 Hey, good afternoon everybody Tom Stewart here. Our guest today is Jason Koff and this is smart business modes Jason, how in the world are you? You know what Tom? I'm pretty good for it being our busy season as October 1st through March 1st And it's very busy, but I'm doing really good in that crazy business So all all is good all is good in the world as far as what we can see right now You know, what makes those periods of time busier than? The other periods of time, you know, it's interesting I think that most business owners kind of earmark this time as we get closer to the end of the year to start thinking Strategically about 2023 everything from the people plan Maybe a refinement in products and services a refinement and pricing for sure Especially in today's economy and then also building that budget. So we see that around the holidays The folks that we work with they really begin to become very intentional About creating that plan and being very strategic in that maybe peeling away from their business a little bit to start to think There's also tax planning that all oftentimes kind of triggers people on about November the 1st They start thinking about tax planning and what their tax situation is So that means that our our email lights up a little bit more and people we want to have a little bit Handholding some guidance and a lot of those discussions This is the time to be thinking about that You don't want to be waiting until the end of December and ask yourself do I need to buy another vehicle for for tax purposes you want to Get ahead of that Absolutely, and I think that you know this year has been such an interesting year And I don't know if your data suggests it that most of all of these Service industry businesses that you know you and I are so fortunate to have conversation with that they they have been very very very busy most have posted an Amazing top-line sales number and they're coming off of the year that has an extreme level of success And if that's not you for anybody who's listening right now or watching, you know There needs to be a peer into why that isn't because I would say that the majority of the folks that I talked to that they have had a banner year and They're also paying attention to all these headlines or paying attention to what's going on in the economy and in the world And with unemployment and people and all this kind of stuff and they want to make sure they're really well prepared For whatever is dished out to them in 2023 But it's also a reset of expectations Expectations because 2022 might not repeat itself depending on what industry and business and business Sector and geography that you're in So do you see differences different parts of the country? I Do I I do you know, it's interesting I as I think you know and those that maybe know me You know we work with companies in almost every single major market and then even in a lot of smaller markets So they have a wide swath of all over the country and there are places in the country that are just bulletproof to the economy I I was talking to somebody this morning who's in one of those bulletproof areas. They sell really expensive Like construction type projects. They are booked into 2023 They're they're they're backlog even a potential clients. It is significant It's like no one is really Being phased by you know the the headlines Then there's some people that I know that that are in other parts of the country That that might be a little bit more compromised in terms of what's going on in the economy and they're starting to be a little bit Having some discretionary in terms of their decisions in terms of where they're spending their money And so I do see that it is geographically Influenced and I and I also think that it has to do with what business you're in are you a commodity non commodity Are you specialized or you non specialized? Do you target residential? Do you target commercial so on and so forth? And I really do think that that has a lot to do with it And I I think that there's just going to be this kind of swaying of those companies Based on what industry they're in the geographic area and what segment of their clientele. They're actually targeting Yeah, that makes sense and you know our primary interest for smart business moves is the residential cleaning industry and one of the things that I've been been hearing and trying to get my my mind wrapped around is kind of the shift in consumer thinking that residential cleaning is being considered less of a discretionary investment and more of More of a staple Seems like it wasn't that long ago that the economy gets a little bit rough and people start thinking about how can I Cut things out of my budget that the house cleaning was was You know at the top of the list or or what are the top considerations? I'm hearing more and more now that you know, we'll make cuts in a lot of different areas But nobody either wants to or knows how to clean their home anymore Well, I I had not thought about that, but I actually think that you're totally correct. And here's the other part, you know I I have Virtually always worked from home, especially the last 12 years of my life, but a lot of people have moved or working from home um Even still, you know kids are Our home kind of more often and so the fact that the house needs to be cleaned Is a little bit not more important, but maybe more timely because people are home more often, you know I mean, I mean, I think that most people like to clean home. Of course, there's those people that don't I'm sure you can tell stories all day long about that that are you know, they're just they're you know, they're They don't they don't keep a tiny home And and they don't care to either But the reality is is that I think that most people do want that and the more they're home You know the the more they want their space to be clean and and and organized and all that So I think that that is very very true Your home is your office now. So you're spending all your time there in some cases for a lot of people More so than they used to pre-covid Yep, absolutely. Absolutely. Um, I think that The other thing that I would say kind of to follow up on on What I was talking about a couple of minutes ago is that I think that businesses need to be very aware of what's going on In their marketplace. They need to be paying attention to those trends I don't need to necessarily know that they need to react or overreact But they absolutely need to have a level of awareness because I don't want anyone to wake up one day And realize oh, I didn't plan for potentially, you know, my business to get a little bit smaller One of the things that we've seen is is that in 2022 because 2021 was also a really great year for most people in the space that they um, they built up a business model and an overhead to grow And that means more overhead and when you have more overhead it also might mean a little bit more debt and um Did I just freeze? No, your audio is coming through fine, but your your video for us still is So the thing that I've seen is is that they've built up this overhead Maybe they've taken on a little bit of debt by buying some assets or moving into a new facility With the with the desire to grow which makes all the sense in the world But if the business is going to teeter back a little bit in 2023 You need to be prepared for how you're going to continue to service that overhead And it's really really really important that somebody has a plan and they pay attention to that And they have a level of awareness so they can pivot and pivot quickly The worst thing that you want to do build an overhead for a business this size Have the business be this size and continuing to service that higher overhead because all it's going to do Is drop those cash balances and the ability to have profit and that's really important Sometimes it's too late for people because they don't make the hard decision about reducing some of that overhead In advance of when it needs to be reduced So keeping an eye out for trends and things that might be happening in 2023 Part of the planning process or there are certain things in particular that that you would recommend Cleaning business owners to be paying special attention to as they get ready to go into 2023 I think that the best thing that they can do is to pay attention to their current clients out Are they asking for skips regularly where they don't want to have cleaning done Is there a situation where a credit card declines or they're they're not credit worthy where they haven't paid a bill They they find that people are a little bit more Micro critical of the work because they want to try to get more value out of their dollars Really watching that client sentiment is is very important The other thing that I tell people to do is to pay attention to the new client discussions Okay, so you have a new client. So that's your existing clients pay attention to their behaviors But your new clients that are are they being more critical about pricing when you haven't changed their pricing Are they being more critical about the scope of work? They want more for less They are asking questions. That's not typical or your close ratio goes down That's all a larger indicator that maybe there's something something rumbling in The geography or the community that you're working in where people are being a little bit more like I said discriminatory or discretionary about the way that they spend their money And that could be an indicator of something that's a little bit larger that's going on in In the world that could cause some harm to the business because people want to slow down the The fact that they're buying or they want to change their scope or whatever it might be So one of the things that I guess is unique for Just about anybody who's running a business at this point I don't think any of us were around doing this 40 years ago the last time there was any meaningful inflation in the economy and certainly seems like it's They're now and seems like that will definitely be dealing with it in 2023 2023 as far as the planning process is concerned. Are there any special considerations that we should be giving to inflation and what prices are now and what they might be a year from now Great question. So I have been a proponent. I think we've even talked about it on this show before I've been a proponent of Of really right sizing the pricing and having that tie back to metrics that reside in the financials for any business including the the residential home cleaning sectors and and if You have not raised your prices in the last couple of years. I still know people who have just not they're afraid to They they are afraid they're going to lose clients Then you're almost a little bit behind the eight ball right now because the economy has accelerated faster than your prices have And you might need to right size prices in a significant way, which means people might want to kick the tires and get an estimate elsewhere But if you have been raising prices, you know, so so I know people that have raised prices Four to six times in the last two years They've they've literally been aggressive and assertive about raising prices over the last couple of years to right size pricing so that they can right size pay To their employees try to give those those raises and get people to be to be paid a little bit more As as a result of of what's going on with the job market and how you know people are just paying ridiculous amounts of money for employees If that's the case, okay, so let's say that you've been one of those companies who's who's regularly raised your prices the Kind of the the number that i'm hearing out there is you know I haven't heard what the october number is and it probably won't come out for another 10 or 15 days But the last time i checked january through the end of september the number was a little less than seven percent um And a little less than seven percent now a lot of people are using as eight nine percent number That's 12 months. Okay, but if you go back to january first Through now it's probably somewhere between six and seven percent Based on cpi which is which is documented by the federal government i've heard people want to try to go into four to five percent They don't want to try to take their entire clientele and nail them with that seven or eight percent number trying to go into five percent Now here's the crazy part. Okay, tom And it's insane because let's say what's the you know, you might know this. What's the average? residential home cleaning business revenue per year average There was a time when The cleaning business got past a million dollars a year that that was considered to be rare I would say that That might not be the average against because there's all you know a whole lot of start-ups and smaller companies out there but It's definitely north of of a half a million i would say Pushing a million So think about this way if you get way above the clouds and it's a half a million dollar business, right? Per year right and you raise prices five percent That's an extra 25 grand. That's right there the extra 25 thousand dollars that that company will have now if they do nothing in terms of paying Their people more that's a 25 thousand dollars of additional profit I think sometimes people think that the small common denominator raising prices five percentage points, right? and and let's say the average, you know House is a hundred dollars to map easy if somebody's paying a hundred dollars Will they be willing to pay a hundred and five dollars to have their their house clean? I would say they would I would actually say that they'd be willing to pay 107 or 110 or maybe even the elasticity is back to 115 That's a 15 percent increase and so each person needs to kind of go through a process where they understand Pricing increases the impact that has on the client and what the threshold is that they might lose the client Or at least go into kicking the tires to get a competitive estimate We have a calculator that we share with main central users that they can plug in a few metrics and then say i'm going to do a 8 price increase and i'm going to assume i'm going to lose 2 of my customers and they'll do the calculation and it'll tell you How much extra money you're still making even with the nutrition? And um What we're finding is It's not so much I mean you could You're better off or at least you're going to have less less attrition customer attrition customer churn If you do multiple increases over the course of the year of a smaller amount You can get away with doing two five percent increases Over a one-year period then doing one 10 percent increase Absolutely true There's there's been lots of case studies out there that um that you also Can be strategic about the timeline that you raise prices Okay, like when you go to do it what what part of the calendar and it might be at a time You probably don't want to go and raise prices I'll call it in july and august and here's the reason why most Families who probably have house cleaning. They're sending their kids back to school They're finishing that vacation. They're getting a big large credit card bill in the mail from that vacation They've got to pay tuition and so try to be strategic about the timeline the other time do that is not during the holidays That's when people feel like oh my gosh for buying gifts somewhere hosting family and for buying You know turkey dinners and all that and so to be strategic about the timeline of Of going and doing that in the house cleaning industry though there has there is a school of thought that For the holidays is the best time to do a rate increase because that's the last time anybody wants to lose their Cleaning service because they do most for the holidays That's an interesting thought process You know, I wonder what if anybody's that that's watching has any data on that if they've done a price increase And I know you come with lots of data in there But that's really an interesting thought process is that at a time where there's high expenses That's the time where they don't want to lose because that's kind of of the biggest vulnerability That if their house isn't clean for Thanksgiving dinner or or Christmas or Hanukkah or New Year's or whatever it is then all of a sudden they're not able to You know, they're they're have an additional stress So they're willing to pay a little bit more very interesting Ideology and the worst time to do it is in January because that's when the credit card bill shows up for all the holiday shopping Right You know, I don't I don't know how how real that is. I think anniversary dates mean something because if they started your service in January evidently They're comfortable spending money in January if they started in june. They're comfortable spending money in june That being said in 2022 2023 when prices are going up There's no rule that says that you can only increase your prices once a year. You might want to Accelerate that a little bit and do two more modest rate increases for incumbent customers going into 2023 Yep, I totally agree. I think that that's great Oh, linds, I thought it was just me because you've missed the last couple of times that I have been on the show What Jason Jason was just Liz doesn't like me that just must be it every time he's on the show you can pretty much count on Liz not being here One time and I also said to tom just today. Oh jason's going to be on there. You'll be fine. I'm not going to worry about being I She's worried about me when she leaves me alone And she wants to make sure you know, I've got a guess that can can carry the show So No, I'm just I'm I'm giving a little bit of shade Liz because I know I think last time you weren't feeling well or something Had occurred or something. So it's good to see you. How you doing? You see me flying in here taking off my coat and everything so I was racing to get here One I miss a moment Oh, it is kind of true. Actually, I you know, I love jason. So I feel like you always bring the goods Well And we were waiting for you liz. We saved some of the good stuff till you got here. You know what this week was jolts report Jolts report I'm sharing my entire screen. I don't mean to be doing that, but we'll just do that. How about that? You can't see that. Can you? I can't Well, what's happening is the the open jobs went down in august But they're back up again in september And that was not supposed to be happening What we want to see is the number of job openings continuing to go down The fewer job openings Then the more job hunters per opening and presumably the easier it is for those of us who do have open jobs It would be to hire them. We're back up to like 1.9 openings per job hunter at the moment Well darn If you go down to like hospitality and leisure it went up about another quarter of a million I guess So it's uh We're not out of the wood yet in terms of having the labor in in you know, there's there's a school of thought out there that it's going to be this way for The next, you know for the balance of this decade anyway that It's going to be a long time coming until we can set back and and hire and comfortably fill all the positions that that we have in our businesses So interesting statistic if if I could share so That is a bummer and you and I talked about that right before we went on the air tom but but an interesting statistic that That I have and this really applies to everyone that would be watching this Is that we're finding so I think some of some of you all know that we do a bunch of HR work And and so we we touch those hires pretty often in terms of interviewing them and one of the things that we're finding is is that there are Good people out there that have top level talent and the reason that they're out there is because they're really Sick of working for a bad company or a bad boss Or somebody who doesn't manage them or somebody who has a temper problem or somebody who you know promise them some level of compensation And it just never came through And so there there is talent that's out there and the reason they're leaving Is pretty systemic to their own situation where they came from And that just points towards the the element that I am so passionate about I've been passionate about for the last 15 years of my career That you have to run a great company and you have to be a good person And you have to be kind and you have to have empathy and compassion But you also have to to manage people and you got to call them out on things And you got to make sure that you're doing the right thing And you got to let your yeses be your yeses and your nodes be your nose And if you say you're going to be married to this compensation package to make it happen and to build a really positive culture And and that is something that I think is really really really important that everyone understand is that they have to run a good ship in terms of the way that they Communicate with people and to care for them and so on and so forth That is paramount and those that are seeking jobs today want that they need that they demand that they're not interested in taking dollars When they're going to be treated poorly or when they're working for a poorly run company or a company that's not well financed or whatever it might be Well, I think that's always been the case. But what you're saying is it's even more pronounced now, right? I mean, it's just ever since the whole big shift people are like, yeah, I don't have to anymore Not doing it Well, I do think so and I think that But what I think happened, of course, you know, it's a little bit speculative on my part but I think that people maybe ran to A company for a dollar reason And that they found out that the grass was wasn't necessarily greener on the other side of the fence They recognized that that may be part of the reason for an additional Higher than market wage was because the company had a turnstile because of Culture and retention and all these things that I just mentioned Yeah and you know Liz and I, you know had some experience doing business should we tell the portland story and this was pre-COVID We got we that was our that was my first introduction to this concept of work-life balance We heard a lot of that Yeah, it's like I'm in Charleston, South Carolina. You know, this I you know, I need to google that. I don't even know what it is It seems like that that was kind of a precursor to where we are now everywhere and You know, it's it makes sense when you when you when you think about it, but um, you know, that's a paradigm that Maybe was slow coming in some places and you know for some of us Maybe we're still figuring it out But if you're going to be competitive in the marketplace today, you know, if you don't know what that is google it and figure it out You need to find it in your business yeah And and what people consider work-life balance is different than what they considered five years ago work-life balance just meant That when you finished work You were able to go home and not work anymore And then focus on your family And then when you went to work you were able to Go to work and not focus on your family. That was work-life balance, right five years ago now work-life balance is Work this much time Just enough that you can have An abundant life and work much much less and spend much more time not working That that wasn't a consideration back then everybody worked 40 hours period. That was the thing Take your take your policy manual one page at a time and ask yourself, you know, what here is Absolutely a must-have from the company standpoint and what here is negotiable It's a lot of things that we have in our policy manual that may be made sense pre-covid that You know, it would be nice to have but If you give up some of those things or compromise or become more adaptable if you will That, you know, you'll you'll get that back by having a larger more more engaged work for us And you you know mom we talk to people all the time. They're Three years ago two years ago right before kovat No, there were there were companies that thought we could not Could not operate a cleaning business it with any part-time people Wasn't you say pre-covid though you're talking about almost three years ago now Yeah 2020 so In china actually it was in 2019. Yeah I was I was overseas in january of 2020 and I came home and I was definitely ill So I believe I brought it to the united states. You're you you're the one I am the one hey, you know I did a little googling While I was here while you were talking about work life balance because I remember many years ago I wrote an article about work life balance. I'm just gonna hit I'm gonna hit the high point. So I think it's important Number one manage your time. Yeah, meaning you it's okay to say no to work number two work from home Isn't that weird? This was a little bit aged number three hire your hire your weakness build your team around you Make sure you have a dynamic beam for resist weekend work close that laptop turn off the computer notification or a phone notifications Five take a retreat get away from your your work Area and go someplace and think about business number six go on vacation And really really really really do number seven which is unplugged number eight Schedule things with yourself. I do that even today I block parts of my calendar to work on projects or to do things for myself Number nine join a peer group, which I know you all do like be in your be with your peers learn from people And number 10 make sure that you are always investing in self This is an article that I wrote a long time ago and I just googled it And I found it and it's one of those things where I think that when people have that level And I know it's shifted and changed over the years But work life balance is super powerful and for me It's literally like a level of rocket fuel to make me a better person In the way that I work with people and run my own company and advise people how to come How to run their companies when I have a good work life balance if I'm tired and I'm cranky I'm certainly not doing good work on the other side. I think you guys would agree with that You know on your end as well Jason if you look off to the right hand side There's a chat area you can take that url and drop it in the chat and I can share it with everyone Oh, somebody needs a vacation take it Facebook user I don't know who you are, but you need a vacation get it on the books and actually I'm not joking So really um back to what Jason said Schedule it schedule it now because if you don't schedule it guess what in six months You're still going to be saying I need a vacation six more months. I need a vacation. You got to get it scheduled Yeah, so right So this interestingly enough, um You didn't hear us because we started out on this I was you know, tom has asked me why this makes the this the busy time of year and normally Um, I would just like october 1st to march 1st just work work work work work work work work work now I started this but right before covet I now take a few strategic vacations in the middle of the crazy season Because I realized that it actually is fuel for my ability to do better work And and I think that it's a little counterintuitive you think oh my gosh, you're in the middle of your busy season Why take a vacation? You're asleep at the wheel. No not at all It actually is an energy booster so that I can do better work in the midst of all of that You know, I I'm not a huge vacationer I Yeah, I know I I don't love being on vacation Uh, sometimes I like I like going and visiting my grandbaby But like I don't really love the whole unplugged all the way thing Not enjoyable for me I mean There's a lot of you know Different ways of looking at this and approaching it and you know, I know I have an affliction I'm joy working So, you know the idea of taking a vacation I mean I do it occasionally, but You know a day doesn't go by that. I'm not checking email and logging in and doing a couple of things It's just what I do For fun. Yeah See my friends I don't want to do my things You know, you could argue that's not healthy and you could you know, if I if that was a habit that I modified, I mean Good grief. I can imagine like being unplugged for a week Well, I do I just don't really enjoy it But why do you do it? Anyone All right, Jason what tell us Anybody that's a business owner including us us three crazy people we'd love to work We we almost have a really healthy maybe unhealthy addiction to it But I I found that it's still okay or still appropriate to you know to unplug a little bit in fact When I talk to an entrepreneur who Doesn't want to work now. I understand if they're what a retire or they built a you know Really dynamic business and they want to be an absentee owner or whatever that might be But my my gut tells me that once an entrepreneur always an entrepreneur They're going to go do something else when they retire or they're an absentee They're going to go do something else, you know to go and like to feed that intellectual mindset of building something again I I at least that's my experience Yeah, I think you're right like that this certain Uh personality type, right? It's fun. Like why would I want to stop doing this? It's so much fun. Oh, we got some other people I like working all the time. Hey Danit Hey, I don't know. Is that facebook user that likes working all the time. Are you the one that also needs to go on vacation? We have a lot of facebook If you if you're blogging if you're watching us in a group, there's a We don't get a chance to see your name. Um There's a way for us to see them. I just can't remember what it is. Yeah, I'm copying the production's gonna paste it Um, but if you're the one that likes that needs a vacation and you like to work all the time I feel your pain. All right, but if you said you need a vacation So even though you like to work all the time go on vacation, right? That's what jason say Sometimes it's gonna energize you and it's gonna make things better Yeah, I mean, that's probably the the you know, good advice. I mean, I I know for a fact that has to be good advice because I don't follow it, but that's good advice Email, you know, like I understand there's a way that you can set up something in your email that says, hey, I'm away this week I'll get back to you when I go, you know, I've never even bothered to figure out how that works because it seems like a useless feature in my mind so I use so tom's called out of office just so you know I used it only when I know that i'm not going to be able to check email on a regular basis Like if I'm in a massively different time zone or I'm not going to have reliable internet service I still read my phone. I you know, I don't know. We can go down a rabbit hole We talk the whole rest of the time About ways to vacation and vacation well and run a business and all the good stuff But I I don't use out of office unless I'm truly going to be unavailable because I like you We'll still check my email when I'm when I'm on a trip or when I'm on vacation So what you're telling us is this advice is for everybody else No, because I so well No, actually not because pre-covid I had made I won't go down this road But I pre-covid I had made a commitment to myself that I was going to take two Trips per year overseas and with the times known change it almost forced me To not be available at the time that other people were available So I did put it out of office and it created lots of boundaries because I was able to reply to messages on my time Line rather than unfortunately the person on the other end We you know, I mean, I think you guys know I mean, I reply to emails pretty darn quick people that we work with You know expect us to reply to emails pretty darn quick So I always want to let them know if they're not going to get a pretty darn quick reply Yeah, yeah, yeah all right, okay, so All right. Well, we could probably talk about this go back and forth forever What what what's our topic this one time? We were we were talking I mean, we've been talking about several things But the general direction we were going in Liz was this is the busy time of year for Jason In part because it's planning season. We're kind of getting ready to Think about 2023 or their tax considerations. I need to be you know working on You know, what is my budget going to look like for 2023? What are the major strategic initiatives? Do we need to kind of get lined up? And I know Liz that you're really big on this I think that you're even doing a workshop here pretty soon about your plan for for 2023 or to just plug Yeah, this weekend It's too late, but Yeah, this weekend. Yeah, we're doing down in Sacramento two-day goal setting workshop And I really feel like it's late Uh, I was trying to get behind arcsy, but it feels It feels a little late to be, you know, just starting to To do this, but I still think it's better than waiting longer, right for people that are haven't done it Haven't started Liz. Why do you think it's late? Uh, because I really like to start thinking about So whatever quarter I'm starting right now I like to begin the process because that quarter is already laid out for me, right? October, November, December are laid out. So in October Middle of October, I like to start thinking about the next quarter, but Because the next quarter is not a we're not just going to be thinking about the next quarter before we do that We have to do the whole The whole year and then we got to break down a lot more stuff than we do when we're just planning a quarter So it feels kind of late to me like middle of October. Maybe it would have been better to Start to get started, but it's only a few weeks late. So I'm good I'm good. Got it You know, interestingly enough you you say that and most people think about planning Annually, you know, they want to plan all of 2023 I actually think that the best planning is what you just described quarter by quarter because this is changes people change Clients changes financial situations change the economy changes are so much the changes Right. Yeah, right. I mean and and if you plan the entire year, I mean think of in 2020 if you had planned the entire year and then all Covid hits and then you've got to figure out Wow, how is this going to change? What does this look like? What is the difference? How am I going to manage people and deal with finances and so on and so forth So I do agree with you that I think quarterly planning is really brilliant So here's what I like. I really like to set through the annual plan But not not In detail like over the course of the year Where do I want to be at the end and then kind of break it down by What am I going to be my like my four main things that I'm going to work on next year? Which one and then kind of put those in order based on needs This one I'm going to work on first quarter this one second quarter and you're right when covid hit Well that plans out the window, right? Because uh But I still feel like Even though it does have to be adjusted I like the idea of it having to be adjusted and having that be a regular part of the plan That you should be planning good job And this isn't a bad thing that this is a normal part of the process So I don't think we cast you recast your plan every quarter based on more recent information Yeah, absolutely Uh, and I like having that there because well jason, you don't know but down, you know We work, uh, we break things down by quarter set our plan and then break it down by month And then we have an accountability every single week. Are we doing the things for this one? So I really like to even weekly just double check that I really am doing the highest value This week not just go my gut Because if you don't set the plan What I've seen is the people in my circles that don't set the plan They start going with their gut. They start putting out fires And they end up putting out the wrong fires. Dude, you see that fire over there that's burning your company down Why are you laminating? Uh stuff for your wall And you know, we were talking Liz before you joined that, you know There's unprecedented things that we're dealing with as as business operators that We just don't really even have you know firsthand experience of of of you know how to deal with it The inflation and how prices are going up and is everything from wages to You know the fuel we put in cars to all you know all our supplies and space and everything else um You know, there are a lot of us that have been running businesses We're all that stuff's been fairly level year after year and when You know, we didn't really even have to manage it We just did what we were doing and there was money in the bank, you know every friday to cover payroll And it might not work that way with Prices going up at the way they are unless we are managing differently And You know, that's that gets back to the planning process that gets back to It gets back to the numbers jason. You can speak to this. I know that you are Like as big a numbers person as anybody I am. I don't know if I should admit it or not. But yeah, I I I blew a whistle on you already ratted you out Yeah, I I am I do I do really love to I believe that every business needs to be run by numbers I I absolutely think that almost every critical and even non critical decision can be made Based on numbers and and I was alluding to it earlier that So many companies have invested in overhead for growth And if we think that 2023 is going to be a little bit off You need to really analyze that overhead and do you need all of that overhead overhead might be You know customer support people or administrative or technology or client acquisition strategies Or all of these different things that are variable based on how big your business is right And I think it's really important that Anybody who's who's in tune to their numbers understand the difference between fixed overhead and variable overhead Realize the variable overhead is going to go down based on what top line revenue is fixed overhead is fixed You're going to pay the exact same amount in rent whether or not you do $1 in business or $100,000 in business And so if you've got a big building and you're doing $1 in business Then you maybe don't need that big building You need to figure out a way to generate revenue whether it be a Subleasing part of that or maybe getting out of your lease or something to be able to reduce that fixed That fixed cost that you have in the business because what sometimes people do is are so busy Well, I use the terminology you want to chase revenue in business or do you want to chase expense in business? Okay And I love The uh-oh, maybe i'm going to disagree with liz on that I think that you should be chasing revenue in business meaning Like like you build the expense and then you go chase the revenue But if you're chasing expense means that you are like in this level of Dream desperation to try to get the sale in the door because you're chasing You're chasing to try to feed the animal of expense and that might be in hiring or your facility Or your marketing company that you've hired or whatever it might be There's all of these different categories. And so you're out there just chasing expense all the time and it gets really exhausting running the business when you're chasing expense all the time. It's not fun But you know, if you have a lease that is For renewal next year You might not want to assume that it's going to be comparable to what you've been paying in the bank pass because You know space costs have been going through the roof Check look at all your debt, you know, you might have some some some notes borrowed some money That's variable interest and if so you're paying a lot more Interest now than what you were, you know a year or two years ago and presumably even more moving forward if you listen to What federal reserve told us today, you'll be paying more in the future than you are even now All of these things are just changes that we're going to have to manage in our business that if you've been doing this For last 10 20 years even you've never had to deal with situations like this before making The planning process and knowing your numbers even that much more important Absolutely. I'm glad you brought that up a lot of people don't realize that lines of credit and credit cards are all Based on crime. They're variable that most all of them are based on on variable rates And so we are getting ready to possibly be paying twice as much interest Supposedly if they raise the interest rates what they say they're going to do, which I think is this week and next week Well, they went up the unified basis points today, which you Right and so then I think I said next week I met next month and the first week of december they're saying maybe 50 basis points I think is what they're saying which for those of you that don't know what a basis point is It's three quarters of a percentage point or half percentage point. So When we get to that if they raise if they raise the rates by 50 basis points in the first week of december We're now paying almost twice as much interest on those exact same notes that we did a year ago So that can be a budget buster depending on what you have. I mean, you know, I'm writing some education right now on On on how to bulletproof your business for whatever is in the future And one of the things is to be very aware of your variable interest rate and try to pay That off as best as you can and I can't stress enough that the only way that you pay off debt is to Profit that's the only way you can't you can't refinance your way out of debt And so it's really important. That's one of the key things that if you want to bulletproof your business Make sure you don't have any variable interest rate debt, sorry variable interest rate debt, right? And if you have lines of credit you use in your business for I don't know receivables or just you know other other things in your business as we go into 2023, there's a lot of you know, the consensus is building that we're going to have a Technical recession and things are going to slow down and Oftentimes when that happens banks get very conservative about lending money Even though the interest rates are high They don't want to lend money that they're not going to get back So they're more conservative of lending. So You know, if you've got plenty of cash and have access to cash all that's good But if you're thinking well, I've got this credit line banks will pull back credit lines from you If things start getting tight. So just when you need it most it might not be there. So these are things you need to plan on as well absolutely the old adage of Ask for money from the bank like in a form of a line of credit when things are good when your numbers look awesome Which might be right now is really paramount If things get tight and you go to ask for money from the bank the answer is going to be no Because they're going to see it in your numbers and they are going to be hesitant to lend absolutely 110 percent well Tom and I both have you say at the same time Yeah, yeah And you know, there's a school of thought out there and if you have a line of credit that you haven't tapped into and you're thinking well, I'll just not borrow that money until I need it If you read the small print almost every line of credit that the bank gives you will say a business line Of credit is that they can basically take that away at any time that they want to So if you've pulled the money out, you know, they can ask you to pay it back If you don't have it you'll work out, you know some type of terms and whatnot The point is if you think that you're going to need it It's worth considering taking the money out, you know borrow the money While it's available because when things get tight the bank might say no we change your mind And we really don't want to let you borrow that money Yeah, so two things on that number one most banks On lines of credit Revolving lines of credit, which basically is is a factoring element to receivables or inventory or your assets They vary into the Explain that again, Jason. I didn't get what you said So most most lines of credits that banks issue to businesses It's a factoring to a accounts receivable Inventory or business assets. That's how they determine how much they'll let you borrow. Okay And um, they almost always in the fine print like tom said put in one of the covenants That say that they can at any time start using a financial instrument called a borrowing base Okay, a borrowing base is a Document that they send you Where you have to prove to them that you have this an accounts receivable this an inventory and this an assets And they could recalculate They could recalculate the amount of money that you can borrow on your line of credit So if they use a borrowing base, that's one of the ways tom that they can reduce that credit limit You could have a two hundred thousand dollar line of credit But you in it that you you fill out the borrowing base and they only allow you to borrow 60 grand That's it. Okay. That's the first thing The second thing that's oftentimes in covenants with lines of credit is that they can do what's called a sweep If at any time the bank feels that you Might not pay back the line of credit. I kid you not I have clients that it's happened to they can hit a button and they can take that money out of your operating account To pay the line of credit off with no notice whatsoever It's called a sweep so Wow So what I recommend people to do that if they get into that place where it's a little bit tense Pull the money out of the credit Oh That's more than a little tense if they yank the money out of your account Back into dozens of people that I know that get into a little bit of financial insecurity or the bank gets into financial insecurity So here's the other thing that can happen the bank could begin to have a lot of problem loans And they could say we want to get as much cash in because if banks don't have cash They can't lend and that's where they make their money. So it's very complex Makes sense though But but let's say things get tense in business and you want to pull from that line of credit And you pull a hundred thousand dollars. I strongly recommend you put that into another financial institution That is because bank a can't take money from bank b Borrowed money from bank and you've got all your Cat, you know checking account and so on and so forth Oh, okay, that's awesome. Yeah, I would not even have thought of that. That is amazing The irs can take money from your account from any bank Yes, they can't hold other conversations. It's for another day But that's just some practicalities in terms of banking and unfortunately I'm on both sides of those really successful business that have great Banking relationships and not successful businesses who have very tarnished banking relationships And I promise you this is a very real thing. They can sweep and they can borrowing base you immediately on that line of credit and you know, it's it's it's Not a bad idea to hope for the best but plan for the worst and You know, there is the possibility of some some bad economic things I had we just don't know So right now there has never been Uh a better time that I have experienced That we need to be paying closer attention and making better plans because things are so volatile and so You know, they're just We we don't know what's gonna happen Just yeah, again coming off all this and it's still we're just in unprecedented times It's just I agree But I also don't want to be like gloom and doom and everything I mean most of the people that I know that are running great businesses are still running great businesses And they're having the best year of that they've ever had And I just want everyone to be aware that there's going to be ebbs and blows and the whole cycle Of business and you need to be very well prepared Very well prepared because the last thing that you want to do is to get yourself into a situation where Where you're surroundings that have nothing to do with you Forest businesses go down a little bit and you're not prepared for that and then you get caught In a potential precarious financial situation, but it's not gloom and doom I mean things are still very very very strong In and a lot of different businesses and they're not seeing Things be reduced, but we don't know what the future holds. We never know what the future holds There's a there's a lot of there's a lot of strong reasons to to go all into 2023 with the idea that you're gonna grow your business You're gonna make a ton of money If you're not gonna, you know, don't even get out of bed in the morning if you aren't thinking that but Be prepared, you know, it's like I live on the coast of South Carolina. I'm always prepared for a hurricane I don't wake up every morning looking for it But you need to be prepared because every once in a while it happens and this is You know, there there could be a hurricane blowing around out here next year And you just want to if it happens you want to be prepared for it All right. Well, we only have five minutes jason if you had no people I know see it goes fast. You know what you were thinking that it goes so much slower when tom is here. All right All right, so um, but tell oh, yeah, well tom will get us this I'm wrong website tom. Where am I? Where am I going? Jason cup.com Okay And actually enough we we are like going to be launching a new website probably Probably by Thanksgiving. That's the hope cross our fingers. We've been trying to do it for a while websites are a pain, aren't they? Right. Oh my gosh. Yes. All right before I let you go um, if you had to it Not if you have to would you please? Give our audience the three things that you think they should do top three things that they should do to prepare for Whatever might come So, um for me it's it's uh Number and these are in no particular order, but but there are the three things I think you need to do I think number one I feel like I've said this before on the show, so it might be repetitive I think number one people need to know Where they make money In their business where they don't make money in their business where they can sell And where they have the resources to be able to scale. So for example, if If the viewers know that they can make money in residential cleaning in this particular neighborhood or segment of their area Uh They need to go and do that because that's where they make their most gross profit I think sometimes people just throw that at wide and they're out there selling anything and everything They don't know if they're making money and it's all going into some big pot And they have no clue whether or not they're making money So number one identify where you're making money and go and sell into that and make sure that you can scale into that as well That's perfect The second thing is is every single business needs to have a Budget financial plan. This is how much money is going to come in. This is what it's going to cost to acquire those clients This is what it costs to complete the work. This is what my overhead is. This is what my debt is This is what my positive cash flow is Budget is not just saying i'm going to do a hundred thousand dollars in a month And i'm going to net ten thousand dollars in a month. It is much more than that It comprises your cost to get sold how much it costs to get your work done It comprises things like client acquisition your fixed cost your variable cost your net profit your shareholder distributions and your debt service really need to build an adequate and completely Well thought out budget plan so that you have a money plan The third thing you need to do is you need to have a people plan I am convinced and I have been on this soapbox for the last several years That people are what makes a business go around and around and around and if you don't have the best people You might be struggling in some area and you've got to make sure that you've got a really really really great team That is something that's paramount And if you have a good strong balance sheet now How's the time to invest in that team so that you can scale and you can build and you can't hit those budget numbers in number two So if you're listening to the show right now and saying wow A detailed budget sounds complicated. I'm not sure how to do that or people plan. That sounds like a good idea But how in the world do I do that? I dropped jason's uh url his website in the uh in the chat here If you reach out to jason i'm going to go on a limb here I bet you'd be glad to talk to people about that you could probably help them Yeah, I mean we've got a team that does that so we're happy to talk to people about those questions I will say It starts with having at least accurate financials to be able to build that plan if you don't have accurate financials It's going to be really hard to build that plan and build it appropriately But if you don't have accurate financials You know the best time to you know the best time to have done that is you know a long time ago second best time is today And jason could help you figure out how to do that too Talking with people about this today if you don't have data Stop stop stop fretting and just start start getting it today Yeah, you got to start at some point start today We are at the top of the hour Especially but Liz got here. I knew I wanted to be on a whole lot faster I'm sorry y'all Thanks so much Jason. I really I'm so glad that I was able to make it here today. I do feel like you always Give me stuff that I mean I take notes a lot, but I'm always getting good notes I feel like a good notes when you're on here stuff that I can actually do and you're welcome It's it's fun to be with you guys. I I love it when I see on my calendar that already spending time with you guys It's it's easy and it's fun and the people who are watching they're fun, too So this is great We're going to call it a take for today for this week jason as always you're awesome Thank you very much for for being with us today Um, Liz we're going to be here next wednesday five o'clock eastern As far as you know, yeah I'll be here. We will be here next week five o'clock eastern. Please join us. So then take care. Bye. Bye Take care