Feeling Stuck in Business? Start Here

In This Episode

• Intro

  Alright, g'day. Welcome to the Trade Business School Podcast. Today I'm going to be answering some questions that people have written in with.

  Now, I've picked five that I'm going to answer. The first one is, I'm profitable, why don't I have any cash? The second one is, how do I get better staff?

  The third one is, why do I always feel like I'm chasing my tail? Number four, how can I handle stress better? And number five, how do I know if I'm charging enough?

• I'm Profitable, So Why Don't I Have Any Cash?

  So first of all, number one, I'm profitable, but why don't I have cash? So when I look at my profit and loss every month, it's showing a profit, but I don't have any cash. Where's it all gone?

  And it's a good question. There's two main things to look at. First of all, check your accounts payable.

  The profit and loss is going to be running on accrual, so you're going to be looking at what you're invoicing. You're not going to be looking at what you've been paid. Go and check your accounts payable.

  You should have no one in 90 days plus, no one in 60 to 90 days, virtually no one in 30 to 60. Zero to 30, I would always allow about 15 to 20 percent, and current is obviously what's current. That's okay.

  Anything that is outside of terms, especially 30 to 60, 60 to 90, 90 plus, you've got to chase. You've got to get that money in. The squeaky wheel really does get the oil when it comes to this sort of stuff.

  If you find that you've got a lot of overuse, that's probably where your cash is going. You need to get it in, number one. Number two, you need to develop a system that doesn't allow you to blow out like that.

  Previous podcasts I've spoken about a system that we implemented that really brought down our accounts receivable. If you'd like more information on that, reach out to us via the website and we can have a chat about it. I'm not going to go into it here.

  But that's the first thing to look at. If you don't have any cash and you're profitable on your P&L, check your accounts receivable. Second thing to have a look at is two main things that don't generally show up on the profit and loss.

  The first one is any debt that you've got, especially vehicle debt, is not going to be coming off the profit and loss. It's going to be going onto the balance sheet. If you've got, let's just say, 10 vehicles and they're all loaned and it's $1,000 a month, that's $10,000 a month in cash that's coming out of your business that's not shown on the profit and loss.

  Does that make sense? The second place to have a look at, depending on how your accountant has structured your personal wage as the owner of the business, it might not be shown as wages and salary. It might be shown on the balance sheet as a loan or a dividend or something else.

  If you're paying yourself a correct amount, which should be a minimum, I would say, of $10,000 a month, a minimum, plus your super, there's another $10,000 that's not shown on your profit and loss perhaps. Between that and the vehicles, there's $20,000 straight away. Your profit and loss, you'd need to be making a $30,000 profit every month to be making a $10,000 cash profit.

  Does that make sense?

• How to Manage Your Cash Better

  Whilst I'm talking about this, another sort of topic that's close to my heart, I guess, is manage your cash better. So many business owners don't manage their cash well. I'm going to give you a couple of points here.

  First thing I want you to remember is the money that's in your bank account, it's not all yours. Some of it is. Some of it is your suppliers.

  Some of it is your employees. And some of it is the government. When you have a look in your bank account, know that that is not all yours.

  So a couple of things that you need to do here. Number one, most important thing is pay yourself a wage that you can live on. This way you're not dipping into the company's money.

  Separate your money and your business money. The wage that you pay yourself should be enough for you to live, should be enough to pay your mortgage, go on holidays, buy your clothes, send your kids to school. All of your personal expenses as a person, as a family, need to come out of this wage.

  The business has profits and the business can distribute the profits to you or your investment company. But don't be dipping into your business account to pay for personal expenses. Number two, a lot of you aren't going to like this, but don't buy toys.

  I don't know how many people I come across that have got no cash, but they've got motorbikes, boats and jet skis. Don't buy them. Buy income producing assets first.

  One of the reasons that I was able to retire in my 40s was instead of buying boats and jet skis and cars and holiday houses, I put that money into income producing assets. That meant in my mid 40s, I had enough money coming out of my investments to live. I'm not saying don't enjoy your money.

  And if you are a fisherman and you do like boats and you want a boat and you can afford it, then go and buy one. But just make sure that you've got your investments under control first. Third and final point on managing your cash better, have multiple bank accounts.

  At a minimum, you need a cash flow account, a tax account and a savings slash investment account. The cash flow account, that's the money, the account where money just comes in and goes out. Every invoice that gets paid or at the end of every week, you should transfer a portion of that into your tax account.

  It could be 10 percent, it could be 30 percent. It depends on your business. That way, when your tax bill comes in, the money is sitting there to pay for it.

  You should also transfer a percentage every day or every week into your savings or your investment account. OK, now this is the account where you're going to build up savings and you're going to look to invest into income producing assets. If you can get those percentages right, you can just keep rolling through life and business and you keep accumulating.

  Whilst you're doing this, I want you to remember one main thing, that your level of expenditure rises to meet your level of income. So you need to trick yourself. And what I did was I had a separate bank account with a separate bank that didn't show up on my zero where all of my investment money went to.

  And for me personally, it was a percentage of the payroll that I was paying every week. I figured if I'm paying $50,000 a week in wages, I can afford to put two and a half thousand dollars a week into an investment account. That's what I did.

  You multiply that over years and you end up with a very good amount of cash to invest. So I'm profitable. Why don't I have cash?

  Number one, check your accounts payable. Number two, there might be some things that aren't showing up on your profit and loss like vehicle repayments and owner's drawings. And number three, learn to manage your cash better.

• How Do I Get Better Staff?

  Second question, how do I get better staff? This is one that I like because I like seeing the response on people's face when I tell them that the best way to get better staff used to be a better boss. I remember reading a book.

  It was written by a guy called Brad Shugars. And Brad was growing his business and he was complaining to his dad that he had a job. He was saying, "You're a bad employee."

  And his dad said, "Son, you get the employees you deserve." And I remember reading that thinking, "No, he's wrong. You don't."

  Then I went away and thought about it and I was like, "You know what? He's right. You do."

  So the first thing in how do I get better staff is be a better boss. Go to work on you. What should you be doing?

  You should create a working environment where people want to be. Okay? You do this, first of all, by having a level of emotional intelligence where you don't fly off the handle when things go wrong.

  You don't yell at people. You don't tell people off. You use that level of emotional intelligence and you're consistent.

  Okay? If you've ever worked for somebody and you don't know whether they're going to be happy this day or sad this day and this day they want to go and get a whole heap of new work and this day they want to fire people, that erraticness is very, very hard to work around. So be consistent with a high level of emotional intelligence.

  Create a great working environment by recognizing your people. This is one of the biggest things that you can do to create a really good culture. And get and keep good staff.

  Recognition is something that men die for and babies cry for. If I've done something wrong, tell me. If I've done something right, tell everybody.

  The best thing that you can do is look for reasons to praise all of your staff publicly. And when they have issues, just call them in quietly. Just say, "Hey, mate, this isn't like you.

  Is everything okay?" You will get better staff by being a better boss. The second way is to hire correctly in the beginning.

  Now, first of all, a lot of my clients will hear me say regularly, "Always be hiring." If you're always hiring, quite often when you need somebody, you've got somebody sort of sitting there on the sides almost ready. Second thing is there really is a lot of truth to hire slowly, fire quickly.

  Okay, hire attitude over aptitude. And finally, coach and mentor your staff. If you want better staff, teach them.

  Coach them. Mentor them. Bring them into the office.

  In part, some of your wisdom on them. Support them so they can grow as people. I had multiple staff that were working for me for 10 years or more, and every year those guys got better.

  So how do I get better staff? Number one, just be a better boss. Number two, hire correctly at the beginning.

• Why Do I Feel Like I'm Always Chasing My Tail?

  Third question I've got here, "Why do I feel like I'm always chasing my tail?" Well, probably because you are. If you feel like you're chasing your tail, you probably are.

  So what can you do to stop this feeling? Because if you feel like you're constantly chasing your tail, you quite often, that leads to feelings of overwhelm. The first thing you've got to do is you've got to be organized.

  And I'm going to steal a great line from a guy called Jocko Willink, which is, "Discipline is freedom." It really is. Be organized.

  Have the discipline to follow the plans that you've set. First thing you're going to want to do is set up tomorrow today. It's a principle right out of the seven habits of highly effective people.

  It's one of the best principles that I adopted early on in business that helped me be organized. Simply put, before you finish work today, have a look at what you've got on tomorrow and organize it before you leave your office, before you get out of the van. That way, when you go to work first thing tomorrow morning, you're already prepared.

  It's a tiny little thing. And quite often, some of the things that make the biggest changes to us in life are actually small. They're so small, they seem insignificant.

  If you adapt, set up tomorrow today into your life, it'll have a massive impact. Second thing about being organized is you've got to use a calendar. If you can't use an online calendar, I use Microsoft Excel.

  I know some people use Google Calendar. Go back to using a diary, an old-fashioned diary. In your calendar or your diary, you need to have all of your appointments and all of your tasks.

  One of the things that I do with new clients, especially those that are newer to business, will sit down and I'll show them how to do that. I'll show them what my calendar looks like. On my calendar, I have appointments that are color-coded in either orange or gray, depending on what the appointment is.

  I also keep all of my tasks there. For example, if I have a look at my calendar today, I have the meeting booked in for the studio whilst we're doing the podcast. I've got a task here to check out a wrong payment that was made on my bank account.

  I've got a couple of phone calls that I need to make. I've got an invoice that's a recurring invoice in my zero that I need to remove. Then at the end of today, I'm catching up with one of my mates for dinner and a show at Bird's Basement.

  All of that is in my particular calendar. It's got different color codes for different things. I sit down and I show this to new clients.

  We come up with a way of creating a calendar that works for them. You can't be organized if you're trying to keep all this stuff in your head.

• Chunk Your Time, Get It Out of Your Head, and Schedule Ahead

  Another thing to do is chunk things together. For example, if you've got 10 quotes to do, don't do one in the morning, one at lunchtime, two in the afternoon, then a couple tomorrow. Chunk them together.

  Set aside a period of time where you're going to do all 10 quotes. It might take you an hour. This is the trick with chunking.

  I used to do chunking in blocks of 24 minutes. You've got to turn off all distractions. Phone on silent.

  Email turned off. Web browsers all shut down. You focus entirely on the task at hand with no distractions for 24 minutes.

  Set a timer. In 24 minutes, when that timer goes off, you've got two options. Number one, go again.

  Quite often, you're in a state of flow and you'll just go another 24 minutes. Or relax, have a break, get up and stretch, go get a coffee, whatever you want to do, come back, hit 24 minutes again and go. By chunking your time together like this, you will get so many more tasks done.

  Setting up tomorrow today and chunking with the two biggest things that got me organized. Both of them a little, but they made a very, very big difference. Another thing that you've got to do is get stuff out of your head.

  I remember years ago I was talking with my coach and I'm like, I've got so much going on. I'm just really stressed. And he's like, all right, well, let's sit down and write down what you've got going on.

  So I got out a piece of paper. And I wrote it down. And I remember it was five items.

  And I'm like, oh, no, there's more than that. I just can't think of them. No, it's just those five.

  It turns out I had these five things just going round and round and round in my head. So I think of number one, number two, number three, number four, number five. And I go back to number one again.

  This constant circle is what was leading me to be overwhelmed. And I was a country boy. And the analogy that I came up with, the picture that helped me understand this was we had a mate that had a farm and occasionally we'd just go into a paddock and we'd do circle work.

  And it was a lot of fun, a bit stupid, but a lot of fun. And in summer, we'd create so much dust that you wouldn't be able to see anything. This is what it was like for me with these five things.

  I was just going round and round and round and round in circles. And I was creating all this dust and I just had no clarity over anything. Once I got them out of my head and wrote them down and then I created a plan, just a dot point plan for each one, I was clear.

  Later on, I read a book where they talked about this issue resolver spreadsheet. And that's something that I have with my clients now where if you've got any issues, it's a great way to get it out of your head, steps you through some questions. And at the end, you're going to get a plan, an action plan that you need to action within a week.

  The first two items you need to do straight away, the next two by close of business, the next two by tomorrow. What it does is you go through that issue resolver and you get the action points. As soon as you start focusing on what to do, the issue goes away.

  Another really important thing, especially if you're running the operations of your business, have the schedule booked out at least one week in advance, preferably two and if you can, three. Booking the schedule out that far in advance reduces so much time and effort and it creates a much more organized business. Things flow a lot better.

  It's one of the things that people with operations managers, your operations managers need to be taught this. It's a skill, but it's a skill that's worth learning and worth being taught because it saves so much time. Lastly, what can you do if you feel like you're chasing a tail?

  Have some operational software to run your business. Now, most of you probably already do, but the question I've got is, are you using it properly? There are so many good operational softwares out there these days that when used correctly, not only make your business run smoother, but they save so much time.

  So why do I feel like I'm chasing my tail? Number one is because you probably are. What can I do to get past it?

  Get organized by setting up tomorrow today and use your calendar or diary correctly. Chunking, 24 minute chunks. Remember that discipline is freedom.

  Get things out of your head. Schedule one to two weeks in advance and use your operational software correctly.

• How Can I Handle Stress Better?

  Question number four that we've got here is, how can I handle stress better? This is a very interesting question. Stress affects different people differently and different people are going to be more stressed out than other people.

  They just have a natural inclination to it. But running a business is stressful. It's stressful for everyone.

  So in my view, the first thing you've got to do is just accept it. Accept that there's going to be times of stress. Don't try and avoid it.

  Just take it on like a challenge. Whilst you're taking it on like a challenge, there are some things that you can do to handle the stress better. And the first one and the biggest one for me is have a life outside of work.

  So many of us, and I fell into this bucket, our company and our business becomes so consuming that we forget to have a life outside of work. If you're stressed, having a good social circle, going hanging out with some friends, whether you go camping or fishing or you have a few beers or whatever you guys do, that will de-stress you. So hanging out with your family and being present, especially if you've got children, go and do activities with your kids that takes you to a place where you've got to focus on what they're doing and you can't think about work and how stressed you are.

  Remember that we work to live, not live to work. Now that doesn't mean that you're not going to have to work hard to build a successful business. It doesn't mean that you shouldn't be really passionate about your business.

  It means that your business should feed the lifestyle that you want. Not all the time, because there's times of sacrifice. But don't lose sight of the fact that, you know, this isn't a test rehearsal.

  This is life. You're going to need to live it along the way. A really, really big stress reliever is exercise.

  For me personally, I like to lift weights. I still do. The amount of times that I went into the gym after work feeling terrible and walked out feeling great, there wasn't a single time I left that gym not feeling good.

  And I know there's a bunch of studies out there where they talk about, you know, the endorphins that are released and things that happen and I don't really care what it is. It makes a difference. So you need to exercise and whether that's going to the gym, lifting weights or doing classes, riding a bike, martial arts, whatever it is, exercise is going to be a big stress reliever.

  So is doing something creative. It could be artwork like painting or sculpting. It could be things like acting.

  It could be doing a jigsaw, playing a musical instrument. Stepping into your creative side of your brain means that your brain needs to focus on something else. And if you're learning how to play the guitar, you can't be thinking about how stressed you are at work while you're trying to figure out how to play a B chord.

  It's a really good way to get you out of that sort of stressed headspace. The next one, which I think is crucial is meditation. Over the years I did various kinds of meditation, but I landed on transcendental meditation.

  And I'm astonished at the amount of successful people that talk about how much transcendental meditation has helped them. It's very easy to do. You do have to go do a course, which takes a few hours, but it's a meditation that I found I look forward to.

  Now I've been doing it virtually every day for, I would say, six, seven years. It's very easy to do. And it really does reduce the level of stress that's in your body and gets you thinking.

  Less erratic. It brings you thinking sort of in line. Another big one is don't think about work on the weekends.

  My personal ethos or personal motto was, "I will work 12-hour days during the week, but I'm not working weekends." Weekends were my time to recover. I spent time with my children, do things that I wanted to do.

  And I got so good at not worrying about work on the weekends. And on Monday morning I go into the office. I'm like, "What on earth am I doing?

  I've completely forgotten about it, and I'd have to go and have a look at my calendar to refresh my memory on what I was doing." If you can find a way to switch off your work brain on the weekend, it's going to help you de-stress a lot. I have people say, "Well, that's, very well and good, John, but I can't control what I think.

  Now that's complete bullshit." We actually have control over our brains. Most of us just choose not to exercise that control.

  So make a choice. Control your brain, control your thinking, and allow yourself on weekends to not work, not think about work. The final one that I'm going to talk about here is the issue resolver document that I mentioned earlier.

  I remember this particular one. I was driving to a conference in Byron Bay, and I was staying the night in Bermagui, and I had this issue at work, and it was just making me feel sick. I happened to get into my hotel room and read that book that night, and I did the issue resolver questionnaire that they had in there.

  And by the end of it, I had an action plan, and all my anxiety, all of the nastiness that I was feeling about this issue was gone. So I've created an issue resolver that I've refined a little bit over the years. And whenever I've got an issue that I can't resolve, or it's making me feel a bit yuck, or one of my clients has, we go through it.

  If you want any more information on that, like I said earlier, just reach out to us on our website, and I'll have a chat with you about it, because it was one of the things that really did change my life.

• How Do I Know If I'm Charging Enough?

  Final question. How do I know if I'm charging enough? This comes up a lot.

  And there's two factors here. Most tradespeople don't charge enough, and they don't charge enough because they don't want to rip people off. The second factor is some people are charging way too much and losing work.

  And most people want to know what they should be charging, and there's no correct answer for it. Ultimately, you want to be charging as much as you can, and still win work. But I'm going to give you a couple of tips to try and figure out where that is.

  The first one, the first one, it's a must. You must calculate your actual cost of labor. Here in Australia, we have so many additional costs when employing people.

  If you're paying somebody $50 an hour, once you calculate annual leave, including leave loading, public holidays, payroll tax, superannuation, long service leave, lost time, sick leave, training, they're probably costing you $80 to $90 per hour. I have a spreadsheet that I use with clients where we go through each one of those items. And at the end, it tells us exactly what the on costs are.

  It's the first thing that you must do. I remember sitting down with somebody that owned quite a large company. He wasn't making any money.

  And when I went through this spreadsheet with him, his face was white because he realized his cost was less than what he was charging. That's why he wasn't making any money. Okay, that doesn't even include the overheads of the business.

  That's just the on costs of labor. So the next thing you need to do is have a look at what your overheads of the business are. And you need to try and calculate that in to an hourly rate.

  Now, this can be difficult if you do it annually. On the metrics that I use with my larger clients, every month, we get the exact figure on how much their overhead had cost them per chargeable hour. We then get the exact figure on how much their labor had cost them per chargeable hour.

  And we can see what their business costs per chargeable hour was. Next thing that you need to do once you've calculated your actual cost of labor and your overheads is you need to determine what your wage is going to be and what your super annuation is going to be. And it needs to be a market rate.

  So if you're not paying yourself at least $100,000, $120,000 a year minimum plus super, you're not paying yourself enough. You need to add that into the overheads. And then you need to factor in a net profit.

  Now, people say, "Well, what sort of net profit should I aim for?" I have a pretty basic response to that. If you're not making, your net profit should be between 10 to 20%.

  Anything under 10%, it's not really worth the risk, the pressure and the stress. If you're above 20%, you're probably working too hard and or your management team is working too hard. Now, it's not a black and white rule, but it's a good sort of range, 10 to 20%.

  So figure out what that 10 to 20% is by having a look at your profit and loss annualized. Figure out how many hours, chargeable hours you've got and then run the calculations and that's going to give you the hourly rate that you should be charging. There's one more thing to factor into that.

  Trade businesses have two main forms of income. Number one is a profit on labor and number two is a profit on materials. Now, it gets a little bit tricky to calculate that, but we can make some estimates.

  So the best thing that I can probably do here if you're interested in trying to calculate how all that works is reach out to us via the website and we can sit down and have a chat. We can review your finances, review your profit and loss. So you can come up with it won't be exact, but it'll be a pretty good charge out rate that you need to adhere to to make the kind of profit that you want to in business.