In this episode Josh speaks with Blaine Bertsch, CEO of Dryrun and author of “Pandemic Cash Flow”. They discuss the importance of tracking cash flow and what to do in times like these with the virus.
Blaine Bertsch is the Co-Founder and CEO at the Dryrun, where he oversees the strategic direction and core operations for the company and the software platform. Blaine also leads the application’s design direction, resulting in a beautiful, exible and actionable customer experience.
Blaine’s mission is to have a lasting positive impact on businesses all over the world by helping them collaborate with their accounting team to manage cash flow and grow.
In 2019, Blaine released his first book, Pandemic Cash Flow, which explores the problems businesses face and offers a collaborative and an effective solution to crushing the affliction.
Narrator: Welcome to “Cracking the Cash Flow Code”, where you’ll learn what it takes to create enough cash to fill the four buckets of profit. You’ll learn what it takes to have enough cash for a great lifestyle, have enough cash for when an emergency strikes, fully fund a growth program and fund your retirement program. When you do this, you’ll have a sale ready company that will allow you to keep or sell your business. This allows you to do what you want with your business, when you want in the way you want.
In Cracking the Cash Flow code, we focus on the four areas of business that let you take your successful business and make it economically and personally sustainable. Your host, Josh Patrick, is going to help us through finding great thought leaders as well as providing insights he’s learned through his 40 years of owning, running, planning, and thinking about what it takes to make a successful business sustainable and allow you to be free of cash flow worries.
Josh: Hey, how are you today? This is Josh Patrick. We’re at Cracking the Cash Flow Code. My guest today is Blaine Bertsch. Blaine has a really interesting software company, which I know he’s going to tell us about. It’s about something that’s really appropriate today. You’re in the middle of the Coronavirus epidemic. A lot of business owners are really, really, really suffering today.
In fact, I just put out a newsletter today about how you must do disaster planning is starting with scenario planning, which is what plains company does. Let’s bring Blaine on. Let me stop wandering around and we’ll get started.
Hey, Blaine. How are you today? First of all, what’s the name of your company? That’s the first thing you need to know.
Blaine: Oh great. My company, the name is Dryrun and you can find us at https://dryrun.com/.
Josh: Cool. Okay, so we’re going to be talking about essentially all the types of things Dryrun probably does. I’ve not looked at the program myself. I probably will at some point in the near future. I’m always looking for programs that help with cash flow management and what it sounds like in my conversation of playing we’ve been talking on LinkedIn quite a bit recently.
His software takes the place of my scenario spreadsheets, which I’ve been using for like 9000 years. First of all, Blaine, why start off with scenario playing first place? I mean, why do we want to do it? Especially, why do we want to do it in the age of Coronavirus?
Blaine: I’ll just go back a little bit just to give you an idea. Dryrun came from my experience with my past business getting through the 2008, 2009 recession. This looks like it’s much faster, much more dramatic, but that’s building those scenarios like you said in a spreadsheet. That’s what I was using at that time. Building out those scenarios helped us understand where we were going.
No, you’re basically in panic mode, that point all of our contracts are slamming shut by just slam shut just like they are today and understanding where we set, when we were going to run out of cash and what our different options were to cut costs. At that time with our cutting staff is quite different for a lot of businesses to sustain. That helped us navigate the waters and figure out how to first of all get through it.
I know like this will be replayed in later day too. This could be the situation where businesses are made it through and other starting to figure out how to get traction under the tires again and get going. That’s exactly what we did. It starts with right now. Getting through the crisis and further down the road. Basically, it’s a new world, and how do you work through this new world? That’s exactly what we did last business and that’s what led to Dryrun.
Josh: Under normal scenario, Blaine what I want to do is I want to look at, worse probable and best cases as a rule. I’m assuming that’s what your software basically does. My question comes in, okay, I get an answer where my cash flow is inappropriate. What would be your first thing you would look at to get it to be appropriate? I want to see if we have the same answer.
Blaine: Well, number one, I’m assuming the same your answer too is the cost. It’s your expenses and how do you cut that budget back down into basically an emergency budget. We even have articles online from years ago on having prepared a potential emergency budget and cutting costs are number one, because that new revenue, that increase in revenue may not be out there.
We are seeing a lot of businesses coming up with very innovative ways really rapidly to change their model and actually start bringing some revenue in, like you mentioned, not always profitable, but bringing cash in the door. Number one is where can you cut those costs back? Where can you get some relief?
Josh: My answer that not assuming we’re in the middle of Coronavirus is to raise your prices.
Blaine: That’d be tricky right now.
Josh: Typically, under most circumstances, in my experience especially businesses that are in the service sector, not so much in the product sector, but even the product sector. We don’t test pricing ceilings very much in the world. In my experience, most of the time, there’s a significant room for price improvement that would actually solve an awful lot of cashflow problems.
Blaine: It’s interesting. I was talking with an entrepreneur just last week. We are talking about, of course, the current times, but also, she’d recently sold her business. She went through the same bad light in 2008, 2009. And where she saved her business was in her rush charges for the service that she offered because they found the types of businesses that were still using them could actually still afford them and which raised arrest charges fairly significantly that literally saved the business and gotten through.
There may be an opportunity for businesses to do that. I think at this time, it’s going to be a bit trickier. I think it’s much more dramatic, but it just depends on the business model and other clientele.
Josh: Yeah, it also depends on the demand for what you’re doing. For example, one of my clients is a soap manufacturer. He’s not having much price pushback.
Blaine: Yeah, I could see that.
Josh: On the other hand, if you’re a car dealer, you’re probably getting a lot of pushback right now. It’d be my guess is that you’re not selling cars, you got the seats and a lot. Maybe it’s better to reduce your floor plan costs. That would be something to look at. Blaine, I want to take a little pivot here, because I mentioned something.
It’s probably where we should have started, which is the difference between a profit and loss statement and a cash flow statement. Most business owners, I know, think they’re the same, and they’re not. Can you tell us what the difference is between the two?
Blaine: Well, I will actually go one step further than that actually we suggest people do is a forecast, which is if you’re relying on the statement of what’s happened in the past, especially now, it’s not going to necessarily inform a lot of what you’re looking at because so much has changed. Traditionally, you can look at a casual statement, say, “What was my cash flow like after the past six months?” It’ll inform a little bit of what you’re looking at today or maybe even seasonality. Right now, you almost want to throw that out.
Like you said, it’s you’re expecting 10,000 a month on these three. Well, we really deal with is actually all of it as looking forward and when we’re looking at those cash flow models, it’s all about what is potentially coming in this next 12 weeks and really all the way through the year and into next year because the tricky part is trying to figure out but those like you mentioned that the best case worst case likely case scenarios, how long will this go? How long until there’s some normalcy? How long to sort of go back to sort of complete normalcy? It’s going to take a lot of insights and some educated guesses to try and figure out where you’re going. It’s more difficult than ever to do that, but it’s more important than ever to do that.
Josh: Yeah, if you’re not doing there’s a good chance you’re not going to be a business three months from now.
Josh: Profit loss statement and the cash flow statement. If you’re looking at a historical number, it’s not going to do a whole lot of good today. The other problem is, when I see people do scenario planning, but doing scenario planning based on their profit and loss statement and not based on their cash flow statement. That’s what I mean by you can get yourself into a really, really big problem. In fact, I did when I had my food service vending company. I managed to almost go bankrupt while being quite profitable.
Blaine: 70% of businesses that fail, were profitable when they closed their doors, because they’re profitable on paper. If you’re showing receivables just doesn’t matter if you’re not getting the cash in. Today, it’s going to be very hard to get cash in because your clients, they can literally be doors closed. They could be either out of business or just on a complete stock right now. The money is just not going to come in the door, which makes it really difficult.
Josh: I’m just curious about your thoughts about this. I own a business. I have, let’s say $100,000 in receivables. I’m noticing that my receivables which are normally coming in today are not showing up nor are they showing up next week or the week after. If you’re in that position, what would you be doing?
Blaine: Well, the first thing I would be on the phone with every single one of those clients and talking with them not even email. Find out when you can expect the money to come in. One of the other things I would definitely be doing is negotiating even partial payments. If you can’t any way to get some cash coming in the door, there’s going to be I think, a lot of negotiations and a lot of give and take just to get really the money that you’re owed.
I definitely wouldn’t expect it all to come in, but when you’re building your forecast, when you’re modeling that out, one of the worst things you can do right now is basically just leave everything on the due date. You need to know when that cash is likely to come in and actually be accessible. So bringing some reality to that forecast is absolutely critical.
Josh: You’re talking to your customers. They say, look, “I just can’t afford to pay you right now. I do expect to be in business 90 days from now. Here’s why I believe I’m in business.” By the way, when you’re talking to those customers, who are your money, kind of push back and say, “Okay, why do you believe you’re going to be in business 90 days? Can you prove it to me?”
Because the next step I think you should take is maybe term out their receivable over a 12 month period. Get them to give you a personal guarantee and file in the United States. It was called a UCC-1 which means you have put a lien on their business. If they end up going bankrupt, you’re at the front of the line because you’re a secured creditor and not an unsecured creditor. These are really important things to be thinking about, at least in my opinion.
Blaine: I’m not an accountant by trade. One of the things that we’re basically telling our customers right now. Number one, start modeling the cell to know exactly where you’re at and what you’re looking at. Number two, talk to professional advisors, talk with your accountant, talk with your bankers and any advisors that you have, because you need that sort of information.
For us, we’re talking with people across the globe. We have a little bit better idea of what’s happening to Canada versus the United States but they’re everywhere and talking with a professional that knows your local not only like tax codes and opportunities there but also what sort of relief programs are in your region, in your country, and can you take advantage of them. What does it actually mean in dollars to your business?
Josh: If you don’t have enough cash to go for the next 30 days, you have a real problem. Because I don’t believe the government programs going to be coming through for at least 30 days.
Blaine: Not a chance.
Josh: The second thing you want to be thinking about is, what type of loan do you want to have now? I assume Canada has several programs. In the United States for small business, we have two major programs. One is payroll protection plan and the other is the disaster emergency relief plan. You can’t get both. You have to go one or the other. So if you need to be financing your receivables, and you need to be financing payables even, and you need to be financing payroll, rent insurance, and all that stuff?
Then you want to probably go down to the disaster loan area, which means you’re applying right to the SBA. If you are not in that position, you just would like to get some relief for payroll, then the payroll protection plan is the plan you want because that has total forgiveness versus the disaster plan.
You do have to repay the loan, but you’re 30 years to do it at about 3% interest rates. It should be affordable and will allow you to stay on. I’m no CPA either, but in any rate, for looking for help, you’re looking for professional help. My belief is that you really need to be looking for somebody who has experienced at turnarounds. They may not be a turnaround specialist that made me know how they hang their shingle, but they should have experience in turnarounds because we’re in the world of turnaround planning right now. Does that make sense to you?
Blaire: Absolutely, makes sense. I would say I would go even a step further and make sure that the people that are given you the advice, and especially your accountant, we’re at mission critical point right now. If they’re not in the right position to give you advice on how to manage your way through this, you need to either move on or ask them for a referral to someone that can actually help you. That’s going to be very proactive and probably innovative and how to navigate very difficult waters that no one’s really seen before.
Josh: In my experience, most CPAs are not equipped to handle this. They are not willing to really think outside the box for what can be done. For example, if I owe a bunch of money for payables, I’m going to be way further along the curve, if I call my creditors before they call me.
If I call my creditors and say, “I’ve got a problem, and here’s what I’d like to do. I’d like to turn this out over two years, three years and pay you 6% interest to do so.” You say, “Here’s a choice, you can do this, or you can go out of business. Now, if I do this, you’re going to keep me as a customer, and you’re probably going to get paid. If you don’t do this, I go into bankruptcy and you get pennies on the dollar, what would you prefer?” There aren’t CPAs I know, they’re going say that very often.
Blaire: We deal with a lot of CPAs. There’s a lot of CPAs that use Dryrun and a lot of CFOs, we have fractional CFOs, in-house CFOs, but it tends to be a lot of times with our experiences to CPAs that have some management experience and are serving as sort of a CFO role. You’re right, you do need to find the right person, getting on the horn and talking with your clients. Same thing with your creditors that you cannot have too many conversations.
I would say on the phone right now, sending back emails is not a great way to communicate when you’re trying to communicate really difficult things like this. Letting us sit is not the way to do it like exactly like you said, “Be proactive, talk it out, and jot those notes down. Go back to your models, update them.”
We also know that there’s a lot of businesses, if they can just hang on long enough then suddenly, some of the relief programs will start to kick in. We don’t know how quick the market will start being active again. You want to be around to give yourself that chance that opportunity. We’re seeing some very innovative rapid switches to businesses, where they’re delivering their products or they’re delivering services online.
They’re offering services by going and picking things up and pulling them back to their shops. They’re changing so rapidly just to find ways to bring revenue in the door and may in the end not be profitable, but it will give him cash in the door to just survive long enough to hopefully get through this till it settles down.
Josh: There’s one thing that I can tell you for sure, having been through several cashflow crunches in my life is that you come out of these things a whole lot stronger if you make it.
Blaire: Yeah, it’s true.
Josh: What you realize when you come through the other side of this, if you make it is, what you thought were rules really aren’t rules? They’re just ideas that other one tells you should be doing.
Blaire: When we came through 2008, 2009, if it was 2010, or 2011 was our biggest year yet. We did such a rapid transformation of our business, of our market, of how we access them. We started with cash flow, but I started to work this way, all the way down into our sales pipeline and efficiency and productivity and profitability.
Because once you start looking at the numbers, you can just kind of keep digging and keep digging. That’s what it’s going to take right now is businesses that were flying by the seat of their pants can’t do it anymore. They have to be on top of it. They have to use that data, those numbers and just figure out a little bit fine here, a little bit fine out there. Like you said adjustment and pricing, where can you maybe bump your pricing up, where is there other market opportunities that you didn’t have before? It’s easier when you have a really solid understanding and sort of mapped it out to start with.
Josh: Can you pivot, for example, I’m doing a little pivot right now, in that I’m pivoting from helping people become financially free from their business, to doing disaster planning with their business. Because we’re not going to become financially free unless you have a business and become financially free from. We need to save the business so that’s something that’s important for all of us to know.
Blaine, unfortunately, we are out of time. It sounds like you’ve got a really interesting project. I’m going to bet with the background you have, that the products only really good with the support you get for using the product might be pretty interesting, too.
Blaire: If you have a COVID Relief Program, come to https://dryrun.com/ and you can check us out. We’re going to help everyone sort of get over the next few months here. You’ve got a download of my book. We’re rolling out webinars. We’ve got a lot of resources that we’re rolling out really rapidly to help people through this.
The current crisis like I said, right now we’re in early April, but we also, this is not just like a light switch on and off. Later on in the year, there’s going to be a lot of businesses that have just made it through by the skin of their teeth and they’re figuring out how to rebuild and how to move forward. We can help you in any of those stages. We’re going to help you work through that.
Josh: I also have an offer for you. This has been normally I make this offer in better times today, but we’ll make it anyhow today. I’ve been using this tool for years and years and years. I’ve been doing on a yellow pad. I finally went out and had somebody build me a little widget to do it so it’s a quiz now. It’s an online quiz. It makes it really easy. It’s called the Four Boxes of Financial independence.
You’ll spend seven minutes putting some numbers into it. At the end of the seven minutes, you’re going to get an answer whether you’re on the road to financial freedom from your business or not. If you are, there are certain things you can do to make it even better then if you’re not there are certain things you need to do to fix it. It’s really easy get to you just go to thecashflowcode.com. That’s thecashflowcode.com all one word, and click on the big orange button. Spend seven minutes doing the quiz and you’ll get your answer. This is Josh Patrick. We’re with Blaine Bertsch. You’re at Cracking the Cash Flow Code. Thanks a lot for stopping by. I hope to see you back here really soon.
Narrator: You’ve been listening to the “Cracking the Cash Flow Code” where we ask the question, “What would it take for your business to still be around a hundred years from now?”
If you’ve liked what you’ve heard and want more information, please contact Josh Patrick at 802-846-1264 extension 102. Or visit us on our website at www.sustainablebusiness.co. Or you can send Josh an email at firstname.lastname@example.org. Thanks for listening and we hope to see you at Cracking the Cash Flow Code in the near future.