This is Waste to Wealth, a podcast about turning your waste hauling business into a profitable, scalable cash flowing machine. And now, here's your host, Michael Hi, this is Michael McCall with Buffalo Finances. And today I want to talk about healthy companies, healthy companies. What is a healthy company? And I'm talking about small businesses, not big businesses, because frankly, you and I are not running gigantic multibillion dollar businesses. We're running small businesses. You know, a million dollars is a lot of money, not billions of dollars. Healthy businesses do certain things to make sure that they stay healthy. They have positive cash flow. They know their numbers. They can track how much cash is coming in, how much is coming out. They know how much they owe people. They know how much other people owe them. They have predictable revenue streams. They have predictable expenses. They can see into the future. They know what is profitable, so they know where to put more resources. They keep their promises and honor contracts. I'm just naming off a bunch of things that I can think of that are healthy parts of businesses. And the reason why I'm doing that is because I see a lot of businesses that are not healthy and they don't even realize why. And then I also see businesses that are trying to be healthy, but they don't have the right things in place. I think health starts with knowing what your customer needs and solving and finding their problem, and then coming up with a solution to that problem and telling them, hey, I can solve your problem for this price, and that price is a good value to their customer, and it's cost effective for the company producing it. And those are all number related. The value of the customer should be quantifiable so that the price is going to be less than the cost. So if something is worth $10,000 in value and it costs $2,000 in price, that's a fantastic price versus value difference. It's an $8,000 or five times value creation. that that business is doing for that customer. That's how our world works. That's how specialization makes things better. Because if I do one thing many, many times, I'm going to do it efficiently and create a specialization that you can't match. Healthy things that companies do. They maintain positive cash flow. They operate profitably and they know their margins. They keep timely and accurate books. Manage debt wisely. Don't just take on debt in order to buy assets that you think you're going to pan out. That's risky, so you've got to manage it wisely. You have a budget and you stick to it, so you know how much revenue you have, how much of your expenses can go towards each category of costs, so how much goes to direct labor, how much goes to contractors, what's your overhead, rent, things that you can't change, what's your marketing expense so that you can get more sales, what's your sales expense so that you can convert those marketing expenses and leads into customers, what's your direct labor? How much does it actually cost to hire people to do the work? That is the biggest part of your organization is your direct labor, and you have the most control over that. Plans for year-round taxes, that's a financially healthy thing to do. That way, it's not just a surprise at the end of the year. You actually know how much money you make every single month. You set aside money for your taxes, you set aside money for your future growth, and you set aside money for yourself as an owner. Maybe you pay yourself. And that should happen every single month. It shouldn't be once a year or when the bank account gets to a certain level. It should be measured and targeted. Healthy businesses reinvest in growth. If you have assets, you buy more. If you have trucks, you buy more trucks. You figure out how to do that. You hire more people. Healthy businesses build a safety net. Two months of expenses in cash, in cash reserves. That's your target for a safety net. If you have less than two months of expenses in reserve, then you are riding the red line and you're in danger mode. Definitely want to have a line of credit in case you deplete your reserves and have to go negative. hope that you can stream your vendors along because they will, you'll hurt those relationships and they'll charge you more money because you're higher risk and they'll demand faster payment or they won't even work with you. So you can't even get vendors to help you accomplish your mission. healthy businesses track KPIs and benchmarks so that they know if they're on track with leading and lagging indicators. So a leading indicator is how many outreaches did I do? How many connections did I make? How many sales calls did I have? Lagging indicators is how much have we produced? So in our world is how many financial statements have we produced? How many tax returns have we produced? How long did each of those take? Did we take way longer than we expected? And so we have to adjust either our system or maybe we need to communicate with the client up front so that we can make things more streamlined. Healthy businesses pay themselves fairly. You can't expect to run a business and not pay yourself at all. That's unreasonable. And you can't expect to pay yourself too much because then you'll kill a business sucking all the resources out of it. Got a lot of resource management going on here. And then you give back and you operate with a purpose. The business is not there just to make the owner money. If that's the reason for the existence, the business will... get infected by that. And the people will know that they're there just to help this person become rich, the owner become rich. And nobody wants to be in that world. I've been in that world and I've left every time I have an opportunity because no one wants to just be there as a cog in the machine. No one wants to just be part of making someone else wealthy. Now, that is a natural by-product of creating value. If I create value for you, and you create value for me, there's reciprocation there. You hire employees because you can pay them, let's say you pay them $20 an hour, just pick a number, their worth has to be more than $20 an hour to the business. Otherwise, you wouldn't have them. that the business is valuable to the customer because you solve a problem that's worth more than that $20 per hour. And that will result in a profit. And that profit is to the benefit of the ownership, whether it's investors or owner-operators. And I'm primarily talking to owner-operators, investors, they play a different game and they have a different role in all of this. I see a lot of problems with small businesses because they're not thinking financially healthy, and that binds them up so they're financially tormented. I want to see you be financially free. Buffalo Finances is named after buffaloes because buffaloes are not afraid to run through the storm. We all have a financial storm that is keeping us from financial peace, and I want you to be strong enough and tough enough to run through it. Just like a buffalo is strong enough and tough enough to run through a storm, to run through wildfires, not afraid of anything. And they don't go alone. They go with a pack. So don't go alone, don't be alone. You need to have partners around you that understand how to get through financial storms, have the tools to do it, and are tough and getting tougher every day. And if you're not part of a group like that, then you're gonna struggle and be alone and you're not gonna be a buffalo, you're gonna be a cow. And cows run away from storms, because cows, they're meant for being farm animals. They're not tough enough to take on the storm, the challenges of life. They need to be protected, and they need to be in a safe area. You want to be tough like a buffalo and handle all the storms that are coming at you. So be financially healthy. Companies that make financially healthy decisions look like what I just laid out. They have financial statements they look at every month. They know what's going on. They don't act like an ostrich and put their head in the sand. they actually pay attention. This has been Michael with Buffalo Finances. I hope you have a blessed day. 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