Jim Johnson explains that the length of time from starting a project to collecting payment (time-to-collect) critically affects cash flow and profitability. He warns that long collection timelines effectively make the business act as the lender and uses a numeric example: a $10,000 job taking 100 days equals $100/day, while the same job in 50 days yields $200/day, illustrating higher profitability and better cash flow with faster cycles.
Chapters
You've heard me mention time quite a bit. I want you to understand time is important. And so from the time I start with somebody to the time I end with somebody, timeline. And I got this lead over here, I got a timeline, so to close over here, okay? And the amount of time between those two things determines a lot of factors for you. One of those factors is cash flow. So from the time that you built it till you collect it, how long is that taking? If you don't know that answer, you are likely in a situation where you've become the bank. In other words, you're financing projects because they're taking too long to collect and killing your cash flow and putting you in a situation where you're going to have a problem. But through all of this, you have those milestones that your processes have been built around. How much time does it take to go through each one? This is why we include it in our process. Because if it took me 100 days to do a $10,000 job, I'm making $100 a day, right? Took a hundred days to go from start to finish to do a $10,000 job. But if I could cut that down to 50 days to do that same $10,000 job, that would be $200 a day. Which one is more profitable and which one generates more cash flow?
