Ep 030 – 7 Metrics to Master Financial Health

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Is your financial strategy prepared to outlast the end of easy sales? In this eye-opening episode, Tommy Cole sits down with Jennifer Murray, finance savant and executive coach at McFarlin Stanford. Discover the hidden pitfalls of fraud risk in landscape companies and why internal processes can make or break your success. Learn how to maintain liquidity, manage leverage, and optimize asset efficiency. Jennifer’s insights reveal why profitability, growth, and risk management are not just buzzwords—they are essential habits for a thriving business. Don't miss out on actionable advice that will transform how you perceive business health, from top to bottom.


Financial checkups ensure long-term business viability.

Key Moments:

[03:02] What is a financial health checkup?.
[05:28] Profitability in Landscape Companies
[07:13] Importance of Revenue Growth
[10:50] What is asset efficiency?
[13:29] How to leverage your finances.
[17:33] Deepdive into cash flow
[22:38] Financial risk management
[17:33] How Organizational Structure can affect finances


    1. What is a financial health checkup?

    2. How should I structure payment approvals and financial oversight in my business?

    3. What is the difference between a "wagon wheel" and a "wedding cake" organizational structure?

    4. How do you strategically use debt for business growth opportunities?

    5. How can I reassess and streamline my client base for better profitability?

Episode Transcript
Jennifer Murray [00:00:00] The Roots of Success podcast is for the landscape professional who's looking to up their game. We've got a brain trust of experts to help you nurture the roots of a successful business and grow to the next level. This is The Roots of Success. Tommy Cole: Hello, welcome to another episode of Roots of Success Podcast. And I'm your host, Tommy Cole, and we have an awesome guest today. Jennifer Murray with McFarland Stanford and by far the smartest person in the room is with us today. I am going to enjoy this a lot. How are you, Jennifer? Jennifer Murray: I'm doing great. How about you, Tommy? Tommy Cole: This is great. Oh, we're going to be a great episode because I love super smart, intelligent people way smarter than me, and we get to learn a ton of information from you because you have a lot to to provide us. Jennifer's an executive coach and facilitator for several of our peer groups at McFarland Stanford, the grow group. Once again, she is an [00:01:00] intelligent, smart business person. So she has a lot of knowledge. Jennifer, what's a little bit of your background? You've got a couple of degrees in business administration. Masters from Columbia, Bachelors from Baylor, Sikkim Bears. Background as a Banker Tommy Cole: But tell me about some of your background and what you, what you've been doing previous. Jennifer Murray: Yeah, yeah. So, I mean, I like to characterize myself as a recovering banker. I started my career right out of Baylor as a lender at Chase Manhattan Bank. So I'm first started wearing the hat of evaluating companies as, you know, credit worthy for making loans to and then I transitioned and became an investment banker with Morgan Stanley, where I helped companies think about sales, about capital raises, about kind of, you know, Strategic finance. From there I moved to private equity, kind of the dark side and spent some time helping the fund look at acquisitions and [00:02:00] then how to, how to sell the businesses that we had acquired. So I've worn a lot of different financial hats. Since then I've been in my free time teaching finance at the university of Texas at Dallas. So I am a I'm a finance geek. Tommy Cole: love it. Well, you hit a little sensitive subject about private equity. That's sort of like the common trend. In the landscape world these days about, these equity companies buying landscape companies. And, it's interesting to see what's attractive to, from their point of view, right? So you, you provide a lot of evaluations for all of our existing clients. And it's some just great financial knowledge. One of the things that you do that is super amazing is what we call a financial health checkup. And people are like, well, what in the world is that? I'll let you explain. But from a layman's terms, that is what I compare it to is. I may look healthy on the [00:03:00] outside and I'm thin and lean and everything's great. But what's happening on the inside? Like what's the blood sample of your body? What, what is going on way behind the scenes that could be brewing something very bad could be happening that nobody really knows about it, even including yourself. What is a Finacial Health Checkup? Tommy Cole: So you have this thing called a financial health. Explain what that means in your terms. Jennifer Murray: Well, I think you did a great job, Tommy. I think exactly it literally is the equivalent of an annual, you know, visit to the, to the doctor. So some of the things that I do with with my friends, Stanford clients are longer range planning. You know, valuations, where do you think the company is going to be in the next five years, the financial health checkup is, is very much the annual component to that, the steps that you need to kind of take or be aware of to make sure that you're hitting your longer range goals. And so at least once a year, just kind of taking a moment as a leadership team or a CEO to say, okay, let me just. Get [00:04:00] some blood work done. Let me kind of look at some key metrics, evaluate where I've been, and that'll help me make a better plan for the coming year. You know, I can eat better. I can exercise more, but I have to kind of know where I am right now. Tommy Cole: Right. It's a roadmap, right? So this is the foundation we have, but this is the roadmap to get better in your financial health checkup. And I will, I will reframe the audience. This is not the sexy side of the business. This is oftentimes owners look the other way, put a rug over and go, I'll deal with this later. I don't have time for it because. They're more attracted to the awesome piece of equipment, the truck, the facility, the awesome project they're working on, the great maintenance property that they just got signed up, whatever. But all, put all that aside and really dive into the financials. Quote unquote the blood test of your body, but you've come up with a good. I'm gonna say seven necessary things that you look [00:05:00] for in a health checkup and I want to go through all those and provide a little more Detail of what you're looking for so that the average Joe's like myself are going. Oh my gosh I need to pay attention to certain some of those things Jennifer Murray: And Tommy, I would just, just kind of maybe push back a little bit on the fact that this is not the sexy side of the business as a recovering banker. I think money's pretty sexy. And so the more profit you can make, the greater value that you can build in your company. That's a win win. Tommy Cole: 100%. So jumping into that, number one is profitability, which is kind of a dirty word of an industry a little bit, right? The profit side but oftentimes most landscapers, that is one thing that suffers. What does Profitability look like in Landscaping Businesses Tommy Cole: So explain about the profitability side of the financial tech app. Yeah. Jennifer Murray: Sure. Well, I think the number one thing that, that I hear from McFarland Stanford clients when I'm working with them is like, Oh, my revenue growth is great. My top line grew 10 percent last year. I really [00:06:00] expanded, you know, my maintenance business line. That's great. How many pennies? Fell through to the bottom line. And I think that's something that businesses need to regularly kind of examine and make sure that you're trending positively. So if you have, a dollar's worth of sales, how many cents are falling through to the bottom line? And you'd like that to be a positive trend. So maybe last year it was 15 cents, and this year it's 20 cents. That's great. Maybe it's flat, and you view that as a win because you've had some key customer losses things going on on the top line. So I think it's as important, maybe even more important to think about profit versus revenue because profit spends, right? Revenue does not. So I look at trend over time, and then I also talked to business owners about what's a realistic goal for you for the next year. You're not going to get to a 50 percent profit margin overnight if you're starting from [00:07:00] 10. But what's a reasonable goal for the next year? So again, kind of looking at where you've been and establishing a benchmark that you're gonna shoot for for the coming year. Tommy Cole: And. I would agree with you a hundred percent profit is absolute must. We do not do this for free. We don't volunteer our time. You have to make money in this business, period, end of story. You can't carry on. Government can't take care of you, that sort of thing. So I'm, I'm with you. Iportance of Revenue Growth Tommy Cole: The second thing is growth, top and bottom money within a targeted, line of businesses. Okay. So, so, so revenues. what you mean by the growth side. Jennifer Murray: So, you know, again, lots of folks like to talk about how much their revenues grew year over year. And I think that's great and that's something we should all celebrate because we need reasons to kind of, you know, feel good about what we're doing. I think kind of getting a little more granular about what type of growth you had during the year and is it what you [00:08:00] wanted? So I've worked with clients who've said, you know, I really want to expand my maintenance business, have that be a higher percentage of my sales year over year. So digging in, if you grew 10 percent last year, how much did maintenance grow? Is your business mix changing or are you actually still kind of heavy in construction and installation, which was not your objective at the beginning of the year, so looking at growth by business line also looking at customer counts and customer concentrations. So, you may not want to add. A hundred more hundred buck a month customers, you may want to be a little more strategic, you know, have a customer account that doesn't grow quite so much, but have them big, bigger, juicier, more profitable clients. The last thing that I would say on this is, concentrations just once a year saying, you know, how much of my revenues do my top 5 customers represents? Is that number getting bigger? Is it getting too big? What happens if I lose [00:09:00] my number one client or even my top two clients? How do I feel about my revenues and my profit then? Again, just a once a year to kind of say, things still somewhat in balance? Tommy Cole: Right. So let me ask you this growth is always just a big word that people say, and it means different for everybody, but what's a good growth mark. Is it a percentage wise? Is it amount of clients? Is it the revenue? Like, what would you consider a healthy growth for someone to plan for? Jennifer Murray: I think that's going to be pretty unique to the type of business that owners have. And it's going to be it's going to be a function of the economy, right? Sometimes, honestly, it's a victory to stay flat year over year. If you're in a market that's shrinking. So I think, you know, you have to kind of look at your environment and kind of set a realistic goal based on that. I tend to coach folks to think less about customer counts. In fact, I'm a big fan of periodically. [00:10:00] Culling the herd, so to speak, making sure that you're not, you know, keeping legacy clients who are a drain on your team and are not super profitable. So I'm more focused on growth in the business line that you want to grow as a leader and then kind of making that your top priority and everything will fall, you know, virtuously from there. Tommy Cole: Love it. Because most people think growth is top line. That is the truth. Most of almost everyone I talk to is all about revenue, but I love the fact that we always start a business and we get so many years into it and we still have the Miss Smith that pays very bottom line numbers because she's been a client for 15, 20 years and she's super sweet, but is that your target market and your audience and your ideal client? I love the fact that you're like, we got to call these things out. make more sense. That's still considered growth. I [00:11:00] love that part. Jennifer Murray: Absolutely. addition by subtraction. Tommy Cole: Yes. Jennifer Murray: I've, I've read somewhere. What is assett efficiency? Jennifer Murray: Yes, absolutely. So the number three thing is asset efficiency. What do you mean by that? This is a delicate topic with this industry, because as you very correctly pointed out up front, landscapers love new stuff, right? The, you know, the newest of everything, the coolest new, you know, piece of equipment. And so it's always fun to go shopping. I think asset efficiency is something, again, that you want to look at at least annually, maybe more. On a couple of levels, the most basic is how many dollars of assets do I have for dollars of revenue? That's a basic kind of asset turnover calculation. ACE members talk about this in their quarterly meetings and their financial metrics, but it's, it's evaluating what is my level of assets relative to my sales? Is that higher than I would like [00:12:00] it to be? Is it trending in a direction that maybe indicates I'm not as efficient with the assets that I have as I should be? Is it right where I want to be? You know, I bought big last year. I'm going to hold for a while. So next year I should, again, set a goal for an asset turnover that is higher because I'm not adding more assets. And now I'm going to be generating revenues with those assets. So that's kind of one piece of asset efficiency. The other piece is accounts receivable is kind of low hanging fruit in some cases for companies that maybe have, have had trouble managing their liquidity and their cashflow. I've talked to lots of clients who are converting to, credit card payments, or automatic billing in an effort to kind of prevent, a 90 day receivable or having your accounts receivable, you know, just grow and grow. If you have a high accounts receivable days on hand, that is money that somebody else owes you that [00:13:00] you could be doing something with, so being more efficient with your assets. And again, just once, once a year say, okay, what's my turnover? What's my days on hand? And what do I want that to be for the coming year? And what's my plan to achieve that? Tommy Cole: the next time I see someone post of their new, awesome, brand new piece of skid steer tractor equipment, I'm going to repost back and comment, say, what's your number of assets versus sales. And just to kind of strike a conversation, you should think I should do that. Jennifer Murray: I would tread lightly. These are folks with like blades on heavy equipment. So Tommy Cole: do that knowing I know some of them out there. What is Finacial Leverage? Tommy Cole: For the fourth thing, let's talk about leverage. How much debt a company has relative to assets? Explain that topic. Jennifer Murray: I think leverage is maybe, maybe a topic that we don't talk about [00:14:00] enough in our peer groups and in our client meetings. I work with some clients who just have an complete aversion to debts. You know, they were raised in an area or by folks like my, mine who were like, you know, we pay cash for everything. You know, debt makes me nervous. That's not a really efficient way to run a company. So that's kind of one extreme. And then there's the other extreme where particularly if you are purchasing a lot of equipment, if you've purchased another company, if you're growing your business and investing, you may have, borrowed a lot on the line of credits or have a lot of asset based debts. You want to take a look at least annually to see what are my obligations for repayments of that debt. Relative to my cashflow. So not just how much, if I have a hundred dollars of assets, how much of that is funded by debt and how much is funded by my equity in the business, but how much am I going to have to repay this year? In principle and interest. And [00:15:00] what is the relationship between that number and my cashflow? Obviously you don't want to have 80 percent of your cashflow going for debt repayment. That means that you're very limited. In how you can invest those other kind of 20 percent of funds in your business. And it also means that you're particularly vulnerable. If you do have a key client loss or something that kind of is a hiccup on the profitability side, if your cashflow gets constrained. And a whole bunch of that is going to debt repayment. That is a very uncomfortable feeling. So kind of finding that right balance between no leverage and too much leverage and establishing, you know, on an annual basis, kind of what you think your funding plans are for the coming year can really help people be a little, a little more strategic about how they fund their business. Tommy Cole: Yeah. I love it. can you enhance a little bit when you say, Paying everything off and having less cash, right? Let's be honest. That's the world I grew up in. My parents paid, almost had no debt. [00:16:00] My grandparents almost had zero to little debt, but they would pay every single thing. what's your take on, the amount of debt or pay everything cash, have no debt type deal. What's your feedback on that? Jennifer Murray: So I think, many business owners feel like they are being conservative with kind of a zero debt or minimal debt capital structure. And that's kind of true in some cases. Butit can really be limiting in terms of the amount of growth that you can achieve and how, how long that's going to take. I mean, debt used in moderation is a good thing, not a bad thing. If you have the opportunity to buy a competitor and this is kind of a once in a lifetime opportunity, you may not be able to achieve that if you don't take on some, some level of debt. financing has gotten fairly attractive or it's not as attractive as it was 3 years ago, but it's still not terrible. And so that has [00:17:00] provided maybe a little bit of comfort to business owners to say, you know, look, it's not a, it's not a 12 percent note. It's, you know, a 6 percent note, and I have more than adequate cash flow. The way I think about. Leverage and, and a little bit cashflow we'll talk about next is just the relationship between your available sources of liquidity, whether that's cash on the balance sheet credit card that are undrawn, line of credits relationships. What type of liquidity do I have relative to my cash swings? So big burn months, big build months trying to kind of establish how many, how many months of liquidity do I want to have access to to feel comfortable and be able to sleep at night? Tommy Cole: Love it. Good stuff. Cashflow in your Business Tommy Cole: All right. The number five thing. Cash flow. We talk about this all the time. I think you kind of, spoke about it briefly in the previous one, but cash flow, it's [00:18:00] always what's coming in. What's going out right? We used to have a competition back in the day, like how much cash we could receive in one given day. And it was a competition what we could collect. And it was almost like a cool game because our director of finance would run that and he would post on the, on the board inside his office. I'm like, we collected X amount today. That's our new highest goal of cash. And people at first were like, well, this is kind of a weird thing. Why aren't we celebrating? But like, it was like a, no different than a watching budgeted versus actual hours on an installation, right? It's, it's no different than watching the fuel spent. You know, each month and each quarter, right? It's the same. it's a game of competition. So we'll also say, you know Jim Callis says it best cash is king at the end of the day, right? So explain why cash is so important for, for number five. Jennifer Murray: Sure. So I think the, the key thing to take away from the cash flow conversation is, you know, 1st of all. [00:19:00] It's really volatile. Anybody that's been in this business more than 10 minutes knows that, you know, some months you're building. You're making more than you're spending and some months you're burning, you're spending more than you're making. And that's normal and natural. And just a fact of life for, I would say 90 percent of the companies in the landscaping space, you're going to have burn months and you're going to have build months. And so kind of having a sense for how high the highs are and how low the lows are is an important kind of first step. What type of, volatility is there in my cashflow between my best month and my worst month? And then secondarily, I would say as a planning tool at the end of the year to just evaluate where your cash came from and where it went. Huge exercise. Very few people do this enough, I think. Cash can come from a lot of different places. I mean, the number one place is going to be from profitability in your business if you're running it efficiently. So that's, you know, [00:20:00] profit is a great source of cash. Bank lines are a source of cash. Assets to your point, kind of collections, asset receivable improvements or reductions in inventory. That's a source, a cash, if you're kind of being more efficient with your asset base. So where did the cash come from in the last year? And in, in the last couple of years, a big source of cash has been PPP money. And other government programs that, you know, well has kind of dried up. And so we may be missing a source that we've all become a little bit used to in the year, next year or two. And then where did the, where did the money go? Did I pay myself a big distribution? Did I buy a bunch of new trucks? Did I pay off debts? Those kinds of things. And so we're evaluating where did the money come from? Where did it go to? Am I happy with how I spent it? And as I plan for next year. What are my primary goals for where I'm going to use cash in my business? So being a little more strategic, not just like more [00:21:00] cash, more cash is good for sure, but cashflow planning, you know, kind of figuring out how you want to deploy the cash that your business is bringing in, Tommy Cole: love it. Love it. Well, I just learned something more about it's also profit is where a lot of cash comes. So that's what we think about mostly, but based on line of credits and asset and AR and inventory reduction, that's all more stuff or even subleasing parts of your building or the land or. Other, other things that keep the cash coming in, I, I love to plan for that. That's, probably the key takeaway is we don't do enough of that. Like where did it come from and where it's going? that's, that's good stuff. Good stuff. Jennifer Murray: you know Tommy, I worked with a client who had, back to the top line, you know, had, had a great growth in, in top line and in his year, and he was so happy that his revenues had grown by 15%. And at the end of the [00:22:00] year, he's like, Man, I got less money in the bank this year than I do last year. What happened? And so we had to do kind of a deep dive to say, well, you know, you did buy a lot of equipment this year. And you did pay yourself a pretty good size distribution and remember that loan that you had that came due and you had to kind of pay off some of that. And so, not a happy conversation. I mean, and I think it helped him be a little more strategic about where he plans to use his cash in the coming year. Tommy Cole: Yeah. Love it. Well, there's a strategy session about what to do with it, right? I think oftentimes we just, we just look at our profitability. And go, okay, that's good, bad. I got to work on it. I don't need to work on it type deal, but there's no, there's no plan to what to do with it type deal. Right. So great stuff. Finacial Risk Management Tommy Cole: Number six is risk management. before I give give all the answers out, what's your take on that?[00:23:00] Jennifer Murray: So risk management, I would kind of break into two pieces. The first piece is going to be, you know, insurance. So. If, if finance is not a sexy topic, insurance is an even less sexy topic. Nobody ever wants to think about, you know, insurance, but at least once a year, whether it's you or your, you know, head of finance or your controller, take a look at your coverage and just make sure that the policy limits are still in line with your business. A lot of business owners are growing so quickly that they don't realize that, you know, their per occurrence limits, maybe you're a little small for the types of jobs that they're working on now. So kind of evaluating that evaluating, do I have the right coverages as my business evolves? I worked with a company recently that's put in place a cybersecurity insurance policy because they've been hacked a couple of times. And that's kind of a real and present risk in, in today's age. And probably not a type of risk management that you would have had to do even five years ago. So just [00:24:00] once a year, kind of saying, okay, what type of insurance do I need? Is what I have kind of appropriate for the size of my business? And when should I put a note in my calendar to think about an increase in my policy or meeting with my broker? Tommy Cole: Got Jennifer Murray: So that's the first part. The second part is a little bit more about internal processes. You know, separation of folks who enter requests for payment and those that approve it so that you can kind of minimize the risk of fraud embezzlement. Do you have good password security, kind of dual factor authentication or you know, protections if you're trying to dial into the office from outside? You know, again, hacking is everywhere, including the landscaping business. And once a year, just kind of saying, okay, how do we think about managing the risks out there as best we can? You know, there's always going to be a new way to get hacked. But on an annual basis, say, okay, we've got this protection. [00:25:00] We're adding this additional layer. We're going to do this kind of frequency of password changes, have this level of sign off for certain invoices, you know, above, you know, Just making sure that you're kind of trying to put in place some checks and balances, as your business grows and matures. Tommy Cole: Yeah. so that's what you mean by process is,I believe that, internal threats, right? It's like what we don't think about that. Whereas, man, I didn't realize that, you know, how the invoicing is structured, where it's going, like. Who's collecting the money. And like, we hear a lot of horror stories, not a lot, but a handful of horror stories of the bookkeeper, this or the account manager, this type deal. So you're also saying about the internal and external, whether it be a cyber type deal outside, but internal services as well, correct? Jennifer Murray: Absolutely. Absolutely. So making sure that the person that's requesting payment is different from the person that's approving payment. Tommy Cole: Okay. Got you. Love it. So there's a checks and balances across the board. [00:26:00] it. Jennifer Murray: And as certain kind of like, as, as bills get bigger, you know, maybe you want, you know, a more senior set of eyes on something. If it, if it, you know, passes the threshold of, you know, a thousand bucks. Maybe that needs to be kind of a group head level sign off versus someone more junior. Tommy Cole: Got it. Got it. Organizational Structure of your business Tommy Cole: Last but not least, number seven is organizational structure. You've got a great analogy here. And what does that mean in, in your eyes? Jennifer Murray: So organizational structure, when I do financial health assessments, I know, let's be honest, this is typically a needs improvement, Item for almost every company. Why is that? It's because even if you put in place the most beautiful organizational structure known to man, within probably a week, certainly a month, you're gonna have the loss of a key team member. You're gonna have a change in business, whether it's a big new client that comes in is going to require you to redeploy resources. You may have a, [00:27:00] a new hire that is not as efficient as you want them to be. So you have to think about where you're going to put that person or if they're going to leave the org chart entirely. So it's a living, breathing document. The basic structure is that as businesses grow and mature. You want to move away from what's called the wagon wheel structure, where all decisions come to the owner super common in smaller businesses, you know, all roads lead to you as the CEO and, and the owner but as you grow and mature, you need to create what we call wedding cake so that you've got tears, you can kind of delegate authority to, you know, a leadership team, not a leadership person and that there are you know, kind of. Layers underneath that to support the execution of the business. I saw an amazing org chart about a month ago, working with a client where not only did they have their current org charts in green. So the boxes of current employees were green. [00:28:00] They had new hires for 2024 in pink, where those were going to fit underneath which business line. And then they had new hires for 2025 in yellow. So thinking, you know, strategically, not just about where am I going with my profitability and my revenues, but what types of human resource investments are we going to need to make sure that that happens Tommy Cole: Well, and, and everyone on the team sees where we're headed. Right? So they're like, okay, this is their direction. We need another account manager. We might need someone else in the office to help support the team. We will need a couple additional crews. They can see where we're going at the end of the day. It's nice to have an organizational structure currently for everybody, but it's also nice to see where they're going and they're headed towards, right? Jennifer Murray: now? Absolutely. It's, it's great because it can kind of show a career path. to more junior team members to say, you know, look, as we grow, you may be starting in the lower left hand corner of this org chart. We grow, there are some, [00:29:00] some openings that are going to occur higher up the chart. And if you execute the way we hope you will, you know, we'd like to see you, you know, grow as a leader. Tommy Cole: Right. Love it. Yeah. And we have a lot of wagon wheels. I've seen a lot of them. I actually saw a few months ago in a peer group meeting that someone had a wagon wheel org chart. I'm like, that's very interesting. Some of the, some of the peer group members are like, that's a great idea. And I'm going, Oh my gosh, I thought of Jennifer and the wagon wheel. I'm like, this is not a good thing because in order for the wheel to turn, I'm The owner's in the middle getting attacked constantly. Although we have the Wedding Kate structural organization in our mind, or it's on paper, but in reality, we probably manage as a wheel, right? And what's just awful, it's really, super inefficient, but I think a lot of organizations has the wedding cake appearance on paper, but when it comes to action, it becomes [00:30:00] a wagon wheel. So, Jennifer Murray: we're all kind of control freaks at heart or we wouldn't be entrepreneurs. Right. You know, nobody's going to make decisions better than you as an owner. But you know, as you grow and create a company, not just, a small business. You need to make sure that you're hiring talent that can really step into leadership roles active day to day basis so that you're not, you know, ultimately, there's only 24 hours a day and only one owner in most cases. And so, if all roads lead to that person they're gonna be pretty exhausted and they're gonna be constrained by how much they can grow. Tommy Cole: Absolutely. So, so we went through these seven sort of steps in a financial checkup for our audience, Jennifer, what are some key, things that you're seeing? you do a lot of work for our clients. You do a lot of these checkups annually, sort of bi annually. what are you seeing out there that you could share our audience thought or a success story or someone that's. Been [00:31:00] working with you for a few years now. Like, what kind of feedback do you have for that? Oh, Jennifer Murray: what's interesting is having done these in consecutive years for a couple of clients. How much change can occur year to year? I mean, I think some folks say, Oh, I had my blood work done three years ago. I'm still pretty fit. How different can it be? A lot can change in six to 12 months. I've done a number of these for one of our clients. They were super profitable two years ago. They had a whole bunch of PPP money and some other government programs. They were super cash rich. And so appropriately they paid themselves. A nice distribution, bought some new trucks, did a lot of stuff with it. Same company, nine months later would tell you that they were fearful that they were going to make payroll. The cash situation changed dramatically. Some unexpected things happened. The client didn't pay on [00:32:00] time. There was some inventory they got stuck with that wasn't right for the project. Government money had kind of dried up and, you know, they were faced with potentially a decision to have to put some of that distribution back in the business. They ultimately were able to kind of navigate through that. The lesson for them was we need more bank line capacity. We need to be a little more aware of kind of where our cash is going and the timing of those expenditures. And so I would say that's something particularly as, as We're experiencing an environment that maybe is not the super high growth that many of us had during coven just being mindful of your liquidity is probably the number one thing that I would recommend folks kind of focus on. Tommy Cole: God, I love it. You know, I think we got a little fat and happy during COVID because sales were flying through the roof, you know, you just name your price and get it done and we had government money, that's all cut, that's all gone. All that's gone. All the sales fall [00:33:00] into our lap or gone. We actually have to go work and go. Put a game face on and go sell, go do the install, follow up with the client, collect the money, close the entire loop and repeat that every single day. Right. Fantasyland is over with with the government it's done. So just to recap, Tommy's takeaways, kind of a new thing for our season two. I'm going to go through these real quick. Jennifer. So financial health checkup one profitability, like make money at the end of the day, you should be watching your books daily, weekly, monthly, close the books at the end of the month. I'd recommend Jennifer probably agree. Evaluate your past previous month. Evaluate the last quarter. Evaluate the last trailing 12. Number two is growth. I love the customer accounts. And it's more about culling the bottom, finding your ideal client, having the top five clients. What are your top five clients? How do, how do you become more [00:34:00] of the top five clients? Love it. Number three is asset efficiency. Your AR is your low hanging fruit at the end of the day, right? And how the number of assets divided by sales and it's that high, is that low? What's the trend type deal? Number four is leverage, which is not used very often in landscape businesses, but debt in moderation, completely debt free is probably not the most ideal world. We learned that cashflow is great. We've got to, you know, figure out what's coming in and what's going on. I think that's the biggest takeaway. And what do you do with that type of cash? Risk management, two processes. One is. Is the insurance and evaluate it once a year at a minimum. I mean, insurance costs are going through the roof, Jennifer, like it is. It's like doubling every year and people like I didn't have any claims and it's still rising. So evaluate that every year and then what's your processes [00:35:00] about requesting for money and approving the money kind of back and forth type deal. Last but not least is organizational structure. You want the wedding cake and not the, not the wagon wheel structure. Jennifer Murray: And actually kind of forecast what that may be multiple years ahead. To cast a vision. Wow. my gosh, Jennifer, you are extremely smart and have tons of feedback. Any last second away by you? I would just say that, you know, this is, you know, not rocket science. These are pretty basic metrics. If you just kind of create a discipline around looking at it periodically. The upside of that is if you're financially healthy, you have a lot of flexibility. You're going to be able to buy out a competitor. You're going to be able to take on new work when it presents, you're going to be able to maybe open a new location, lots of flexibility and good things [00:36:00] come to folks who are financially healthy. Tommy Cole: Yes. You know, and this is this financial health checkup. We'll make it a little side note here. It's not just about if you're looking to sell your business, that's what some people think, well, I'm looking to sell, so how much can I get out of it, right? We're all emotionally attached to our business cause we put the blood, sweat, and tears in it. But it's, it's a good observation for someone like you to see from the outside, your business and provide real metrics of how it's really doing at the end of the day. And I, I mean, I recommend it either yearly or, or every other year to see what's going on because in 12 months, things can rapidly change. Jennifer Murray: Absolutely. No, this hasn't, this has nothing really to do with a sale process. This is about how do you manage your company more effectively? Tommy Cole: Absolutely. Jennifer, it's been a pleasure again. We're going to keep you on a rotation because we need to know more about the financial side of our business. So it's been a pleasure having you. And thanks again for joining us. Jennifer Murray: Thanks so much for having me. Tommy Cole: Absolutely. John: [00:37:00] Ready to take the next step? Download our free Profitability Scorecard to quickly create your own baseline financial assessment and uncover the fastest ways to improve your business. 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