← Profits with Pajak
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You could have your pricing dialed in, you could have great marketing, and you could still go out of business. Why? Because profit doesn't keep you alive. Cash Flow does. Today we're going to break down the three pillars that actually determine whether your business survives and those are true operating cost, your customer acquisition cost, and the one that kills more businesses than anything else. Cash Flow.
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Today's episode is brought to you by Yardbook, the All in one CRM for your lawn care business. And as an exclusive partner of this podcast, you can get started today and begin simplifying your business and maximizing your profits. Sign up now@yardbook.com the link is in. The show notes Time now for Profits with Paycheck, an essential podcast for you in the green industry who are looking to unlock the full potential of your business. Hosted by John Pajac, your certified financial coach, the show features in depth discussions with successful entrepreneurs, thought leaders and industry experts providing practical advice and proven strategies on financial planning, operations, marketing and sales. Profits with Paycheck has valuable insights and action steps that you can implement today for creating long term success. Now here's John Pajak.
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Welcome to Profits with Paycheck, the podcast where we talk business strategies and financial insights for the green industry. I'm your host, John Pajak and today we're going to be talking about something that separates businesses that look successful from the ones that actually survive. Because I've seen it too many times, guys are doing big numbers, they're running full routes and they're broke. Or worse, they might be going under. So here's the trap. Most business owners focus on how much did I sell? Or how busy am I? But they ignore what what it actually costs to run the business. They ignore what it costs to get customers and whether the money is even there when the bills are due. You know, you could get the first two right, but if your timing is off, you're done. So the first pillar is true operational costs. This is your foundation. It's not guessing. It's not ballpark numbers. It's it's the real cost to operate your business. And I mean, we're talking about fully laden, fully burdened labor, your fuel, your equipment, payments and repairs, insurance, software, taxes and owner pay. And you know, all the things it takes for you to keep the doors open on your business. And here's where people mess this up. They calculate. They calculate the expenses, but they don't calculate the cost per hour or cost per stop. So they end up pricing work that covers some of the expenses. They ignore others and A lot of times, they just leave nothing for profit. And here's the reality check. If you don't know your true operational costs, you're not pricing, you're gambling. And once you know what it costs to run your business, now we ask the question, what does it cost to grow it? And this is when we come into pillar two, the customer acquisition cost cac. The cac. Okay. This is what it costs to make the phone ring. And in this category, in this pillar, everything counts. Your Facebook ads, your Google Ads, your mailers, your yard signs, your door hangers, website costs, and even your time. So let's say it costs you $120 to get a new customer. Well, that's fine if you know the customer is worth much more than that. Let's just say 800 to, say, $1,500 over time, maybe in a season, right? But if they only buy one service, and it's say $110 for the service you just paid to work. So you have to have a good balance of. You have to understand and record what your CAC is. You know, and CAC isn't bad. You know, it's just when you don't. When you don't track it. Because when you don't track it, you overspend on bad marketing. You underinvest in good marketing, and you really can't scale unless you understand how much it costs to get a new client in the door. So let me hit this real quick. This is exactly why knowing your numbers matters. And you might be thinking, man, that's a lot of tracking. And yeah, it is. But this is how real businesses are built. And again, you know, budgets are not there to restrict you. They give you permission to spend the right way. And when you know your break even, and you know, your cac, your cac, you could spend aggressively without fear. And if you want help building that system, check out budgets breakevens on bottom lines@johnpajak.com now, here's where most businesses die, even if they get the first two pillars right, and it's pillar three, the cash flow. That's the lifeline of your business. This is the oxygen of your business. It's not profit. It's not revenue. It's cash flow. And the reason I say this is because you could be profitable on paper and still go bankrupt. And why? It's because of timing. You know, let's just say, you know, you land a big job, you know, you spend 5,000 on materials and labor, and you didn't get a. You don't get paid for 30 days. You know, meanwhile, your payroll's due Friday. The fuel is due today. You know, the trucks need fuel. Insurance is due next week. Now, on paper, you know, you're profitable because these jobs are going to pay for all that. But you're actually broke. You don't, you don't have the money because your bills don't coincide with the cash flow that's coming into your business. And the hard truth is, you know, cash flow problems don't show up on your PNL right away. They show up when you can't make payroll, when you start floating expenses on credit cards. And essentially, you're kind of robbing Peter to pay Paul. And even healthy businesses can collapse if cash in doesn't match the cash out. And I want to share a little bit about my personal experience with this. Uh, you know, when I started to focus on cash flow, it changed how I ran everything. You know, my first business was when, even before my business, when I was working for another company, my boss was experiencing the same things. We, we had dozens of clients that were, you know, 30, 60 days, 90 days past due. And we were, for some reason, we were still servicing their property. But, you know, I looked at that, and when I started my second business and looked back at it, I said, I'm not going to deal with this. You know, I started doing prepay only, which essentially was like a deposit up front. You know, they were still getting billed monthly, but they were paying at the front end instead of the back end. You know, when we were doing some project work, you know, we had tighter payment terms. And what I mean by that is, you know, we would collect a deposit and then we would have, you know, 20% due at, you know, one certain point in the job, about halfway through, collect another 20% and so on and so forth until the very end where we would have it to where basically we would just have 10% was due. And when we did that, it's like all the, you know, everything was basically paid for. And, you know, that last payment was part of our profits. You know, I made sure by, you know, if we split it into five payments, that our fourth payment included, you know, part of our profits, and the fifth one was pure profit. So that way, in case we did get burned, at least all the foundational things were paid for. Of course, we want to make sure we gather 100% of the profits. But at the same time, um, you know, when we were doing project work like landscape installs and things like that, then we would get paid. And we, we could guarantee it. Back when I was getting my lawn care business off the ground, I was juggling routes, invoices, and customer notes with paper and prayers. It was chaos. Until I found Yardbook. Yardbook gave me the structure. It helped me track chemicals, route efficiently, invoice faster, and most importantly, it helped me grow a profitable business business. If you're tired of duct taping your systems Together, go to yardbook.com and sign up for free. And if you're ready to go premium, use promo code payjack to get your first 30 days on me. Then we, you know, kind of moved into recurring billing models. And, you know, when we started to change a little bit, we started to realize, you know, prepaying was okay, but if we would actually charge a card on file at the time service was completed, man, that did wonders for our cash flow. And I'll tell you what, it wasn't. At that point, we were not in survival mode. We were in thrive mode. And I'll tell you what, survival is not about how much you make. It's about how much you get paid. And if we were getting paid actual money, we're charging it out within two to three days. We're getting the payment actually coming into our bank account. That is lovely. I'll tell you, I'm never going back, you know, especially with the fertilization weed control services that we offer. We did this with mowing, we did this with fertilization, weed control. There's other services that we, we offered like that getting that money in as quickly as we were doing the work made that made all the difference. And I know some of you are still billing on a monthly basis. And I'm not trying to tell you you have to do this, okay? But I'm just sharing my personal experiences. You know, we never have to worry about payroll anymore. All our operational expenses are paid because we have literally, you know, out of the four days that we work, Monday through Thursday, we basically have money flowing in every single day. And it's great. So here's the thing. I. I kind of want you to take a look, to dial in your true costs, you know, know your real cost per hour and per service. Because, you know, if you're doing certain several different services, your mowing costs per hour are going to be different than your fertilization weed control per hour, as well as, like, aerations and overseeding. And, you know, every single service that you have is probably going to have a separate hourly rate. And a lot of guys just, you know, they they, they just say, oh, you know what, I'm just going to say across the board, we need this much an hour. But there are some services that are just going to be more profitable, they may be in a higher demand and people are willing to pay more for them. So I think it's a better idea to look at each of the service offerings that you have and consider them their own division because I guarantee you a lot of them, they may use some of the same equipment and everything, but they're different. So why charge the same for everything, charge out differently? Track your, your cac, your cac every dollar that you spend to acquire a customer. Because, you know, we talk about what our true operational costs are and we track every single thing that goes in there. When you're in your marketing phase, make sure you're tracking how much, how many dollars you're spending on the marketing. And then let's just say it's a new potential client. They reach out to you and you're talking to them, you say, how did you find us today? And they say, well, we've gotten postcards and we've gotten, you know, we saw you on Google, you know, Google business page, you know, website, whatever it might be. But the thing is, it's like it takes more than just one time for somebody to see you. A lot of times they need a ton of touches. A lot of different marketing ads have to hit them before they, they're interested. Some people, maybe they just go on Google and check the first person that they call the first one on the box. But you know, a lot of times you, you know, it takes more than just that to acquire a customer. And then I also want you to take a look at your, your, your cash flow. Control your cash flow. You can, don't be a naysayer. You can do this. I know because I have done it myself. You know, 25 years ago, 30 years ago, whenever it was when I worked for another company, I watched as my boss would literally turn me into a collector instead of a, you know, mowing tech. You know, I would literally have to take time out of my day, which he was paying me for, to go knock on doors and try to get payment from these people that were there. He would go out, you know, he had another job. He was, you know, he was not just, you know, this was a part time thing for him. And he would literally set it up to where, you know, he, honestly, back then, you know, knowing what we know now, he was almost designed for failure because people could get away with Months of not paying him and all the while he's still footing the bill for all the daily expenses that he incurred. So you can take control of your cash flow. You can shorten your payment cycles instead of every month. I mean, you could do it on a weekly basis or a daily basis like we do, because our services are basically, you know, we might see a customer once a month, so why wait a whole month to get paid? We just charge out immediately. And even when we were doing mowing, you know, we were charging every single week, every day for our mowing clients. And you might say, well, oh, you know, instead of making four payments a month, you know, it's more convenient for them to make one payment. Well, the thing is, we didn't even. We just put it on autopilot. We would gather a card on file and charge it as everything was done. Oh, well, I can't do that. You're giving yourself self limiting beliefs, okay? When you talk like that, you're. You don't believe it, so you're going to make it true. I took the chance. I went out, we had a lot of clients and we had very little kickback on that. When we started to grandfather people in, there were certain clients that we had on our list that already said, you know what, I still prefer to do the prepay. I like it better that way. And we said, no problem. But all of our new clients, they had to have a card on file. And that vetted a lot of people out. I would tell you, anybody that was kind of a problem or potential problem, it would weed them out. They're like, oh, I'm not going to do that. Okay, no problem. Have a good day. And they're like, whoa, wait, wait, wait, what's. I'm like, no, that's how we do it. We decided we did not want to have to chase money anymore. We decided that this is what is going to be best for our business and for our clientele. Because if we get paid on time, we're going to be showing up and doing the service with a smile. No more chasing money. Okay? You know, if you're not in maintenance and you're def, you know, let's say you do project work, make sure you're getting those deposits. Make sure that if it's a multi, tiered, you know, payment system that, you know, say you do a $30, 30% deposit, 20% is due when materials are delivered, you know, halfway point, you get another 20%, another 20%, you know, at another predetermined time. And then the final payment. When you're doing your walkthroughs and making sure everybody's happy, you know, that's when the final 10%'s due. That method works pretty well. I mean, you could even shorten it to a four step towards, I would do like a 30, 20, you know, 25, 25. But regardless, you know, you determine how you're going to get paid. And when you do this, you're just basically aligning your income with your expenses so that no matter what, you're not waiting like a 30 or 60 day period of time to get paid. You're getting paid on a regular basis. It's going to match up with the bills that you have. Make sure that you never, you know, are scrambling to pay payroll or pay the phone bill or whatever else fits in there. So here's the truth. You don't have a business until you control what it costs to operate, what it costs to grow, and how much cash moves through your company. So a little challenge for you, I like giving you some challenges, is look at your next 30 days. Will you have enough cash on hand to cover everything coming out? And if that question makes you uncomfortable, that's exactly where you need to start. So I want to thank you for listening today. I hope you had a great time. I enjoy talking about these things because I'm a weirdo and I'm a nerd, but it's helped build my successful business and I've helped many others grow and develop their their businesses. So I as always, I want to say God Bless, Keep pushing through and we'll catch you on the next one. Thank you once again for listening. If you've enjoyed the show, please leave a review and share it with fellow business owners. Your support means the world to me and helps keep the show going strong. I want to give a special shout out to our friends at Yardbook. Their continued support has been instrumental in bringing this podcast to you week after week. If you haven't checked them out yet, visit yardbook.com and see how they can give you the tools to streamline and manage your lawn care business. Also, don't forget to explore the resources and upcoming events that I've collected just for you in the show Notes. These are curated to help you stay ahead in your business with the latest tips, tools and networking opportunities. Whether it's a new tool, an insightful article, or an event you don't want to miss, I've got you covered. Until next time, keep pushing through and God bless.