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April 26, 2024
Ep 210 - Replay - Electrician Cash Management Secrets
Are your business finances on a winning streak or could they use a strategic overhaul? Joe joins me in a robust conversation that will challenge your perspective on cash flow, pricing, and sales, equipping entrepreneurs and electricians with the insights to turn financial management into a competitive edge. We unmask the myth that 'cash is king' and tackle the stark reality of inflation, offering actionable strategies to fortify your financial fortress against the eroding forces of economic change.
Joe and I dive into the mechanics of cash flow and business growth with a fervor that can only come from two people passionate about seeing small businesses thrive. We reveal the secret engine behind referrals akin to compounding interest and debate client diversification, all while offering sage advice on crafting inflation-resistant contracts. Real-life examples are peppered throughout to illustrate how strategic cash flow tactics like updating rates and securing deposits can not only maintain but accelerate your business's momentum.
In our final act, we turn the spotlight on the game-changing power of investing in personal and professional development. The episode becomes a mirror, reflecting how a line item on your profit and loss statement can spell out your commitment to growth. Join us as we underscore the transformative power of expanding your skills and educational horizons, with Joe providing invaluable tips to ensure that electricians—and indeed, all professionals—don't just survive in their trades but achieve their dreams through mastery of their craft and excellence in service.
Join us LIVE 5 days a week on the Facebook Community page:
https://www.facebook.com/groups/electricpreneursecrets
And see us and our stories and wins at:
https://www.servicebyelectricians.com
Transcript
WEBVTT
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hello and welcome to Electropreneur Secrets, the electricians podcast.
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We're here with you five days a week to help you.
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Master pricing, master pricing.
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I did it, joe.
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I dropped it, master simplify pricing.
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You know what we're at a premium level service.
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As you know, we got rid of the fancy shit.
00:00:20.914 --> 00:00:24.510
I say the intro and outro every day and sometimes I joke about eventually messing it up.
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Today was that day.
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I think I think it rid of the fancy shit.
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I say the intro and outro every day and sometimes I joke about eventually messing it up.
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Today was that day.
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I think it was semi-intentional, subconscious level, intentional here's why I said master pricing.
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And today, what are we talking about, joe?
00:00:38.680 --> 00:00:39.865
We're actually talking about money today.
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Talking about money, so that kind of made sense.
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Today, we are mastering pricing and simplifying sales.
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How about that?
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It works, it'll go.
00:00:50.009 --> 00:00:51.472
How are you feeling today, by the way?
00:00:52.119 --> 00:00:59.729
I'm feeling great because we were talking about what songs remind us of money, and the only thing that's come on top of mind is Pink Floyd.
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I love it.
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Yeah, absolutely yeah.
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That's what was ringing in my head too, but before that you were singing money, money, money, oh, hitting the high notes.
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There he is, even with the cold.
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Joe how is the cold doing you surviving?
00:01:19.362 --> 00:01:20.948
The man cold sucks, not gonna lie.
00:01:20.948 --> 00:01:23.486
It's not fun.
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Some people are like, oh, it's just a headache, and then you're like vomiting into a waste paper basket, which isn't fun.
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So you know what the point is.
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I'm here, I'm showing up, and it's more important that I'm here with you guys than I am curled under a blanket.
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So we appreciate that.
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I appreciate that.
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If you appreciate that, even though we can't see you, go ahead your hands, say I just appreciate joe for showing up here, presenteeism, sick or not, here to help us in our journey to master sales, simplify pricing and deliver premium level service.
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I got it right that time.
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As you guys know, we're just a couple of master electricians with business addictions here to help you out.
00:02:01.986 --> 00:02:16.360
And today, as joe said, talking about money, money is a great thing, can be a very scary thing, can be a very painful thing, can cause a lot of emotion, can cause a lot of problems.
00:02:16.360 --> 00:02:21.968
But whoever said money is evil, I disagree.
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Money is just a tool, right, and there's so much else in our life that can hold a magnifying glass on the problems that come from money.
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But ultimately, when we truly accept and get to know it as just a tool, then we can receive it in abundance and get rid of this scarcity mindset.
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So I want to kick this off with that little kick of knowledge, but also in saying have you ever heard this before?
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Cash is trash, cash flow is king.
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Yeah, it makes a lot of sense.
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What do you think about that statement, joe?
00:02:56.947 --> 00:02:57.941
So?
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people sometimes say like cash is king, because they try to say like it's an old style of money concepts where you could say, oh, I give them cash and they're going to give me a discount, or they're not going to tax me or they're not going to.
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Everyone assumed that cash was great.
00:03:14.105 --> 00:03:29.485
But if you're sitting on a pile of physical paper money, you are literally losing out significantly on interests, on flexibility, on liquidability and even inflation inflation what is inflation right now?
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what are we shooting for in the states this year?
00:03:31.754 --> 00:03:45.790
oh, god, I was gonna say, I mean, if you told me that inflation was anywhere between eight to eleven percent, I wouldn't, I wouldn't blame you right it's crazy, and in some other places, our website developers currently working on argentina 9% a month.
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You can believe that.
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So there are worse economies, people.
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Now we're not here to just be doom and gloom, but that said, cash is depreciating yeah it's really not what it used to be and if you think about it, it's also a very big liability Because if you think about it, let's say you had I'm going to round numbers right.
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Let's say you had a million dollars in cash.
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Very few of us do.
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Let's even go down further.
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Let's say you had $100,000 in cash and you had it in your facility and something burned, Believe it or not.
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You don't just get the money immediately.
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You have to file for that, You've got to go through insurance and you've got to prove that that money was there and that you're not doing some sort of insurance fraud.
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So what you thought was a huge flexibility, you're actually down to zero and you have to fight to get it back, Whereas if it was an FDIC or federally insured account and something happens, the government will back it up.
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So cash is not something I want to carry anymore.
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Right Now, even if we were to be smart, maybe safe with that open a savings account.
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Guys, if you're thinking, mike Michalowicz, profit first, don't worry, we're going to get into all sorts of that stuff today too.
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But if you're one of those thinking, hey, savings, high interest yield, I'm going to safely invest my money in a place where I still have control.
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It's linked to my account, I can continually contribute there and maybe have a 2% to 4% yield, maybe 5% in extreme circumstance.
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We still have to recognize well, that's better than sitting at nothing.
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It's not currently beating inflation, so that money is still losing value.
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That doesn't mean these efforts are fruitless, though, does it.
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Correct, because if you were to take just any money and go to your local bank and you were to put it into some regular savings account, you're going to get like 0.08% interest.
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But how many people you mentioned going to get like 0.08% interest?
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But how many people you mentioned earlier the online high yield accounts?
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You want to talk about what those even are?
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Yeah, sure Dig into it a bit.
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Yeah, I was going to say so.
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A lot of us remember banks being brick and mortar stores, whether Chase or Bank of America or whatever it is.
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You physically went to a location, the money was in that location.
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You physically went to a location, the money was in that location, you put a withdrawal in and they gave it to you.
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That's really what it was.
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But because there's so many logistical concerns in running a business, which a bank technically is they had to pay the rent, they had to pay the lights, they had to pay the staff, there's all those things that go into it.
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So, as a result, you lose out on the interest.
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Now that online banking is such a common thing, there is something known as high yield interest accounts.
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They're usually FDIC, which is federally insured lines, meaning that if the government or if something were to ever happen where that money tanked or we had a real problem, the government actually, if something were to ever happen where that money tanked or we had a real problem, the government actually insures it against calamity.
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But the benefit is, because they're not brick and mortars, they don't have those same expenses that go into running it.
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There is very little staff, there is no physical store, so the interest that they are able to give you is significantly higher, like, if you're talking, 0.08% as typical bank.
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Most high yield interest accounts are at three to 5%.
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Think about that.
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Three to 5% for just sitting there, that's crazy, right, significant.
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Now, I think, the challenge becomes for a lot of us well, what if there's not much sitting there?
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Ah, and here lies the challenge, right?
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So, ahead of that, cash savings and having that interest yield high interest or other we actually do need to master this cash flow principle.
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Possible.
00:07:46.680 --> 00:07:47.100
Hence why pricing?
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Simplified pricing, one of the things we help with, ensuring that you're increasing rates to amount that's stimulating your supply and demand balance for your service.
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And guess what, if there is no demand, up the service, and that too will come.
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There's a few problems.
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I'm unpacking here, though, and maybe too much, but let's just start with the cash flow issue, because so many contractors are facing this.
00:08:06.721 --> 00:08:24.608
Joe, yeah, you're coming in end of the year and it says, hey, we've got 150K, maybe 200K in profit, but then you look at your accounts receivable and you're owed 250K, which means you're sitting on a big old nothing at that point.
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Breaking even, unsure when that money's coming.
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It was net 90 and now they're not answering your calls.
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This is not a rare occurrence.
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We're talking to people that are in this situation every week of the year and that is some of the crap that comes with projects.
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It's unfortunate.
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The last time I ever hear people brag when doing a project and don't get me wrong, I'm a project guy, invested pmp project manager, right here in the flesh.
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I've gone to university for training and projects but it never did give me that fulfillment.
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And the last time you ever hear someone brag about a project is when they receive the award and they brag about that big revenue number.
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Ah, we got a million dollar project, we're booked for the year.
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But think about all the inherent risk with that.
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Likely net 60 to 90 terms, right, so you're doing today's work, tomorrow's work, the next two to three months work without any pay.
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So you got to float that on your back.
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Right, demand for extra insurance, just in case.
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Right, larger workforce, lesser training and quality for that larger workforce.
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Less reviews, less diversity of customers and we've talked about that before.
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How do we get rid of risk Diversification If one client owes me a million dollars, isn't that kind of risky?
00:09:53.643 --> 00:09:53.842
Yeah.
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Because the thing is is all it takes is that customer to give you a problem, and now all of your money is in one basket, whereas instead of going and this is why I went into residential service rather than go into heavier, into commercial or new construction or industrial was because if you had one job that gave you $100,000, I would actually rather 10 jobs that gave me $10,000.
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Because all it takes is one to bust, bust, and I still have the other 90,000.
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It's ready to go, but if that $100,000 job busted, we'd be screwed.
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In fact, actually, can I talk about a personal experience where that actually is relevant?
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Absolutely.
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So there was a period of time when we actually wanted to get into heavier commercial, specifically because of this chasing the big revenue, and one of the biggest presentations I did was for a $500,000 actual awarded job and it was a chemical factory and we were going through we're checking everything out and we're like two months into this bid at this point and I had escalated it further by getting it to the person who actually could sign the check or face-to-face with them, and we actually were going to get it awarded.
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That was the thing.
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They were like yes, we're really strong in considering you and one other person, but when I realized that there was a huge risk if they didn't actually pay or us having to front it because they weren't going to give us a deposit and all that, we actually backed out and said you know what, this is not an opportunity we want to consider at this point.
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And they said you actually were going to get the job.
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Wow.
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But the fact was that I'm so glad that I didn't take it, because we ended up filling the entire calendar for the whole year with other projects and it actually ended up being one of our most successful years getting out of commercial and it actually ended up being one of our most successful years getting out of commercial.
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You know what there's this saying, and it says it goes like this Humans are endlessly capable of recognizing what you lose when doors close.
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I did the wrong gesture there.
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When doors close, yep, but we're infinitely incapable of recognizing what opportunities may come from closing those doors and opening others.
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We do not know.
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It's called loss aversion.
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It's the very thing that keeps us at the casino.
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God, that's just when you can see it and you still know there's just an opportunity right there.
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You'll just keep digging deeper and deeper, and deeper and deeper.
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Or imagine being in that place and then going well, all we need is another big project, excuse me.
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One other big project would solve this because they'll pay us in a more expedited manner.
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Guys, if you're going through this, can I just say I've felt these pains, I get it and I feel for you right.
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My first business suffered deeply from this.
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Deeply Huge problems, right, we talked about that on a different podcast.
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Cash flow, diversity in clientele this is the same thing mutual funds do with the stock market Diversify risk by going through a variety of different investments.
00:13:04.453 --> 00:13:10.928
If you looked at your clients like investments, well then we're back to what you just said.
00:13:10.928 --> 00:13:13.052
Right, you have diversified risk.
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More chances to have optimal outcomes, more chances to have optimal reviews, more chances to have optimal and organic referrals.
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Good neighbor program If you really put your mind to this service game, so many opportunities come from every single call, every single job.
00:13:33.589 --> 00:13:36.418
Please jump on it, yeah.
00:13:37.010 --> 00:13:40.905
I actually want to stitch even further into this and I don't want to go too far down.
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But it also I look at it almost like compounding interest, because if I have a one job and I do that job perfectly, what are the odds that commercial facility is going to refer me to another commercial facility?
00:13:53.979 --> 00:13:55.962
You're not really hot.
00:13:55.962 --> 00:13:58.835
They're going to keep me under lock and key, Like they are going to be, like.
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You are our guy.
00:14:00.312 --> 00:14:03.360
It goes like this here's what went well.
00:14:03.360 --> 00:14:04.990
Yeah, yeah, that's fine, let's move on.
00:14:04.990 --> 00:14:08.400
Here's all the things we can improve on next time to make it better, faster, cheaper.
00:14:10.370 --> 00:14:39.793
So you're in that circumstance where you get this job and even batting a thousand, the best thing you get is another job from the same people, whereas if I were to have 10 customers and each one of them gives me a good one, I still again have 10 other customers, but with residential they're going to refer you to other people and you have the opportunity of getting a compounding interest from it, where if I get one client and that client gives me two clients and that client gives me two clients.
00:14:39.793 --> 00:14:42.000
Suddenly now I'm sitting on a thousand clients.
00:14:42.019 --> 00:14:48.244
didn't even realize how I got there and we just came full circle and bridging to a very important aha moment.
00:14:48.244 --> 00:14:59.275
If you land a million dollar commercial job today and we've all accepted and agreed, there's roughly a 10% inflation happening.
00:14:59.275 --> 00:15:03.097
Doesn't that contract suffer?
00:15:03.097 --> 00:15:07.000
Say, it's a year-long contract, doesn't that contract suffer the same inflation?
00:15:07.000 --> 00:15:17.005
So by the time you're done and getting paid for that old money plus net 90, you could be 12% shy in the value of that cash flow at the time that you receive it.
00:15:17.005 --> 00:15:19.647
And that's insanity.
00:15:20.567 --> 00:15:26.197
Who would bill in for that right?
00:15:26.216 --> 00:15:29.029
Do you have to bill in for inflation into your bids at this point?
00:15:29.029 --> 00:15:33.692
I mean, technically, you should.
00:15:33.692 --> 00:15:36.580
Now, speaking of this cash flow problem, right, we've already established hey, this is monopoly night with the family.
00:15:36.580 --> 00:15:37.182
You run out of cash.
00:15:37.182 --> 00:15:38.772
Close your eyes, you're going to bed early.
00:15:38.772 --> 00:15:39.913
That's how it right.
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Your business needs cash.
00:15:41.277 --> 00:15:43.380
Your personal finances need cash.
00:15:43.380 --> 00:15:47.240
Call it a money, b money and c money we'll get back to that in a moment.
00:15:47.240 --> 00:15:54.956
But this cash flow, the nice thing about a business and the only other thing I'll touch on here is, uh, real estate.
00:15:54.956 --> 00:16:00.763
These are two investments, two assets that produce cash at today's rate.
00:16:00.763 --> 00:16:19.581
So this is big support for the service game, because if I can do a job today that only takes today at my full rate, that I've reassessed every quarter since I've been in business to make sure that I'm always charging what my business needs to grow and be sustainable.
00:16:19.581 --> 00:16:22.736
That's cash flow, joe, isn't it?
00:16:23.671 --> 00:16:27.721
And it's the best kind because it's managed cash flow.
00:16:28.169 --> 00:16:35.457
Now add one more thing to this your favorite 50% upfront for a job we're going to book just a week from now.
00:16:35.457 --> 00:16:36.500
Two weeks from now.
00:16:36.500 --> 00:16:38.063
Now what's happening?
00:16:38.970 --> 00:16:44.630
The benefit there and I love you put me on the tee for this one because I love talking about deposits.
00:16:45.332 --> 00:16:52.673
So what you're doing is you're getting paid in advance, but you can take that and allocate it to other things.
00:16:52.673 --> 00:16:56.623
So let me give a practical example of how this applies.
00:16:56.623 --> 00:17:00.879
So we've always talked about generators and that's a consistent thing that comes up.
00:17:00.879 --> 00:17:16.977
But the benefit of getting deposits on generators is that it's a capital improvement, which means that your customer has a situation where they're not being taxed on any of the services that go into play when you do the initial installation.
00:17:16.977 --> 00:17:29.931
So, following that logic, what you can do is you can actually package all the upgrades, all the enhancements and all the maintenance packages under one bulk quote.
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Get it qualified for capital improvement.
00:17:32.680 --> 00:17:42.515
The customer is actually not paying tax on future services and they are more incentivized to give you a much larger deposit than they normally would have been.
00:17:42.515 --> 00:17:48.577
If they say I'm going to go year by year, you're the only one losing because you're paying one inflation rate.
00:17:48.577 --> 00:17:50.142
Two, you're paying tax on it.
00:17:50.142 --> 00:17:54.296
So am I wrong to want to save you that kind of money?
00:17:54.296 --> 00:17:56.809
And the answer is always no, you're not wrong.
00:17:57.111 --> 00:17:57.631
Here you go.
00:17:57.631 --> 00:18:00.453
Yeah, man, I love the way your brain works.
00:18:00.453 --> 00:18:02.736
So again, man, full circle.
00:18:02.736 --> 00:18:04.737
Cash is trash, cash flow is king.
00:18:04.737 --> 00:18:05.938
We got that.
00:18:06.419 --> 00:18:08.400
Today's rates, that's important.
00:18:08.400 --> 00:18:16.527
If we can get paid today during today's value of money, currency, then this is a win, isn't it Damn right?
00:18:16.527 --> 00:18:22.112
Is a win, isn't it Damn right?
00:18:22.112 --> 00:18:27.392
Awesome, okay, so here's the thing we were going to talk about, and tie in this principle of A money, b money, c money, and I wouldn't be doing justice if I didn't do that.
00:18:27.392 --> 00:18:32.282
I may have said this before, but hang with me, guys, because this one is important.
00:18:32.282 --> 00:18:34.994
It will actually change your life, as it did mine.
00:18:36.076 --> 00:18:41.230
A money that's today money, that's what's putting food on the table roof over your head.
00:18:41.230 --> 00:18:49.619
It's the money that you're earning and then you're spending just on survival needs, physiological needs, right, b money.
00:18:49.619 --> 00:18:54.834
B money is the money we're investing our little cash, soldiers to go make money for us.
00:18:54.834 --> 00:19:07.537
Mutual funds, the high interest yield accounts, any stocks, any other investments you're making, even real estate could be considered B money if you're in a passive position with lots of cash and someone else is doing the work.
00:19:07.537 --> 00:19:09.782
But then there's C money.
00:19:11.211 --> 00:19:16.853
C money is really important because that's the money you invest in yourself, your own growth.
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This is the money that you may have heard some of your own mentors say.
00:19:20.061 --> 00:19:22.434
That's the stuff they can't take away.
00:19:22.434 --> 00:19:26.042
That's the stuff that pays dividends for a lifetime.
00:19:26.042 --> 00:19:45.755
Like us, many people may wonder how we came about the knowledge that we have, the sales that has been achieved, the growth that happened here for a couple of young master electricians with business addictions and it's that business addiction piece, it's that constant event investment in C money.
00:19:45.755 --> 00:19:50.994
Would you say that you made up most of this sales, joe, or did it cost you a little bit to get here?
00:19:51.777 --> 00:20:02.025
It cost me an insane amount of money to get here, because, when you think about it, it wasn't just going to conferences and traveling and listening to podcasts.
00:20:02.025 --> 00:20:03.836
There was a lot of that that was going into it.
00:20:03.836 --> 00:20:14.075
But I was also really invested in schooling and getting personal mentorship from anyone who'd be willing to talk to me, and because I needed so much help.
00:20:14.075 --> 00:20:17.903
Also, therapy is training as well.
00:20:17.903 --> 00:20:25.001
It's making you better people, and I wouldn't be the person I am if I didn't invest years and years and years into therapy.
00:20:25.930 --> 00:20:28.518
So that's been years of coaching yourself too, right.
00:20:29.000 --> 00:20:34.942
Yeah, I've been coached for over seven years just doing it from one or two personal trainers, like that's the thing.
00:20:34.942 --> 00:20:47.951
It's one of those scenarios where, if you don't put money into the machine, the wheel doesn't turn and you always need to be rolling the wheel forward because life moves in one direction.
00:20:47.951 --> 00:20:50.679
Either you're moving with it or it's going to move without you.
00:20:50.679 --> 00:20:52.750
So what are you taking away from it?
00:20:52.770 --> 00:21:01.844
So this becomes a really interesting conversation and some of you, this becomes a really interesting conversation and some of you I expect to go holy fuck, that makes perfect sense.
00:21:01.844 --> 00:21:12.529
I've had people, when I explain this for the first time on a call, go their mouth open and go oh my God, wow, I never realized that.
00:21:12.529 --> 00:21:14.813
So I really want to help you guys with this.
00:21:14.813 --> 00:21:20.423
If you have a business, you have a tax advantage, right?
00:21:20.423 --> 00:21:23.355
My accountant always says this You're making money, you're paying tax.
00:21:23.355 --> 00:21:24.097
It's a good sign.
00:21:24.097 --> 00:21:26.242
Never feels like a good sign.
00:21:26.242 --> 00:21:29.438
Never feels like a good sign when I'm giving you a tax Never feels like a good sign.
00:21:29.951 --> 00:21:31.237
Here's your tax advantage.
00:21:31.237 --> 00:21:33.577
It's actually a timing advantage, guys.
00:21:33.577 --> 00:21:35.412
Let me explain this to you very simply.
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It's the best I can do as an employee.
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You earn, your employer decides okay, this is what you've earned for said period.
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They tell the government what those earnings are, they agree on following the income tax tables and they deduct what you owe the government and then pay you what's left.
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So you earn, they deduct, you get what's left.
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Doesn't feel like a lot of fun In business or even as a sole proprietor.
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