to cancel the ones we're no longer using, and these expenses add up, and before you know it, you're overspent on stuff you're not using at some point. I think I was well over $1,200 a month on different apps. I've got it well below 700 now, so be careful. A lot of These apps are 50, 60 bucks, 30 bucks, 100 bucks. If you're not using them, cancel them.

So you know all the apps you're using. I stopped paying for Adobe because that was costing me a lot of money each month. And I predominately use Final Cut Pro anyway. And then I've started outsourcing my editing, so I don't need any software. So check the apps that you're currently using. Check what subscriptions you're currently using and are you taking best advantage of them? Are you actively using them? If not, if you're not actively using them, then unsubscribe from them. Next up is to audit your gear. Now, this is gonna be a tricky one for some people, but sell the stuff you've not used in the last six months, cut your losses, and redeploy the cash. Having money tied up and equipment that you're never using is a complete waste of your resources. If you're cash strapped, then simplify your kit and make it work for you. And don't have items that are not generating new revenue for you. It really is pointless having a bit of kit you've not used for a few months on the shelf. Number three, use RescueTime. RescueTime is this phenomenal app which tracks what you're doing on your computer at any time and sends you a report at the end of the week for how effective you've been. This is an absolute deal breaker. You might be asking, what's that got to do with cash flow? Well, social media.

And admin tasks are not revenue or cash generating activities. You should be spending the first two hours of each day working on how to generate sales and how to generate cash.

Generating sales is one thing, but calling up clients and asking what's going on? How did the last project go? And that's the way you generate cash by saying, hey, we've got this interesting project where we're doing X, Y and Z. I'd love to have a chat with you about it. And even you could even go as far with good clients. Say, look, we are actually running a couple of specials just now. If there's any projects you want to get done before the end of financial year, for example, we are able to offer you a special deal for upfront payment so we can actually save some money off it. We can give you some extra services so you give them free grading or something and some clients will take advantage of that. It's a great cash generator.

Now a lot of companies slow down at certain times in the year.

So it's a good time to approach them and say, hey, listen, you know, if you come out to Christmas or Easter or a big holiday, you know, you might be slowing down before going away, but do you want to get something done before you go so that we can work on it while you're away? It's all about getting in front of clients, asking them if they want to take advantage of a discount for payment upfront. Or more importantly, be analyzing how you're using time yourself and be really honest with yourself. Are you actually using your time effectively? Make sure that if you are having conversations with clients, you're building relationships and if appropriate and you've got a good enough relationship, say, hey, look, you know, we've done some work with you before. We've got a special on just now. Are you interested in taking advantage of it?

Now? What's important is not to be thinking these kind of holiday periods that, oh, it's coming up to Easter, it's coming up to Christmas, no one's spending. There are plenty of companies who have budget and will create the content if you ask them. Now, I want to just bring you back to this kind of idea of being effective. We have between 40 and 60 hours per week actual productivity we can be using. That's actually an immense amount of time. Ask yourself, how much time are you actually being effective and are you using your time well?

You see the cicadas in the background there? If you can. We're in the middle of the rainforest here. Number four, structure your project so you get 50% cash up front before you shoot a single frame. This is huge. Huge. And I had a bit of a debate with someone recently on a video that I promoted on Facebook and one guy was like, there's just no way you can get 50% of people up front. It just doesn't happen. And it's just. It's bs. It's absolute bs. We're actually working on a project just now for a big Japanese company, and we've done work for them before, and it's a series of training films for them, and they're paying us 50% up front. We just made it a condition and we framed it in a way that made it kind of, you know, a discussion point. And we actually featured it on our statement of works. That work wouldn't begin until 50% was paid up front. It's absolutely doable. If you structure the deal correctly, you can always get paid up front.

Now, we have templates for that sort of thing that we actually give to our clients inside the Creative Business Accelerators. If you're interested in learning more about that, then please do drop a. Well, you can just punch this URL and it's www.meetme. so Denlenny, and we can have a chat about whether or not it's right for your business. But one of the things we give away in there is templates for how to make sure you get paid up front, which is pretty helpful. It's probably the most important thing on the list. And not enough people ask for 50% upfront. It's absolutely critical. It can be the make or break of your business. All you have to do is have the conversation with the client in the early stages and when they get close to agreeing the job and say, look, you know, just so you know, our terms, we ask for 50% up front as a deposit, and then once we finish producing, we do the edit. And once you've approved the edit, we invoice the second 50%. And once that edit is approved and once the payment is received, we release the masters. It's just that we just say it up front. If they're going to have an issue with that, then it's probably a red flag that they're going to be difficult client to work with. Now, sometimes larger corporations just won't or say that they can't do that. But you know what, we've had 50% upfront from Sony on every project we've ever done, so I don't necessarily Agree that's the case if you frame it correctly. If you frame the deal correctly, people will always pay up front. If you make your case and explain why you need the cash up front and that you're a small business and you just can't simply cash flow larger productions, you've got people to pay, etc. That can be enough of a frame where you say if we had four or five projects on each with 30 grand in expenses up front, that would be 150 grand. We can't stomach that kind of, you know, risk. And plus if we're worried about that, we won't be focused on the creative. So we get the money up front, we do the business, get that out of the way, then we fully, fully commit to the creative and most clients have no issue with that.

It should always happen in your pre production so that your hard production costs come out of that 50%, leaving the remaining 50% for post production and your profit. If the client doesn't pay the remainder, then yes, you lose. But it's unlikely they're not going to pay once you've shot the project and you paid 50%. I've never had a client not pay. It's all about how you structured the deal up front. So always get 50% up front. This is a non negotiable in my book. If you don't do this, then you're knowingly screwing your cash flow number five. Now this one is popular. Not stop spending your cash buying the latest iPhone, laptop or camera. The latest doesn't necessarily mean the greatest clients couldn't care less what phone or laptop you show up with. If you want to invest in new technology that will help drive your business, then lease it, don't buy it. If you want to access new equipment, rent the gear, don't buy it. You should only buy equipment when you're renting more days a month than is viable than as if you were just to buy the gear out front and stop spending your cash to offset your tax bill. This is one of those crazy sort of, you know, old wives tales that I hear perpetuated amongst freelancers and amongst filmmakers that if you win a big job and you get the payment, you should spend your cash to offset your tax bill. Because you know if you spend the cash it means you're not paying tax on it. But here's the thing, and I'm not a qualified accountant to be giving you tax advice, but for example, in Australia just now the government has a $20,000 offset where if you buy equipment in this financial year, up to the value of $20,000, you can offset it all against tax. Now that's a situation where, if that's the case and you have the cash, that can be a sensible thing to do. Because normally what happens, let's say you spend, you know, piece of equipment costs 10,000 groats, you generally won't be able to write that off in one year. Under normal, normal tax circumstances, it's likely the government or the tax accountant will write off 25% of that capital expenditure every year for four years in Australia, for a vehicle, it's a write down over seven years. So whatever the percentage of a 7, 7 into 100, some random number, it's a write down every year. So let's say your car costs $40,000. Then actually if it's $42,000, you'd be writing down $6,000 a year on the vehicle. So it's actually not, you know, you could spend 40,000 in cash, but only be writing 6,000 down on your cash on your tax bill. So if you spend 10,000 groats on a piece of equipment, you'll probably find you can only write down 2,500 groats per year, every year for four years. So you're actually not reducing your tax bill very much at all. Plus what it's doing is reducing that 2,500 groats off your taxable profit and then that just reduces that by 2,500 groats a year, plus you're spending your cash. So a far more sensible approach is to lease equipment. You can lease computers, you can lease camera equipment, and that lease payment is fully tax deductible in most cases because it's a lease payment, it's a higher purchase price, a higher payment, you never actually own the asset. So you can fully write off the rental and equipment and the leasing of technology that maintains a strong positive cash flow and position in your bank and not in Apple's. So I did it recently. I bought a new MacBook Pro, fully specced, it was about $8,000. But rather than spend $8,000 of cash flow leasing it for two years and it's like $1,000 every quarter. So that's about $330 a month for a top spec MacBook Pro. That is a much more sensible thing to do than to write off $8,000 in cash. Then number six, and this one, I'm going to caveat here. Use this with caution. If you're not disciplined, then you need to avoid this. But using a Credit card to offset some of your costs. I have an American Express card that gives me 55 days of credit, interest free.

Now the caveat is I clear the balance every month on time so I don't incur any interest charges. Now I also collect air miles that can be used. For example, recently I had a client job in Perth. I went to see the client. I was able to use my pawlence to book a hotel. But it's very important that you maintain the credit card as a cash delay, not as a means of credit because the credit fees are usually very, very expensive. Now you know this already, but it's important to use that to boost your cash flow. I use mine for fuel. I use mine to buy my Facebook ads. For example, I have a $950 limit on my Facebook ads before I get billed. So what I do is I use my amex card as the payment method on my Facebook account. Now, Facebook will only bill me when I reach $950 or at the end of the month. So at the beginning of the month I can be running ads and if I don't spend 950, I won't be billed until the end of the month. And then because I'm using my Amex card, I have 55 days after that to pay the bill. So in essence, if I run an ad today, beginning of February, which is when I recorded this, I have till the end of February where Facebook will bill me and then 55 days after that, which is almost March, April before, have to pay the full bill. So it's like almost a 90 day delay in paying. So I'm actually getting two and a half months of credit by utilizing those functions now in that time, my ads can return me the investment. So this is a really like, if you, if you're disciplined enough to clear the balance every month, this is one that I strongly recommend.

But as I say, I'm not, I'm not giving, I don't want you to take this advice verbatim. Do your own due diligence. I'm just telling you what works for me. Number seven, think about setting up a service you can bill your clients monthly for recurring revenue is golden revenue. For example, could you create a number of videos or a package for social media content creation? It's the big boss just now. Clients need lots of content and you could be providing them a series of videos for a fixed price every month. Now we have a process for creating lots of content. I talked about it in a recent podcast and you know, within the creative business Accelerator. We've actually got the entire system for creating it, down to pricing, down to exactly how to create, how to send the editing offshore to maintain a low cost per edit for you. And monthly billing is great for cash flow. You can create a package of content for existing clients and sign people up monthly for a six or 12 month term and you get monthly cash flow. It's absolutely brilliant. You want to be putting your existing clients into some kind of recurring billing retainers or management fees to enable you to run your business and give you predictable cash every month. You want to be billing people up front wherever possible so that if you're not funding someone else's business by essentially offering credit to productions. I did a podcast on this a few weeks ago about this American company who had, you know, shot this music video and hadn't been paid. And I just thought it was ludicrous that they would put 13 people on location without any money up front. So, you know, there you have it that that's seven tips to improve your cash flow.

Let me know how you get on in the comments and this will have a massive impact on you and your business. And as I say, if you want to learn more about how we might be able to support you and your business and you're interested in the Creative Business Accelerator. It's a monthly program where we coach, mentor, hold you to account and support you in a great community. And really our core objective, our program promise, is to get you more business, to get you more clients. And we don't lock you in to a contract. It's month to month because we want you to be getting results and staying because you're getting results. So if you're interested in learning more about that, you can book a call with me www.meetme.Soul Denleny. Happy to have a chat and just see if we can offer some guidance on your business. And if we think there's a good fit, we can chat about you joining the Creative Business Accelerator. But there's no pressure, so I just want to let you know it's there. I'm going to keep referring to it because it's having a massive impact on the clients we're working with and I want to make sure I have a moral obligation to share it with you because if you're sitting running a business and things aren't going so well, I'm pretty confident we could help you get on track pretty quickly. So that's it for this week folks. Thanks so much. I always look forward to your comments and suggestions. So Please leave them below wherever you're at consuming this. Or you can come to the website at www.filmmakersbusinessacademy.com. as always, I've been Den Lenny and I will talk to you soon.

You've been listening to the Business for Creatives podcast with your host, me, Dan Lenny. If you're a creative business owner who is struggling to get your business performing at the level you want, then head on over to businessforcreativespodcast.com to take a free business evaluate survey and discover where you can plug the holes in your business. You can also access a range of free training to help you build your business faster. Also, don't forget to rate the show over on itunes so we can get the message out there to more creatives.

Who need to hear it. Thanks for listening.