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029 – Cash Flow Wins The Day – Josh Long

December 21, 2015 by JoshPatrick Leave a Comment

Joshua Long - Bust SuitToo many companies focus on top line growth instead of cash flow first.  Your buisness runs on cash and if you don’t pay attention to this, there’s a good chance you’ll wake up one day and find that you don’t have enough cash to run your business.

Today’s guest, Josh Long from 90daydouble is going to help us understand why cash really is king, at least in the size businesses that we run.   I hope you take the time to listen to this episode.  It’ll help you think about your business in a way that will help you become more sustainable.

 

Here’s some things you’ll learn today:

  • Why you always start with cash flow and profits.
  • How you can be profitable but still run out of cash – It happened to me and it can easily happen to you.
  • Why testing and fail fast/fail cheap often win the day.
  • How you can avoid the trap of sunk costs in your business to remain flexible in what you do.
  • How growth in your business doesn’t necessarily have to be only sales.

Transcript:

Narrator:         Welcome to the Sustainable Business Radio Show on podcast where you’ll learn not only how to create a sustainable business but you’ll also learn the secrets of creating extraordinary value within your business and your life. The Sustainable Business is all about creating great outcomes.

Here’s your host, certified financial planner, student, entrepreneur and private business expert, Josh Patrick.

Josh Patrick:    Hi. Today, I’m talking with Josh Long of the 90daydouble.com. Josh has been helping business owners unlock sustainable growth since 2008 when he worked with Chet Holmes to help launch his consulting agency. He quickly became the Marketing Director of Business Breakthroughs International that Chet had with Tony Robbins and has since worked with other thought leaders and stars in the world of marketing like Jay Abraham, Dan Kennedy, Perry Marshall, and Siimon Reynolds. Josh launched the 90daydouble.com to focus on fast growth for small businesses and is coming out with a book to implement his process by the end of the year. If you go and take a look at our show notes, we’ll get you some information on how to get his book. Just go see the show notes at askjoshpatrick.com.

So Josh, boy, this is really kind of a cool thing for me to talk to somebody named Josh, which is a rarity but welcome. How are you doing today?

Josh Long:       I’m doing great. Thanks for having me. I’m looking forward to this.

Josh Patrick:    Yeah, me too. Josh and I, just to let you know, have had some long conversations that have been really interesting. He’s a fascinating guy and I can promise you that spending a few minutes with us today is going to be well worth your time.

So, Josh, let’s start off with a relatively complex question, what are the core philosophies that drive your work?

Josh Long:       I think the biggest issue that I deal with clients is making sure they understand where I’m coming from and why. And so, the first thing is that cashflow and profits win the day. I’m not involved with venture-backed startups. Those are touted in the news and get a lot of press and get a lot coverage. We’ve got Shark Tank now that makes it really popular to raise investor capital. But for the businesses that I deal with, they’re really all mostly under $10 million. And so, cashflow wins the day. You can have a profitable business but if your accounts receivable is off or if your terms are off then you can go bankrupt even with profits. So that’s rule #1, is that, cashflow wins the day.

The other thing is that I’m really big into testing assumptions because assumptions are what get business owners going. They’ve got this idea that the market needs X or “Man, I just came up with this brilliant idea and if I just build it, they will come.” And so, to me, assumptions are all the risk that a business carries – a risk of failure, a risk of not working out, a risk of lost time, capital or influence. And so, how do we take those assumptions and convert them to facts as quickly as possible because to me that de-risks a venture. When you find out for sure that out of 10 people that you talked that are in your target audience, 3 will say yes; you can forecast off of that. You can create a business plan, a model, based on the fulfillment, the pricing, the deliverables – all of that, that you can move forward with confidence. It’s not going to scale necessarily 1:1 but de-risking a venture to me is all about converting assumptions to facts.

Those are some really big fundamentals for me that allow me to move faster with clients because if they know that I’m coming from that place that these are guiding all of my decisions and it’s all about sustainable profits then it makes it a lot easier to just execute, move forward and not have to second guess “Well, why are you doing this? Well, why are you doing that?” I’m happy to answer some of those questions along the way but I don’t want to always have to re-state my intent. So, those two are real big fundamentals for me.

Josh Patrick:    Cool. So that actually brings up something that I just find fascinating. I’m a big fan of testing myself. One of my mantras is fail fast, fail cheaper and the reason for that is we have this thing called a sunk cost bias in our life. Do you care to comment on that?

Josh Long:       Sunk cost. I’ve got into playing poker a few years ago, when it got really popular, like Texas Hold ‘E-mail. It’s the same thing in poker that you get pot committed is the other angle of that same argument. It’s that you’ve spent enough time or money into something and you feel like “I’ve gotten this far, if I just give it more effort – a little bit more time, it might turn around. I can’t just walk away from all of this investment – time, money, energy, heart, soul, passion, influence or whatever.”

I really love the concept of zero-basing. I’m sure you’re very familiar with it. I did not coin this term but I love it. And taking the point – from today forward, this situation, forget all the sunk cost, forget all the past, what I invest at this stage, in this opportunity, or “would I continue this effort?” I really got into the zero-base philosophy when I was an undergrad. I was a psychology minor and I really loved existentialism as a psychology philosophy because it was essentially that – forget the past, what are we going to do going forward to create a healthy environment? I think, being able to take a sober look at any opportunity, any situation on a day-by-day, snapshot-by-snapshot review basis is really important.

Josh Patrick:    I love the fact that you put cashflow as the number one thing. Back when I was in my vending company, I had this little silly saying – because we never had good cash, was “happiness is positive cashflow.” But at the same time, the name of your company is 90daydouble.com which leads me to believe that, boy, you’re focusing on fast growth and every time I think about fast growth and I think about positive cashflow, the two don’t seem to be in the same sentence. How do you put those two things together?

Josh Long:       Yeah, that’s a really good point. I think that the challenge with fast growth – and I always look at it that you can either grow revenue or optimize profits but you can’t do both at the same time. And so, with the clients that I work with, the long-term sustainability is a big fundamental, a big key piece of growth because there’s nothing worse in my opinion than fast growth that leaves once you stop focusing on it or is not sustainable, or it’s just a quick hit; and also, because of the thrash of employee loss and all of that.

When I’m working with clients on fast growth or really any growth, it’s that “What are we doing that’s setting this up to last?” And so, most of the time systems are involved. And if you have a vision for where the revenue is going to be, what the organizational structure is going to be like, to have to support a 2X revenue number, then you can start planning those systems ahead of time and start getting those in place to grow into. And so, in regards to growth and cashflow, the biggest thing is that you’ve got the right business model, the right pricing model, the right infrastructure that you’re growing towards so that it’s sustainable and profitable. Those are all factors that come into play when I’m making recommendations or planning with clients, so that it isn’t just “let’s dump a bunch of money into a big event or a big promotion” and then run into the Groupon situation. I mean, we’ve heard of all those horror stories of people that got small businesses – local businesses that did a big Groupon promotion but went bankrupt because they got too much business at a discount and didn’t have the margin to sustain it or support it and had no back end on that Groupon traffic to keep profits going once they got that initial spike of business.

Josh Patrick:    You brought up something which I think is really interesting. You mentioned the term growing profits. In fact, I will say, many of our listeners are pretty much happy at the size of business they have and they really don’t want to grow the size of the business. We’ll get into that in a second. But growth isn’t just around sales, is it?

Josh Long:       Right. I think you hit the nail on the head. I think Peter Drucker talks about that in his mantra of ‘If you’re not growing, you’re dying.’ The way that I position that is the same thing that growth doesn’t have to be around revenue. Gross revenue does not have to keep going up and to the right, so some ways that you can keep growing and if somebody’s happy with the size of their business, the types of clients they have, their profitability, then I focus on how do you fortify that position? How do you improve your customer service even more? How do you improve the quality of your staff even more so that your clients fall in love with them? How do you improve the view of your business in the marketplace so that more people continue to view you more positively?

Out here, I’m in Central California. On the coast, there’s a little ice cream parlor Doc Burnstein’s in a little tiny town called Arroyo Grande. They’ve got a little tiny downtown, they call it the village. It’s probably a quarter-mile long of throwback‑type shops.

Doc Burnstein’s is a nice little ice cream parlor. The guy that owns it—I don’t remember where he moved from but he’s done that. He’s got an ice cream parlor. There’s only so much revenue you can get out of that but he’s improved the experience. He’s improved the training. He’s improved the product quality so that there’s no way any other ice cream parlor within 5 miles is coming into that area. He has expanded and he’s created a new branch about 100 miles north but he’s perfected it with that local area business.

Again, you’ve got to fix footprint. There’s only so much merchandise. There’s only so many things you can do inside a retail shop but he’s continued to improve the experience and improve the quality so that he’s fortified that position and essentially made himself bullet-proof to competition, in my opinion.

Josh Patrick:    Let’s talk about businesses getting stuck. A lot of times folks think about dollar range businesses get stuck at. Some other people think that how many employees you have – we all have stages that you get stuck at. Are you at either one of those pews or do you think something differently about stuck?

Josh Long:       For me, it’s mostly revenue. I find that the patterns I’ve seen over the years of interacting with hundreds of businesses all over the map that unless there’s the outliers where they’re dealing with large dollar amounts like financial brokers and stuff that are doing lending and have gross revenue coming through that isn’t the typical that most businesses get stuck at the $100,000, $500,000, $1 million, $5 million, $10 million and $100 million marks. I find that between $10 million and $100 million is really a freefall. And once they get to $100 million, it’s another very clear plateau. And so, I find there’s just so many commonalities at each of those plateaus, the companies that are hitting those ceilings all have in common 90% of the time. It can go be an organizational issue that pairs with that revenue because the organization can only handle so much staffing, based on their revenue and profitability, but yeah there’s very clear lines, in my opinion, that they’re revenue based.

Josh Patrick:    So, what kind of issues would a $500,000-business get stuck at?

Josh Long:       The biggest issue that I see there is that, at $500,000, the business owner is still the primary salesperson, the primary lead gen person handling all of that. They’re directing fulfillment. They may have an assistant or two or three. But the thing that I find that business owners stuck at $500,000 run into all the time is that they view their assistants or their fulfillment staff like an extension of themselves. So, they give them the responsibility but they don’t give them the authority to make any decisions. And so, I have this mental picture that it just essentially makes the business owner’s arms longer with these assistants to wrap around everything but the business owner is still fully in control and is still directing all the decisions.

And the two things that I see business owners being able to get unlocked at that stage is (1) by making assistants not only responsible but give them authority to resolve issues because to me making somebody responsible without the authority puts them in purgatory. It’s not quite hell because you’re not dying every day and burning up and hating life but you’re walking around with this big responsibility on your back and you’re just marching forward with no ability to resolve it.

And so, a simple little example is just, if you’ve got somebody in charge of fulfillment and they’re interacting with customers – and I think Zappos does a great job at this because they give their customer service reps the ability to resolve any issue in their own judgment. And so, there’s great case studies of people gifting the shoes because the person had some catastrophe happen and they weren’t able to get it shipped back or they have roses delivered or whatever but you give that employee the authority to be able to resolve the issue.

And that does two things, (1) it makes that employee much more engaged, feel much more trusted and they take it with a lot more intent and responsibility to get it right. The beauty is that in today’s society, the majority of employees are going to welcome that authority, welcome that willingness to do right by you, to take care of the customer and to make a decision. (2) The other thing is that frees up your time from the minutiae of “Hey Josh, I had this client, they needed XYZ exception and this is what I would think but I didn’t know, I wanted to run it by you.” And of course, 9 times out of 10, that employee’s gut call is going to be right and you’re just going to let them make that decision and run with it and that would have save you from those got-a-minute meetings that a $500,000 business owner is a crutch for their employees by not giving them that authority and their day is consumed with a got-a-minute meetings from any type of staff.

So, that’s the first real lever that I see getting business owners unlocked that are at the $500,000 mark, it’s empower your employees, give them authority. Don’t give them a rope to hang themselves with right out of the gate but give them considerably more rope over time as they earn it.

Josh Patrick:    Since authority is a big deal and I agree with you 100% on that, why don’t business owners do it?

Josh Long:       I think there’s a myriad of factors. The business owner is operating out of the fear that they’re going to get screwed or taken advantage of, or if they don’t control every last detail it’s going to run away and become out of control and it’s all going to fall apart. I think that’s a very real fear that most business owners have.

The typical small business owner starts a business because they want to be their own boss. They’re tired of working for idiots. They want to make decisions. They want be autonomous. And so, they never come out of that pattern. I think it’s really important.

The other part is that small business owners, to me, lack significant management skills. It’s not something that they need to go to a 10-week training for. There’s three or four really simple little levers that I see that when you do these things in management it frees up a lot of your management headache. I think small business owners undervalue management because they come out of an environment possibly where they were micromanaged or they had middle managers that they thought were morons or things like that. And so, they undervalue it. They care about fulfillment and they care about vision and they do sales because they have to most of the time but management is just a bad word in their mind. But the reality is that the Fortune 500 over value management and systems, in my opinion. But in that argument the Fortune 500 wins because they have all the money and they sustain it.

So, to me, small business owners need some fundamental management training and need to shift their perspective on how management works because having an assistant and expecting them to know how to do everything exactly like you do and be in your head is just unrealistic. If that were the case, you’d be training your future competitor because you’ll be training an entrepreneur who’s willing to learn on the fly, pick things up and wear a lot of different hats and have a lot of stimulation. But the typical employee, even in a startup environment, isn’t wired that way. I think those are the two real big bottlenecks for business owners.

Josh Patrick:    Yeah, I would agree with that. And then there’s always trust and mistakes which I think is probably the biggest reason that delegation is done poorly at that size business.

Josh Long:       What do you mean by that – with the trust and mistakes?

Josh Patrick:    To grow a business, you have to allow people to make mistakes and learn from them. Small business owners don’t give responsibility or really don’t give authority because somebody else might make a mistake and if they make a mistake then of course their business is going to die tomorrow. That’s their belief and it’s idiotic but it is their belief. The other issue is people haven’t proven at least in the owner’s mind that they deserve trust to take these responsibilities on. Owners need to really re-think that whole thing around trusting their employees and building a “culture of mistakes” is what I call it.

Josh Long:       I love it, yeah.

Josh Patrick:    It’s one of those things which I think is just really important.

Josh Long:       And I think – real quick on that trust topic, I have a view that will probably get me shot someday but I think is really effective and it’s useful for a lot of business owners is when I started viewing all of my employees as if they were an eight year old, all of my management headaches went out the window. I don’t mean that you view them as dumb, immature, or unable. I just, for some reason, I see an eight year old.

I have a seven-and-a-half-year-old daughter now and she’s a great example of it. She’s intelligent. She’s responsive. She likes learning. And I have to keep correcting her, keep giving her boundaries or guidance so that she is trained in doing things right but as she does them right she gets more responsibility and more authority. She takes a lot of pride in figuring things out and doing them on her around, just like I find a lot of employees when you give them boundaries, when you train them. You don’t expected an eight year old to show up and know how to do whatever it is you have in your business just like you can’t expect any employee to show up and know exactly how to do what you do in your business. You have to provide training. And as you give them the chance to prove themselves, they earn more trust over time – just like you would give to an eight year old as they become a 10-, 12-, 14- and 18 year old or whatever.

For me, when I shifted to view them as eight year olds and I’d never yell at an eight year old for screwing up. I would never call them stupid or belittle them because they’re eight just like I don’t think anybody should ever treat their employees that way. You reinforce a lot of things. You set boundaries. You encourage them and the mistakes are great learning experiences and great training opportunities for everybody involved. So to me, that was a real big one and for some reason it seems to resonate with other business owners I deal what that it takes away the expectation that they’re just going to divine the knowledge right from your brain and know how to do it because it’s common sense to you.

That’s another thing, it’s the assumption that “Well, this is how I would do it.” Well, did you tell anybody that that’s how you wanted it done? Did you state that expectation? “Well, no. They should just know it. It’s common sense.” Well actually it’s not. You’re a unique individual. You’re an entrepreneur. You’re a business owner. You’re a visionary. Not everybody’s brain is wired like yours.

Josh Patrick:    Well, unfortunately, we’re out of time and we only got to the first stuck. So, Josh, I’m going to have you back again sometime soon.

Josh Long:       That’d be fun.

Josh Patrick:    And we can talk about those bigger businesses and where they get stuck and how they do it. This take away of treating your employees like an eight year old, from the point of being curious, learning, understanding, teaching, and giving them support to move one step at a time – that is a great nugget that I’m going to take away today.

Josh Long:       I’m glad.

Josh Patrick:    Josh, I’m sure our listeners are going to want to figure out how to get in touch with you. How would they go about doing that?

Josh Long:       So, 90daydouble.com is the best place to go. They can find out about my approach. They can apply for a lever-hunting call to dig into their business and find what those one or letters are that can unlock real fast growth for them. I have a Facebook group that I’ve launched. It’s free to join. You just go to Facebook, go to the search bar, type in 90daydouble and they can ask to be invited. It’s just an environment where we help business owners unlock their bottlenecks, collaborate with each other, encourage each other and be able to have a forum to implement the stuff that’s coming out in my book soon.

Josh Patrick:    Well, this has been really fun today. Thanks so much for your time and I appreciate it. I’m sure were going to have you back some time in the near future.

Josh Long:       Yeah. This was a blast. I always love collaborating with you, Josh.

Josh Patrick:    You’ve been listening to the Sustainable Business Podcast where we talk about what you need to do with your business if it was to be here 100 years from now. If you like what you heard and want more information, please contact me at 802‑846‑1264 ext 2 or visit us on our website at www.stage2solution.com or you can send me an e-mail at jpatrick@stage2solution.com.

This is Josh Patrick and thanks for listening. I hope to see you soon for another edition of The Sustainable Business.

 

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