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- [00:00]
A
You're hopefully going to sell more, but you would have to sell 12 times more if you're going from a 1 pay to a 12 pay. Right. To be even on cash flow. And then it's going to start catching up. But it's literally 12 months before it starts doubling, like before it starts to compound, and 24 months before you're fully caught up, assuming that you're not selling more. So if you did go to 12 pay and didn't sell more, you probably ought to go back. And you might want to test 3, 6, and 9 along the way. Right. Just to make things a little easier.
- [00:36]
B
Hey, everybody.
- [00:36]
A
Welcome to another episode of the Business Launch podcast. And we have your host today, Richard Lindner and myself, Roland Frazier. Rich, how you doing today, man?
- [00:46]
C
I'm good.
- [00:46]
D
How are you?
- [00:47]
A
I'm doing really good. Everything is going well. Excited about our upcoming event for our founders board people here in San Diego. Looking forward to seeing you. And apparently drinking some Weller. Millennial. Well, Millennium or Millennial?
- [01:02]
C
Millennium. Yeah.
- [01:03]
E
Okay.
- [01:04]
A
Millennial is a different brand that complains a lot and doesn't like the word. So that's. No Millennial. Hate here, guys. Okay, so you just did some amazing analysis and found us an extra million plus a year in our businesses. And I think that it's something that everybody that's watching and listening could really benefit from. So I was thinking maybe we chat about that. How's that sound?
- [01:33]
C
Yeah, I think it's. I think you're right. I mean, I think everyone needs to, you know, needs to take a. Take a look at the bottom line, no matter what climate we're in.
- [01:40]
A
I have said for years now, years, that every extra million dollars helps. Every extra hundred thousand dollars a month helps. I've also said.
- [01:48]
C
I've heard you. I've also been completely unsuccessful in disproving that. That point.
- [01:55]
A
Yes. Yeah. Despite lots of efforts that both of us have made.
- [01:58]
C
We have tried. We've tried.
- [02:00]
A
Yeah. So. So why don't you tell a little bit of the background of kind of what, you know, what the lead up to this was and, you know, then why we thought that we wanted to take a look at it and then kind of how we went about it.
- [02:16]
D
Yeah.
- [02:17]
A
So when I say we. Richard did all of this so well.
- [02:21]
C
There was a lot of. We involved. We were. We were at a point where sales had stalled.
- [02:28]
D
Right.
- [02:28]
C
Sales had stalled in. In kind of two of our companies. And in looking at how do we, you know, how do we change that? We went through all the. The normal evaluations Right. Did something change in the market? We looked at product, we looked at process, we looked at all, all of the things including price. And where we ultimately landed. The easiest thing to change is pricing terms. Right? Not price. We don't want to change price, we want to maintain. We believe that we're fairly priced in the marketplace for the value that we deliver. But one thing that is appropriate is to look at the, the pricing terms, the, you know, the, the payment terms that we're offering.
- [03:04]
A
So, so basically can the people afford it? Sure, it's worth it, but.
- [03:08]
D
Right.
- [03:08]
A
Can the people that we want to buy it afford it?
- [03:11]
D
Right.
- [03:11]
C
What's that cash outlay up front? How are we, you know, how are we structuring that? So we wanted to test that out. We, we tested changing the payment terms and really going to a 12 month, it's a 12 month program. So let's look at a 12 month. What we saw in one of our brands was we saw a doubling of sales velocity. In another brand we saw a tripling of sales velocity. So it worked, right? It worked. The other thing that we saw, which is less exciting obviously if you go from a, you know, a pay in full or a two month or a three month payment term to a 12 month payment term, the other thing you see is a massive reduction in the cash collected and you stretch out that, that cash collection over a 12 month period. So in, it's kind of this really weird feeling of like yay, aww, we're winning. But at the same time we're watching our cash position and the unit economics have changed, the cash position has changed and in seeing an increase in sales velocity but a decrease in cash. So at that point we're not dealing with a business that's failing from a business model. We're dealing with a business that is in a cash flow crunch. So what do you do?
- [04:32]
D
Right?
- [04:32]
C
We don't want to make any, any knee jerk reactions. We need to keep spending and generating leads. We need to feed the sales team. We need to keep this, the core business functions going, but we have to be more efficient in the spend. So you know, how do we, how do we look at our different categories of spend? Where can we reduce? And that's kind of how we got here, right? How we got here and said we have to basically buy time for this model to work, I guess is the, was the, was the challenge. How do we, how do we buy time for this model to work for things to compound and for, you know, for these unit economics to get to where they need to be from the amount of cash collected in, in the snowball effect.
- [05:12]
A
Yeah. Because you're hopefully going to sell more, but you would have to sell 12 times more if you're going from a 1 pay to a 12 pay.
- [05:18]
D
Right.
- [05:18]
A
To even on cash flow. And then it's going to start catching up. But it's literally 12 months before it starts doubling, like before it starts to compound in 24 months before you're fully caught up, assuming that you're not selling more. So if you did go to 12 pay and didn't sell more, you probably ought to go back. And you might want to test 3, 6 and 9 along the way. Right. Just to make things a little easier.
- [05:44]
C
But for us seeing a, seeing a doubling of sales velocity. Velocity and a tripling of sales velocity, that's nice because sales did go up. So now we don't have to wait as long. But we do. You know, even with the compounding effect of if you make 30 sales month one, you're technically collecting 60 sales month two, assuming you're retaining all of those. And billing efficiency is the same, but still it takes a while just to build back to where you were on even half the sales from a cash collected standpoint. So how do we make sure that we make cuts efficiently without negatively impacting that sales velocity? That that was the challenge.
- [06:24]
A
The other thing I think for people to be thinking about because I went through this this year is switching to gaap. If you are on generally, you know, accepted accounting principles type of accounting, which, you know, if you're headed towards selling your business, you probably want to be on that. You get into revenue recognition issues. And so not only do you not have the cash dollars, but your P and L starts to look very anemic because you are now receiving something that's going to be paid over that period of time and the services are going to be rendered over that period of time. Presumably if you were rendering all the services today, you might be able to recognize the revenue today. But the way that usually we do that is we say 12 months because they're going to continue to be getting value for that period of time. So that's another thing just, just to kind of chat with your accountant about if you're in the process of getting ready for a sale or something like that, it could, could affect you in a way that you might be surprised.
- [07:23]
C
Yeah, we had to go in and completely look at how we were classifying revenue. There were a ton of changes that had to happen when this. So at some point when it worked, we were the dog that caught the car, right. It was a bit of a win and a loss at the same time. So diving in and saying, how do we make this work? How do we make sure that the business can afford for this model to prove itself and get to that critical mass? So that was where I started and diving in and making sure that we don't overcorrect and accidentally lop off critical aspects of the business that are enabling this to work. So went through, and kind of went through a stop process, right? As we're, we're looking at the categories really where, where overhead expenses hide, right? Stop staffing, people, tech and tools, operations and overhead and, and, and purchases and procurement.
- [08:25]
D
Right.
- [08:26]
A
So those are the four categories of expenses.
- [08:28]
C
Four categories that, that you want to look at. And you kind of have to start with, with people, right? In most cases, these are going to be some of our biggest expenses. And we have to look here and.
- [08:41]
A
Is that primarily employees or are there other people that you would also be looking at?
- [08:46]
C
Employees and contractors.
- [08:48]
E
Okay.
- [08:49]
C
So and contractors thinking of not only maybe contractors, but contracted services. So if I'm thinking people, I'm also thinking contracted services as well. So any agency services, anything like that. And really within, within that, staff and people, I'm going to have some, some additional categories. The, the first way that I would, I would look at that is are there any roles?
- [09:16]
D
Right?
- [09:17]
C
I'm going to think role first. I understand every role has a name. And this, you know, this is tough, right, because we're talking about people. We're not, we're not talking about a pair of blue jeans you can take back to Nordstrom, right. These are, these are human beings. And I understand that the first category I'm going to look at is what roles within the company would we not rehire if we were to rebuild this company today? Because look, companies change, right? We evolve as companies and there are people that occupy roles that we like that add value, but those people are in roles that may not be necessary for the value that your company adds or the model that you wind up in today. So when you're going through and you're evaluating people, the first place to look is do we have any people, any roles that are not critical in the value creation process, right? So the easiest way to do is are there roles that if we were to rebuild this company from scratch tomorrow, that role would not be an open to hire. We would not replace that role. The next place that I look for people is where are there.
- [10:31]
A
Let me ask you something about that. So when you're doing that analysis, are you also looking at what is new that might cause us to not have to have that person? So kind of actively thinking AI particularly comes to mind. Has technology or automation advanced to the point where this person is in a role that can be replaced by computer effectively, or has our business changed processes wise, customer wise, product wise in a way that we no longer provide the thing that this person used to provide, so the value is not there.
- [11:14]
C
Absolutely.
- [11:15]
E
Okay.
- [11:16]
D
Yeah.
- [11:16]
C
Typically my third, that's kind of my third filter.
- [11:19]
E
Okay.
- [11:20]
C
So I want to kind of get the, just I say easy. Get the off the board of like this. This role is not required.
- [11:26]
E
Got it.
- [11:26]
D
Right. The.
- [11:27]
C
It's not required at all. We wouldn't replace it with automation and we wouldn't replace it with a human.
- [11:33]
A
Just don't need it.
- [11:34]
C
We don't need it. And, and it is, it is a nice to have.
- [11:38]
A
Is there an example of that that you could think of?
- [11:42]
C
So, I mean, let's say, let's say post Covid and I know we, that was forever ago and we don't want to talk about that, but it happened. And let's say the company went virtual and you used to be in office and maybe you had an office manager in that Covid environment and maybe that office manager has stayed.
- [12:05]
D
Right.
- [12:06]
C
You've kept an office manager and you found things for this person to do because this person is fantastic.
- [12:11]
D
Right.
- [12:12]
C
But if you don't have an office but you.
- [12:15]
A
There's no rto, then there's no need for the manager. Yeah.
- [12:19]
D
Right.
- [12:19]
C
And, and they may occupy a different role or have a different title, but at some point that's a nice to have.
- [12:26]
D
Right.
- [12:26]
C
And if, if we, if we're being honest, we don't, we can't, we can't keep that role. So I think that's a, you know, maybe more obvious example, but I think it might be.
- [12:38]
A
I like it. I think it's good. That's, that's a great example.
- [12:41]
C
So after we go through those nice to have like what will we not rehire then I'm going to look more to scorecards.
- [12:47]
D
Right.
- [12:47]
C
Hopefully we have scorecards and they don't have to be people scorecards. I'm looking for department scorecards. Where are we missing our goals? Where are we underperforming departmentally? And then I'm going to look in those departments and say where do we have people that are paid at the top of the market that are performing under, you know, below average and at that point. That's an ROI thing, right? That, that is an absolute ROI thing. We are, we, we are paying top dollar. Like every business doesn't have expenses, every business has investments.
- [13:24]
A
Are you, are you looking at that like, what's the KPI? Is it an rpa? RPE for the industry, like a, a revenue per employee has to be.
- [13:31]
C
I'm definitely looking at a revenue employee across the board. But I'm saying let's go to the marketing scorecard. Let's go. Scorecard. Let's go.
- [13:39]
A
You know, I'm wondering, how do you, how do you figure out whether they're contributing or not at the level and what is the level of contribution required.
- [13:47]
C
At a, at a very high level. I want to go to that department scorecard or that scorecard on the company level and see what is, let's say marketing, for example, what is marketing supposed to be contributing to the company goals? And, and is marketing contributing? And if marketing's green across the board, they're contributing at or above goal, then I'm probably going to move on and go to that department last.
- [14:08]
E
Okay.
- [14:09]
C
If marketing's yellow or red, then I'm going to look in marketing and say, let me see marketing and let me see how many people we have. What are we paying? And do a little bit deeper of a dive inside of that department. Because at some point someone or everyone in that department is underperforming, unless we're just really poor at setting goals. And you have to be honest about that. Did you set realistic goals? I like to think we're pretty good at goal setting. We kind of, we set really good achievable goals. We, we reverse engineer them. So if we're red in a department, and I don't mean for a week, but if we've been red in a department, that's a tipping point for us hitting our goals, then that's an inefficient spend. So the next category I'm looking at out of nice to have is inefficient spend, like low ROI on team members. So if we are paying at or above market rate and getting below average performance, then that's an opportunity.
- [15:06]
D
Right.
- [15:07]
C
I've got to go there next and then roll in. The third area that I look at is exactly what you said. What are the roles that could be replaced with new technology? Automation. Sometimes it's AI, sometimes it's just automation. Yeah, right. Sometimes we have people doing things that, that could just be automated.
- [15:27]
D
Yeah.
- [15:27]
C
And that's really how I go through and, and, and identify where are there opportunities within staff and people?
- [15:35]
A
So that's the S of the stop.
- [15:37]
C
That's the S of the stop.
- [15:38]
A
Okay, what's next?
- [15:40]
C
Tools and tech. And I'll tell you, this is where profit dies by a thousand cuts.
- [15:46]
D
Yeah, right.
- [15:48]
C
The number of people that add little to big subscriptions and then forget about them. Sometimes they're used, sometimes they're not. Sometimes those people no longer exist, but the subscription long outlives them. So two places that we look here, we go to the P and L and we go to any card. So whether you have a Tools card, a specific card for those, or you have just a company card, however that works. But I want to attack both places. I'm going into the P and L and I'm looking at a detailed transaction in the P and L sorted from most expensive to least expensive. And what I'm going to do is I'm going to run a three month P and L, open up those categories because I want to see something that shows up three times. I want to make an impact. I don't want to make a one month savings. I want to know that if I'm canceling something that's $1,000 that we're not using, that's a $12,000 savings annualized.
- [16:44]
A
And then I'm guessing if. Because a lot of like sasses bill annually. So I'm guessing if you see a fairly large thing, then you're going to investigate that and find out.
- [16:55]
C
Once a year I first go a quarter, then I go a year and I'm looking for those large months. So I'll export a year's P L, break it down and look for anomalies in those different categories. Where is there a, where's there a month that, that jumped out on a, on a spend? There's obviously an annual there.
- [17:15]
D
Right?
- [17:16]
C
There's an annual there. I need to look at that. When is that coming due? Are we using it? Can we go ahead and give notice now if we're not using it? But I'll tell you, we saved just as much in the reduction of tools as the cancellation of tools.
- [17:32]
E
Yeah.
- [17:32]
C
So you don't have to cancel Tools. There were accounts that we signed up for five years ago that we've been paying, that they've changed their billing and frankly we've changed our usage. So we were on a contract for, or we were on a plan for $1,000 a month. When we went back and looked, we weren't using it that month and they had plans that were $120 a month is a real example. That was more than we needed.
- [17:59]
E
Yeah.
- [17:59]
C
One click, right? One click and we save $780 a month.
- [18:04]
A
It's like your phone and cable bill that you should always be looking at.
- [18:07]
C
Exactly.
- [18:07]
A
They keep coming out with new programs and.
- [18:10]
C
Exactly.
- [18:10]
E
Yeah.
- [18:12]
A
So wouldn't it be nice if you didn't have to do that?
- [18:14]
C
But it would be amazing. This is something that we used to do once a quarter. Yeah, but this is, you know, this is the. The internal saying that we have. That is funny, but it also hurts it. It works so well. We stopped doing it.
- [18:27]
D
Yeah, right.
- [18:28]
C
But tools and tech. We saved, you know, $40,000.
- [18:33]
E
Yeah.
- [18:33]
C
A month, give or take in the cancellation, the reduction of. Of tools and technology that again, had no effect on our ability to fulfill our products and service, to generate new leads and prospects, to manage our team. Nothing. Zero impact. So any of those redundant tools.
- [18:55]
A
Okay, so then are we moving to the. Let's say we're going to O. To O. Okay, what do we got?
- [19:00]
E
O.
- [19:01]
C
Operations and overhead. So what are your facilities? What are those utilities? And. And again, you said things like your cell phone bill and stuff like what are you paying for Internet if you have an office?
- [19:12]
D
Right.
- [19:12]
C
We reduced Internet at our office from some archaic dedicated fiber. That was horrible Internet to it. I think we were paying $2,200 a month. Now we're paying $300 a month and we have better Internet.
- [19:28]
D
Crazy, right?
- [19:29]
C
Better for less. Who knew? So what are you paying in. In. In. In these different utilities? What do you think?
- [19:36]
A
Even. Even leases now because there's so many vacancies and offices that landlords probably to keep you there. And also if you were thinking of renewing is a great time to renegotiate that, right?
- [19:50]
C
Yeah, definitely. If you're within 12 months of your lease, it's a great time to go and look at an early renewal. Especially to your point, Roland, if there are vacancies within. Within the building that you're in.
- [20:03]
E
Yeah.
- [20:03]
C
It's a great time to get a deal.
- [20:05]
D
Right.
- [20:05]
C
And don't get a deal on. On when your lease expires. Have the new lease, but renegotiate a lease that starts next month and lower the lease.
- [20:18]
D
Right.
- [20:18]
C
So dive in there. What. What insurance? What's your insurance looking like?
- [20:22]
D
Right.
- [20:22]
C
Where are these different things? What we're trying to do here is just figure out what are we overpaying for again? Because at one point someone looked at it. It was the best deal then, but maybe it's not now. Stuff changes let's go in and renegotiate. These are things that we assume we should look at when our term is up. But are you, you don't have to.
- [20:46]
A
Are you also looking at efficiencies like workflows and things like that to see if things could be done? I mean, because you're kind of doing that with looking at the people that are absolutely unnecessary. Then you probably look at redundancies and then how we do things. Are we doing things in the way that's most efficient or are we scratching our ear by doing, you know, reaching the back of our head?
- [21:10]
C
Yes, and I'll tell you, one of the best places to look for that is inside the tools and tech. Okay. With the, with the launch of AI. Now, AI is not just what we're using, you know, inside of our different standalone AI tools. The tools that you're using have now launched AI inside of them.
- [21:32]
D
Right?
- [21:32]
C
So they have AI attacked through agents.
- [21:34]
A
You're talking about basically right, through agents.
- [21:36]
C
Through, you know, what is available now inside of your erp. That's AI that you could now replace any number of things with efficiencies by leveraging the AI inside of your ERP or inside of these other software solutions that you were incredibly efficient with your automations and your processes. But that was in a different world.
- [22:01]
D
Right.
- [22:02]
C
So we're always automating our, our SOPs and our processes quarterly, but now we're looking at them outside of just the value creation process. We're looking at them through each one of these lenses. So when we're staffing people, we're not just looking at the people, we're looking at the processes. When we're in tools and tech, we're not just looking at the tools that we're cutting, we're looking at optimizing the tools that we have for efficiencies. Same with operations and overhead. Then how do people purchase? That's the last one in stop P. Okay, if, if what we're doing is we're finding and kind of sh up a lot of maybe bad purchases or at least things we haven't checked in on, let's go ahead and put a stop to it now. Like what are the ways that we, we allow people to purchase and where are the, the contracts we have or what are the rates that we have? Now is a good time to renegotiate with any vendors. Like what are your, what are your raw materials costs or what are those core inventory costs that you have? You can go back and renegotiate now. What are the things that you're using? What are the terms that you're getting?
- [23:09]
D
Right?
- [23:09]
C
If you're, if you're spending media dollars, right, how are you paying for those media dollars? Are you being invoiced? Are you paying on a credit card? Is that the best credit card to pay on one?
- [23:23]
A
One thing that I just was consulting with some people yesterday, and they are, they are in the mobile homes business. And so they go and buy repossessed mobile homes and then find people to occupy them and then place them in mobile home parks and then sell them to investors. And, and so obviously a giant cost for them is the cost of acquiring the mobile homes. And so we talked about why not just like if they're acquiring those homes at 30 to 45% of retail, but if they sold for that company, the company would pay them a 10% commission. And I said, so basically, they're charging you for the carrying cost of holding the inventory 35%. The difference between the 10% they'll pay you as a commission when you don't buy it and the 45 that they'll discount it if you buy in bulk. That, to me is an opportunity for you to shift costs because they got stuck with a bunch of inventory. And the interest expense on the inventory is so high that it can create a negative profitability issue. But even if they could get back half of the discount and go from not a 10%, but a 22 and a half percent commission, it's a win for the people that are doing the repos trying to liquidate them, to have somebody that can do it. Particularly I told these guys, if you can sell in advance, because if you could sell in advance and then arrange for delivery within, say 30 days, you've got the money, completed the financing, and then you could go buy in bulk and effectively eliminate. It was about a $400,000 a month carrying cost on just that simply by changing the process. So I think that's a, like, that kind of thinking is a good thing to get into too, when you're doing this.
- [25:23]
C
Absolutely. And similarly to the, to the media example, right, we put all of our media onto an amex card that we switch from points to a cash back that at the end of the year gives us a 1% cash back. But in evaluating that, there's a media card that if you hit a specific tier that will qualify for quarterly, they'll actually give you a 5% cash back on any media spend.
- [25:47]
A
So you got a 500% right increase right in what you're getting.
- [25:51]
C
Yeah, it's getting a different credit card.
- [25:53]
E
Yeah.
- [25:54]
C
And instead of waiting until the end of the year, you're getting it quarterly.
- [25:58]
E
Yeah.
- [25:59]
C
So what are these little things that, I mean that's a Google search away.
- [26:02]
D
Yeah, right.
- [26:03]
C
I mean it, it. And, and at this company we offer every employee unlimited Google searches. It's one of the benefits.
- [26:09]
A
Wow, that is a pretty sweet perk.
- [26:12]
C
I know. Chat, GPT credits too. It's crazy.
- [26:15]
A
And we pay for all of that, right? The whole 100 of all of it. Nice.
- [26:18]
C
100.
- [26:20]
A
Okay, so we've got the four categories. And so I think, and correct me if I'm wrong, I'm doing it from memory. It was staff and people, tech and tools. I remember purchasing, procurements, operations and over overhead.
- [26:36]
C
There you go.
- [26:37]
A
Okay, so, so we've got those four categories. What is the actual process? Because there's a process like a step by step to go through to do this as well, right?
- [26:46]
E
Yep.
- [26:47]
C
So now we're going to go through the save process.
- [26:49]
E
Okay.
- [26:50]
A
So now we've stopped and now we're going to save.
- [26:52]
C
Stop and save.
- [26:53]
A
Okay.
- [26:53]
C
Stop, drop and roll. We're going to stop and save. So save the, the kind of acronym there. We're going to scan, we're going to analyze, we're going to verify and we're going to execute.
- [27:04]
E
Okay.
- [27:05]
C
We don't want to do is just put this list together and assume yay. And then go in and kill everything.
- [27:12]
D
Right.
- [27:12]
C
We need to scan it. We've, we've created this, we're making a list and, and just build that comprehensive list, put a spreadsheet together and create the categories that they're in. For me, I actually have the categories of, you know, is this employee, contractor, software. So we've got those categories. I also have categorization of separation difficulty.
- [27:38]
D
Right.
- [27:38]
C
So I want to know is it low, medium, high? Then we want to know, we want to go and analyze. So let's look at, let's look at them.
- [27:48]
D
Right?
- [27:49]
C
What's the usage? What's the strategic importance? What's the alignment of this tool with company goals? What we're looking for is the low hanging fruit. What are the tools that, that the tools, the people, the no impact, low to no or no to low impact? Because we know those go right now. I mean we're not waiting for anything but, but consensus amongst, you know, the leadership team or people who, you know, outside of yourself. You want to just verify again, are.
- [28:19]
A
We in analysis or are we in scan still?
- [28:22]
C
So I'm in analysis When I see a low, you know, when it's. This has, you know, no real usage, no one's using it, no strategic importance, no alignment with company goals. I'll fire out a quick message. Is anybody using this? Especially if it's got a comma in the monthly price?
- [28:41]
A
You know, I do that every email I get on a rebill. I just send it out to the three people that are primarily looking at those kinds. And I'm like, are we using this? That's literally just. Are we using this? Those four words.
- [28:54]
C
That's it.
- [28:55]
E
Yeah.
- [28:56]
C
Very, very high ROI forwards.
- [29:00]
A
So, so what you did with what we just went through that I really, really liked was you sent the executive team a spreadsheet that kind of had the. All of the expenses. They were categorized and then they had that low, you know, like all of that stuff.
- [29:17]
C
That's it.
- [29:18]
A
That, that was really, really helpful. And then you had the monthly cost and the annual cost. I mean, it was that. That analysis, I think is a brilliant way to do it because it just, it's just there, you know, I would say in black and white, but it was actually color coded too. So it was there and in pantone colors. That, that, that really just shows you what the opportunity is and what the.
- [29:38]
C
Cost of business with it. You had to. I mean, there's some. There are obviously emotions that go into these things, whether it's a human or a tool. I mean, we can have some emotional attachment and that can be, that can be appropriate. But when we do business with the unemotional aspect of the cost versus the, the return, you have to look at that and you have to say unemotionally, is there an ROI here? But when you got that sheet, there was already. These are already done. Like there was a, There was a below the line that these cuts have already happened. Those in that analyze phase that. Are we using this when it was. No. And they were low impact. I'm not waiting, I'm cutting them. There was $8,000 a month in savings were already realized before I sent that sheet to anybody.
- [30:31]
E
Yeah.
- [30:32]
C
And we're almost a hundred thousand dollars annually in savings. Before anyone evaluated that sheet. Just from a couple of Slack messages and texts.
- [30:41]
E
Yeah.
- [30:42]
C
Before we got to verify. So in the verify, that's where I want everyone in the leadership team because different people own different, you know, different aspects of the company. Different software tools. Different people report to different division. I don't assume that I know everything.
- [30:56]
E
Yep.
- [30:58]
C
And, and what that first scan through is going to do is give my opinion, my Understanding of the impact of that person, that contractor, that service, that tool. So I've said is it essential? Does it create or protect revenue? And, and third, this is important. Is there a lower cost alternative?
- [31:17]
A
Right, right.
- [31:18]
C
It may be a critical tool. You may be on the best plan for from that vendor. But is there another vendor? And again with those free Google credits search vendor name alternative.
- [31:30]
E
Yeah.
- [31:31]
C
And what you're going to get is a, is a list of them and I don't know, maybe use AI and write a slightly more intentional prompt of exactly what you need it to do and you're going to get some alternatives and just see that's great. What can you save there and then execute.
- [31:46]
D
Right.
- [31:47]
C
You're going to need to, to have a plan. On the another column I had there was date. What is the date? So we had proposed, approved and cut or reduced. Those were the, those were the, the different drop downs when we had the.
- [32:02]
A
Date that it was proposed to, to eliminate the expense. The date that it was cut and then.
- [32:07]
C
Correct.
- [32:08]
E
Okay.
- [32:08]
A
I mean that it was approved to be cut and then the date.
- [32:11]
C
Yeah, right, got it. And then some of them are going to be immediate.
- [32:15]
D
Right.
- [32:16]
C
Others you're going to need a plan. Especially if what you've said is yes, there's a lower cost alternative, there's a bit of a migration there and I would look to phase this out. We're going to fate. We're going to go and start with the ones that can happen immediately. There's no migration, we're not replacing them. Then we're going to go to the ones that, that you know, it's, it's going to take a little bit more planning.
- [32:36]
D
Right, right.
- [32:37]
C
We've got to migrate to a different.
- [32:38]
A
Tool or go hanging easy fruit first and then work your way.
- [32:41]
C
Yeah, exactly. And obviously as we get to any type of reduction in force, then there's some planning there.
- [32:49]
D
Right.
- [32:49]
C
Depending on how big of a reduction in force you're talking about, what does that look like? What's the messaging, what's the plan you're putting together and how does that work? But that execution, I mean if you're doing this should take less than a month.
- [33:06]
D
Right.
- [33:06]
C
Unless you're doing massive migrations, you need to. This needs to be measured in you know, weeks and ideally days move fast to get these results. The ones that are left over should be those that require some sort of project plan.
- [33:21]
E
Yeah.
- [33:22]
A
So in terms of benefit, I think it's great system. And in terms of benefit, just looking at ours, it's obviously nice to have the extra hundred K a month because that falls straight to the bottom line. It's, it's. It's literally money we were spending, we're not spending. So there's no cost of goods sold or anything associated with it. That's amazing when you think about a business that. Let's say, you know, let's say that most businesses fall in, you know, a 5 to 10 multiple. So let's pick in the middle and say it's, I don't know, seven.
- [33:55]
E
Right.
- [33:56]
A
At a seven multiple, that makes the business worth $8.4 million more. $8.4 million more from just that activity and expense creep to me is something. I watch it and I've seen it ever since I was a kid. I would ask, I remember going in my father's law office and there'd be all these people, and then I'd gradually, like over a couple years, I'd see more and more people. I'm like, gosh, you must be really, really growing. What do they all do? And the truth is, is that, you know, when I was talking to my father about it, he's like, honestly, I don't know. I think we have way too many people. It's like. And I thought about the cost of them, you know, and this was obviously a thousand years ago. So, you know, but like, let's say they're $30,000 a year employees and there's 10 of them. It's 300,000, you know, just really, it's so much accidental bloat and creep that, you know, that occurs in our businesses that I think this is a great framework and a great product process for people to go through. Quarterly, did you say? Is that kind of how you look at it?
- [34:56]
C
I would do it. I would do it quarterly. We, we have not. I would at least do the tools.
- [35:02]
A
So you wouldn't do it quarterly?
- [35:03]
C
Quarterly. We, I would. We have not done it quarterly. We used to go through and do the tools evaluation quarterly. We wouldn't go through and. And necessarily go through the full stop. We would go at least two. So the tools and operations and overhead.
- [35:19]
A
Cut the middle right there.
- [35:21]
C
And again, it works so well. We stopped doing it, but we fixed that as recently as just now. Because again, you talked about it from value, right? And value is fantastic. It's. It might be a little longer to realize, but let's talk about it from profit margin.
- [35:34]
E
Yeah.
- [35:34]
C
If you're operating on a 25% profit margin and you cut $100,000 out of. Out of your net net bottom Line. That's the equivalent of increasing not just sales, but collected revenue. $400,000 a month.
- [35:49]
E
Yeah, yeah.
- [35:50]
A
It's insane.
- [35:51]
C
It's. I mean, it's noticeable.
- [35:53]
A
It's better than sales.
- [35:55]
C
Right, Right. And heaven forbid, you, you attack both at the same time.
- [36:00]
E
Right, Right.
- [36:01]
A
I love that. Well, I think it's a really good framework. Anything else that you'd want to leave people with before we sign off for the day?
- [36:10]
C
I'll tell you the, the, I think the tendency is going to be to do this when things are bad.
- [36:15]
D
Right.
- [36:15]
C
I mean, the, the whole, you know, never waste a good crisis. I would challenge people. If things are really good right now, definitely do this anyway. Right? Yeah. Don't wait for things to get bad to make things better. It. To go from bad to good gives you relief. To go from good to great feels so much better. So if you're listening to this and you're going, oh man, things are pretty good, I don't need to focus on this. I would challenge you. It'll feel so much better if things are really good right now. To go from good to great.
- [36:49]
A
And I'll tell you, bad times come for every business. Every business hits cycles. Every business has stalls in sales. Every business has unexpected challenges that bring with them expenses that occur. And if you can stack cash and get a war chest of savings to be available to handle the down times while you're in the good time, that is really, really valuable. So I agree with you 100%.
- [37:14]
E
I love it.
- [37:16]
A
Well, so we've got just to review a stop and save program Richard just executed on. It saved a hundred thousand dollars a month in one of our businesses. You want to run through the acronyms one more time.
- [37:29]
C
So stop staffing people, tech and tools, operations and overhead, procurement and purchases.
- [37:37]
A
And that's the categories look at.
- [37:38]
E
Right.
- [37:39]
C
Those are the categories we're looking at for, for where these expenses are found. Then save. So what are we going to do after we find them? Scan, analyze, verify, execute.
- [37:51]
E
Love it.
- [37:52]
A
So the stop is what to cut, the save is how to do it basically.
- [37:56]
C
Right. You got it.
- [37:57]
E
Awesome.
- [37:57]
A
Well, I hope you guys enjoyed it. I would love to hear if any of you take this program or this framework and use it in your business. We'd love to hear what kind of results you get. That's always really exciting for us. You can reach us on social media basically at forward slash, either Richard's name or my name anytime. Also, Business Lunch has its own site and channels and socials. And if you enjoyed it, please share it with a friend. And we'll see you next time.
- [38:31]
B
Hey, Roland Frazier here. If you're looking for a way to grow your business exponentially to get more customers and ultimately increase your wealth, there's no faster way to do it than to acquire other businesses that already have the customers, products, services, teams and media that you want. If you want to double your sales, just acquire a company that has the same sales as yours. It sounds simple, but far too many people end up starting new businesses that fail and forget that they could skip all the hard stuff and and just acquire one that already exists. There's a reason why private equity firms, family offices, big companies like Apple, Google, and some of the smartest entrepreneurs on the planet do not start new businesses from scratch. They acquire already successful businesses and when they do it, they instantly increase their sales, their profits. If they want market share, they increase that they can get new products and services to offer, all instantly. Hey look, 90% of new businesses fail. 90%. Why not acquire an already successful business and increase your chances of success by 900%? What most people don't realize is you can acquire highly profitable businesses with no money out of your own pocket in pretty much any country in the world, regardless of your credit, and without having to go find a bunch of investors or needing any experience. Look, I've been acquiring businesses for over 30 years now, and I cover the whole process in my EPIC Investing strategy training and I want to give it to you 100% free. Just visit businesslunchpodcast.com epic to get your free access to my EPIC investing training right now, while it's available.