Your Expectation of Growth Is Stopping You From Success — Transcript

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1. 0:00Yep. Yes, sir. I sell remodeling
2. 0:02services to commercial property owners
3. 0:04and tenants. We do about $2 million a
4. 0:06year. We'll do $2 million this year. And
5. 0:08I'd like to do $100 million by 2025. I'm
6. 0:11>> Wait, by 2025?
7. 0:13>> $100 million. From
8. 0:14>> From two From two?
9. 0:16Okay. I mean, hey, no, it's all good.
10. 0:17It's all good. It's all good.
11. 0:18>> the end of 2025. At the By the end of
12. 0:202025. I'm stopped by the lack of
13. 0:23capital.
14. 0:24So, I currently take residential
15. 0:25remodels to fund commercial contracts
16. 0:27due to net 90 waiting terms.
17. 0:28>> Okay.
18. 0:29>> We've been slowed drastically due to
19. 0:30extremely high interest rates on loan
20. 0:31shark short-term lending and high
21. 0:33overhead costs.
22. 0:34>> Okay.
23. 0:36And so, the thing that's stopping you is
24. 0:37cash flow.
25. 0:38>> Yeah.
26. 0:38>> Okay.
27. 0:39>> [gasps]
28. 0:41>> Okay.
29. 0:43Man, the thing that threw me was the
30. 0:44$100 million thing.
31. 0:45Um
32. 0:46Just and I I I want to be I want to be
33. 0:48clear like I'm all for it for for
34. 0:49thinking big. The it's it's it's real I
35. 0:53don't know of a single business in your
36. 0:55space that's going from two to 100 in 13
37. 0:58months. The reason I bring this up is
38. 1:00because sometimes you can shoot yourself
39. 1:02in the foot for a decade because you're
40. 1:03trying to go from two to 100 in 12
41. 1:04months. And every strategy that you try
42. 1:06and go from two to 100 fails because you
43. 1:08want to do it in 12 months. But if you
44. 1:10did it in 10 years, you'd for sure hit
45. 1:11it.
46. 1:12Does that make sense?
47. 1:13>> Got it. So, just
48. 1:13>> So, just as a just as a as a as a frame
49. 1:15shift. Um
50. 1:17in terms of the cash flow, so you have
51. 1:18these you have these commercial
52. 1:20remodels. So, that's like a building
53. 1:21like this, correct? Or is it? Okay, so
54. 1:23you do you you remodel these these types
55. 1:25of buildings.
56. 1:26But then you do residential because cash
57. 1:28flow is faster.
58. 1:29>> Yeah, correct.
59. 1:29>> For the spaces. Okay. So, um
60. 1:33And I'm guessing you said that you've
61. 1:34maxed out your lending.
62. 1:36>> Lending isn't exactly available to me
63. 1:38and the lending that is is extremely
64. 1:39high interest rates.
65. 1:41>> So, it sounds So, the the biggest thing
66. 1:43with this type of business is like you
67. 1:45can solve it with payment terms.
68. 1:47And so, this is where like the sale has
69. 1:51two components to it. And everybody
70. 1:52who's had a sales team before knows what
71. 1:53I'm talking about, which is like it's
72. 1:55one thing to close the sale. It's
73. 1:57another thing to actually [ __ ]
74. 1:58collect the money.
75. 2:00Right? Like they said yes. It's like
76. 2:02oh so you have the card and they ran it
77. 2:03and they're like, "Oh no, he'll be back
78. 2:04with the card, but he said yes." And
79. 2:05you're like, All right. Like let me
80. 2:07explain how sales work.
81. 2:09Uh and so I think that uh I actually had
82. 2:11to fix this with a I referenced this in
83. 2:13a guard services business. And so it was
84. 2:15like industry average in that business
85. 2:16for example to um to pay like net 30. So
86. 2:20that the guard does his work and then
87. 2:21they remit payment, right? And so
88. 2:23basically what I'd recommended for them
89. 2:24was to say, "Hey, we just bill quarterly
90. 2:26up front." So we bill and then you get 3
91. 2:29months of service and then we bill. So
92. 2:31they're always 3 months ahead of cash
93. 2:33flow requirements. Now I can understand
94. 2:35that there's industry industry standards
95. 2:37and norms, but part of that is why you
96. 2:39want to be better so that like if I'm
97. 2:41looking at two contractors and one has
98. 2:44you know slightly different payment
99. 2:45terms, but I really want to be with that
100. 2:47guy more, then I'm going to go with that
101. 2:48guy. And if you think that you're a
102. 2:50commoditized service, then I think
103. 2:51you're missing the boat, right? Like you
104. 2:53want to show how you're not the same as
105. 2:55everyone else. And so I actually think
106. 2:56this is a sales issue when it comes to
107. 2:59payment terms more than everything else.
108. 3:01And so you can obviously solve this
109. 3:02thing with like AR lending and things
110. 3:04like that, but it's probably a payment
111. 3:06terms and sales thing, which is like
112. 3:07what would it take?
113. 3:09And sometimes I ask that question in the
114. 3:10sale,
115. 3:11"What would it take for for you to put
116. 3:13that you know half down?"
117. 3:14>> So I've I've only been in business for
118. 3:17about a year and a half.
119. 3:18>> Okay.
120. 3:18>> Um so most of these super large clients
121. 3:21are I'm foot in the door. So whenever I
122. 3:23walk into a place like Amazon and they
123. 3:25say that they're going to give me a job
124. 3:26to start remodeling a warehouse. Um
125. 3:29I I don't know I don't know how to tell
126. 3:31them that they need to pay me not on
127. 3:33their terms, but on their
128. 3:34>> Yeah.
129. 3:34Well, I mean if you go if you go hunt
130. 3:36whales, then you will be on like you'll
131. 3:39be you'll be catering to to their terms,
132. 3:41right?
133. 3:42Um but again, I actually think what I
134. 3:45said at the very beginning was the main
135. 3:46thing. You are cash flow constrained
136. 3:48because of the arbitrary expectation of
137. 3:50growth that you're putting on yourself.
138. 3:52That's so like basically, do you
139. 3:54actually have a problem or do you have a
140. 3:56problem based on the timeline that
141. 3:57you've created for yourself?
142. 3:59Does that make sense?
143. 4:00>> Mhm.
144. 4:01>> So basically, the business has grown.
145. 4:03You've been doing this for like whatever
146. 4:04a little bit more than a year, right?
147. 4:06So going from zero to that in in
148. 4:0912 or 14, whatever it was, months
149. 4:11is a is a big W, man.
150. 4:13Um and I think that like you just keep
151. 4:15doing that, you'll be just fine. It's
152. 4:17just that like you need to let some of
153. 4:18that gross profit that you've booked out
154. 4:20that's in AR fall through.
155. 4:23And then I think like if the business
156. 4:25model fundamentally works in terms of
157. 4:26profitability, so I'm not I don't have
158. 4:27time to dive into that, but in terms of
159. 4:29looking at the gross margins, which
160. 4:30hopefully you have done. If the margins
161. 4:32work, then it's just that like cash flow
162. 4:33comes to timing. And as long as you're
163. 4:35not like worried about losing losing
164. 4:37your ass,
165. 4:38cash flow constrained businesses,
166. 4:41the only limit to those businesses it is
167. 4:43the rate of growth provided the gross
168. 4:46margins have been set up properly.
169. 4:49And so that's why I said originally, I
170. 4:51do actually think the biggest problem is
171. 4:52the expectation thing.
172. 4:54Because if I said you can get to 100
173. 4:55million in 10 years, would you want to
174. 4:56do it?
175. 4:56>> Sure.
176. 4:57>> Yeah, then I think you'll be fine, dude.
177. 4:59Like you went from zero to two million.
178. 5:00You got to let some of that money flow
179. 5:01through, and then you'll be like, all
180. 5:02right, well, if I grow at I mean, just
181. 5:04look This is The nice thing is that this
182. 5:05is an Excel sheet problem. And so it's
183. 5:07not a real problem. Like you can solve
184. 5:08for what like I told that story
185. 5:10yesterday about cash flow projections.
186. 5:11You can just solve for how much cash
187. 5:13flow do I have? How much does it take me
188. 5:14to get a new customer? What's the
189. 5:15average value per customer? Okay, how
190. 5:17much can I expect out to grow If I grow
191. 5:19at 30% I'm going to go negative on cash
192. 5:21flow. If I go at 10, I'm upset at myself
193. 5:24cuz my father never will say I did a
194. 5:25good job. And so at 20% though, I make
195. 5:28money and my father doesn't talk to me.
196. 5:30And so that's probably a nice sweet
197. 5:31spot.
198. 5:33Does that make sense?
199. 5:33>> Thank you very much.
200. 5:34>> Yeah.
201. 5:35Shoot.
202. 5:36>> Yes, sir.