these type of clients will make you go BANKRUPT!

Mike Andes. And today we're gonna show a video from, actually a Q and A that we did last weekend. And it's about cash flow. Because if you believe it or not, you can actually have a profitable business that goes bankrupt and loses all its cash and goes out of business. Not because it's a bad business model or they're doing a bad job of their customers or invoicing or whatever, but simply because their accounts receivables keeps going up. People are not paying them, and they're not collecting the money that they've earned. So this is a good question, and I think something that a lot of people struggle with when it comes to cash flow. And so let's go ahead and dive into some of the things that you can do to improve your cash flow. Get money faster. And it's not just get credit cards. There's other things that you can do to be able to increase your cash flow and make sure that you're receiving the money faster than it is going out the door.

What's up, Mike? My name's Anthony, so I am born and bred. My dad was in the landscaping business prior to me, so it's pretty much all I know. He about three years ago, he, you know, retired. We worked out a deal where I took his company over, which was about 65 accounts. So I was cutting, you know, maintaining those lawns, me and one employee. Obviously not too much overhead and expenses. Last year, at the beginning of last year, I purchased another company, bumping me up to around 215 accounts. So now I have five employees. And my question to you, and obviously a lot of overhead and expenses that I didn't previously have, and I sort of did go 0 to 100. So it's been, you know, a struggle. But it's, you know, what I do and what I know. So I'm definitely not complaining. But my question to you is, do you have any advice on cash flow? Because I use Aspire for my route sheets, and I'm collecting a lot of data. Obviously. I use QuickBooks as well. I'm collecting data there also. And my numbers are all pretty good. My profit margins are nice, and I'm happy with the amount of money that we're generating. It's just getting the money in that seems to be my biggest hurdle.

Okay, so a couple of things. So you're saying getting more money in is the problem right now, or is it when you say no revenue or you mean profit?

No, just cash flow. I just need cash flow. Like everything, the profit margins are there the revenues there, it just keeping up with the, you know, customers that are not paying, holding out on payments. And obviously I have, you know, a decent sized nut to come up with every month for payroll. So that's, that's my biggest struggle right now as far as operations where, you know, we crush it. You know, we really do. We have a great team here, but it's just getting the money in. I'm always owed some so much money, you know, out on the street.

So a couple things. It's very common this time of year to be in this situation because we're kind of going like most money in home improvement, almost all of it in terms of profit is made in the second half of the year. So this is usually like the kind of the, the, the bottom trough of profitability or cash flow, right, the next six months because you're collecting on people that were overdue and all the rest of it. So here's what I'd say, here's the really easy one that most people do and it's something simple is get a line of credit, right? That if you know you're profitable and just a cash flow issue, getting a credit line of credit will help this problem and then you'll pay it off in the second half of the year. That's like the simple, easy answer. Another, and if you have good tax returns, you're going to get a line of credit pretty easily, right? If you can show good balance sheet in your business, etc. Go ahead.

No, I was green, okay.

And so that's like the easy thing. Then you got to look at further beyond that. It's like, okay, what actually operationally can I change to improve the cash flows? Like, okay, do I make sure I have a credit card on file? So that way someone cannot go to collection. Like they don't, it cannot not pay me. Can I require them have a card on file? Can I, you know, invoice them, you know, every week or every day instead of every month? Those are the more operationally things that you'd have to change your response to those. What's that?

So, okay, line of credit. Yeah, I, you know, obviously I thought of that. Now what I was afraid to do is actually require people to.

Give me a credit card or have some type of car payment on file. And obviously reason being is just that my expenses are so high. If I get pushback or they don't want to, I'm just nervous to try to back them into a corner like that. And then they say, oh no, I'm going to go to the other guy that I could string out for another two months.

And you know, that's pretty much my theory.

Let me ask you a question. This question could backfire on me. Out of all of your bills, let's say you have hundred bills, how many of them do you write a check every single month for versus having a credit card on file or bank like ach.

I understand, I know, but it's also, this is the business and it comes down. It's like a supply and demand thing. There's so many, everybody in their brother's a landscaper. So you know, I'm easily, I do provide an amazing service. We show up on time every week, nobody ever has to worry. But in the same breath there's a guy out there that will do it cheaper and you know, that will put up with, with not getting paid and stuff like that. But I'm at a point where I'm realizing fast because my second year doing it with this amount of employees that I can't, you know, I can't keep doing it the same way. It's not working. So.

So why would someone choose you over him? Why would someone choose your business over him? Because he's obviously cheaper. They don't have to pay him occasionally. Why would they choose you?

Well, I would say quality and reliability. That's what's going to be the separation right there.

And so what you're going to do is require your car. Having a credit card file is going to flush out 5 to 10% of your customer base. All the ones that give you the most headache and always the ones that give you the most problems about your pricing and you showing up at the right time. And they are the ones who are 30, 60, 90 days behind. So putting little occasional like price increases or requiring things like credit card file allows you to get rid of those customers. And then you're going to have way more time to go focus on getting new customers that are actually willing to pay a price. And furthermore, we always think of like require a credit card as like a bad thing. Keep in mind personally, all of us like to do it. Secondly, you're actually paying for their convenience. They're going to get their extra 1% back or their air miles or whatever. And most people actually want that. And so either a, I would like say if you're hesitant about it, make your onboarding process of a new customer much more pushing them towards that by really talking about how your customers love it. It's a great auto pay and it's like the Next step of the process of getting set up as a customer. And then if you literally, if you do that correctly, 90% of your customers will use it because they want to. And then if you want to, if you still need the cash flow, require the next 10%, put a car on file. And guess what? Those are the 10% that are causing all the cash flow issues. And so they left. You shouldn't really worry. So I think, first of all, you got to spin it. First of all, it's actually a positive thing for them. Most of them want it. Most of them want the air models and the cash back. If you're hesitant about making a requirement, make it much better in the onboarding of the new customer as an email, that's like, hey, the next step here is to set up autopay. All our customers love it. Click here and then just go right.

Into the form right now. I don't know how much time you have with me, but to even push, push the envelope a little further. What do you think about more? Because, like, look, everything's subscription based. And I think that's the name of the game. And landscaping almost like, alter it to be like a subscription, like Netflix. Like, you pay for Netflix the month before you use the service. Do you think that is something that's feasible in the landscape industry? Basically, like saying, hey, if your lawn costs $160 a month, you know, we chart, we build the cards out before we do the work. If you have 12 months, if you.

Do services year round, I'm a big fan of this. I would do this in a heartbeat.

Okay.

If I. If I was able to mow your lawn year round, and that is charged at the beginning of the year. We have a couple of our franchisees that gust along here that do this, and they have the best cash flow in the world. But the problem is if you don't mow someone's lawn for three or four months or maybe do it once during the winter just to kind of keep up with it. It's very difficult to convince people that they're paying for something prior to it happening and then you don't see them for three months. Right? So.

Well, Mike, Mike, I was saying during, like, our cut season, during, like, our window of cut season, just as far as, you know, let's say I do ask all my clients to get a card on file. And then instead of saying, hey, look, we're going to bill you out after the four cuts are done for the month, we're going to bill you before the four Cuts. If it rains and we don't come, you'll get a credit for the next month. I think that's like, I think that's like the best way to stop that cash flow problem.

Totally.

But I just don't know if.

No, I agree 100%. There's a few things why we've never done it. And the number one positive thing is cash flow. I'm all on board with doing level billing even for like say eight or nine months, doing it prior to the month starting. There's a few things that throw a little bit of a glitch in this. Number one, you're going to have months where there's five services, right? So you can't just multiply it by four. You're going to have to bake in like 4.3. Right. So then they start running the math against the guy down the street that's giving it per cut price. And they're like, well, you're like $10 per cut. It's like, well, no, I'm baking the fact that there's going to be five cuts on three of those months. And so, you know, you're starting to get this game, like explaining things. But I'm, I like it. I like having upfront card on file. You charge it at the beginning of the month. And the reason, honestly, it's an admin side, right? So say for example, someone cancels on 15th of the month. Well, now they want 50% of their that month refunded to them. Right. What happens if someone, you know, now it's a matter of like if they got long grass, you're still gonna do a per cut price to get them up to spec before they can go on to that. So you're just adding more friction to the beginning of the sales process.

Right. More variable, more variables can arise from.

But, but you do solve myself cash flow, you solve that problem for sure.

But I'm also locking myself into a set price. There's no room to adjust is what you're saying.

Yeah, but you can raise, you can raise prices like, like a subscription, right? Uh, you can absolutely do that. It's just that I've seen it harder to upsell customers too. Um, it works really well. What you're talking about works really well for full service and 12 months. Right. So when I say full service, I mean you're doing their weeding, they're bush trimming, they. You do everything when you show up at the property. I've seen it work really well for that. And for 12, if people mow year round. Um, it's a little bit harder when you are trying to upsell, for example, mulch. Now you're going to bill for that after the fact. Right. It's just more explaining to a customer and I don't know, oppose that. It's just you're adding friction to the upfront of the relationship and if you're not trying to grow, that's probably fine. And so I'm a big believer once someone stops wanting to grow their business and if you're at that point, I, I, I, this would be a good move. And that is you're going to start adding some more friction to the sales process by requiring, hey, I need, by the way, if you want to do mowing service for this, I'm going to take a card right now and I'm going to charge you 250. Like that's more friction to yeah, we'll be there tomorrow and we'll bill you at the end of the month. Which can all be automated. Right. So you're just adding more friction. But I think, you know, based upon what you've said, I think that's a good move for you. I really do. You're going to add more friction. You don't need to grow. You're not in that stage where like I need to grow, grow, grow. You can change that policy. Yeah, if you need to go ahead.

But in the same breath, I am 29 years old and you know, I'm fortunate enough to rent for my parents. So basically it's like, you know.

All hands on deck for this business. So I, that was my next question for you is I'm at that 202/15 mark. I have five employees, three on one truck, which is my big bench route, and then two on my other truck, which is more, you know, spread out. How do I get, how do I break through from that like $400,000 revenue mark to like let's say a million or you know, obviously I know there's levels in between, but how do I, how do I push it?

It all depends on how fast you want to do it. Right. If you want to do it fast, you're probably not going to do 12 month billing card on file, payment prior to service. That's going to be a more friction up front of the sales process. If you want to sell over the phone, get them on the schedule and bill later and you have a card on file then, then you're probably gonna be able to scale faster. Now that's the, this is the thing. If you want to build a million dollar business over the next 10 to 12 years, I would do the more cautious approach, better cash flow approach that we've talked about. If you're like, I've got to get there in the next three years or I just want to quit, that's when it's like, okay, well then you're going to have to, you're going to have to sell over the phone. You're going have to reduce friction of the sale. You're not going to be trying to do all these other services and you just want to focus on selling and that, that again, just a matter of close ratio.

Yeah, I'm trying to think what else I could ask you because honestly, dude, you put out such good content. I appreciate, I appreciate the time.

My pleasure, brother. We'll stay in touch. Have a great weekend.

Hey, be well.