Episode 62: Cash Flow and Profit First Tips with Kevin Davis

You're listening to the Profit first podcast, episode 62.

Boom. Six.

Bam.

I got all down.

All this talk about rhinos. My goodness. Welcome, everyone.

God, we got out of control.

It just gets nutty. Welcome to the Profit first podcast. I'm Chris Curran. I'm the founder of Fractal Recording.

And I'm Mike Michalowicz, the author of Profit First In Studio, joined by my colleague, Christina Bulda.

Hey there.

How you doing, Christine?

I'm fabulous. How are you?

I'm doing well. I'm doing well. And you, listener, you're listening to the Profit first podcast. This is a show where we dig into all aspects of prospects in a new fancy schmancy thing. We're bringing on guests who are living through Profit first, facing the challenges that are associated with it, and we're helping them navigate. That's what you're going to hear on this episode.

That's right. And revenue's wonderful.

Twitter.

Sorry, I paused Twitter.

I had to come up with a rhyme. That's a tough one. Yeah, revenue's wonderful.

But profit is.

Makes your pocket full.

Oh, that's pretty good.

There you go.

There you go. So profit is the name of the game in business. And by the way, you can find our show on itunes and Stitcher and tunein radio and profitfirstpodcast.com Listen to all the craziness of past episodes. We've had some great guests. We cover such great material. I always think that if a business owner or, you know, a salesperson, anyone in business, if you listen to this show every week, the knowledge is just going to ooze through your ears and into your brain, right?

Oh, my gosh, yes. And we actually got our first email in specifically about the podcast listener. And unfortunately, I don't have the email in front of me, so I'll paraphrase it, but says I'm more profitable than ever. But actually, it was Dr. Terry. I'm not going to share the last name, and I remember who was. Dr. Terry sent their P and L their profit and loss statement to and said, I want to show you my P and L from 2014, and I want to show you the impact. Since I've been listening to the podcast, they've actually implemented Profit first, more profitable than they have been in the history of this company. And it is a doctor. It's a doctor's business. I don't know why I have to show that. But more profitable than they've ever been in the history of the company. Because they did one thing that so many People don't do. They took action.

That is awesome.

They did it.

They did it. The tips are here. You just got to do it.

That's right. And sometimes you need a swift kick in the buttock to get going.

Yeah. Or you need a five point belt stop system that we talked about earlier. So. Hey, Chris, man, what have you been up to, my brother?

You know, I've been looking for my profit first book. You know, I know you gave me a copy of your book when we first met, and I read most of it. Actually. I didn't finish it, I have to be honest. But I was looking for it recently. I can't find it. So now I'm gonna. I'm gonna get another one and. Because I wanted to give it to a friend, but yeah. So the profit first book is missing over here at my house.

You know, it's funny about finishing books. This is my little update. Most people never finish their books. And I'm true too. That's true for me too. I read tons of books, I don't finish most of them. Authors. Nowadays we do a technique called front loading where you put the action will meet of the book in the front and then you put the advanced kind of techniques in the back as opposed to marching them through the entire process, the entire book. So you can accommodate the short reader, the reader that reads like three chapters so you can take action on it. And then the long readers, the people that like the detail, they can continue through and get more and more advanced techniques.

Right.

But so with Profit first, after you read three chapters, you have the core concepts already and you can start impacting your business. That's cool.

I'm totally cool with it. So I'm kind of a short reader then. I am under 4 foot tall, so that qualifies me, I think.

So you are a little rich.

You're a shorty kind of rhino.

Dude, you know what we're talking about today?

I do.

Okay, we have a guest coming on. He owns multiple businesses. I'm gonna give you details about him in a little bit, but I will tell you, this nickname's Rhino. Okay. But before we go into inviting our guests on, you know who's sponsoring the show, Christina?

I do know who our sponsors are. Radomoff says they're actually corporate partners, though.

That's right. So I was gonna say no one's sponsoring it, but a lot of people are partnering with us. Who are they?

Fundera, Fundbox, nextiva and T Sheets.

Wonderful companies. And we're having our conferences coming up. Our Mastery Session. So for profit First Professionals, this upcoming May and T sheets is going to be hosting a lunch for us there. Awesome. So, yeah, just it's a cool company and they're getting involved in many aspects of supporting our youth people.

Hey, our guest, our guest is from Montana.

Did you know that I've been to Bozeman, Montana. I want everyone to know that I did a cross country. Not cross country, but cross state cattle drive. And it was in Montana.

I love the hand gestures. Everyone can see what you're doing.

Yeah, I'm riding this horse.

Oh, my God.

Or cranking some kind of wheel. You can't really tell. But the Montana is called the big sky country. And I get it. Now that it's out there, you can see forever and it's a gorgeous country. But it's freaking cold. It gets pretty cold.

Was it like city slickers when you want a horse and everything?

Yeah.

Oh.

So one last little thing before we dig into the. There's six cowboys with us. There's 20 guests. We drive cow for five days across Montana. At the end or during the process, I go to the cowboy there. I say, wow, you know, if with us helping you guys out move cow around, how many do you normally have? How many cowboys you need? Like seven or eight or ten. He goes, no, no, normally we do this with three cowboys. He goes, because of our guests, we need six to wrangle you in.

You probably slow him down.

Yeah, we're more disruptive. We're scaring cattle. So it was funny.

You're ruining it.

All right. People are not here to listen to the cattle drive. They are here to listen to what you're about to hear from Kevin Davis. Now, Kevin Davis is an entrepreneur, as you know, from Montana. He currently runs four businesses. Sometimes that's a big red flag, but maybe not. And you're going to learn about why he's been successful in the web and graphic industry. He's an app development. This goes back to 1998. Today he runs a business called Detailers Helper. Actually got a whole helper line. Little Helper, Big Helper, Hamburger Helper, Hamburger Help. That was his big blockbuster success. The Helpers Helper. No, but Detailers Helper is his primary product, but he's got lots of offshoots going around from it. And, and by the way, what I'm about to say is because it says it in his written bio, this is not me because I don't want to make it into innuendo, but I'm sure it's true. Oh, Boy Kevin and his smoking hot wife live in Montana with their two girls, 17 and 16.

Oh, my God. Now everyone's going to his website.

Oh, my God. Okay. And they. And they all carry the entrepreneurial theme throughout. So with no further ado, it's an absolute pleasure, Kevin, to have you on the show.

Kevin, thank you very much.

Welcome to Blues.

They're going wild. That's a stadium. That's a stadium in Montana.

I've got to shut my cattle drive down here before we can have this conversation. And actually, I am in. I'm right outside of Bozeman, so you may have come by my house.

It's a beautiful airport. That little airport. Have you ever seen those cow drives go by where you are?

I have, yes. We often can't get to town because they use the highway. No kidding. To drive. To drive cattle between fields. Yeah. And I. I have participated in said cattle drives as a cowboy.

Oh, cool.

Oh, wow. Do you ride aggressive?

Some, but not. Not enough to call myself a cowboy, actually. I, you know, have the shiny boots with the stupid tips on them or something. I don't know.

So I don't.

I don't really. But I like to pretend some days.

It was. It was just an amazing experience I suggested to everyone listening in now. Kevin, you got these four businesses. Oh. And you're kind of come on the show. What's. What's the challenges or what's the biggest challenge you're facing right now?

The biggest challenge is probably working capital, cash flow, that kind of thing. Which is why Profit first is working so well for me. But hey, let me. Let me say one thing to you, Mike, before we get started. I'm thankful for you because I haven't sat on the toilet without thinking of you in the last six weeks, thanks to your Toilet Paper Entrepreneur book. You should know that I think of you every day.

I love it.

You not only help with profit, but you help with digestion and all the other.

I do. The most intimate moment or the second most intimate moment of your life.

I'm glad you. I'm glad. I'm glad also to use front loading in that book because I'm assuming there's some business stuff in there, but the toilet tips were really helpful.

Yeah. Now, that book, you know, when I wrote that book, it was an edgy, kind of, in your face, let's get real about business kind of ready? And it's still a very popular book. Not gonna be very happy about that, but when it really first came out, I must have heard a thousand Toilet jokes. And I'm not like into toilet humor and stuff. They're like, oh, you're the number one author and the number two business.

Oh, gosh.

So tell me about these challenges with cash flow. You maintain a lot of inventory, I presume.

Right. And so, you know, I was in the web development business for probably 15 years before I started doing products. And so this, this product business, Detailers Helper and subsequent brands are sort of my first foray into product stuff. My overhead with web development, super low. Hire some people, buy a new computer every couple of years and you're done, you know, pretty low overhead, high billing. So it's good margins. But now that I'm doing products, I end up having tons of inventory, spending a lot of money on marketing. But the inventory sits in my warehouse, my office, my shop until it gets sold. So you may invest five to ten grand on inventory and then, you know, it's three or four months before that that number comes back. So that tends to be a cash flow issue and, and all that.

Okay. And so the, the, what they call the turn is four to five months, you said. So you, you. If you buy, what does $5,000 buy you? How many units of the detailers help her?

Oh, we're buying a, you know, a few hundred units of that for that amount of money. So the turn is probably more like three months for that. Depending on resale, you know, retailers and wholesalers and direct consumer. I sort of use a multiple avenue model for sales.

Okay. And just so our listeners can. Can get a good sense of what you're selling, tell us more about what the detailers Helper product is.

So the detailers helper belt is basically a tool belt or a couple of different versions of a tool belt. That's a lightweight tool belt for the automotive and detailing industry that helps professional detailers carry their tools and supplies and all that stuff around. So it's a bit of a paradigm shift in this industry. In an industry like construction, the way I explain it, you'd never see a guy out there framing a house with a handful of nails and a hammer. But for some reason in our industry, that's not the case. You see guys with bottles on the floor and polishers here and on the windshield and that kind of thing. And so we're trying to sort of change the industry with this product to get people to adopt a tool belt as a method to increase their efficiency.

And if you're, if it costs you $5,000 to buy 200 units, I just want to be absolutely Clear. That means a unit cost you 25 bucks. One belt cost you $25.

Yeah, something in that range.

And what do you sell it for?

We're selling it for 60 and 80. And so we have two different versions. So our cost is between 25 and $40, depending on what the unit is. You know, textiles are pretty expensive. And so just because of the labor cost involved. And so each belt has four to five bags, plus some belt itself, a little towel loop and that kind of thing. So the, the labor is pretty expensive.

Okay, so. And are you profitable or what's the historical profits and are you profitable today?

We are just barely profitable. We'd be more pro from a pure inventory sold standpoint. It would be considered profitable when you start figuring stuff like money that we blew on, you know, automation work within our marketing plan and that kind of stuff. And some of the stupid decisions I made in 2015. No, we're still upside down. I actually just shot a YouTube video for my niche called what I did to screw up in 2015. Sort of going through some of those things, the mistakes. It was a pretty popular one actually. Yeah. So I try to be really authentic and transparent with my audience. And so when I screw up, I tell them, I screw up when I made success. When I'm successful, I tell them that too. So.

Okay, so I want to give you one real simple tip right now that may start turning this around. I call it the, the four. The four times rule. And then there's also a little kind of multiple. So, you know, I'm also a co owner and a manufacturer. I don't know if you know that, but Hedgehog leather works. Okay, so one of the rules, when you sell products and you sell direct to consumer for all this or some of it, or how much goes to consumer, it's.

We probably do about 5050 between direct consumer. Margins are higher on direct consumer, obviously. So yeah, cut out the middle. But we do, we do a fair amount of wholesale too.

Okay, so let's just talk about the direct to consumer model first. When selling products directly to the consumer, the minimum markup should be a four times markup for premium products like this. Now this isn't a high volume product. You're moving. I looked at the numbers. 200 units every three months. We're selling a thousand to 1500 units a year. It sounds like.

Right. We're not moving a ton of inventory. Right. It could be a little bit higher than that, but we're not. Yeah, we're not moving a ton yet. It's okay. It's only. It's only been on the market for 12 months, 13 months. So we're still sort of building that audience.

Okay, so something that sells a low volume of units, I suggest doing a four times markup plus. And what you do, the next factor is the inventory turn. You take whatever the inventory turn is. You said it's three months, and you multiply it by 0.2. So three times two results in 0.6. So your markup should be four plus whatever the result is. So four plus 0.6. I suggest you do a 4.6 times markup. And if your cost is $25, 25 times 4.6, I suggest you're selling it for 115. Now, here's the thing. Here's the thing. If you do that based upon most businesses and you're running effectively, you will be profitable. But that price you may look at, it's like, oh, customers won't pay that over $100 for a belt. I can't. You know, the most they'll pay, their reactions, like, $80 is the most they'll pay. Then you just reverse it. You take 80 and you divide it by 4.6, and you got to be purchasing that unit for $17.39 at the most, right?

So that buy more volume, get more, and get those prices down. Right?

Amen, brother. Amen. And so the common resistance I get when I tell someone that they're like, I can't do it. I got to keep the prices where they are. I can't get cheaper, but I am going to make it up on volume. And for many businesses are actually losing money. So I'm saying, hold on. You're losing, say, a dollar. I'm not saying this is your case, but say you're losing a dollar per unit. And I tell people, hold on, wait. Are you losing a dollar? Every time you sell something, you lose a dollar. You want to do more of that, you want to increase the volume, you're gonna be losing even more money. It's pretty outrageous.

So that's the loss. That's the Las Vegas financial model.

Yeah. What's that? Give me some details on that one.

Yeah, we pay 98 cents on the dollar is what they have in all their casinos. You know, they say this game pays out at X number of cents per dollar, and somehow that's a good thing.

So is that. That's funny. That is funny. But that's exactly what it is. So let me ask you this. If you were selling those units for 115. What's your initial reaction to that? Is that outside of the consumer's ability.

Based on market research, I don't think I can sell it at that. So my, my best approach is to get it for cheaper, which sort of fits into the working capital thing because in order to get it cheaper, you buy it more volume so you can get the quantities up and get the prices down from the factory. Okay, so that's, Yeah, I mean that's a, that's definitely a model. I understand.

Okay, so here's the, the next part is formula. If you buy greater quantities, your price drops but your inventory turn slows. So you had a three month say you double your inventory. Now the, in the turn just roughly estimated now will take six months. Right. So now you'll see how it starts becoming a little bit of a trap. 6 times 0.2 is 1.2 plus 4. So now it's a 5.2 times markup. Times say you get for 20 bucks but now you gotta charge it for $104. So what I tell people and everyone listening in, if you have a product based business, look at that multiple four plus the 0.2 markup on your inventory turn. And then as you consider alternatives, keep running this multiple until you find the sweet spot. The goal is how do you get the same inventory turn at a lower cost point or how do you increase the prices? That's always the thing to look at. Have you looked into alternative manufacturers and stuff like that?

Yeah, I've got some things out there and as we, I mean even my own factory, I know the price points that we can get it down to at different quantities. We're actually doing some private labeling for some different companies. And I know that those prices are substantially lower than what I'm paying. So I know that at that volume we can get, we can get more so or get those prices down. That's actually one of the reasons we're going to the consumer brand which, which is a much larger market. So the sales potential is higher and we're, we're focusing more on the retail market than direct to consumer. Because I know then if I, if I get a PO for 30,000 units from you know, a Bed Bath and Beyond or some, you know, retail store, then then that can allow I, then I can buy everything at that rate because I can batch that in with the moq Right.

Right. Now tell me a little bit about the implementation of profit. First you started implementing it at your business when and what have you.

Yeah, it's, Yeah, I finished Everything. We were at sema, went to SEMA beginning of November, and I listened to the book. I already had it in Kindle form. Listen to the audiobook on the way down. We actually took a vehicle down to SEMA. SEMA's the specialty equipment Manufacturers association trade show. If you're a car guy, it's like Vegas, too. It's the biggest in Vegas. Yeah. So, yeah, I. I don't gamble because it's a stupid investment, but. But yeah, that's. That's part of why I remembered that little 98 cents on the dollar thing. But so I listened to that. That was the beginning of November, and I could not wait. I actually started doing some stuff in the hotel and pretty much had that ready to implement by the time we got back, which had been the first week in November. And within about a week, I had either modified the existing accounts that I had to fit in the model that I needed, or I. And I think I added two new accounts. We happen to have a ton of accounts already across two banks. So it was a perfect setup to sort of just implement it right away. And so got all my accounts set up. I actually, I'm sort of an Excel geek, so I created an Excel worksheet that does all the math for me. Automatically. I put in what the deposit is, and I track all that, and it does all the math. I know how much to deposit on the 10th and the 25th, and I'm good to go.

What have you discovered about your business now that you're taking your profit first?

I was blowing way too much money on expenses, and I did a video review for my niche about profit first. And so many people have been asking me questions about profit first as a result of that video. Like, it's, It's. You're. You're having a huge impact in my little niche of detailers. But. And so what I said in the video is if I had had this. This system 18 years ago when I started my business, I wouldn't be shooting this video because I'd be sitting on a beach right now, retired with multiple vacation homes. Because that, That's. That's the impact that. I mean, even this year alone, I probably blew. And I think I said this on one of my videos on the what I failed. I mean, I probably blew 40 grand this year on stuff that I ordinarily would not have done or that I know I wouldn't have done had I had profit first on January 1st of this year.

And how much are you allocating toward profit with every Deposits coming in.

Right now I'm doing only 3%. I wanted to start sort of low. I'm sort of a. Well, I am a one man show. My wife does help me. Smoking hot wife does help me. Thanks for that, by the way. I'll be sure to take advantage of that later today. So, you know, we're, we're a small company and so it's not like I have a bunch of employees and all that stuff. So I allocated 3% to my profit and then I shifted a lot more towards owner pay currently. And we'll go through that. I have a question about that that we can talk through, but on whether or not that's the right approach. But that's what I did. 3% profit and then I put a lot more towards owner pay so I can pay for my extravagant lifestyle here in Montana.

What exactly is the question you had around that?

Okay, so you know, small company, we're trying to deal with cost of goods sold and inventory and all that stuff. And so from someone like me who primarily basically shifts income from the business directly to, you know, living expenses, for lack of a better term for my own lifestyle, I'm curious about how that shifts that. No, two part question, excuse me, how that shifts the. For the cost of goods sold part of it. And then also just in a sort of sole proprietorship small business, you know, two people, that kind of thing. And whether distributing that towards more owner pay is a good thing or bad thing.

Yep. Okay, so we'll, we'll tackle that. So for most businesses that do profit first, you do not make an adjustment for cost of goods sold. And I actually don't even call it cost of goods sold. I call it material, materials and subs. And the reason you don't make an adjustment is because most businesses have inconsequential amounts of materials and subs and they're all considered an expense. And you'll learn why the consumer expense in a second. Because when we adjust percentages, we put, we want it to always be controlling and reducing expenses, particularly the bad ones. Some expenses are very good, they yield more profit. But in a business like yours, where there's a high amount of materials, product being purchased in advance, we need to subtract it out to get to, I call real revenue. And real revenue reflects what your business is actually doing. It's best shared by example. So if you were a home contractor, I worked with one guy, he was bragging about his fifty million dollar company. He goes, I make fifty million dollars a year in building houses. So I said, okay, how much of that money is redirected to buy the materials? Like how many materials you need to buy? It's like, well, that's a huge amount of our cost. We spent about $20 million on Sheetrock and wood and all these different materials that are required when we build these homes. I said, okay, do you and your team, do you do the work or do you sub out it. It out to contractors? He said, yeah. I said, how much? He goes, about $25 million of subcontractors, the plumber, the electrician. So I said, okay, you have a 50 million dollar company that spends 20 on materials, 25 on subs, 45 million dollars. What you don't, what you really have is a 5 million dollar company, not a 50 million dollar company. You, you have 50 million dollars of cash that you touch for a second, but 45 million of that is immediately redirected to other people to do their work. So you're not managing a $50 million company. You're managing a $5 million company that above the line just transacts or pushes around some money to other people. So we have to get to what's called real revenue and then we have to run our business off of this real revenue model. So let me ask you some more questions, Kevin. What is your total revenue for annual revenue for your company currently?

Oh, we're probably 120 grand.

Okay, 120 grand. How much do you spend on.

That's for all the business. That's for all the businesses together.

Okay. Oh, so good question. So. Or a good point. Let's focus when doing private first, if you own multiple businesses, to properly do this assessment, we need to break the businesses out separately. What's the total revenue for the detailers helpers business?

I'd have to guess a little bit, but we're probably last year, I think about 15 grand. I mean, we're not, we haven't really made a lot of money yet on this thing. So.

Okay, but here's the nice thing about profit. First, you can make $1,000 a year, $100 a year, or $100 million a year because it's a percentage based system. We can sort this out. And the nice thing is, the smaller your business is, the earlier you get started on profit first, the more you've positioned yourself to be on that beach, you know, with your smoking hot wife. So $15,000 in annual revenue. What is your cost of goods sold? Meaning what are the material costs to get those belts?

Material cost. Let me do, I'd have to. Actually. You. You didn't prepare me for this, right?

I didn't prepare. I gave you all the questions and answers in advance. Except for this one.

Except for this.

Say this.

Let's. For the, for the sake, for the sake of math, let's call it five grand.

Okay, Perfect. So what we are really running here is a $10,000 business. What we do with profit first is those allocations. The 60 plus percent that goes to your pay comes out of $10,000. The profit 3% comes out of that $10,000. Now here's how we adjust cost of goods sold when setting up these accounts in your business. You'll set up an account called well, product purchases or it's unique name to buy these products. When the. And you assign a percentage to it. 5. $5,000 of 15%. 15. 15,000 is 30%. So when a deposit comes in, 30% goes to a cost of goods sold account, this purchasing account. Then the remainder goes to your an account I call real revenue. That's the real money you're making. Then that money in the real revenue account gets allocated based upon the percentage you determined to owners pay profit, taxes and operating expenses. That way you know what your business is really generating. $10,000. And you see where the money is being allocated. Now here's the key with that the cost of goods sold account where you're accumulating money to make purchases. If we're not doing that rule of the four times. The four times rule, the four times plus rule, you're never going to have enough money to cover your cost of goods sold. So you're always going to be pulling from that. If you need to be pulling money from your cost of goods sold account to buy more stuff, that means you don't have the ratios set properly. You're not selling for a big enough premium.

Right, Right. Absolutely.

So that's how we set for now. We set a calculate 30% initially and then when you do the multiple, when you start increasing your prices, you should have excess money in there. Then you will, because now you're charging the appropriate premium that will flush right through. And you adjust your percentage on that cost of goods sold down to a smaller percentage over time.

That would make sense. Yeah, for sure. Because I do not currently have that set up and I'm not allocating enough operating expenses. So those numbers are upside down.

Right. And it gets a little confusing in a business like yours, especially as the business gets bigger. Because what happens is say your business goes from 15,000 next year, you do 150,000. And I hope that's the problem you face that rapid expansion. The thing is, if you keep the percentage the same for your owner's pay, 60 plus percent or whatever, you'll be taking out so much money that you'll never have enough left for your operating expenses. That's why we need to allocate money for product purchases first before we go through the profit first system. So that's how you address that.

And do you find that, and I know that it's sort of up to 250,000 and this, you know you have those categories, do you, over time you adjust those down as you make more money. Right. Is there? And so that's, is that typically what you're saying?

Yeah. So as your business gets bigger, the percentages start adjusting in certain categories. And the reason I did that is once your business hits 250,000 or above, you have to break out what I call the freelancer model, which is usually a solo practitioner. It's just you and maybe a little part time help over 250 in real revenue. So for your business it may be 500,000 or 400,000. And you know, we go to the real revenue adjustment and now it's 250. Once you get above 250,000 in revenue, chances are you're going to have to hire people and that starts shifting the model around on how much you can allocate to yourself and so forth. So the percentage being allocated to you as an owner for most businesses starts to drop, but it's a smaller percentage of a much bigger number. Your income should continue to climb up.

Okay. You don't use the Ebenezer Scrooge model. In other words, that's what I could get people.

Two pennies for a, or whatever. Oh, hey boy, get me a pheasant for two fennies. Kevin, believe it or not, we got a split. We just, we dug. I know you had multiple questions. Here's what I like to do. I'd love to have you back on a future episode. Maybe people could follow along and listen to your story. And we want to guide you through building a very profitable business here and in your other as businesses too.

Absolutely.

Cool.

I would love that.

Hi, Kevin, thank you for joining us today. We got to discuss you now internally and talk about what we learned from you.

Thanks, Kevin. Great job, man.

Thank you.

All right, so in a second we're going to recap what we learned here. Some interesting discoveries I think about small business. But first I do want to thank the corporate partners who allow Us to do this amazing show. So tsheets is one of them. Fundera. Let me tell you. T sheets is first. T sheets is time tracking software. Wheeze internally. By the way, we were having that one problem, remember? Like, you couldn't enter your time.

Oh, yeah. You process payroll. We couldn't enter like a week.

I was clicking on a button that gives you an option to lock people out. Oh, it's a protection mechanism. I unchecked that after calling their support, and they said, oh, you're just doing the wrong thing. And now you notice there's no more problems.

Yeah, we're good.

Yeah. So the. The fool was me.

Cuban error.

Cuban error. But I can testify to how good their support is. Next evil level support them almost. Fundera love them, right? Funding every. I can't think of a moment that goes by a day it goes by without us talking about Fundera.

Very true.

Okay. You know why? Because we record the show every day. Because we record the show every day. That's why you hear about. No, Fundera is fantastic. And you know, folks like Kevin are in a perfect position to use Fundera. Once you buy a product, once you figure out your profitability model, and that's one thing, you know, we're talking about Kevin first. He's not at a point where it's profitable just based upon that simple assessment of the four times plus rule. He's not there yet. But once he gets a profitable model, that's the time you use outsourcing. You bring on debt to buy higher volumes because you know you're profitable. Well, Fundera supports stuff like that.

You know who else is great?

Who?

Fundbox.

Boom.

Whoa.

Fund box.

Fund box.

Funderbox. First of all, they're cool people. I was talking with David talkin at the last conference of Sleeter, and the other guy's just a fun, good guy. Who was talking about using them? Someone I was talking to this morning. I can't remember who it was, but you know what Fun Box does? What do they do? You write an invoice. Say you invoice me for, you know, you do the opera. Singing on the side. Say you're like, mike, thanks for coming to my concert, by the way. Here's your bill.

That'll be five grand.

You know what's gonna. I'm gonna sit on like, five. I'm like, five grand. Like, I. I paid for a ticket and there's a fee. Like, I'll be like, I don't know if I have the money. It's not your problem anymore. Fundbox will release those funds to you until I sort out my meshugness here and send the check to you. So when you're not getting your invoices paid promptly, Fundbox releases those funds.

Nice.

And the Nextiva. Nextiva. I'll tell you, if you could fall in love with a company, it would be Nextiva. Kevin's got a hot wife. Nextiva is a hot company.

I was going to say, there are smoking hot stuff corporate partner.

They are smoking hot corporate partners. They are amazing. It's a voiceover IP phone system. They. They added an HD service that we've been using recently, too. The. The phone clarity is so clear. It's like someone's talking to you right in their face. It's pretty amazing until you think, like, God, this guy's, like, yelling in my face.

It's right up there.

And they're like, no. He's like, no, I'm calling from Montana, dude. Like, what's wrong? I'm like, you're in my face.

Christina, is it true that when Mike talks about our corporate partners, he holds both hands to his heart?

Yeah, he's fond. Lang.

I'm fondling my chest right now. Yeah, fondling your chest. Detailing your chest is. So I'm dealing my chest. I just needle my chest. All right, what do we learn from today? Christina, you're first.

I mean, there's obviously many, multiple reasons why you should be implementing profit first in your company, all the benefits that it has for you. But the biggest thing that I'm noticing is a trend is people are starting to notice how much money they are blowing on stuff that they don't need. I mean, Kevin even mentioned he probably blew about 40 grand this year on stuff that he normally wouldn't just because it's there.

Right.

That's just. I don't know.

You know, it's Parkinson's law, and I. You know, we've all experienced this in our personal life, that that check comes in, and maybe it's an off week where you get paid for a little extra time, or maybe you do overtime. And we just have this sudden feeling, whoa, I got extra money, and disappears like that.

Yep.

When we see it and it's available, we spend it. That's basically the basic definition of Parkinson's law. So what we do, what Kevin's doing, he's taking 3%, but he's taking a piece of money and hiding away. And I suspect when that happened, he realized, wow, I don't have nearly as much money as I thought. It's being tucked away now for other purposes. And he found that these expenses he had were unnecessary.

I know.

Yeah. Chris, what did you learn from Kevin today?

First, I want to congratulate Kevin for stepping up and really taking steps to bring his business to the next level. I mean, for God's sakes, the guys in Vegas, other people are in their rooms drinking and doing whatever else in their hotel room. Guess what he's doing. Spreadsheets for profit First. First business. Right.

Love it. Nothing sexier, right?

I'm telling you. So. So I also like how what you explained about taking the money out for inventory purchases first and then applying the profit first percentages and getting back down to the real revenue of your business. I really like that.

Yeah. Yeah. My hat's off to him, too, to come on. And you're sharing the honest numbers. You know, the numbers he shared is the reality of small business. Most people like, oh, you know, I'm roughly doing $1 million of revenue. And you look at. It's like you didn't even do 50,000 last year. So they just kind of make up these things. Here's what I liked about or here's what I found interesting in Kevin. Cash flow is king. I don't care what kind of revenue you're doing. If that money doesn't come in, you don't collect that money, it can destroy a business inventory. Turn is a big deal. Imagine this, say I gave you $100, Christina. And then I said, but here, you can't use it yet. It's got to sit on that shelf, and you can never touch it. It's just going to sit there for the next six months. It's not. I didn't give you $100. It's sitting there waiting. You can't get your hands on it. And you have an immediate need. Maybe you need to pay rent for your apartment. You need to do something. You can look at it on the shelf, but you can't touch it. It's the same as not having the money in the first place. So anything that sits on a shelf is burning money. It's wasted money.

Big tease.

Yeah, it's the big tease. It's the big hope. Inventory turns a big deal. The faster you can clear that stuff out, the sooner the money's released to you. So you always want to reduce inventory at any point. And in fact, if you're a manufacturer. I know he's not a manufacturer. There's a whole concept of lean principles. And one of the key lean principles is wherever you have inventory Piling up. You have a problem. Yeah. So remember that.

Got it. In the vault.

In the vault. Okay. Dude, we got to. We got to rock and roll. We got a few more things to share, Chris. Where can. Where can people learn? What can they do about rating this wonderful show we're doing?

Yeah. Check out our show in itunes and Stitcher and on tunein Radio. You can give us a rating or a review. You can also share these episodes. I mean, today's episode was very dense with knowledge, and I. I feel like I want to listen to it again. So that's the beauty of our shows. You can listen again. You can go back and binge listen on a Saturday morning when it's 70 degrees in New Jersey and you're walking on the beach in December. Right?

Oh, my God. Yeah, yeah. No, please leave your comments, leave your ratings, and come on the show. Like, you know, Kevin's gonna get a little more guidance off the air, too, through email and stuff like that, because he's come on the show. But here's the deal. Profit first is a simple system. People get lost in the nuances. So that's what we're trying to tackle in the show, the meaty kind of questions that people have. So come on, on and join us. By the way, if you need absolute guidance through this, Profit First Professionals is the place to go. That's our website. Profit first professionals dot com. Go on there. We have a gaggle. Gaggle of accountants and bookkeepers throughout the globe who are experts in profit first and addressing the nuances. They'll help you get started, they'll help you keep accountable, and they'll address all the challenges you face hand in hand with you.

And we have a Profit first app for the smartphone.

Oh, yeah. The Profit first app is outloaded. Go to itunes and type in Profit first. You'll find us right there.

Bam.

And in the distance, Ron outside the.

Studio, who runs this place.

He yells. He's all disappointed.

Well, this has been great. So thank you to Kevin for being our guest. Thank you, Mike and Christina. And if you want to know more about podcasting, go to my website, fractal recording.com. this is great. So we're gonna have a great guest next episode, right, Mike?

Bill Dos, bro. Oh, Bill. Bill Dost, bro. I don't know. I like to throw it. Ever since the episode we did with Chris Ducker and the whole bro thing. I was listening to that. It's hysterical. So, Chris, Chris, we're having Bill Dost on. We're gonna talk about equipment financing for businesses and stuff like that. And we're only a few episodes away from Married to Mayhem Part 2. How do you run a profitable business when your spouse is like, what the hell's going on? Now this episode. You better get ready for this episode, because not only is it my wife coming on, we also have a gay couple coming on.

We have Matt Perosi.

Matt Perosi and his husband Jamie.

I can't remember.

Matt and Jamie are coming on and talking about the dynamics there. Entrepreneur, non entrepreneur, married. With the added, you know, uniqueness or variable of being a gay couple.

Mayhem.

Mayhem. It's gonna be pure mayhem.

What could go wrong on that episode? I don't know.

Everything.

Everything will go wrong in that episode. Everybody is going wrong.

So check out profit first podcast dot com. Go listen to all our other shows. And we really appreciate you listening. So thanks, everybody.

See you.

Bye.

Here we go.

Oh, we're getting rid of this.

I like this part. It's like badass.

One hour of misery.

It's still going. Let's talk about profit for like five minutes.

Falling to your death.

I think there's like 10 more octaves. You think, like, you just think life is over that. That part of the bridge. I just think, like, like my musical life has ended. You're in the pit of hell and it's all over, and all of a sudden, out of nowhere, it's black.

I mean, wow, we're back. A little compassionate for the drummer, man. Jeez.

Got that drummer wants to kill himself. Alex Van Halen would be like, I can't even do that. Neil Peart would have, like, just given up on music overall.

Is this a different song?

Yeah. One drummer could have pulled off. Phil Collin. That's the only one Phil Collins, he could pulled it off. Yeah. Because that's. That's his film.

I can feel it coming.

If you take a. If you take that long to do your drum fill, you could do a drum fill for an hour.

Yeah.

Okay.

It's like a Frankenstein drum fill.

I did this one drum fill in my old hardcore band. My bass player said it sounded like grandma falling down the stairs.

That's when you hit that cheesy at the very end. Instead of having a nice, like, Zildjian symbol, you have this cheap china made crash cymbal. Like, you hit it, it goes like it has a crack in it.

It's dead. Great job, Kevin. Thanks, man.

Yeah, thanks, brother.

Thank you to Phil Collins Credit. He was singing at the time.

Touche, Touche. That is like. It's so funny. Like such a basic drum fill. And it's one of the most epic, well known drum solos of all time.

It is epic. It's the timing in the song too. The whole emotion of the song. Yeah, it actually, it hits right on that fill.

Hits.

You just got like a 4 for 1 deal on his toms. That's all. Like he had to use them all.

Four for one on the toms. Oh, my God.

And it's still doing a fill. I didn't realize that little.

Oh, there you go.

Little word entendre.

That's funny.

So hang tight. Kevin. Put on your seat belt.

Yeah, exactly.

And your helmet.

Got all four point harnesses. Nice.

Nice. I have a five point harness.

You do?

Well, yeah, I do.

I don't like the idea of sliding forth and forward and having those things squeeze me.

Oh, no, no. It doesn't go over my genitalia. It actually goes over my face. It's very hard. Yeah, it's very hard to drive or sit. But you're so secure.

You feel much more secure. Nice. I get that.

The beautiful thing is because you can't see, you don't drive. You just sit in your driveway the whole time. I've never been in an accident because of my five point harness. Is that ridiculous?

I think we have a product idea.

Five point harness. Guaranteed never get into an accident.

I also thought you were talking about the, the lower extreme there.

Like, you know, that's a six pointer.

As if your nickname was like tripod or something. There was a guy, there was a manager at one of my recording studios. This big black guy. His nickname was Rhino.

Rhino, That's a good nickname.

The question is, did he come up with his own nickname or did his girlfriend.

That's.

You know what? I don't know.

Rhino. All right, let's get this party started. Rhino. Actually, that's your nickname coming into this. Is that cool? Kevin?

Yeah, I love it.

Kevin the Rhino Davis. Okay, perfect.