¶ Financial Tips From Successful Founders
Welcome to the Profitable Painter Podcast . The mission of this podcast is simple to help you navigate the financial and tax aspects of starting , running and scaling a professional painting business , from the brushes and ladders to the spreadsheets and balance sheets . We've got you covered .
But before we dive in , a quick word of caution While we strive to provide accurate and up-to-date financial and tax information , nothing you hear on this podcast should be considered as financial advice specifically for you or your business .
We're here to share general knowledge and experiences , not to replace the tailored advice you get from a professional financial advisor or tax consultant .
We strongly recommend you seeking individualized advice before making any significant financial decision . This is Daniel , the founder of Bookkeeping for Painters .
And this is Richard , tax director . How's it going today ? Oh , it's going good . We're getting ready . We're going to be gone for a couple of weeks on vacation , so we're excited , looking forward to a little bit of rest and relaxation . How about you , daniel ?
I'm not going for a couple of weeks , but we are going this weekend . We're going to the beach . That'll be nice . We're hitting up Clearwater Beach area in Florida , and so that's going to be a little bit of relaxation there and then we're going to come back on Sunday evening .
So one of the things that I've been doing the last several months is reading a lot of biographies , and one of the things that keeps coming up is just different financial tips from founders like Steve Jobs , sam Walton , jeff Bezos , etc . Etc .
I thought it'd be cool for us to go through a list of some of the top recurring kind of financial advice from the founders coming out of these biographies .
Awesome . Now is this all like beach reading . Are you going to take these books to the beach with you , or is this mostly just- ?
Yeah , I will definitely be reading along every every evening . I've been trying to do a book a week , so it's a pretty aggressive reading schedule . So , yeah , definitely do some reading .
Well , I love the idea of learning from what other people have already figured out and you know , certainly the people you mentioned are those who are doing something right . They've got something figured out so cool . I'm excited . Let's jump in and figure out what we can learn from these financial gurus .
Yeah , so we've got seven financial tips . The first one is focusing on cashflow management . So this one a lot of them do this , but I'm just going to take a couple of highlights , first one being Jeff Bezos . He's big on something called free cash flow , one of the kind of weird things with Amazon . In the beginning especially , they didn't really show a profit .
They were losing their negative income for several years and that concerned a lot of investors initially . But Jeff Bezos has this thing about cashflow .
So , even though we're showing negative income , they're actually positive on the cashflow , on the , on operating cashflow , and the way they were doing this is you know , you go on Amazon , you buy whatever you want to buy , so they get the money right away from you , the customer , and then they have vendor agreements where they have favorable terms so they don't
have to give the money to the person that posted their item on Amazon for a little bit longer . So there's a gap where they get the money , they have it for operating use and then they pay their vendors later . So they had a positive cashflow business that could sustain having negative income .
So they didn't show any income , but they're positive on cashflow and this is something that as having a painting business . You can take the same idea , making sure you're taking deposits on the jobs that you're doing . Absolutely . Our clients a lot of them are doing 50% deposit , 50% down to get on the schedule .
Obviously there's some rules , like California , there's a limitation you can only take $100 as a deposit , but you can still use that same idea and then do a progress payment as soon as you start the job so you get that cash flow coming in as quick as possible and that's going to really help you .
I think a lot of people underestimate how much that can impact the cash flow in your business . You're getting money quickly in . That will help you meet payroll a lot easier and just a lot of worry will go away once you start taking a higher deposit .
Yeah , trying to keep that AR accounts receivable as low as possible . Getting paid up front , I love it . And then there's the opposite side of that , too right , Because you mentioned that Amazon was getting paid up front . But then they were also negotiating favorable terms with their vendors so that they wouldn't have to pay their expenses right away .
I know some of our clients have been able to do that with , like their Sherwin-Williams or their Benjamin Moore accounts . They may have like 30 day or 45 day terms where they don't have to pay for the materials until a month or two months later , and that again opens up that cash flow for things that can't be pushed off , like payroll .
If you don't pay your employees for 30 days , you're probably not going to have any employees , so it's about prioritizing how you spend your cash .
Yeah , a good point Using those vendor credit lines with Sherwin-Williams or Benjamin Moore . They give you 30 days interest-free and then a pro tip . If you want to even extend that even longer , you could use your business credit card to pay down the Sherwin-Williams balance and then get another 30 days interest-free .
So you get up to 60 days interest-free on your materials if you stack that credit .
It's like the Russian nesting dolls of credit . We just keep pushing it onto one card , onto one card .
Yeah , exactly , and that can make a big difference in your cashflow not having to pay that big short-term loans bill , especially if the longer-term projects that will really help Awesome . The next one is maintaining a long-term perspective . So , instead of focusing just on the short-term profits , think of have a long-term perspective for your business .
And so this idea comes from Warren Buffett . He invests with a long-term strategy and he has a long-term perspective on building wealth . And I think that idea can be translated into your painting business by not being so caught up in the short term , because when you start a business you should have a long-term perspective .
It's hard to start a business and get quick success . I think a lot of people have that like how do I make money fast or easy ? Fast and easy is not really in reality . It often does not work like that .
So I think just having a longer-term perspective and I think Alex Ramosi he's a owns acquisitioncom , I think he talks about this a lot as well where you want to , he says something to the effect of when you talk to folks that make , you know , millions of dollars or billions of dollars , the longer timelines they talk about , you can kind of tell with the way
they speak . If they're talking in terms of decades , they're usually a higher wealth person than someone that speaks in like months or years . So it's almost like a mind shift . If you think , zoom out , it's like , hey , I'm going to start a painting business and over the next 20 , 30 years I'm going to dominate this .
You know , my territory , my city , whatever this region , you're more likely to have success than if you're like , hey , over the next 12 months , I'm going to try to hit , you know , $200,000 .
And that's like my big goal , like , um , you know , having that different mindset where you're focused on the longterm and that that will help inform your , your decisions over time , to focus on brand and quality instead of just making the quick buck .
Yeah , I , like you know you mentioned Warren Buffett and I thought it was interesting because I believe Buffett kind of had to learn this himself and he had to have a mind shift or mindset shift .
You know , when he was first investing , I know he talked about looking for what he called cigar butts , like companies that you know just have a little one or two puffs left in them that he can get for next to nothing .
And it was his partnership with Charlie Munger , when he started to think a little bit differently and Munger would tell him like hey , it's OK to pay a fair price if it's a great business , because we're not looking for that cigar butt with the one or two puffs .
We're looking for something that's going to last for decades , and so I think it's cool how he kind of changed his thinking on that , and obviously it's been for the better . You know the idea of get rich slowly . It's not quite as sexy as get rich quick , but it's a lot more attainable and you have a much higher chance of actually doing it .
So there's nothing wrong with getting rich slowly .
Yes , yeah , that's a good point . The next one here is be frugal within controlling your costs . So an example here is Rockefeller . He actually started out as a bookkeeper , that was his first job , but he went on and ended up just dominating the oil industry and then I think Theodore Roosevelt ended up requiring him to be broken up .
His entity , uh , entity that he created , uh , standard oil and uh , but he , he just completely dominated that , that industry , and he was very big picture oriented , um , but at the same time he was very frugal and , like he , he would take huge risks with debt , um , getting financing from banks .
We would just take on a whole bunch of debt and make a big bet on a certain thing , but at the same time he was also super , super frugal . So it was a weird dichotomy he had going on where he was willing to make big bets on himself on accomplishing great things . At the same time he was a penny pincher .
He really looked over his costs he came from that bookkeeping background and looking at ways to cut costs .
So he had an interesting dichotomy going there where he was taking huge risk but also , at the same time , really paying attention to those details and those costs , and that's something obviously all of us can can learn from is um , is , you know , willing to bet big on ourselves and what we're trying to accomplish , but at the same time , pay attention to the
details , because you don't want to , you know , die from a thousand or a million paper cuts , you know . So you got to pay attention to your costs .
¶ Scaling, Innovation, and Risk Management
Yeah , I think , especially as your business is growing and scaling , it becomes important to do that . You know , when you're small , a $10,000 expense might be 10% of your revenue . You're going to notice that , you're going to be very careful about that . But you know , when you're big , that same $10,000 might only be 1% or less than 1% .
So it's easy to kind of like not really worry about it , right , because we've got all this revenue coming in . But you know , $10,000 is $10,000 . And , like you mentioned , daniel , you get enough of these little paper cuts and all of a sudden your profit margins are going down and you've got money coming in .
Top line revenue is great , but your bottom line profit isn't . And that's where you know businesses live and die . So you know you don't have to be Scrooge , mcduck or Ebenezer . Scrooge is probably a . Yeah , I don't know about Walt Disney today or not , but I'll leave that one out . But yeah , I mean , keep an eye . Are we overspending on certain things ?
Do we have unnecessary subscriptions of software that we're not using anymore ? Have we become too loose on our time tracking ? So you know , things are slipping through the cracks , that's . You know , there's a lot of expense that can be avoided if we just kind of pay attention yeah absolutely All right .
Going to the next one is embracing innovation , so not being afraid to invest in innovation to stay ahead of the competition . Good example of this is when Steve Jobs came back to Apple in the late 90s .
So obviously Steve Jobs founded Apple it was back in the late 70s , I think it was and then he got kicked out as CEO and he went and started Pixar , became a billionaire and during when he was gone , apple basically went downhill really fast . They stopped innovating . They had really crappy products .
They had a bunch of products first of all , a bunch of products that nobody Just losing market share , nobody liked them . I remember when I was a kid we had a Macintosh and it was from 1994 . And it was just , it was a piece of crap . It was a piece of crap . And then Steve Jobs came back in was it 97 , 98 ?
And back as the CEO and he basically looked at what products Apple was selling and they had like 20 different products . And he's like , so asking basic questions like why do I buy this one versus this computer , versus that computer ?
And like nobody can give him like an easy answer on why one versus the other , and he's like , okay , we're getting rid of all these products and we're doing four things . Uh , you know we're doing four different products .
We're doing the mobile product and then the desktop product for pro and for , and he like for , like the standard user and the pro user or something like that , and so he really dialed in the products and then he also , uh , focused heavily on innovating .
And this is when , when he came back , that's when they did the ipad or , I'm sorry , the ipod , iphone and ipad in in that succession and just started dominating the those industries and and grabbing huge amounts of market share during this period .
Uh , and and so in that succession , and just started dominating the those industries and grabbing huge amounts of market share during this period , and so he was really focused on innovation . So I think we can apply the same idea into our painting businesses .
If you just think about all the changes that I've had , that have occurred , or the last just short period of years in forms of technology , and if you can take that technology and implement it into your business to make your experience better for your customers , that's going to put you ahead of the competition that are just kind of resting on their laurels or
maybe they feel they're too big to make those changes Really . Taking the new technology that's coming out , it seems like every day at this point , and implementing it into your business and creating that unique and great experience in your business can get you more business , more market share and set you up for the long term .
Yeah , I was thinking of some examples . I've seen , you know , painting . Business owners invest in new CSMs where potential clients are getting text messages , emails , within seconds of filling out their contact form . They're making it very easy for people to pay through , like online portals .
They're using estimating software that you know not only accurately estimates the project but also presents a really nice presentation to the client .
Some of them are even printing it right there inside their van and presenting the proposal to the client before they leave the house presenting the proposal to the client before they leave the house and it's just different ways of leveraging technology and innovation to give that incredible customer experience , get that speed to lead , help them make that decision so that
you don't lose the prospect . And these are all things that we couldn't do maybe 10 years ago because the technology didn't exist . So you know , the word of caution on that is don't get shiny object syndrome and go out and buy everything out there .
But if you can see something that can be leveraged and used well in your business to improve in these areas , don't be afraid to embrace that , because that's going to set you apart from everybody else , and if you're just doing what everybody else is doing , then there's really no reason for someone to choose your business over the other guy .
But if you can set yourself apart through a better experience , that's going to help you get more market share .
Yeah , and our next one is kind of to your point about not getting shiny object syndrome . Our next one is don't put your go ahead and put your eggs in one basket and then watch that basket very closely , which is might be counter from what you've heard in terms of some of the advices you know . Don't put your eggs in all in one basket .
This advice is exactly the opposite . Put all your eggs in one basket and watch that basket very closely . This is from Charlie Munger , an idea from Charlie Munger , where the idea is basically to make wealth . To get wealthy , you need to focus on one thing and do it for a long period of time , be really good at it , and that's how you build your wealth .
Once you're really wealthy , then you can diversify to protect the wealth that you have . But to actually get wealthy , you need to focus on one thing and do it really well for a long period of time , and so that's the investing approach that Charlie Munger and Warren Buffett take . But that can definitely apply to your painting business .
So I see this happen a lot . Where painting business
¶ Building Wealth, Talent, and Control
starts out , they start doing well over a few years , but then they kind of get .
I don't know if it's bored , or they get shiny object syndrome where they see , oh , I could do this other thing because I've been doing so well in my painting business , I'll jump into this completely other different venture and then split my attention and now I'm doing two things Instead of doing one thing .
Really good , now I'm doing two things , okay , and now I'm making less money .
So I just see that happen over and over again where you know and it's I've done it myself as well Like where I go off and start doing something else and then realize I need to just focus on one thing , because it's almost a little bit arrogant to think that you can do multiple things better than other people who are doing one thing .
Like just think of your competition in your city . Like you , you're a painting business in Orlando , florida . There's probably dozens of other painting businesses in Orlando .
So if you're running a painting business and also , you know , have a donut shop or whatever something else going on , what's the likelihood that you're going to be running a better painting business than someone who's just running a painting business and that's their sole focus ? So I think people don't realize that and don't think of it that way .
So I think , per Charlie Munger , putting your eggs in one basket , watch it closely to build that wealth and then , once you're super wealthy and maybe heading into retirement or something like that , then you can start diversifying and then protecting that wealth so it can support you in retirement and then pass it on to your children or whatever you want to do .
Yeah , I kind of think of it as being like an inch wide but a mile deep , and you don't know everything . In fact , you only know a few things , but you know those few things so well and you do them so well that when people are looking for a residential house painter , you're the person because you know it better than everybody else .
So , yeah , I think that is good advice , especially when it comes to the operation side . When it comes to the business side , I would say that if you're interested in diversifying , if you're interested in these other things , you can maybe passively invest in some of these things , either through buying stocks or making passive investments in other companies .
When you have the money , that can be a part of your overall financial plan . But I like what you're saying , daniel , about don't don't get your attention distracted like . Focus on what you know how to do and become an absolute expert on it , and that's what's going to earn you the most over the long , the long run .
Yep . And the next one is overpaying for top talent . So yeah , and this is an idea that comes up over and over again , it's probably maybe one of the more important ones on this list is you need to have a really strong team .
Saw on YouTube or something like that , but he was saying like when you're a small company , having the best people is even more important than when you're a larger company . Because when you're just starting up , let's say you have four people , you and three other people . Well , each of those employees is like 25% of the company , especially for service .
If you're providing a service , they're doing 20% of the 25% of the work , and so the your customer is experiencing you know , 25 their experiences coming from that employee , the quality of their work .
So if you have two bad employees of the four , two bad employees of the four , that's going to be a really bad experience that your customers are going to experience . Or even just one of the four , that's a huge proportion of your employees . 25% of your employees are not any good .
So , thinking of each employee , especially when you're smaller , but even when you get larger , steve Jobs also talks about the Bozo effect , that if you start getting poor quality people in your organization , those poor quality people . When they are in management , they're going to hire even poorer quality people .
So then you have a Bozo explosion is what he calls it . So then you have an Abozo explosion is what he calls it .
So Brad Jacobs he is the founder of United Rentals and several other billion dollar companies he just says that you should overpay for talent , for top talent , and he puts overpay in quotation marks because he doesn't really think you're overpaying for top talent .
For A players like folks that are just killing it and you have complete trust in what they're doing , it's hard to overpay them because they're usually Pareto's law is 20% of the population is going to give you 80% of your results . Pareto's law is 20% of the population is going to give you 80% of your results .
So your top employees , the top 20% of your employees , are probably giving you 80% of the results , like 80% of the word of mouth , referrals or whatever metric you want to use . So he really thinks that you can't really overpay your top talent , your key employees , because they're the ones that are really driving the company forward .
He also has a really cool thought experiment that I've talked about on the podcast before , but it's the A player , b player and C player thought experiment and I know you've heard me talk about it several times , richard , so at the risk of being redundant , I'm going to do it again .
So he says that A player is if you do the slide experiment , you imagine one of your employees comes into your office and says I'm quitting . Just evaluate what your emotional reaction would be to that person telling you that they're quitting An A player .
Your reaction would be something like complete panic and wondering what , what happened , and , uh , you know , having it extreme dread that you won't be able to ever find another person that will be able to replace them or do as good a job as them . So that's an A player . A B player would be like oh , that really sucks .
This is going to be very disruptive over the next month or two . I'm going to have to find somebody else . I might be able to find somebody better . That's a B player . A C player is okay , that's fine , I was going to fire you anyways .
So that's a good framework to use for A , b and C players , but for those in 10 , 20 times as much revenue into the company .
The risk of losing them is too great to worry about quibbling over a few thousand dollars . So no , that's really good advice . I like how it focuses on the fact that people are really the secret sauce in the business . You know , customers want to work with people , not corporations .
So your branding might be on point , your operations might be tight , but if you don't have the right people in the right places , it's not going to work . Places it's not going to work .
So once you , once you find that A player and you're building your team around them , do what it takes within reason to hold on to them , because there's probably nothing more valuable than than a good employee who can who can really , you know put forward forward your , your vision and and please your customers and get those repeat referrals time and time again .
All right . And so for the last one here is maintaining control of your entity and maintaining control of your intellectual property .
And so this is a mistake that I see that folks like Walt Disney , james Dyson , sam Walton , they've made this mistake and it's again and again and again losing control of their , the entity that they initially started or the intellectual property that they have .
And this is a little bit related to financial not quite as straightforward financial , but more , more maybe legal oriented , oriented tip here , the , the . So just to go through some of the anecdotes , so walt disney , his first company , was laughagrams before he started walt disney company and he ended up losing that company .
It's all his employees left him and they took his intellectual properties , the characters that he had created , and they basically went around him and started doing their own thing , and so he lost that company , went bankrupt .
James Dyson , the first company he started and this is Dyson , the ones that did the vacuum cleaner and a bunch of other inventions , but his first company company , he did a , a ball barrow instead of a wheelbarrow , and he started it with some folks . He lost control , the company became a minority shareholder and he put the patent in the company .
So the thing that he actually invented wasn't the company not in his , and so he ended up losing control of the business . And then he got kicked out , and so he lost that business and that invention that he made , and years off of his life doing that . And then Sam Walton is oh , go ahead .
And that's why I always tell my tax planning clients we do not put extremely valuable assets in your S-corp , because you are not your S-corp and you want to hold on to these things . So if you have a patent or a piece of property or something that you want to hold on to long term , make sure that you have control of that and not the corporation .
But yeah .
And then the last anecdote is Sam Walton , his first retail business . He he the terms of the lease , basically the the the lease owner pulled the rug out from underneath them and said , oh , you can't renew your lease . And they started their own store because they saw that Sam Walton store was super successful .
And so they're like , okay , you can't renew your lease , and now we're going to do our own store in the same location and basically kind of take your customers . So he didn't look into the details on that lease and he didn't have any . He had to start over again . Basically .
So the takeaway for painting business owners is one you want to maintain control of your entity , making sure your operating agreement is tight , especially if you have partners , if you're bringing in people that you have your lawyer look it over and it's meeting your intent and you're not giving up control of your entity property .
You mentioned patents , but also trademarks , like your business name , your brand . It would suck to If you had Bob's Painting for 30 years and you built up this huge brand in this , your local town or city , and then you get a cease and desist letter for using Bob's painting because there's already a trademark on it .
Somebody else created a trademark and they're challenging you and you never got a trademark on it and so now you've lost all that branding you've been doing for the last 30 years .
So that's just like a simple thing for branding which is important for painting businesses , branding which is important for paying businesses , making sure you have that trademark submitted for your company so you can maintain control of it . You don't lose that .
Right . I think the Walt Disney Company definitely learned that lesson . I mean , just try showing a Disney movie and collecting five bucks a ticket for a fundraiser , and if you'd like to see what a cease and desist letter looks like from Disney's lawyers , you'll get one pretty quickly . They are hardcore about protecting their brand and their IP ?
Wow , I didn't know . So is that something that you saw firsthand happen ?
happened . Yeah , it's been so . So not to , uh , not to get too off tangent , but , um , there's been a lot of like schools , daycares , things like that , who have tried to do fundraising by maybe showcasing a disney movie or , um , you know , using disney's intellectual property in their artwork or murals , and they're doing this without permission from the company .
And Disney's legal team is very quick to send out cease and desist letters . I mean , disney licenses its stuff constantly , but everything is licensed and approved and they get their royalty on it . So , yeah , that's kind of been in the news , just not using somebody else's intellectual property without permission . But you can see why they're so aggressive about it .
Yeah Well , those are the seven tips and just to recap , focus on cash flow . Make sure you have positive cash flow coming in at all times , maintaining a long-term perspective . Don't just be worried about the short term . Take a longer view of your business , make sure number three be frugal . Cut your costs when possible . Four embrace innovation .
Invest in your company and make sure your company is staying ahead of the game as far as technology goes . Number five put your eggs in one basket and watch it closely . Number six overpay for top talent . And number seven maintain control of your entity and your intellectual property . And number seven maintain control of your entity and your intellectual property .
And I'd love to hear your thoughts on these financial tips from top founders . You can head over to our Facebook group Grow your Painting Business and join in the conversation , and with that , we will see you next week .
Yeah .
Thanks for listening everyone .