Business Financing With Marc Adams

Marc Adams and Mike Goldstein discuss how to analyze your contractor’s business financials and ROI measurements to find holes that can be filled to make your company more profitable as well as how business financials are one of the most important tools that a business owner has at their disposal. They provide insights into where the business is making and spending money and can help to identify areas where costs can be cut or revenue can be increased. One of the key performance indicators that business owners should look at is their return on investment (ROI). 

Topics discussed on the podcast about reactiving to business financials

As a business owner, it’s important to keep an eye on your company’s financials. This includes both your revenue and your cost of goods sold. By understanding where your money is coming from and where it’s going, you can identify areas where you can cut costs or increase profits. For example, let’s say you own a home contractor business. You may want to track your business financials to see how much you’re spending on supplies, labor, and marketing. You can then compare this to your revenue to see if there are any areas where you’re spending more than you’re making. If so, you may need to adjust your prices or find ways to cut costs or raise pricing as needed based on tracking your business financials can help you run a more profitable company.

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Audio Transcript

Hey guys, it’s Michael Goldstein here again with a crushing with kitchen and modeling podcast and today we are so lucky to have with us, Mark Adams who’s gonna talk to us all about really how to structure your pricing, how to look at your numbers and know that your numbers are right, so that you really can ensure that you’re running a business and not just a hobby that you get paid a couple bucks to do and we’re gonna do all of that um in just one moment, Hey Mark, how are you? Hey, how are you, Michael? I’m doing well, I’m so glad that you’re able to join us today and and you’re able to speak to the, to our audience here. Um and Mark, you know, we give you a little bit of an intro just telling people, we’re going to talk today about numbers about taking that business to, you know, to the next level, making sure that you know, you’re financially sound and all of that and I know that you’ve been, you’ve spent a career doing this, but just you know, in short, tell tell us a little bit more about you know who specifically you are and what the heck it is that you do? Cool, cool. My name is Mark Adams and I own next level of business advisors. And what we are is a modified accounting firm for one of a better phrase. We call ourselves profitability and growth advisors and we’ve done that because I’ve been around for about 20 years now, started in the accounting, obviously doing basic bookkeeping and taxes. But what I find is that most people don’t really understand their financials so early on in my business life, I started trying to help people to understand their financials, but it morphed because I wanted people to start to grow their business, so you have to be able to take that information, that knowledge, understand how to interpret it, but then know how to make wise decisions. Uh And so we started really focusing on profitability and growth because we want people to really get the benefit, like you said, people work for years and years and and with a hobby right, just enough scratch to get by and we’re trying to make that change the picture. I say that every business starts with a dream right, every time you start your business with this dream and it can become a nightmare or we wanted to become a dream again. So we try to turn it around how people do that, you know, that that’s that’s great. So many of my clients, you know, in the marketing world, you know, they come to me and they say, hey listen, you know, we’re doing fantastic. You know, we’ve we’ve got a million and a half dollars a year in revenue. You know, we were booked up for the next six months and I say, well that’s fantastic and out of that, you know what, your profit margin, oh well we’re just, you know, we’re making sure we have enough money to keep the business running, you know, So they talked about the fact that there are seven figure business, but at the end of the day, you know, there there are three figure salary and that just doesn’t work and I think that’s one of the keys is in order to stay in business, you need to be able to take care of yourself as the owner, you need to be able to take care of your family, It’s not just growing the business, but it’s growing your lifestyle with it. Absolutely! That that’s, that’s it in a nutshell, right? It’s so funny because I do the same thing, work with a lot of different companies and cash flow is a challenge. They might be bringing in all this money but can’t keep any, they can’t stop the flow in their pocket to enjoy it. They’re always out paying bills. I say robbing peter to pay payroll, you know, that’s not the way you want to like, you know, one of the things that we, we, we have an issue in the home services industry, you know, especially in the home remodeling industry is you’ll take that nice big retainer, but what do you do, you don’t put it in the bank and then say, okay, I’m gonna use this to buy the product, I’m gonna buy the cabinets, the countertops, the tile, but not for for this project, I just took it rather I’m gonna, oh geez, I don’t have enough money to finish the project beforehand. So I’m gonna buy some product for that and then I’m gonna sell another job and that will fund this project, you know, and I don’t want to say it’s a Ponzi, but I mean it’s kind of how that all begins, isn’t it? I have worked with contractors for a lot of years and that is one of the biggest challenges, you’re right, you know, and it’s like if I don’t get this next sale, even though I’m working on this project, I can’t pay my guys and at some point you’ve got to figure out how to break that cycle and get that retainer and use it for what it’s properly set for which is getting those products purchased first. So progress building is critical and those kind of things I think and, and actually just understanding how to build properly is really, really important and I mean, I, I think it all really stems though from pricing at the get go, you know, we, we have just come out of no such a financial roller coaster, you know, in an economic situation where we have supply chain delays, we have cost inflation just out of control and you know, when you do have a backlog of six months and I’m going to take on a project, you know, when we’re gonna sell it in october of 2022 we’re gonna get to it in april of 2023 you don’t really know what the cost of your materials are going to be then and you know, they’re holding cost is a little too much. So you can’t, it’s not as if you can buy that material and just holding, you know, I think a big part of figuring out how to be problems. How do you price your jobs appropriately? And I’m curious if you’ve kind of run across that with some of the people that you work with that, you know, they think that their pricing right? But then, you know, because there’s such a wait time between when they when they sell a job and when they do it that, you know, they just don’t, they don’t have the funds to really complete it. Yeah, you can peter out of funds really quick, Right? I mean, and so a couple of things that I often chat about with owners and not just in construction, but in in any field, right? Sometimes is a lag time, I would have you, but whenever you have a product when you’re looking at a profit and loss and it’s a little nerdy. So forgive me. Right, I look at three sections, you have your income section, you have your cost of goods sold section and then you have your other expenses. I try to keep a close eye on that cost of goods sold section, that’s the part that’s gonna make you or break you right, if you’re not pricing appropriately. Oftentimes you you don’t have enough to cover the expenses and obviously your own living. So you know, sometimes you might try to do some mark ups on the products that you’re going to purchase, especially depending on time frame, right? When you’re gonna purchase uh other times you might have to just come up with some nice um margins that are gonna allow you obviously to cover those costs and you want to build in all the other things as well because until the labor hits, which is, which can happen further down the line, that’s a whole other conversation, the labor, right? Yeah. So you really gotta build those prices and that’s the hardest part. I worked on a calculator. I was working with a smaller contractor and he didn’t have anything and I was working with the calculator trying to help them to understand the importance of how to mark up his his his product, you know, so that he can make sure to cover those expenses when they come the cost of goods sold and still keep running. And obviously when you get that retainer, you don’t just sit on that money, it’s cash. It’s called cash flow for a reason it’s gonna be flowing in and out of the business, right? And so you have to know how to manage that cash flow. That’s probably one of the most critical pieces for any business owner, little contractor and you know, 11 of the books that, that I probably read two or three times. And I always recommend my clients read. It is profit first. Uh and the whole idea is, you know, we don’t take the old formula of, you know, expensive expenses, less cost equals profit, but really, you know, your, your prices, you know, your profit minus the expenses, you know, and with that, I think that it’s really important that you figure out how much, you know, you need to get paid. Um Absolutely, absolutely. You know, I read that book too, it’s interesting profit first to me, it’s for some of us it’s almost intrinsic right? It’s just the way we live our lives, like I think I was one of those, it’s just kind of the way I live my life, I kind of make sure that I had enough, but when I read that book, it really put a nice structure around it uh since that book has come out, you know, I had, I had some derivatives of that, like I’ve worked with clients to help them save money. I have a really cool cash flow management uh spreadsheet that I use for my clients, which uses some of the principles of profit first, but it’s a little bit simpler for them to understand because the goal is to be able to build what I call cash reserves, right? And so with this cash flow calculator that I created for my clients every single month we can use it to allocate money in the proper buckets if you will so that you don’t run out too early and build for yourself because in the end you like you said, you we don’t start business to pay bills, we start business to live a certain lifestyle. So we want to have that lifestyle without calculations and you know, and I know there’s a lot of people out there who really do enjoy what, you know what they do. I mean, I’ll be honest, my business, although it has expanded and I’m able to work with dozens and dozens of people across the country now when it started, I just love creating websites and I put myself through college back in the 90s, learning how to design. It’s all right. I mean, it’s now we we have expanded way beyond that now and, and I couldn’t just, you know, build a site and charge a couple 100 bucks anymore. But the challenges, you’ve got a differential between what it is that you like to do and what it is that you have to do to make money to survive. And that’s that’s where, you know, you have that challenge and you know, one of the the pricing models that a couple of my clients are using right now, I think it’s, it’s interesting, especially with the flux, you know, and, and the the volatility of the markets is that they do their cost plus pricing, you know, so they buy that, you know, they’re able to figure out, okay, this is how much I’m gonna charge you for my services is how much the management fee is gonna be. And then you just have to pay the cost of all the materials and I’ll give you the invoices. Um, and I’m curious if you’ve run into, you know, more and more people doing that because I think it protects against the inflationary fees that you get in in your material, even the labor costs. I have run into a few people who do that. And I like that. Uh, it’s a transparency, right? For the, for the, for the, for the, for both sides, right? Both sides, here’s the bill, here’s how you pay it. And I’m, I’m not against that. The only caveat that I have with that kind of a mindset is even if they’re gonna pay for the materials, if you’re gonna be the one picking up the materials, you have to build that in. Right? And I think that’s where I’ve seen some people lose money. So avoid cost of goods sold. That’s a beautiful thing. But make sure the building that time for yourself because a lot of times people love for you to, you know, you pick it all up and I’ll pay the bill, but there are expenses hidden though, they might be in you managing the collection of the goods, right? A collection and a delivery of those things, Make sure it’s a business to be compensated for that as well. So percentage increase on something like that. It’s powerful. And and and it’s interesting too, because you’re talking about, you know, they expect you to do this. You know, you’re gonna pick up materials and all the little things that you do as a business owner. How many, how many of us don’t charge for our own time. You know, we don’t value our own time. And it’s, you know, there’s a reason why there’s this massive V. A market overseas. There’s a reason why, you know, we have people do make each I mean, asks why we have, you know, who are making strategic decisions and getting paid for those. Um, and I think that one of the challenges is really recognizing your true value. I think that’s what, you know, they say it for many business owners. We often compete against ourselves when it comes to pricing, right? I’ll charge you $3,000. And before the person says anything, but we’re gonna give you a discount of 1500. Don’t compete against yourself. You know, it’s it’s it’s human nature, I just want to be accepted. But at the same time it’s gonna be harder to get some food on your table if you don’t, if you keep competing against yourself, don’t do that value what you’re doing. And look, I tell you what contractors do, what kitchen remodelers do. I’m a pretty, pretty intelligent guy. I can’t do it. I don’t want to do it. I’m not able to do it. I’m too scared to do it. And so you should be fairly compensated for that. Yeah. Well, you know, it’s finally, you know, we do what we do well and then hopefully we’re smart enough to know to pay somebody else to do the things that we don’t do well that they do. You know, and when I was very young, my father said to me, you know, Michael, you’re you’re great with computers, you know, you’re very smart, you think analytically, but when you touch tools, bad things happen and he is right, you know, it’s funny because I I work with guys who live touching tools and then, you know, when they touch tools, magic happens, not me, you know, my toilet backs up, you’ll grab a plunger that’s about as much as I’m going to maybe throw some. But I’m making that I’m somebody, you know, last time I I tried to install a garbage disposal in the kitchen for three days. So, you know, there’s, you know, I think that the lesson behind that is you don’t know your value, but also no gonna cost yourself more money. I agree. I agree. Yeah, Yeah. So let me let me ask this one if you were a new kind of emerging business, You’re just getting started and you’ve been working as as the been working for somebody else, You going on your room. What are the first few things that you would recommend do when they’re trying to set out their financial, how do they get started? How do they make sure that their pricing appropriately and they’re going to actually see a problem? You see it, wow, that’s a powerful question. Um I will tell you a couple of things that I tell every business owner, especially when you’re starting out first, create a budget, right, create a budget. Because when all, when all is said and done, you kind of have to know what you need to live right when all is said and done. And after you’ve created your budget uh but you’re not a business. That’s exactly right. Your personal budget, you got it right because you have to live right? And then when you do that now you start to construct your your pricing matrix and what you’re going after, if you can specialize it’s awesome because it’s, you know, the expression riches in niches, right? But after you do that, then you you’re in a good spot, right? Personal budget first. And then you start coming up with the next. Now when it comes to your your pricing matrix for your business, I think you should try to focus on the type of client you want to have, which can dictate the type of pricing that you want to do. Uh Does that make sense? Sometimes, you know, so when we start out we just take any and everything, you know, I’ll do, I’ll do a kitchen, I’ll fix a crack in the sidewalk out. But if you if you go that route you’ll find you’ll be wasting a lot of time. So figure out exactly what I want to do if it’s going to be kitchen is gonna be kitchens. Uh and then you start to build from there. Um I it’s a challenge trying to figure out the pricing, but when you’re coming from somewhere else, you kind of have an idea of what it takes to price out. But you have to at least come with the minimum of what you would start with in order to take a job. And I also think there’s something to be said for niche it down. And you kind of hit the nail on the head to me is you can charge an awful lot below when you are in a specific field then when you just take on everything. And I mean I look at my own business and Back in the late 90s, I mean, we would work with Mail Order Magic Bookstores. We would work with plumber with work with hospice with anybody who wanted very large national large that we worked with that we work with. And we would basically make money from anybody. And we didn’t know any of this. No. Any industry. Once we were able to do it and we were able to figure out what I really like working in the whole service, even services, services, home remodelers items, good qualified leads, they don’t 1000 people a month coming in. We were able to learn the association, talk the talk walk along with those people and it’s easier to do our job. People respect that work company that if we were to charge work, you don’t know anything about. Right. Right. Yeah, I mean you you hit it perfectly. I try to use this analogy because some people think you limit yourself, but if you drive a car, I don’t know whatever car you drive, if you have a Honda, let’s just say and there’s two cars, you need to get a repair done and there’s two car dealerships side by side, one says we fix cars and one says Honda specialist, you automatically go to the Honda specialist and the Honda specialists gonna cause a little bit more than the regular garbage chicken said, but he’s a specialist, he knows he’s gonna have my parts, right? He’s gonna know my how to hook up to my computer and and that’s the way it is in, in business. Right? So for you and you said it perfectly, even in the home space, their, their niches. I work with a lot of retailers who sell to um contractors, right? My biggest client, they sell Windows cabinets and flooring those three things. Windows cabinets and flooring those three things, primarily the contractors also the developer, some homeowners come in and out. But because they have that relationship, they know exactly who they’re trying to appeal to. They know exactly what the contractor is gonna need. It makes the job a lot more seamless. And as a result they get to sell more and more. Right? And so that’s what you want to do. And if you are doing, let’s just say kitchens and you can find one retailer who does Cabinetry boy, you could have this this symbiotic relationship that can be beautiful, right? Not only that, I think about the homeowner who comes in, you know, they they want, they want to buy, you know, I want to buy, buy cabinetry and they want to buy a countertop. I would so much rather go into rather walk into one of the, into the home depot, the load you think whatever you want, but I’m not going to get someone who wanted to, I might get something. Normally there’s some refrigerator over the, when you are able to be able to expertise to the, you’re able to generate. So it definitely, it definitely, you know, and you’re right about the car. The reason why if I drive shop down the street down the street, I know I’m probably gonna pay five and it doesn’t matter if I’m driving because I know dramatically I’m gonna take it to the right person to take it to the right person with your home even more. Even more people want to home around and around and hold this wall. Yeah, yeah. Yeah. It’s so funny how that works out. You hit it right on the head. Um I had a real short story. I know we don’t have a lot of time but I have a buddy who’s a contractor and he did a basement for another friend of ours. It was a beautiful basement and he ran water pipes and everything. But he ran him close to the outside wall, which may or may not make a difference depending on where you live in North Jersey makes a difference. First winter those pipes burst, right? So you might know what you’re doing, but even expertise locally regionally, all of it makes a difference. Right? And so that that’s what what niche ng does for for you? And if you’re starting out in your business, you’re starting out, I would dare say try to figure out a good niche and then figure out the pricing behind that niche and you will, you have a lot more chance to be successful. And I mean your your company, I mean you you help people take their business to that next level. Um So I guess, you know, once you’ve started out, maybe you’ve got some some reviews, you’ve got some work under your belt, you can give a few names to people, what do you tell people at that point? How do we take our business now? You know we’re low six figure figure out what is it that we do with that. So you know, and that’s really where we do focus, like what I tell people when they ask, what do you do? I help people increase profitability and position themselves to accelerate growth. So you’re talking about that growth acceleration phase. Right? And so what I do and and part of it is what we said that that riches and niches right? Once you’re at a point where you have a little cash flow, you’re doing okay your position properly. As far as profitability is concerned. Now we’re gonna focus in on exactly the type of clientele you want to attract. Right? And it would be things like change your messaging, you’re building websites, change to be more specific to what you want. And then there are different campaigns that you can try to utilize to do marketing and see if that’s the case. But 1st, 1st, 1st make sure you’re properly stabilized, right? And then go for that accelerated growth. I’m I’m big on finding a good marketing company and we work with a couple of them. Um I won’t say any names to hide the innocent but you know, a good marketing company and monitor your R. O. I. Monitor your return on investment because you probably know better than most right. Marketing dollars can fly so fast and you don’t know if they’re coming in. But the other thing that I really try to accentuate is to have a good system of understanding where your new clients are coming from, Where are they coming from because that’s gonna be critical to understanding how your marketing is working and yeah, I mean you gotta know, you gotta have tracking phones. People come from google that they come from a referral. They come to my website, do they come from a facebook and google? Which yeah, you’re right about that money somebody could waste they spending money on google ads and they find out they everyone actually came from one facebook post on facebook and they Yeah, yeah, it’s amazing. But it and it’s easy to lose track of those things. So one of the things that we try to do with our with our clients is help them to understand how to track those kind of metrics right? And it can it can be simple or it can be complicated but you have to to get those things in order or else you’ll lose more money than than than you’ll gain. But once you start to do that, you know, obviously is the growing pains part of it. That’s a lot of fun too. Right now, I’m starting to really pick up and I was properly positioned to to grow. But how do I manage growing pains? You know how it goes if you start managing multiple jobs now you’ve got to manage that cash flow. So monitoring cash flow is going to be critical. It’s an ongoing process monitoring receivables, I think it’s it’s critical so much, you can’t have too much money in the street, you don’t want that much street, that’s the term, right. You have to learn how to collect those figures and that’s gonna help you to start to evolve and grow and so it’s a constant process. But once you get those key metrics in place, you’ll find it easier and easier. And I like we talked about earlier, right? You focus on your part which is delivering a great product and let others focus on the other parts monitoring our oi, that’s what we do here, right, monitoring cash flow helping receivables so that you can do what you do best. I won’t try to change the pipe, you don’t try to change the financial and we’ll both do well, you know that that’s that’s so, so well said, because we work with a lot of business coaches who, you know, they help clients figure out their financials figure out, you know who, you know, who’s the perfect avatar, what what is all that? And then we come in and we actually implemented for you. Okay, now you’ve told us who that avatar is. Now let’s figure out how do we reach where you know, what playground are they right now because we need to be there, right, That’s, it takes it takes a team to make it growing One of the funny things, I I think well this all works so well, you know, two years ago when I, you know what, I’m doing more, the revenue sometimes, you know what makes, you know what you do when you’re making 10 or 15 month, it’s not gonna work when you’re making 50 and 75. And honestly I’ve seen people who are doing 15 K and a lot more money in their pocket when they were doing 75. Absolutely, Absolutely. Right. That law of diminishing returns matters right? And you hit it right? And you know what, what you said, what works at certain levels won’t work and others, that’s why you to keep your eye on things. But the one word you said I was listening to you was one that popped up in my mind, right? When you said a team to be successful pretty much in almost any business ever. You have to have the right team behind you. No man is an island, right? And so once you get that team, when you find the right pieces now you’re ready for that next level and that’s kind of what we try to help people to do, right, figure out what team you need to be successful no matter how never on his own. Giselle said he can’t throw it to himself. We’d like to try anyway. Well listen, um, you dropped some real golden nuggets of knowledge on me and I’m sure that my list is really appreciated. They’re going to take something out of this. Um, if they actually want to go in and you want to go in and what again, what begin? You just broke up with me? Did you ask for my website? Well is it if if our if the listeners are, would like to get in touch with you, what’s what’s the best way to get in touch with the email phone website? Email is always good. You can find me at Mark underscore Adams at nl business advisors dot com uh, marc with A C. So it’s M A R C underscore A D A M S at N. L. Business advisors dot com located in North Jersey. If you want to just drop us a line to a 17313358 and for listening, if you like, I have a book that I’d love to share with you guys. Is it alright if I just tell you how to find it please? So my website is N. L. Business advisors dot com. If you do forward slash the number five keys, K E Y S five keys, you’ll get the opportunity to download our free e book which talks about mastering the five keys to growing your business. I think it’s a must have quick read but gives you some nice insights. That’s that’s fantastic. You know, I think that will definitely help a lot of people if they get that download the book, you know, and I’m sure if they didn’t want that, you’re able to you can give them a call if you can help them out as well. Absolutely. We have a nice little format, what we call it, a disco called Discovery. We talk about some of the challenges and we offer that free. So, you know, we can just talk about some of your challenges and try to give you a couple of tips to overcome them. So courtesy of uh that’s right, that’s right. Courtesy of for all those folks out there, you know, we’re listening to the marketing advice. We don’t ever offer anything for free. We give you value add. Yes, Yes, yes. The way the way I learned it was, you know, along with the free guide, you have a complimentary call and I tell you to take advantage of, because we really love to help. Even if we, you know, we really love to help people, you know, go to whatever level they need to go to, even if it’s a simple tip that we can share, we know you’ll get some value if we just have a little bit of a conversation, I promise you that and that’s and that’s so important that, you know, you you have some kind of leave behind you something take away. So they reach out to you, they’re gonna learn something again. I wanna thank you for being on the show today for being on the show today. This this is the Kitchen podcast, We’re gonna be here again next week, live again for our next great cast. For our next Thanks so much. Thanks so much. Thank you so much for having me.

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