Adventures with lyrical - buying a business

Here"s the thing, 99.98% of my customers pay (in terms of sales-dollars), so why give up a percent that would come out of profits? Furthermore, the biggest offenders are the bigger customers, and they tend to pay whenever they want, and not care about a percent off.

I just traded a pickup truck that we were running estimates for a Nissan Versa, and man, the Nissan is giving us 35 mpg, (versus the truck at 13 mpg), so I figure we"ll save $600 a month in gas for when we talk to customers. People have become so cost-conscious about big ticket items, that there are times during the year where we are undercut by 10-25%. Alot of our competitors don"t know their costs, and they don"t charge enough, so they"ve gone under (probably 50% of them have shuttered the doors). But when everyone is whoring out their services, we need to be close, so cost-cutting is constantly necessary. The guys cutting their bids by 25% are going under at a disturbing rate, they can"t afford to keep their equipment repaired.

prescient63 said:

I would only offer this sort of deal to larger customers with whom you have to lock up a good portion of your working capital. If you have to finance through the bank then you are getting burned at both ends. You require additional cash to stay solvent and are financing a loan to customers. Incentivizing them to pay early is an easy solution to this issue, and one offered in many industries.

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The problem is that the bigger clients have built their businesses by having their vendors finance them, and that isn"t going to change. My biggest client is notorious for this, so much that I"d say the name if they wouldn"t kick my ass, and you"d know why they pay slow. They pay so slow that they held 10% of the jobs of the previous owner of the business for two years, and didn"t pay any interest on it.

Its like a problem that one of the highest rated business professors in my MBA program presented to us. Hypothetically speaking, a farmer is approached by Wal Mart, and offered a deal that would bring in millions of sales, and increase the farmer"s net worth by twenty-fold. The catch is, Wal Mart won"t pay him for 90 days after he delivers the goods, and he needs to incur a ton of expenses out of pocket that he can"t afford.

Instead of the farmer bitching about how Wal Mart is screwing the little guy, and complain about how he needs the 200-300k in working capital that he doesn"t have, he"d be better off going to the bank and borrowing it.

At the end of the day, this is a major corporate client (think Fortune 10 company), and they"ll pay me whenever the hell they please, its how they ran the business from day one of incorporation. They"ve never bounced a check yet, but they sure will sit on their checks for awhile.

Eomer said:

Is it not common in your line of business to have holdback or retention? Because of the way lien rights and such work up here, any sort of construction work except for small jobs that are done in a couple days generally has some sort of holdback. And interest is never paid on it.

Not sure if it"s common in small landscaping here, but I"d be surprised if it wasn"t for medium and larger projects that take a couple months or more.

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We only have one client that does retention, they call it retainage, I call it "suckage." The client that used to hold 10% of our money for two years stopped doing it, but they still pay 90 days out. Without getting myself in trouble, it is a big-box retailer that is known for paying every one of its several thousand vendors on 90 day terms, bar none. Some of the the larger vendors they work with (like Sony or Dell) are on the same terms as I am as the little guy doing work on their philantropic nature projects.

Evelys said:

Like I said in my post, you"re far more likely to hit affluent customers on news talk radio and sports radio. Listeners of both trend older, are more likely to own a home, and have disposable income, and are far more likely to work in a professional setting, which makes them more likely to have your target or better income. Those two types of radio and top 40 are the most likely to be on at a work place, and top 40 gets too many younger listeners to be as finely targeted as the other two types.

It"s a pretty low risk shot, I"d imagine.

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Good call. I talked to a landscaping owner in another town (who fills exactly the same nitch we do) who said advertising on NPR and conservative talk shows is bringing him great results. He made a comment that $200 a week on radio is yielding him 2-3 calls a day directly from radio, and about $750 a day in approved bids. If I can raise $750 a day, that"s an extra $15k a month in sales, which would put us at our pre-recession numbers, and make me have to hire another two guys.

I just called and emailed NPR, and they are working on a proposal. The good thing about radio is that I can turn it off at anytime. If it doesn"t work, I can yank it, there isn"t much risk. Yellow pages is a one-year commitment. I"ll try the conservative radio shows tomorrow.

From what I"m told, the disposable income of both of these two groups is higher than average, and honestly, thats our target demo. From what my acquaintance said, they"ve been able to track calls directly to each radio station, so there is some accountability. Nothing is worse than spending money on all those ad dollars, and only having some of it work.

The most famous marketing saying is, "Half my advertising works, the problem is, I can"t figure out which half."

What was even more shocking is the he talked about how he spent $2k a month in the Winter to stay busy. He said other guys in his town in the Winter are losing money hand over fist (us included), but by increasing his regular radio budget by 250% in the slower months, his guys worked every day they wanted to (some days it was too cold).

Jalynfane said:

We had some success with "sponsoring" daily mentions on classical radio here. They don"t do advertising per say because they are a non-profit, but they do allow sponsorship of the daily programming where the host will give your company shout outs and say the script you give them.

We got about 4-5 calls a day from that and did it for two weeks. We were able to close a few of the prospects and in the end just broke even so we decided to look elsewhere.

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I"m reading an info packet from NPR right now, and yeah, no calls to action are allowed. If I got 4-5 calls today, and our close rate of 50% stood, that"d be $20k a month in sales. I"m a little leary abut $38 for a 15 second spot, going to try to get them to lower it.

Just signed a three month contract with NPR to be on during drivetime in the am and pm rush hour, Mon, Wed and Fri, starting on 5-25. The guys think I am crazy, since we are booked for the month, butI just hired two more guys today to keep up with demand.

I think I am going to go ass out on advertising this Summer and see what happens.

Elerion said:

Weren"t you cash strapped just a page ago? How do you work that ad budget and equipment/staff investment?

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What happened is I"ve now doubled the size of my staff, and doubled up on a job worth almost 20k. The customer is a good one of ours, and they usually pay next day. I hope to get the job done by Friday, and have the check in hand by Monday. Furthermore, we"ve negotiated where we can park our equipment on the job, which saves me $300 in gas a day. Also, I"ve negotiated terms with radio that I can start airing now, and don"t have to pay for 45 days, so I haven"t shelled out one dollar. I"ve gotten freaked out about cash flow before, but in the end, we always do fine. And my bank did tell me they would let me draw down my line of credit, but I haven"t done so yet.

Business is picking up alot, it feels like we are doing close to our pre-recession numbers. The receviables will pay, 99.85% of them pay eventually.

opiate82 said:

That is a very good thing. If you don"t mind me asking, where abouts are ya located?

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Given I have NDA"s, and from info I"ve said in this thread, I was told by a mod awhile ago to sanitize some of that stuff. If I give location, I may as well be giving my client list, and I"m not risking losing any contracts for FOH. Suffice it to say, we are in the wealthiest county in the state.