How to Solve Your Spring Cash Flow Problem

Hey, everyone, this is Mike Andes and you're listening to landscape businesscourse.com today we are going to be talking about why you are so busy right now in the spring rush and yet you don't have any money in the bank and you feel like you're going in the wrong direction. We're going to talk about cash flow and what you can do to improve it. So before we get into today's show, though, I wanted to say a couple things. First of all, the audiobook is now available for zero turn. I know so many of you have been asking because a lot of listeners are podcast listeners who, like me, never have picked up a book in the past 10 years. And so you like to listen to the audiobook. So you can now go to audible.com, you can go on Audible, on Amazon and pick this up in the audiobook version. And I read this. It's like three and a half hours long. Check it out today. Go ahead and order that. Next thing I wanted to say is a big thank you to everyone that has bought the course and, and most specifically to the PRO plus members. So the reason I wanted to say that is because a lot of you have been sending some really nice emails and I try to respond back and thanking me for the increased amount of content I've been creating the past three to four months. And that has a direct correlation to the Pro plus member group. So there's 14 companies that pay $379 a month to be in a group with me. And that money has allowed me to spend more time here at the studio creating content, answering more of your emails, and thereby using that money to make sure my company, my landscaping business, can still operate and run. And so I want to say a big thank you to Pro plus members, also people who buy the course@landscapebusinesscourse.com all of that money is used to create more content, make this studio better, and by the end of 2019, offer classes here for your staff and for you as business owners. So I just want to say a big thank you to everyone that's kind of bought into that dream and what we're trying to do and has support it financially. And I thank you so much for doing that. We're working on a lot of things, tools for website building for landscapers and things that we're gonna have out by the end of the year before a conference definitely next year. So just wanted to say a big thank you there. But let's go ahead and jump in today's topic, which is cash flow. And the reason I'm talking about this is because I probably over the course of the past month gotten five or six emails about cash flow. And they don't necessarily call it cash flow, but this is basically the gist of the email. I am super busy. I'm growing really fast. I'm hiring lots of people. I'm getting crazy amounts of work. The phone is ringing off the hook. I'm getting web leads like crazy. I'm following the marketing things that you've been teaching and it's working really, really well. However, it seems like there's no money in the bank and it feels like I'm actually losing money and I'm bleeding cash. And so almost all the time when I hear that from a landscaping company, there's a couple things at play. Number one, you have to remember that growth sucks cash. I've said this for a long time, but growth sucks cash. So if you're growing more than 20% a year, there's a very good chance that you are not as efficient as you could be. And this is a very, this is an absolute reality I see in so many landscaping business. I see it in my own landscaping business. Something that we're going to be addressing at our off site meeting this week is like, okay, we've been growing like crazy and now it's time to implement efficiencies, to actually capture profit and make it more profitable. And so you have to realize that if you're growing really, really fast, there's going to be inefficiencies. And when I say that, it means you're gonna have, you're hiring lots and lots of people. So it's lots of training expense, there's turnover, you're getting new people on board because you're just growing so quickly. And so there's more inefficiencies there. People don't know their roles, their responsibilities. You're constantly training other people. There's more overhead because the training costs money and it's not actually producing billable hours for, you know, they're not at lawn care, landscaping jobs. You have more office staff because you have to get all these leads that are coming in. You have to create estimates for them all. So there's more labor on the overhead side than there is in the billable hours. And so growth sucks cash. If you're growing more than 20%, even more than 10%, sometimes there is a very much a factor of your cash flow is that growth does take cash. And so that's going to be an element to it. That's the first caveat I would say to the cash flow equation. The next thing I want to talk about specifically today though is how do you fix that? Like, why is it that during the spring we all don't have enough money? Well, not all of us, but why is it that it seems like so many of us don't have enough money or it seems like we're losing money. And so the main reason for that is cash flow and the amount of time that it takes for you to get paid on the work that you do. So I want to talk today about several of the ways you can attack this problem. And the reason I'm going to talk, I could probably nail it down in one or two, but I don't want to. This is the problem I find is that if I say something really radical like number.

Three today, which I'm gonna talk about, which is basically invoicing people every single day that you do work and billing them, then for some people that's just a massive jump. So I wanna kind of give a range of ways that you can improve cash flow. And some things that we have implemented in our business, some things that we are going to implement, some things that we're in the midst of implementing. And again, like this whole business thing, you never hit a finish line, you never are done. There's always efficiencies, there's always ways to become more lean, there's always ways to become better. And so we're still figuring this out, but these are all things that we have either done or are doing right now for our business. So the first way, obviously the reason, let me explain this a little better. The reason that you feel like you're not making money right now is this. So you've gone through December, January, February, the winter months, maybe you've been, you know, your cash reserves have been dwindling, especially if you have full time staff that you're trying to keep on board and you don't want to let them go or go on unemployment. So maybe your cash reserves are dwindling, but during that time you invest in infrastructure, maybe you got some more equipment, maybe you got new trucks and got ready for the massive amount of growth you're expecting in 2019 or whatever year you're watching this in. And so you've basically scaled up your equipment and your overhead and your office and all these other things in expectation of the growth. So again, growth sucks cash. Knowing that you're going to grow so much this year, you've invested a bunch in infrastructure, in resources, in terms of people, and in equipment, all the other things. You need to be able to sustain that growth going into 2019 and for the rest of the year. And so you've done all that. Your cash reserves have slowly declined throughout the winter. Then what happens is you hit, say, March in our market, maybe it's April for you. You hit the busy season. And at that time, you're now hiring and you're getting a bunch of people on board, you're training them. So now it's not billable hours, it's actually overhead. And then at the same time, you also need to invest a bunch of money in marketing. Cause that's like the prime time to market is in that spring rush time when all the consumers are thinking about it. And if you get them on board now, you get them for the rest of the year instead of if you get a mowing customer in the middle of August, you only get a couple months of mowing, but before the end of the season for most markets in the US and so this is the time that you're investing the most money in your people. Cause you're hiring and training them. You're investing the most in your marketing. Because if you capture a lead now and capture a client now, they have the highest lifetime value over the course of this year. And then you're also spending the most in terms of equipment and infrastructure and overhead and all these other things during your spring rush. It's also the time, by the way, that you're the most stressed out and you are really, really working a lot of hours and there's a lot of stress involved. Maybe these things happen to the family, the business, and all these things are pulling you different directions. You're working 80 plus hours a week maybe. And you know that maybe that's not what you do the whole year. Maybe the rest of you, you only work 40, 50 hours a week. But you know that this is the springtime. You got to focus on it. But yet at the same time, you're working more hours. But. But yet in your bank account, you still see the bank account balance dwindling just like it did during the winter. And for a lot of business owners, it just freaks them out because they're like, okay, maybe I grew too fast. Maybe I shouldn't have bought the equipment. Maybe I shouldn't have hired these people. Maybe I should fire everyone. Maybe I should just go back to being solo. And for some people, maybe that's actually the truth. If they've built their business in an unsustainable way, or they over leveraged or they hired the wrong people. But it's also most of the time a function of cash flow. And what that means is, let's say April 1st, you start mowing lawns. Now in March, the middle of March, you've got to hire people, you've got to train them, you've got to buy all that equipment. So a lot of cash is poured in March to get ready for the April rush. Okay? Then you hit April and you start mowing lawns April 1st. Now, you've already paid two or three times of payroll to your employees, the ones that are new that you've been paying and they haven't actually been producing work. Yeah, them, you've been training them all these things, you've had to pay them a couple times, you've already had a couple pay periods go by now you're into April, they start mowing lawns, then they go, they mow all throughout April. And then at the end of April, you send out an invoice to all your mowing customers. And now you've paid for like six weeks of payroll for all these employees. But when you send out those invoices, it's not like you get paid right away. They might take 10, 15, 20 days. You send the invoices out, maybe by email, mail, whatever you do. And then maybe a couple weeks later, they send a check back in and then takes you a couple days to get to the bank. So by the time you mowed Mrs. Jones house on April 1, you send her an invoice on May 1, you might not see the money in your bank account until May 20 if she pays on time, let alone Mrs. Jones, who was on vacation and doesn't get your invoice until she gets home and ends up paying three months later. Right? So let's assume that she pays on time, she gets the invoice, gets the check book out, writes it out, sends it back to you, and by May 20, you're getting a check money in the bank.

For work you did April 1st. And the problem is that you have six weeks where you have to float all of your expenses in terms of labor, equipment, overhead, fuel, insurance, all the things that go into your business, all those expenses, you had to pay those April 1, maybe you had to pay them April 10 on payday, maybe you had to pay for the truck throughout April, you had to pay for the gas the day of performing the work, and yet you're not getting paid for six weeks. And so in that six week window, you're not making any revenue and yet all your expenses are still there. And so this is the season. That six week window is also the season when you're the most busy, you're the most stressed out, you're working the most hours, you need to be investing the most in terms of marketing. And so that's why people get discouraged. The cash flow. Now for some businesses, they have a huge stock reserve of money and they're able to sustain that just fine. They're like, okay, they just know going into winter they need to have a certain amount of money, a certain amount of cash in the bank in order order to get through the winter, get through the spring rush when all that's happening, and then they're fine. Now for most of us, we don't have massive amounts of cash or we don't have enough. We don't have 50% of annual revenue sitting aside in a bank account going into the next calendar year. Most of us don't have that. So what we do is we need to focus on our cash flow. So I'm going to talk about several different ways, four different ways that you can improve your cash flow problems in the spring. All right, Number one, this one's talked about a lot and I'm thankful for it is credit cards accepting credit cards. Now, I know there's a 3% charge to accept credit cards. It's like 3, 3.5% credit card charging fee. But this is how I look at it. Okay.

If you get money on April 1, or, sorry, if you perform work on April 1 and on May 20, you get the money. There is a time value of money and you can just Google that, Google time value of money or watch it on YouTube of a short clip of what the time value of money is. And if you just look at the, you know, the interest rates as kind of like floating around today, whether it be for home equity line of credits or for, you know, average stock market performance, whatever, let's say 5, 6%. If you do Mrs. Jones work on April the first for $20, the value of $20 on May 20th is like $21. It's like $22. So if you can get paid faster for Mrs. Jones by taking a credit card and yes, you lose the 3%. But really the real expense of if you actually do the math of a credit card transaction is more like 2% if not a little bit less, simply due to the fact of time value of money is involved. In other words, you are act. If you give Mrs. Jones $20 worth of work. But don't collect that money until six weeks later, you are acting as a bank. And I'm sorry, you're in the landscaping business. You're in the lawn care business. You are not a bank. Stop allowing your customers to treat you like a bank. If you're doing landscaping, make sure you're getting 50% at least before they even schedule the job. That's gonna cover the supplies that you have to order. It should cover the labor involved in that job. And so that when you come to the end of the job, that 50% that comes is going towards overhead and it's going towards net profit. Or if you break up in three segments, do like 50%. 25. 25. Whatever it is for landscaping jobs. For lawn care jobs, though, we're talking about specifically maintenance and mowing and things like that. Accepting credit cards is something you want to do because if you bill monthly and you do the work on April 1, now you can bill the minute May 1 rolls around. So you cut out 20 days worth of waiting on Mrs. Jones to get home from her vacation checkbook, write out a check, send it to you. You go take that to the bank. Oh, Mrs. Jones didn't sign the check, or she put the wrong number on there, and you got to send it back. And there's a bunch of admin time. And just like handling the check. And so when you start growing and scaling, there's a time that your admin staff, your office staff have to process that they have to open up. Like, this is something you gotta think about. Open up the envelope, take the envelope, take the checkout, make sure it's reconciled correctly in your software, Then put it together and make a bank slip for the deposit. Like, this is time. And so if you actually look at the cost of a credit card, it's a little bit less than 2%, not including, because that's the time value of money that equates for the extra one, one and a half percent. Then you take into account the fact that you got to have admin staff and maybe you as the owner have to go to a bank. Like, all of that time. That costs money. So really, the actual expense of a credit card is more like 1% if you actually run the numbers. So the first way that you can improve your cash flow is accepting credit cards instead of just checks. I could talk about that for a long time. Not gonna do that. Number two is weekly versus bi weekly. So during the spring and during the fall, traditionally in most markets is when the grass grows. The most and so therefore, if you have a rate that you charge, say $40 per mow, it might take 20 minutes in the middle of August when the growth isn't very much. But it might take 50 minutes in the middle of March and April when.

You don't have the money. And yet it's taking the longest amount of time. It's costing you the most to perform the work, and yet you're getting charged. You're charging the exact same amount. So do I recommend that you charge by the hour? No, I don't. I've always said charge a rate by the job. But what I would recommend is making sure that your people are on weekly instead of bi weekly. So many people are bi weekly throughout the year. But a bi weekly MoW in the middle of April can accumulate 6, 8 inches of growth and you're spending 3, 4 times as much time mowing that lawn than if you would if it was a weekly mow, simply because the growth just gets so long, the guy have to double pass on the mows, the edges become overgrown. It's like crazy. So you can literally make sure that people, you can require for people to go from bi weekly if that's their regular schedule, but you can require them during the fast times to be on weekly service. And you might say, well, people would be mad, they would quit their service, blah, blah, blah. Well, you got to get to a point where you have to be comfortable with scaling back the number of clients you have and making the ones that you have more profitable. And so if that means requiring, this is something we're going to be doing, requiring weekly service during those crazy months of, for us, it's March, April. For you, it might be April, May, whatever it is, require that. Now you say, well, that's kind of crazy. Why would they want to double the amount of services you can make it where it's discounted if they do a weekly service. So for example, you should be charging at least 50% premium if someone is bi weekly versus weekly. So for example, if someone's $30 for a weekly service, they should be $45 for biweekly service. You should incentivize people to be on more recurring services. So number one is credit cards. Number two is try to get people on weekly service during this time of year so that you're not going way over your budgeted hours on your jobs. And you can make sure that if they are going bi weekly, that you're going to charge at least a 50% premium for them to do that. The third thing is invoice daily. So this is something that we've really been thinking about a lot. And for some people, I'm going to add like a, a B part to this. So invoice daily, or B, have a net 10 term on your invoice. What that means, net 10 means that they need to pay their. The invoice is overdue if they don't pay within 10 days. So so many people, they just assume net 30, which is like, people can pay within 30 days. This is why it's illogical, is because if you email someone on the first and they open up on the second, there is no reason why they need 28 days to send you a check. All right? So if you make it net 10, what's gonna happen is they're gonna open up their invoice, they're gonna see it's net 10, they're gonna write a check and put it in the mail, and you'll get it, like the fourth or the fifth instead of them opening it up, seeing an invoice, and like, oh, I have all month to pay this. And so they just wait a few weeks before they send you the check. And meanwhile, you have to float that expense. You have to float that cash flow the meantime. So a really simple way is to make it where if people don't pay within 10 days, their invoice is overdue. And so we could get into, like, terms of overdue and collections and all that stuff, but we're not going to go that direction right now. But the really fast way, simple way is make your invoices net 10 instead of net 30, and enforce those overdue invoices. But the ideal thing is to invoice daily, which means every single day when the work is done, you are charging the credit card they have on file. So we talked about credit cards. The next step is like, can you invoice them every single day? And their credit cards just dinged every single day that service is done. This is the ideal situation for cash flow because no longer do you float money at all. No longer is it even charging the credit card. At the end of the month, when you do Mrs. Jones lawn on April 1st, you charge her card that night at midnight, and her card is on file. And if the office comes the next morning and that transaction didn't go through, they're gonna be contacting Mrs. Jones to get updated credit card information. You're gonna reduce the amount of collections you're gonna have to do, because you're gonna know when people aren't paying Right from day one instead of doing like six or seven services and then finding out they're gonna be delinquent and you're never gonna get that money. So charging credit cards every single day is ideal. Again, the first step you could probably do is do net 10, you know, change your invoice terms. The next step you could do is accept credit cards. The next step beyond that is do accept credit cards and invoice every single day. You know, the next step after that could be where you require weekly service instead of bi weekly during a certain period of time. The last thing I would do is number four, and that is raise prices on customers that change their mowing schedule. All right, so everyone knows that in most markets if you're not on contracts, so again, contracts versus non contracts could be a whole other video. Traditionally, non contract companies scale faster because it's easier to sell over the phone. It's easier to sell without having to be there in person. It's easier to keep them on board, it makes more sense. It's easier to retain them over the winter if you have a time where you don't have to mow, et cetera. We could talk about contracts versus non contracts all day. Would I want a business that has contracts over non contracts? Absolutely. But do I think the business that is going to have non contracts can scale faster? Yes. So if you might be in the point where like, well, I don't need my business to grow anymore, again, this might be something you switch over to contracts. This could be actually number five is like when your business hits a certain size, if you're like I'm about right, this is when you can start implementing these things and weeding out the customers that only want bi weekly service, that only pay by by check a month after they get the invoice that only are always delinquent. You're always following up with them, you can start weeding those customers out. Once you've hit the point where you're like, okay, my business is the right size. And so maybe when you hit the right size, you start implementing where they have to have contracts, they have to have 12 month service, full service, they have to do mulch, install, weed control, bush, trimming, mowing, every single week, tree. Like everything, everything's included and you just start requiring that and weeding down your customer base and keeping it the same size. But they're more profitable and your cash flow problems are solved. But if you're not going to do that and you're just going to charge by the service for Mowing, for example, make sure that you charge the customers that change during the summer. So this is. For most markets in the US you have a really, really busy time during the spring, grass is growing like crazy. You're not as profitable on those mowing jobs because you're charging the same amount per service. But then during the summer, you kind of get this lull where there's not much growth and you can get those mows much, much faster. And that's actually where you make a bunch of your profit from mowing is during those few months of summer. And then it picks back up a little bit more towards the end of the fall, and the grass grows more and things. But during the summer, if you're getting a bunch of customers that are like, hey, grass isn't growing, let's just pause service and I'll call you back when I want you to come back out. And they don't do service for a month and a half or two months, I would raise the prices on those customers. Or this is what we're gonna be doing is telling the customers up front, hey, this is why we need people to stay consistent throughout the whole year. Explain to them about labor. Explain to them about we hire all these people in spring, and then if everyone did this, we would have to. It would be very difficult for us to retain our team. And just make it clear that, hey, if you change your schedule during the summer, we're gonna have to raise your price because we gotta make up for that, that reduction in revenue. Explain it to them. That's what we're going to be doing. And so I would highly recommend if you have customers that are changing their schedule, because those are the most profitable mowing services of your year is during those summer times, during July, August, September, maybe, depending on your market, when you can make the most money is during the time when the grass isn't growing as fast. Your crew can do the job in half the amount of time in comparison to March and April. And those are the times when that customer is now all of a sudden not needing service and you're on, which is going to be really, really detrimental to your labor force come September, when everyone wants service again. And now you're pulling people off landscaping jobs or pulling. Or you have to hire more people to.

Suffice that demand that all of a sudden is created because they now want mowing services. So raise your prices on them. If you lose them, you're not gonna cry about it because you're losing a customer who cancels service on the services that you make the most money on. But yet in the spring and fall when the grass is growing like crazy and you're not making anything, that's when they want you. So that's something to think about. So I hope some of those things. I hope it gave you some ideas. Number one is accept credit cards. Number two is weekly versus biweekly, making sure they pay a premium of at least 50% if they're gonna go bi weekly, invoice daily. Number three or have a net 10 term on your invoice. Number four is raise prices on those customers that change their mowing schedule during that couple months of summertime when the growth slows so that you raise their prices to the point where you can still make money on them spring and fall. So that's it for today. I do want to make sure everyone knows about Landscape Summit. You can now register. Just go to landscapebusinesscourse.com conference or just go to the main website and click the conference tab. It will be the best conference for landscapers you will ever go to, and I'm looking forward to it tremendously. It's $299. It's gonna include your lunch and your breakfast both days, and it starts on Thursday evening. And we do a couple sessions then all of Friday, all of Saturday. Long days, but it's gonna be absolutely packed with content. We're gonna do a tour of my facility and I really look forward to meeting each and every single one of you. Last year we had about 50, 60 companies. I'm thinking this year we'll get about 100, 120. So I really look forward to it. Check it out. Make sure you sign up. You, your managers, your staff, your management team. It's a great event to come to. It's in January. Check it out. And thank you so much for listening, watching, and paying attention to landscapebusinesscourse.com.