THE Cash Flow Masterclass for $200K-$800K Owners!

Hey, everyone, it's Mike Andes. And today we're talking about cash flow. I'm going to be talking about five different things that you can do in your business today to immediately collect money faster. Now, this segment, it was live, and if you're watching this on video, it gets a little grainy. But listen to what I'm talking about, because these five things can be changed in the next few hours in your business and will immediately unlock the amount of revenue. These are things that you can do today. In my opinion, there are three major segments of a business. Ultimately, we look at home services. We have to get the work, we have to do the work, and then we have to get paid for the work. So I think of this as sales, operations and admin. Sales get the work, operations do the work, and number three, admin get paid for the work. Admin does other stuff too, like payroll. They grease the gears of the business doing, doing its job. But ultimately admin is responsible to get paid for the work. And for some reason, some of us do a really decent job of getting the work. We do get sales, we do marketing, we do advertising. And most of the calls today already have been about sales. And a lot of us, the vast majority of us, because otherwise you wouldn't be in business, do a really good job at operations. We do high quality work. Customers are happy, we do good customer service. Let's go. And most of us really, really stink at the third one, which is getting paid for the work. It just so happens that the reason you got into business, though, is to get paid and make more money. And yet you would think that we are simply running an advertising campaign or running an advertising agency that gives away free work because so many home service business owners do exactly that. We spend gobs of money on getting more leads and then we spend tons of time, blood, sweat and tears, managing team members, managing customers, expectations to do the work. And then for some reason, after the work is done, the job is completed, the walkthrough is completed. We just like don't care about getting paid. It boggles my mind. Last. I guess it'd be last month. Last month I went to a business that is roofing. You're gonna see this on the turnaround show. So I can say their name. It's good hands roofing. The best people ever. Best people, best family. I love them to death. They had a business that did $1.6 million in revenue last year doing roofing to. This is the problem. $278,000 was owed to them. $278,000 on a 1.6 million dollar business is about 15% of revenue was outstanding. You know what's crazy is that was all of their profit. And if they would just have collected on everything that was currently owed to them, they would have probably felt really good. But when there's no money in the bank account, the reason being we haven't collected on the work we have already finished. Customers owe you money. And the bottom line is this. A fast growing, profitable home service business can go bankrupt. A profitable, fast growing business can go bankrupt because they did not collect on the money fast enough. All right, here, I'll actually draw this out. All right, let me make this a marker and draw this out. See here. Let's go bigger on the marker situation. Okay, very good. Okay, here's how I like to think about. And you'll see this in the turnaround coming out in a few weeks. This is zero, this line. I think you guys can see this one second. Okay, this is zero. All right. When the job starts out, let's say like Good Hands Roofing was expecting a 20% deposit. Okay, so they actually like were above zero, like immediately. Someone gave you 20, 20% of the job. Let's go. But then they have to go buy materials, then they have to start the job, have to pay for all the workers, and then let's hope and pray the customer pays the rest of the job 80% afterwards. And if they did that, then we'd be profitable. Here's the problem. If you don't collect payment for 80% of the job, you are floating a huge amount of cost of goods sold, which is your materials, your direct labor and your subcontractors. And we talk about all of this in Cure number one of the book. You got to know your cost of goods sold to be able to know whether or not cure one will work for you, which is shutdown mode. That being said, at Good Hands Roofing, they were collecting 20% up front and $278,000 was owed to them on a $1.6 million business. And so the thing is this the reason that a fast growing home service business that is profitable, like they are profitable over here, once they get paid, they are profitable. Healthy profits, by the way. But if you start stacking more and more and more jobs and you're growing and getting bigger jobs, more jobs, and this gap, if it starts taking 30, 69 days to collect on money, will catch up with you. And that is what leads to a lot of people getting into credit card debt, into lines of credit. And they're essentially floating their cash flow because they are in the red. There are jobs where actually points in time throughout the entire job that they're losing money. And many times it's after a day or two after the estimate is accepted and the materials have been ordered. So, so you get 20% down. Great, we're on the schedule. You are floating that job like you are in the red. By the time you pay for the materials, your employees get paid, all your contractors get paid, everything gets paid. And then six weeks later, they pay you. You are in the red for six weeks in the red. You're like, well, I'm profitable at the end of the job. We're 15, 20% profit. We're doing good. You are in the red. You are negative cash flow on that job for six weeks. So if you stack enough jobs on and as you grow, this gets more and more painful because you're in the red more often. So let's talk to today about the five ways to fix the cash flow problem if this is a problem in your business. Now let's, let's, let's run something. Let's run some math. Okay, now one second. I think I can show you my remarkable. Give me one second. This will take me about, I would say one minute to figure out, but it'll be better than me sticking this thing up in your face on the screen. I'll just show it on the screen. If I open this up and then open this up. Oh, no, I might not connect to this. Wi fi. Give me one second. We're working on it. We're working on it. Can I share present with Screen Share Connect app? Let's see if this works. All right, Loading. Okay, so what I'm going to show you now is how mathematically this makes no sense. So here's how this works. If we have business, we have business on a monthly basis that is doing $300,000 in revenue. And let's assume a 15% profit margin. Okay, so 15% profit. Okay. I'm showing here how a profitable, fast growing business can still go bankrupt. All right, so that means that on a monthly basis we have 40. Whoops. We have $45,000 of profit. Very good. You're like, man, this is a great business. Okay, our expenses on this business are going to be 255,000. Very good. Now here's the problem. When we look at this revenue, the problem is that we have 200,000 of it we've collected and 100,000 of it is still in accounts Receivable. In other words, people owe us money. Now, here's the problem in this example is I have collected $200,000 in my cash flow, so $200,000 in, but unfortunately I still have $255,000 out, out. So what did the net net of this negative $55,000, my cash balance in my bank account has gone down by $55,000, even though most people would say they are profitable because you're looking accrual, which means I earned the money and therefore I am profitable. But if you don't collect on the money and your accrual accounting, that is when I earn the money does not match up with when I collect on the money, my cash accounting, then I could literally have a negative cash balance in my bank account, even though I have a profitable business. And so just doing the work alone is not sufficient. We need to actually think about collecting on the money. And so I'm going to go over five different ways to prevent this problem from happening. Now, the band aid, by the way, the band aid fixed, is to get a line of credit for about $100,000 that I can tap into for 55 grand. Because I do know that I will eventually be profitable, but I've got to float the $55,000. And that's why many people go into credit card debt. That's why many people will go into lines of credit. And that's very risky because if all of a sudden you get more and more of those jobs and that $100,000 line of credit doesn't work because now I doubled the business and guess what? Now I need $150,000, 90, $200,000, 90 more credit cards. And guess what? When those are maxed out, when you're waiting for a massive project to pay that, that's usually when you get a car accident, you get a lawsuit, you get a workers comp claim, that's when crazy stuff happens. And if you're not ready for it and you don't have any money in the bank because you have all these jobs that are profitable on paper once they're finished, but in the meantime, they're negative cash flow, we have a problem. And so again, the band aid fix is to go out and bridge the gap via a loan, via credit cards, via lines of credit. And this is what boggles my mind. People are like, I'm not going to pay 1% if I get no for an ACH or I'm not going to pay 3% for credit cards. But yet they're willing for some crazy reason, to pay 10, 15, 20% on a line of credit, on a credit card, and yet they're not willing to pay 1 to 3% for ACH or credit cards. To just charge them and get the money immediately boggles my mind. It is crazy to me. I have talked to people before that are using lines of credit and paying on their credit cards, minimum payments and being 15 to 20% on interest, and yet they're afraid of paying 1 to 3% to a credit card processing company so they can get the money immediately. Like, I'm not going to wait for the check, I'm going to go pick up the check, but they're not here. Customer's on vacation for a few weeks, so I'll get in a few weeks. I want the money right now. Once the work has been completed, the job is due, the money is due. I want the money right away. Any time after the job is left elapsed, after I have paid my employees, paid for the material and it's all on the job site and it's finished, I want to be paid immediately. All right, five ways, five ways to be able to fix the cash flow problem. Because I want to collect my money as soon as possible. I want. The bottom line is this. This is why some people get very rich and why unfortunately poor people stay poor is they don't understand this one fact. I want to collect money as fast as possible. I want to pay it out as slow as possible. There are, you know, when you get like a CFO and you get people controlling the finance of the business, their job is literally to do one thing, pay bills as, as slow as possible. This is why your commercial jobs don't take so long to pay. Because they know this and they have people in place to make sure instead of paying you immediately, they pay in 30, 60, or 90 days. Because they know if they can extend the terms and have a period of time where they don't pay for 60, 90 days, they get to keep that money. And if they can at the same time collect as fast as possible, they actually have a negative situation, a different situation. They're able to collect money before they even have any cost of goods sold going out. Because they collect money fast and they're slow. The money goes out slow, and that's all you want. You never want to. You never want to pay a bill faster and you never want to be paid further down the road. Never. From a cash flow perspective, I want money fast and I want to pay my bills slow. Okay, so let's go over these five different ways to fix your cash flow. And these are the things you're going to see in the turnaround with good hands roofing. And we will find out very shortly whether or not they turn things around. But let's go ahead and talk about these five things. Number one, on your estimate, you can change the payment time terms. Now, for some reason in this industry we are in love with 30day terms. Net 30. If you pay us within 30 days, then you're good to go. After 30 days, then you're overdue. I don't know why we are okay with that. I think that is crazy. The fact that I am going to do a job and 30 days later they're going to write me a check and then it's going to get to my house in three or four days and then maybe the week after I'm going to take it to the bank and actually get my bank account. It could be five, five, six weeks before I actually get paid and the job has been completed and I've already paid my employees, I've bought the materials. All the cost of goods have been dumped on that property. Why in the world I am going to make it due upon receipt at the very worst, maybe seven days. I will give them and we'll talk about why. Because I'm not going to accept check. I'm going to require them to have cards on file, which we'll talk about in a moment. So there's no reason for them to have 30 days. Got to give them time. No, no. I'm going to make sure I get paid as soon as possible. And that is going to include estimate terms and payment terms are not net 30. I don't know why in this industry we think it's normal to have net 30. Why would you let someone pay you two pay periods after you've paid all the employees to do the work on their property? You're in negative cash flow on that job. Let that sink in for a moment. The fact that on April 1st you did their property, you build them later that week and now middle of May, they're paying you. You have paid all of the wages out for that job, you've bought all the materials and we are in the red. Make your payment terms due upon receipt, which is when the job is done. And I send you this invoice. It's overdue. And the reason it's overdue is because you should have a card on file. You should have a bank account on file, which we will get to. But number one, we gotta pay. Change the payment terms. Even if you don't even charge fees, like inside of copilot, you can have it where fees start to accrue automatically after 30 days, 15 days, or whatever you want to do. You can do automatic fees getting added. You can do that. But even if you don't, at least just pay, change the payment terms on the. On the estimate that say it's due upon receipt and a credit card isn't required. All right, number two, deposit thresholds. Okay, Another way, another thing that we talked about at Good Hands roofing was get 50% down. I don't know, like kind of industry standard. Do 20%. Look, the customer has not changed their roof in the past. They have not gone and realized that it is industry standard to get only 20% or 25%. Get 50%, give them a discount if needs be. I need all of my cost of goods sold covered with the deposit. And the vast majority of home service businesses, if they're running a solid business, can cover your cost of goods sold if you collect 50% of before the job starts. So that way, back to our little example here. Boom. Back to our example here. What I'm trying to do here by getting 50% down, I'm trying to go like this. Get a bigger deposit so that as the job gets paid out, I don't have as much of a negative cash flow because I got more. Right, right, right, right, right, right, right. More of a deposit. So in my opinion, at least 50%. If I get 50%, I know I'm usually gonna be able to cover my cost of goods sold, which is my direct labor, the materials on that job site. All right, number three, pay in full. Okay, so this is something that I talked about with Good Hands Roofing is like, hey, look, we talk. We're taking 20%. That's fine. I would rather 50% on deposits. But I said in the best case scenario, they would pay the entire estimate up front. And you might think that's crazy. There's no way that will work. No, it does work for about 10 to 15% of your customers. If you give them the option to pay the entire estimate in full, they will do so. Why in the world would a customer pay in full when I'm also giving them the option to be able to pay a deposit? Here's why. Because they trust you. You've done work for them in the past. They know like and trust you. You've done service for them for years, and they just don't want to be bothered with a Secondary invoice that they deal with later. So what do they do? They just pay the whole invoice up front on the estimate instead of the deposit. So here, actually, to show you real quick, give me one moment. See here, when it's asking for the deposit, it's just simply also saying, hey, would you just want to have the estimate total? So instead of 50% down, I am going to be asking for the estimate total. It's just there. Anytime that we're asking for a deposit, we're also asking for painful. And some people will do it. And why in the world would I not want the money sooner? Because, remember, the whole goal is to be able to get collect money as fast as possible and have it paid out as slow as possible. And good hands, roofing is great, great people. They're fantastic. And he was concerned by the fact that, hey, I'm robbing Peter to pay Paul because I could technically start taking the money from this first job that I got for 100% down and pay in full and start applying to a different job. Yes, you could do that. And that's a completely different problem. That's an accounting function. That's a totally different problem. But ultimately, there's never a reason, never a reason why I do not want to accept money sooner and pay bills slower. And so if someone gives you the ability to pay in full, I want that money. That money means something to me. And I even told him, hey, on a $30,000 job, I'm willing to give up 5%. I'm willing to give the customer a discount if they pay me today. Because if they're on the schedule for two months from now, and then I know on average six to eight weeks what goes by before people pay me in full. I'm talking about having that money for two or three months before I otherwise would if they just pay the whole job up front. So even if you have to give a discount for paying full, I'd recommend it. But when we just literally I just showed you just show estimates with a deposit. And we have inside copilot, like over a certain dollar amount. Hey, do you. Here's the deposit. And you can customize all that here actually to show it to you. Like, this is how we have it set up inside copilot. So in your estimate settings, you set your estimate threshold right here. So, hey, anything over $100, I'm requiring 50% percentage. So you could change this to like $1,000. You could change this to a dollar amount or 20%, whatever you wanted. But this is. You just toggle this one little button right, right here. Oops. You can't see it. One second, one second, one second. Whoa. Someone gave me $4.99. Whoa. We're out here getting rich. Okay, one second there. That little toggle right there is going to give you 10 to 15% of your customers will just pay the whole thing up front. I believe we can get that to 20%. As time goes on, we refine the user interface. I do believe that also, as you have more and more customers that have been with you for a long time and they already know like and trust you, this number will also go up and all it is a little toggle that when they're paying the deposits, like, hey, we just want to pay this whole thing up front. You're like, why in the world would they do that? Because they don't want to deal with another invoice getting paid down the road. They're busy. These are working professionals. These are people that have three, four houses. They don't want to deal with another invoice. They already know you're going to do a great job. They'll pay the whole thing up front. All right, so that's how the settings work. Anytime a deposit threshold is hit, it's going to give them the option to pay in full. You can toggle it on and off. All right, that was. Which was number three. So the third way to be able to fix our cash flow problems is pay in full. The fourth one is credit card and ACH on file. This ties back to the first way to be able to fix the issue, and that is not having net 30 and then requiring. Requiring everything is paid, like immediately due upon receipt. Which means when the work is done, the job is now ready to be paid. And the moment after the job is, is not paid and is completed, it is overdue due upon receipt. And the reason you can have that as your payment terms is because you require a credit card or an ACH to be on file before the customer even accepts the estimate. And so like, we built this in in copilot because it's super valuable to us. Because here's the challenging part. Like, if you don't have a. Where they have to have a car and file before estimate accepted. If you allow them to accept the estimate, then you've got to go like, follow up with them to get a credit card or follow up with them to get ACH on file. And the first email you're giving back to them is now, like, can you give us money that goes to spam a lot of times. Also very difficult. And it's another step. I have to get them to contact me back. And for us like I am not doing service if you don't have payment information on file. Which means they could in the past accept the estimate and then I'd have the job coming up like oh man, I got it. Like got to make sure have to go back and I have to like send them a message like hey, we can't do your job unless you get this credit card information on file. Awkward, weird, strange or you risk doing the job and then them not paying you. And so what we built inside of Copilot is like before they even accept the estimate, it's very easy in the workflow they have to put a card information on file or ach on file. But that has to be done before the estimate is accepted. That means when the estimate gets accepted, I know without a shadow of doubt that I can get the job on the schedule and have payment information on file so that I am able to have due upon receipt. Because you have due upon receipt without card information on file, without ach information on file to be able to charge immediately. That means that customers are going to get their invoice at the end of the job and it's going to say overdue and then you'll get some mad customers. So what I recommend is before the estimate is even accepted, when they're paying the deposit capture, that information goes goes on their profile. And at the end of the job you charge that card, you charge that ACH and by doing that you will not have net 30. Net 30 should be is like a curse to this industry and for some reason it's become standard and I hate it. Number five fifth way to fix cash flow is automations. I'm going to have text, email and calls and I am going to make sure that I collect all my money. Okay, so we're going to sequence automations. Let's see here. We're going to do show me the money right? We're not gonna name this something boring. It's in the power pack. So again you can get all of this, it's completely free inside a copilot once you sign up. And this is our sequence. So if they're two days overdue, they're getting a text message. If they're three days overdue, I'm gonna email the customer. If they're seven days overdue, I'm gonna email the customer again. If it's 10 days I'm gonna text the customer again, I'm gonna email the customer, then I'll text the customer and then it gets a little bit, little hairy here. 14 days in, I'm emailing the company owner that's coming to me and it's saying this person needs to go to collections and you need to call them. And then I'm going to text the company owner again. If they don't respond and tell them cancel service, get this person off our list, we're out of here. So we go and click edit here. And you can customize all of these by the way, you can see exactly here. So for example, if a trigger invoice is sent them two days after we're following up, I gotta get paid. I want to get paid immediately. And by the way, by the way, we should never have this automation going out because we have credit card information on file and we have ACH on file. But in the event that something crazy happened, like that credit card expired or something, this is what's going to happen. It's going to clean up after the mess. So two days after texting the customer, three days after emailing the customer, seven days, like why are you doing it so quickly? Because if you don't get payment collected within 30 days, if you don't get clicked within 14 days, the likelihood just continues to drop whether or not you're actually going to get paid. And so I highly recommend same thing with estimate follow up. We'll talk about this later. I would recommend stacking as many of your communication in the first seven to 10 days. There's a precipitous drop in the amount. The likelihood that people will pay. If they haven't paid within 14 days, the likelihood of them paying at all is much lower. So collect the money as soon as possible. Text, email and phone calls. The email here, down here, the company owner here. You can see this is the email template. So I could go check out the email template. Invoice, follow up. Let's check that out real quick. Invoice, follow up, number four. Here's the internal one. Here's what it's going to look like. Overdue invoice. You can click on it directly because this is going to come to me. I'm going to be able to see. Whoops, whoops. I go back to Safari, like 50 tabs open here. Okay, over to invoice for this certain customer. This is their invoice. I can click on it immediately and make sure that service are stopped at their property. Go to the client's house in person with A printed copy of the invoice. You can contact an online or local credit collections agency and send the invoice to them. So hopefully we don't get here, we should never get here because we have all the other things in place and to fix our cash flow because I'm not going to become a bank. You are not a bank and you're not charging interest if you're not charging like by the way we also have the inside of copilot. If they're overdue they're getting fees charged because like if you're going to take money from me in the form of like we don't take, we don't count it as taking money but they are, they are absolutely taking your money. They are taking your money in the form and fashion of labor and materials and you have paid that out and you have done the work. Why in the world do we not get paid? And why don't we get paid fast? Because a fast growing profitable business can go out of business and become bankrupt. Okay, so these are the five ways to fix your cash flow. Number one, we are going to change this payment terms on our estimate. No more than that. 30. That's stupid. Get car information on file etc so you can immediately charge their card and if it doesn't go through it's now overdue and fees can start to accrue. Look at your local state laws, make sure what fees are allowed. But I'm charging fees. Number two, deposit thresholds. So if they're over a certain dollar amount I'm going to be taking a deposit up front. The more the better. Number three, pay in full. I'm going to give the option for the customer to pay in full prior to the job even starting. Number four, I'm going to have credit card and ACH on file required before the estimate is accepted. And number five, I'm gonna have automations to clean up the mess if anything slips through the cracks via text, emails, phone calls, in person and anything short of harassment because they owe me money and I'm not going to wait around for it.