Ep. #1068 - How to Manage Cash Flow
Congratulations to Matt Fruge and the other 13 founders for being recognized as a top startup in Dallas. Are you interested in learning about all the emerging growth companies that made it to our Top Dallas Startups 2023 list? Check them out here.
Covered In This Episode
Are you managing your cash flow effectively? If you need tips on how to do it right, you’ve made it to the right episode for help!
These founders talk about managing cash flow to grow your business successfully. Also, they look into our guest’s journey in transitioning from a construction to a software business.
Listen to what these two Matts have to offer. Tune in to this Startup Hustle episode now.
- Matt Fruge’s journey (02:02)
- Managing cash flow in the construction industry (05:43)
- How long it takes to get paid for a claim (07:18)
- Tips on how to manage cash flow (08:23)
- What is SquareDash? (11:05)
- The challenge when transitioning your business from construction to software (14:18)
- Number of roofing companies in the US (17:19)
- Automated follow-up with adjusters is a big part of the platform (19:16)
- How to manage debt (23:17)
- Taking advantage of discount programs (26:42)
- What is factoring? (32:39)
- On making it easy for people to help you (35:00)
- Advice for entrepreneurs (38:17)
If you think there’s value in a relationship, ask them to help you. In a way that’s meaningful to them.– Matt Fruge
Entrepreneurship requires a high tolerance of pain . . . we’ve all walked across the coals. And to not reciprocate that back to people on the other side of those coals deciding if they want to take the leap, you’d be an asshole not to give them some advice or help them along.– Matt Fruge
You owe it to yourself as a business to: a. understand what they are; b. set them up even if you’re not going to use them right away. Because the problem is that the moment that you do need them, you might not have time to set them up.– Matt DeCoursey
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Following is an auto-generated text transcript of this episode. Apologies for any errors!
Matt DeCoursey 00:00
And we’re back! Back for another episode of Startup Hustle. Matt DeCoursey here to have another conversation I’m hoping helps your business grow. Speaking of growing, if you want to grow your business, you’re gonna have to learn how to manage cash flow. It might not sound like that big of a deal until you try doing it. Cash flow is the lifeblood of any business. And if managed poorly, it can also be the death of any business. We’re going to talk about that and a whole lot of other stuff. But first, I need to remind you that today’s episode of Startup Hustle is powered by FullScale.io. Because hiring software developers is difficult, Full Scale can help you build a software team quickly and affordably. And has a platform to help you manage a team. Go to FullScale.io to learn more. If you didn’t know, that’s my business. And we love talking to Startup Hustle listeners. So, come on, I guarantee you’ll at least get some good advice out of the call. With me today is Matt Fruge. And Matt is the CEO and founder of SquareDash, which was also one of Startup Hustle’s Top Dallas Startups. You can go to SquareDash.com. Now, there’s a link for that and a link for FullScale.io in the show notes once you go down. Click the link for SquareDash so you can learn more about Matt’s business and have a little more context. Straight out of Dallas, Texas, Matt, welcome to Startup Hustle.
Matt Fruge 01:18
Thanks, Matt. Appreciate you having me on.
Matt DeCoursey 01:21
Yeah, and my co-host is often another Matt. And I’d say he’s the other so, I’m either the other Matt or he is.
Matt Fruge 01:30
I shouldn’t or shouldn’t be done. Help me, the other-other Matt, today.
Matt DeCoursey 01:34
Yeah, the triple other Matt. So, man, that’d be confusing. That would really be confusing.
Matt Fruge 01:39
Most people call me by my last name.
Matt DeCoursey 01:40
So, Fruge, I had to ask how that was pronounced. And I asked for a reason because I could have butchered that now. You know, I like to start my conversations on the show with a little bit about, you know, my guests’ backstory. So why don’t you lay a little about yourself on us? And then we’ll get into the cash flow management thing.
Matt Fruge 02:02
Yeah, sure thing. So I was born and raised in Beaumont, Texas. I spent my entire life there until I joined the Navy in 2001. I was an avionics technician on the E6; I was at a Tinker Air Force Base in Oklahoma City and got out. I didn’t want to work on airplanes anymore. But got into sales and kind of bopped around in a couple of different arenas. Then ultimately found my way up to Dallas-Fort Worth. My first job was at a roofing company, knocking on doors and setting up inspections after hail storms had come through, and did that for a couple of years. I learned about the business and decided to strike off on my own in 2010. And yeah, I’ve been a roofing contractor ever since until this most recent venture with SquareDash, where I decided to take a leap into the software game, which is a completely different world.
Matt DeCoursey 02:56
It’s a little different than roofing a little bit, although if you stumble, you will fall down a very sharp cliff. And I think that part is the same now at SquareDash. You’re solving problems related to cash flow. And that’s obviously what we’re going to talk a little bit about today. But what brought you to the realization that there was a problem we’re solving there, a lot of pain and frustration within my own company.
Matt Fruge 03:19
So here in Dallas, Fort Worth, you know, we’re kind of the mecca of hail and wind storms just because of the population density. So, you know, a storm could come through in 40 minutes, you know, later, there are 400,000 homes that just got pummeled by hail, and yeah, it creates some operational scaling problems for businesses that go out into the communities and fix these properties. You know, if you go from five jobs a week to doing 50 or 100 jobs a week, and you’re only getting part of the cash from the insurance claims upfront to start the work, that’s great, but if the money is not coming quickly, you either have to be a cashflow ninja or have you know, a couple of commas of cash reserves sitting there waiting to deploy so that you can make it through through the year. And so we focus primarily on insurance restoration contractors, whether that be roofers or water and fire guys. So that we can, you know, help them speed up their cash flow and give kind of a predictable timeline on their revenue so that they can grow with the speed of their sales and marketing teams and not be beholden to the accounts receivable team.
Matt DeCoursey 04:41
So yeah, I hadn’t really given a lot of consideration about the surging nature of roofing because that and you’re right because, you know, in Kansas City, we have some of the same weather challenges that maybe not well we get tornadoes a little more than that with those come hail and other stuff and you know, when they come through me And then it really messes up a lot of stuff. And I think probably most roofing companies are probably used to working on a couple things at a time at most not 57 Now, now industry-wide. This is the cash flow, nature of construction, and restoration. All of that’s an issue. And those of you that have been less than for a while and watched our series, Startup Hustle TV on YouTube might have seen my good friend Eric Perkins, who’s a YouTube influencer and really well-known homebuilder, struggling during some of those episodes, because even outside of the insurance claims, even just someone that’s building a home, you know, they get paid, and slices as the home are completed and move down the line. And there was an issue, just I don’t know, someone didn’t fill out a piece of paper or check a box on something, and it just messed everything up at the bank. And, you know, that caused a whole lot of chaos and turmoil for him. And, you know, he ended up, you know, getting it sorted out that was talking a lot on the show about, I mean, I’m gonna have to go use my home equity line of credit or, you know, a bunch of different stuff. And, you know, these are things that, well, I guess, on some levels, we may sign up for that as business owners, but I don’t think anybody wants to do that kind of show that their business.
Matt Fruge 06:16
So yeah, I mean, it’s, it’s, it’s a universal problem in the construction industry at large, right, whether it’s insurance claims, or it’s new construction, or commercial construction, you know, a lot of them, you kind of alluded to it a minute ago, you know, the payments are tied to workflow completion, right, you get paid, when you complete this, someone’s got to come to inspect it, they’ve got to take photos, they may have to turn it into their boss, they may have a checklist, they need to fill out whatever the case may be, there’s kind of a workflow, dependency on getting paid. And, you know, it’s 2023. We live in a modern age of easy buttons, right, and everything’s got an easy button. Everybody wants it now. And, you know, that’s what we’re trying to achieve with SquareDash is bringing some modern technology to the workflow process and speeding up some of the steps in between those, those boxes getting checked and contractors getting paid normally tend to get paid a claim.
Matt DeCoursey 07:15
For some who know.
Matt Fruge 07:18
It’s a moving target, right? So contractors are not directly contracted with insurance carriers. They’re contracted with the property owner, and the property owner, as the policyholder, is contracted with the carrier. And so all the payments go directly from the carrier to the policyholder. So, you know, there are some carriers where they make a direct deposit, but most of them still operate on paper checks. So that check has to get mailed out, there may be a mortgage company on it, as listed as a payee. So just like if your wife was listed, you and your wife have to sign it, and you would have to mail that off to the mortgage company to their last draft department. They have to review your file, make sure you’re not behind on your payments, they sign off on it, mail it back to you, then you get the deposit, you give it to your contractor, you know, that process could take 468 weeks, it just I mean, it’s a moving target. So meanwhile, your house is sitting there in disrepair, with a hole in your roof and a blue tarp waving in the wind. And you know, the money is coming. You just don’t know when. And that’s the problem. And so we fix that.
Matt DeCoursey 08:23
I’ve made a list of some tips for managing cash flow to business, and the first one is creating a budget. But yeah, one thing that creates a budget that you can’t do is to predict calamity. Yeah. I mean, you can’t. And then that’s it’s just, I don’t know, they always talk about, you know, Murphy’s Law, which is the worst thing will happen at the worst possible time when you expect it at the least. And can’t really create a budget for that. Now, one of the things when it comes to managing cash flows, as you know, comes up on a couple years off of being 50 Man, and I’ve realized that without, I’m not old, I’m experienced. But I’ve always put this in my budget. I always put it in a line that literally says, Oh, shit. So I have my OSHA line in there, and people are like, what is this and like, see, oh, shit line, they’re like, What do you mean? It’s like, oh, shit, I forgot that. Oh, shit, that happened. Oh, shit. So shit that and like that can be different at every business. But for me, I mean, I’ll put like a solid number, like two or 3% of our revenue just for that because things occur. And I don’t know, man until we host a founder that has a working crystal ball for the rest of us. That’s the best thing I’ve come up with.
Matt Fruge 09:38
I think it’s a good one. You know, in the construction industry. It’s a daily occurrence though. Sure. There’s a lot of ocean. There are a lot of entries in that account.
Matt DeCoursey 09:49
Yeah, yeah, that’s why you might want to dial that up depending on your industry. Ya know another thing I put in here, so prioritizing expenses is once again difficult to do when you have this surge mentality of stuff. And I mean, I read people’s business plans, and I talked to them about their stuff. And you know, a lot of people are trying to prevent the sky from falling. What happens if things go really well? And unfortunately, as in the roofing business, things go really well for roofers when things don’t go really well for other people, but it’s still a business opportunity. And if you can’t capitalize on that, then that’s a problem.
Matt Fruge 10:30
Yeah, it’s kind of a double-edged sword, right? Like, you know, the roofing business. You know, we make our living fixing people’s problems, and we’re, there are problems, there’s pain, right? And it sucks that, you know, people have to endure pain for us to exist, but you know, when shit gets broken, someone’s gonna fix it. And you know, it’s a very episodic industry, like you said, you know, it comes in waves, and it’s unpredictable. I mean, hell, we had a storm here in Dallas on December 13. Right? Like, why is there a hailstorm in December? You don’t know, right? You can’t, you can’t predict these things. And in our business, it takes a lot of operational support in the back office to support the activity of the sales and marketing team. And that’s where owners get in trouble is having to scale overhead to meet the administrative demand that, you know, this type of surge, you know, requires, and if your bank balance accounting, and using your company as an ATM, you’re gonna get caught in a real pickle.
Matt DeCoursey 11:39
And so what does SquareDash do? Like? What’s the specific nature of how you do stuff? Or how do you handle it? Or how do you make it faster?
Matt Fruge 11:49
Yeah, so it’s two, it’s two pronged, right? So when an insurance carrier sends their adjuster out to the house to do their inspection, he’s going to write us a scope of work and an estimate and deliver that via PDF to the homeowner, whether he mails it or emails it. That’s, you know, that’s a promissory note, right? That’s what they say, if you do this work you will pay this much money. And so we develop some document processing technology that allows us to extract all that information off the PDF and create a digital duplicate of it in our system. So that we have a source of truth on that, that claim that we can validate Yes, it’s a real claim. We have full payment rails on our platform. So the homeowners or property owners can make their deductible payments and all insurance claims proceed payments through our platform. But what we do is we use that data, that metadata of the claim to make a decision on whether or not to fund the contractor upfront, basically. So as soon as the customer pays their deductible, the first check that may have the mortgage company on it that’s stuck in limbo for six weeks, we go ahead and advance that money to the contractor and allow them to start the Repairs immediately. Same thing on the back end money once they’re done, they send an approval request to the homeowner, they sign off, everything’s good, they can go ahead and take an advance and not have to worry about where the checks are because we know they’re coming. We just don’t know exactly when. And the second prong is. It’s also someone’s job duty at a roofing company to take these documents, and translate very generic line items, remove and replace laminated shingle, right? Well, that could have 400 permutations between different products and color choices. And what can you actually go down to the material supplier and buy for that line item. So we’ve done the cross referencing and the transcription of all of the actual real world material and labor to those generic line items. So when they import that document, they can immediately turn that into material and labor orders and send that off to production. So saving hours and hours of just data entry and tedious work on each file. And then ultimately, getting them paid as soon as they finish the work or as soon as they’re ready to start the work.
Matt DeCoursey 13:57
So I’m at your site and once again, go to squared off stock comm to learn more about Matt’s business, so your revenue model is a mix between subscript of and subscription and essentially funding a percentage of the funded amount. Right that. Yeah, okay. How much? How much is the average roof? I mean, that’s like a five digit number.
Matt Fruge 14:23
And yeah, I mean, if you’re just talking about the roof, it would be in the 11 $12,000 range. The average hail claim is going to be closer to between 15 and 20 just depending on the size of the house because it could be the roof the gutters, the window screens the fence, you know, the garage doors, whatever it could be damaged by hail could be on a claim and most contract most Roofing Contractors act as general contractors and do everything on the job subcontract everything on the job and just make it a one stop shop for the homeowners.
Matt DeCoursey 14:56
So let’s pull over for a second and ask so what What’s been the hardest part about going from the construction business to the software business?
Matt Fruge 15:08
time and budget, you know, it is always you look at software and without peeking under the hood, you know, it’s kind of like looking at a car, you’re just like, Man, that is an awesome looking car like Paul’s asked sexer. Right, you know, like what’s under the hood. And it’s really easy to underestimate what goes into engineering a product that does what you do. So the project management aspect of it is very similar. But you know, how the sausage is made is quite a bit different from tearing off shingles and slapping some new ones on in a day you want.
Matt DeCoursey 15:47
One of my really good friends is an engineer and a guy at UWA. He has his own company now. But for 15 years, he was the guy that did the blueprint and the bid on buildings between five and $10 million. And he came over and helped me with the kitchen renovation wants and estimated all my parts costs, and he was off by like 18 cents for like the whole kitchen. And he was upset about that I actually was like, dammit, I was like, Dude, how did you even come that close, he’s like, that’s not even that close. But you look at something that has some that’s the difference is some of that stuff is predictable when it comes to time and labor. And I talked to people about this all the time, like no one really knows how long it’s going to take to build your software. Right. And that’s the problem. That’s the problem. So yeah, and there’s, there’s ways to deal with that and work with it. And for those of you that are listening in so many that listen to the show, or our technical founder or own tech companies or aspire to and you know, that’s why we really recommend that you got in the beginning, you gotta put put your bandwidth towards one or two things that are the core elements of what you do and come around for the rest of this things later. Because if you’re not aces on one thing, and that’s, you know, that’s the thing that I like about your platform, it’s its niche in that regard, like you’re focusing on helping the roofing community, but dude, that’s a big, that’s a big market. Like any clue how many roofing companies there are in the US, it’s gotta be a lot.
Matt Fruge 17:19
Yeah, so there’s like 100,000 registered companies. But yeah, it’s a lot in, you know, property loss as a whole. If we’re talking about property loss claims, it’s about $67 billion here in the US. So over a trillion dollars globally. A third of that is hail and wind. So 23 $24 billion, is hail and wind claims. And that’s almost exclusively managed by roofing contractors. Because, as I mentioned, the big ticket item is going to be the roof, there might be a bunch of other stuff. But the roof is what gets damaged. And that’s who comes in to put it all back together. So it’s a sizable sandbox that we’re playing in here is our beachhead market. But we do expand, we do plan on expanding into all of insurance restoration, because the process is the same whether you’re talking about a fire, flood, a hail, or wind, whatever the event is, the process is going to be the same. And I don’t see it changing anytime soon. There may be, you know, small, incremental improvements to it, but it’s gonna be this way for a while. And we’re not trying to steer the entire insurance industry away from their model. We’re just trying to use technology to make a better mousetrap.
Matt DeCoursey 18:31
So you know, I want to get back to the list of ways to manage cash flow management tips. Before I do that, a quick reminder to today’s episode of Startup Hustle is powered by FullScale.io. We talk about expertise and being good at things. We are good at helping you build a team of software developers, testers and leaders. If you’re unaware, North America has a huge shortage. There are about 300,000 Open tech jobs. What about all the tech layoffs, man? Yeah, those people make as much as your seed round, so you’re not gonna hire him on the way out. But you want to build a team quickly and affordably get the people the platform and the process go to FullScale.io. All right, so back to this whole this whole dog and pony show and spin and plates and everything is that’s what it feels like managing cash flow. It’s real. It can be a real pain in the butt. That’s my list. I got monitoring invoices, and I feel like that’s something that you guys, I see you’ve got some automated stuff in here. I’m also the founder of giga book.com. I have a high appreciation for what an automated reminder can do in life. Right? You probably got one this morning about the show. I did. And you know what a lot of people don’t miss the show. It’s the same it’s pretty simple but but you know that I think that I was just doing a recording about sales and most people don’t sell as much stuff because they’re terrible at following up. And if you get something that automates that for you, man, you’re in good shape. So like, you know, what you got the automated follow up with adjusters is a big part of your platform is that do you get? Do you get people telling you like, oh, man, this happened faster because that’s in there.
Matt Fruge 20:13
Oh, yeah. 100%. You know, in the roofing community, you know, it’s very adversarial with contractors versus insurance carriers or adjusters, right. I mean, I mean, you know, roofers are, we’re a rough bunch, right. And so, you know, this is how we make our living. So it can take that route very quickly. But in reality, you know, adjusters are, they’re just people doing their jobs, right. Like, it’s not their bank account. It’s not their money. They’re just following guidelines at their company. And more importantly, they’re busy. They have no personal vendetta against you, right? It’s not like, oh, this Mac guy, he was a real asshole on the roof. I’m gonna delay his payment. No, it’s not talking about me.
Matt DeCoursey 20:55
That might be true, because I’m not good at heights. Man. I’m not good at heights.
Matt Fruge 21:00
I’d probably. Honestly I’m scared to go down. How are you going to cash this check?
Matt DeCoursey 21:04
I’m not. I live up here. Yeah.
Matt Fruge 21:10
Yeah, so the automated reminders are huge. Because you know, we have it set up where it sends them emails until they reply, because you don’t want to bug them or piss them off or annoy them. But you want to just be that constant, squeaky wheel saying, Hey, have you released this payment yet? Where are we at on this? What are we doing? You know, because, you know, they do aid. I know adjusters in a cat, you know, environment where they’re deployed at a hurricane or a big hailstorm here in DFW they might do eight or nine inspections a day. And then they go back to their hotel room and they write all those estimates, send all those emails out. And you know, things get dropped through the cracks sometimes. And so just a constant reminder, it just helped me push things along.
Matt DeCoursey 21:56
Last I checked, if you’re up on a roof, it’s not convenient or safe to be sending reminders to people. This is true. I mean, I was like, dude, when I didn’t get a book that had a lot to do. So Giga book, if you’re not aware, it’s like Calendly on steroids. It’s fully customizable, like we exist. For the people that need a booking platform that isn’t built for a specific niche. Right, fully customizable, stuff like that. But you know, the thing is, is there’s you know, when I started it eight years ago, there’s so many service providers that are you can’t react, respond or reply or remind while you’re providing the service like, and while we’re not really built for the massage therapist, that is a good example could people think about because if you’re paying to get a massage, and someone stopped four times in the middle of it to answer the phone, reply to an email and do something else, you’d be like, yeah, kind of a shitty service.
Matt Fruge 23:00
And if you’re the person providing the service, you’re sitting there doing it, and you’re like, Oh, my God, what kind of stuff? Am I missing? So yeah, simple, simple automation, simple, automated time, where I, you know, I’m looking for a check to arrive, I go check with the adjuster, and he’s like, Oh, I never I never got your invoice Can you resend it? And it’s like three weeks later? And it’s like, What do you mean? So? Yeah, all right.
Matt DeCoursey 23:17
So next on my list, I’ve got managing debt. And I got to feel like that’s something that SquareDash really helps people with, because there’s got to be a lot. I mean, if you’re, we mentioned a lot of things that you’ve mentioned, like a cashflow ninja or whatever, I’m just assuming that a lot of a lot of contractors, roofers, whomever, you know, you’ve got credit cards, credit lines, stuff like that. And, you know, if you don’t manage that appropriately, you get on the wrong side of those levers that can get nasty and expensive. And if any of my so right now, as we speak, my house is finishing its third week of renovation and painting and stuff like that. I mean, if the painter came up to me and said, Hey, man, I got a credit card bill, because I didn’t manage my cash flow. So I’m gonna need to charge you a couple 100 extra bucks, I’d be like, no. Right. So but that’s, you know, debt management. And that can come from a number of different places, and getting paid faster means you get to pay the debt off a little faster, and you don’t have to flex a lot of things. So probably not a whole lot of commentary needed on that one.
Matt Fruge 24:21
Yeah, I mean, we’re, we are helping contractors eliminate debt, right, because the only people in our business at least for roofing that extend credit are the material suppliers. And guess who’s typically paid last material suppliers. And if you’re using that to pay overhead expenses and run your business, because you’re waiting on that cash flow to be unlocked, from checks, you’re waiting, you’re waiting on to collect.
Matt DeCoursey 25:00
Yeah, you can get on the nasty side of that real quick and then once you are, you’re just pushing that AR ball up the hill for like eternity unless you can check the can man that’s a real thing.
Matt Fruge 25:04
I mean, it is almost going bankrupt three times in this business. It sounds like you are an entrepreneur then that’s a normal thing.
Matt DeCoursey 25:07
They say that most successful entrepreneurs flirt with going broke or go broke two to three times. And yeah, the pandemic taught me important lessons and leverage is all I can. I’ll just leave it at that. Yeah, well, that was back to that Murphy’s Law thing, you know, and some of that is, you know, it’s easy to Well, I said, I wouldn’t elaborate, but fuck it, I will. So you know, like, here we go, I thought I was about to, we hadn’t had any investors, I had multimillion dollar offers come in, and I was flirting with some of them. So I actually thought I’d take a couple of them and I and I aggressively paid some other stuff down doing the dumb thing you’re not supposed to do, which is spending money before you have it. Yep. And then all of a sudden, this thing called COVID comes around. And it just changed everything investors wanted to step back and do a lot of different stuff. And I didn’t really appreciate that. So I didn’t move forward with those people. And you know, just like, I don’t know, man, there’s a lot to deal with cash flows. Once again, it’s the lifeblood of the business, your employees don’t want to hear about it, either. They want to get a pair, they want to get paid whenever it is that they’re supposed to get paid. So that’s your problem, you get to deal with it, and you know, to deal with it. Alright, so another thing in here, and I think this is a thing that a lot of people don’t think about as taking advantage of early payments and discounts. Does any of that apply with insurance or anything like that anybody gives a discount or pays a couple extra bucks back, if they get paid faster?
Matt Fruge 26:42
Your material supplier usually has a discount program set up depending on how you set your credit line up. And, you know, it’s usually like a 1% discount, you know, which adds up if you’re doing a couple million bucks a year. In business, you know, it can make a difference there. The moat the real benefit, you know, you just kind of alluded to it and your story. I have a similar story. We decided to expand in 2019 at my roofing company, we got a new office 7000 square feet, and we had a sales team of about 15 people. Some things inside the company with management went wrong. We lost most of our sales team, the week after I signed the lease. So here I am with the $80,000 a year commitment for an office and two salespeople. And I’m like, What the fuck are we gonna do? You know, and it just goes back to the unknown, right and spending money before you have it. A lot of times you have to write if you’re planning for growth, you have to invest in people, space, equipment, whatever the case may be. And if we can bring predictability to revenue. And we know that, okay, I have five people, they produce this many deals, we get them on this date, we’re going to be paid in full by this date, right? Versus let’s just go out and be a shit hot sales team and sell as much as we can. And then we’ll worry about the collections when they come in. Right.
Matt DeCoursey 28:16
And that model has worked out a lot of businesses, though.
Matt Fruge 28:19
It does and it’s how most businesses operate in this space. But it’s very hard to plan and strategize around something very fine with your pants on fire. You know, well, the hard part with that is not most salespeople aren’t anywhere near as good as they think they are.
Matt DeCoursey 28:32
It’s just the truth. You know, and especially if you have a new sales team or something that can I mean, that can be all over the place. It’s, I always tell people in my business like, hey, look, if our problem is we’re selling too much too fast. Y’all keep doing that. I will figure out how to clean up. We’ll figure that out. You know, and, you know, also being too tentative, you know, there’s a story that I like to tell that’s about It’s fast. There’s the shopkeeper that never gets around to opening the store because he’s too busy cleaning. You don’t want to be that guy either. And that’s you know, there’s a lot of people that do that. They’re like, I’m waiting for the right time, the right time doesn’t come people like that isn’t that is a myth and a lie that we tell ourselves to excuse ourselves from not doing the stuff that we want to do or that we’re capable of doing or it’s, you keep if you hear yourself, you hear our echo of your own voice. It’s not the right time.
Matt Fruge 29:39
There’s never a right time.
Matt DeCoursey 29:40
Yeah, it’s not common. That’s, yeah, that’s an ad that doesn’t make a lot of promises. But that one I will make so yeah. All right. So um, in regards to the early payment discount, I’ve mentioned before that I used to work in the music industry. I worked for a company named Roland and they were the world’s largest maker of electric. They are The world’s largest maker of electronic musical instruments with like 5 million a year in sales. But yeah, I, you know, I dealt with dealers that were in 13 different states. And, you know, we had all kinds of options. We had financing options through companies that would do what’s called floor planning, which can help you get, you know, kind of pay it off as you as you sold it, we there were always net terms, we had to have different specials and offers. Here’s the thing we didn’t run around and like, always tell everyone about that, because it’s expensive to get paid six months later. But I’ll tell you what, when people ask for it, they usually get it. And there’s a simple phrase that you can always utter to anyone. So is that your best price? Say that to people in life and see what happens and you will eventually save money somewhere somehow, because most of the people that are working at places giving the desk I don’t give a shit. They don’t, that’s not their money. Right? Can I get a better price on that?
Matt Fruge 31:04
Yeah, I can, you know, next thing you know, you’re and let them determine that and yeah, I’ve had in her past the worst that can people come back, give me 1000s of dollars back?
Matt DeCoursey 31:07
And if they had just said no, I was gonna buy it anyway.
Matt Fruge 31:13
Right? Yep. But guess cash flow?
Matt DeCoursey 31:17
It’ll have the worst thing you’re gonna hear is, is no. All right, this next one is something that people really mess up dude, accounts receivables, and this plays right into your business. It’s like, they get busy. And it’s just another day, it’s just another day. It’s just another day. And next thing you know, you got all these aging receivables and those add up, man, they add up over time. And you know, people are bad about chasing them down. But look, if people aren’t paying your invoice or your bills on time, that’s a red flag. Yeah, that is a huge red flag, because that’s how businesses get themselves on the ship side of AR and, you know, cuz I, this wasn’t Roland but I worked for another company in the musical instrument destice that was basically going bankrupt and was flexing big credit lines, to sell more stuff and kind of pad the pad the bank account, and Roland was one of the companies that got hosed on that because that company ended up going out of business. And these are, these are things if you pay attention to the AR use tools like SquareDash, there’s, there are other things and other industries that I’m in, you’re aware of that. And so you know, look for the tools that are around if you want to find a solution, looking for a solution is usually the first place to start.
Matt Fruge 32:36
Absolutely. All right. Yep.
Matt DeCoursey 32:39
So factoring. Factoring is similar to, you know, factoring. This is the problem you solve because factoring or AR or invoice advances, traditionally, were stupidly expensive, like you guys do a set rate on like the whole thing like that. But factoring, I mean, oh my God, dude. So we I looked at that for so my average client pays 20 grand a month recurring, and I don’t run AR they pay at the front of the month for the church that’s about to occur, because if I didn’t, I’d be floating a million dollars a month and receivables. We went to look at what it would be like to maybe finance these factoring companies meaning like, they’re going to take your AR and be like, Yeah, sure. And then and the dude, it’s like, you’re at a fraction of what they would charge these places were like payday loans, man, like they want to 2020 crazy.
Matt Fruge 33:36
They’re just like modern day loan sharks. You know, unfortunately, there’s only a handful of options for contractors to solve this problem, right? Go get a line of credit from their bank. But if you’re out there selling a couple million dollars in your first or second year, you’re not gonna have two years of tax returns to support a $2 million credit line, right? So then you got merchant cash advances where you, you know, it sounds real good, and they attract you with the, you know, low interest rate. But, you know, when you actually do the math, it’s like a 50% interest rate paid daily over six months. So our business doesn’t support that kind of payback. So it’s, that’s why we came up with the solution, right? Like, we can validate the claim, we know the mechanics of the money, we know the timelines involved in it, we know the work being done on it, we know the approval chain that needs to be in place to secure and kind of mitigate risk. And with all of that understood there’s an easier, cheaper way to provide funding to these contractors and we’re super proud of it. Super excited to release this to my peer group, the industry I’ve been a part of for 13 years, and heard so many horror stories, experience the horror stories myself in trying to manage the money inside the business as you grow. The thing I like is that I’m looking once again at SquareDash.com.
Matt DeCoursey 35:00
And I just like tools that help people get things done better, faster, cheaper. Yeah, you know, it’s like you mentioned, like, rather than a blank line, or a bland line item, like, here’s some options or collect this, or maybe just make some assumptions, or, I don’t know, man, if you make it easy for people to help you, then you’re gonna get a lot more help is usually the advice I’ve given people that I can’t get any help. I’m like, first off, are you asking? Second, offer to help. I’ll give these messages and people will be like, Okay, first off, I’m flattered, but don’t invite me to coffee, I’m not coming. And I say that, because it’s, you know, it’s a, it’s a two, it’s a two hour thing. Like, if you want to talk like, let’s, here’s a zoom, Link, man, let’s get into it, you know, and so some of that is offered to come to me, or something like, if it’s all advice driven, and you want something from someone else, make it easy for them. And you will find you will get more help. It’s a very simple formula.
Matt Fruge 36:05
People like to help anybody that’s fundraising out there, you know, we just kind of wrapped up our round. But ask for help, ask for advice for feedback versus asking if they’re interested in investing, right? And that just, that’s kind of universal across anything. If you think there’s value in a relationship, ask them to help you. Right? Not in a way that’s meaningful to them. Right?
Matt DeCoursey 36:29
Some of the best advice that I’ve ever received in my life. So I was in New York City, this man, this is like, seven or eight years ago, I was meeting with this guy named Kirk McDonald. And he had an office in Times Square and first off, and I went in, I was like, Man, this seems like an interesting company across the hallway. Who is that? He’s like, I don’t know. They’re called Snapchat or something like that. I don’t really know what they do. Anyway, so I went in. I always think that’s funny. But I sat down and I’m talking to Kurt and he said, you know, Matt, he goes, I think you’re going about some things the hard way here. What’s easier climbing the mountain yourself or asking those on top to pull you up? Yeah. And I was like, Whoa, dude, I felt like I just talked to the Oracle for a second, you know, and like, but it was great advice, because and you’re right. You know, you mentioned like, there’s so many people out there. Now, you and I are both enough. In the Midwest, you’re a lot more of a South Midwest, but I don’t know, man, people have people here in Kansas City. They’re friendly. If you ask Nice. They’ll, they’ll talk to you. And I think I’ve learned that entrepreneurs love helping other entrepreneurs. Because here’s the thing, man, there was someone I remember being well, look at that story I just told, right? I didn’t know that dude. He was introduced to me by a friend. You know, like entrepreneurs, like helping other entrepreneurs, knowledge isn’t meant to be kept. It’s meant to be transferred. In fact, if you have knowledge and you’re not transferring it, you’re kind of a selfish asshole.
Matt Fruge 37:53
Absolutely, yeah, I mean, entrepreneurship requires a high tolerance of pain. And we’ve all gone through. Yes, we’ve all walked across the coals, right. And to not reciprocate that back to people that are on the other side of those coals deciding if they want to take the leap or not. You’d be an asshole not to give them some advice or help them along.
Matt DeCoursey 38:17
And dude, some of the best advice you can give people and I don’t like to shed or crush on people crush people’s dreams, but sometimes I just tell people, I’m like, I don’t think this is for you. Right? Like, or, Hey, you’re, I had a guy wants to lose weight. And for me after I gave a speech, and he had this big tech business plan, he’s like, Hey, man, I want to talk to you. I was like, what’s up? And he goes, I’m gonna take down Amazon. And I was like, Dude, I don’t have time for this. You know, it’s just like, I mean, because there’s, there’s, you know, back to good advice. It was probably episode eight or something. We had a guy named Daryl Hall. And I asked him to describe it. He was the founder of a huge company called CARSTAR. And are you familiar with CARSTAR? I’m not know. They they created a franchise and and business model that was good for body shops, because they were fragmented and kind of like your tool does, you know, it was like, Hey, here’s all the shit you need. Because you probably don’t know how to do this. Right? Well, but I asked him, I said, Well, who are you? He goes, Well, I’m a coward. And I was like, Okay, that’s a strange answer. And I said, Tell me more, because there was not computing at this point. Because as entrepreneurs, we are brave because, well, I’m brave like an entrepreneur. But I’m really a coward because I like to find something that no one else is doing. And I go somewhere to get really good at it, where everyone’s going to leave me alone, and I don’t mess around with fighting giants. Then it made sense, because like, you talked about Google or Amazon or whatever. And like, I mean, these are hunting companies like data. They don’t know you’re there. It’s your step on Yeah, and move on. So all right. Well, here we are. And you know, the time always flies here on the show, and I like to end my episodes of Startup Hustle with what I call the founders. restyle with that I’d like to hand the mic over to my guests and, uh, you know, math your you what are your closing remarks that you’d like to leave the listeners with today?
Matt Fruge 40:12
You know, I would just speak directly to any roofers or any contractors that are listening out there, right cash flow is much more than, you know, how you sustain the business, right? It certainly is a huge part of how you sustain the business, but it’s also how you grow the business. In in our business, you know, if you want to hire a new sales rep, he’s probably coming from an industry that he was unhappy with, he may have been excelling, but he probably doesn’t have the bankroll for 6090 days that it’s going to take to keep him his family fed. Which means while he builds up his pipeline, which means you’re going to have to fund that, right, you’re gonna have to pay him drawers, you’re gonna have to figure out a way to keep him fed, so that he keeps hopefully producing for you, and there’s no guarantee that he will. So if you want to hire 10 guys, and you have to pay him two or $3,000 a month, you’re gonna need 100 grand liquid cash in the bank reserved to make sure that guy moves forward. And that’s just another one of the problems we’re solving is how do you use cash flow, acceleration to grow the business and not just sustain the business? So even if you’re not a roofer? You know, think about that in your business. And as Matt said, there are tools out there, seek those tools out, become aware of the problems that lie in your business and see if there are tools out there that can help you. Because that’s all we aim to do is help contractors using our tool.
Matt DeCoursey 41:37
Yeah, for my freestyle, first off, thanks for joining me. Congrats again for being on our list of top startups in Dallas. Quick reminder, FullScale.io, thank you for sponsoring the show, another episode of Startup Hustle. You know, we were coming up on our 5 million downloads and had listeners in 194 countries. So I’ll thank everyone for paying attention, it means a lot to us now. You know, I always like to leave good practical advice. And when it comes to cash flow, there are all kinds of tools, all kinds of methods, and all kinds of things you can do. I think you owe it to yourself as a business to understand what they are to set them up, even if you’re not going to use them right away. Because the problem is the moment that you do need them, you might not have time to set them up. And, you know, that’s you look at something like SquareDash, like, you know, go and pay the subscription fee, you know, have it ready, understand how it works, because at that time you need it is, you know, not always the right time, even if you talk about needing a line of credit, or just getting a loan or any of that stuff while it does and can happen remarkably faster than it did five or 10 years ago. Still not always fast, man, we’re talking about bankers, and you might, and with that, you might not have your shit together at your business, you know, document in two years of tax returns or this or that and like how, how, how much is your house in order you no pun intended there. But you know, with that, just explore the options and understand what they are. And if it comes to setting something up or having that stuff on standby, I think the peace of mind of knowing that you can lean in and that you have the right tool. Look, the best craftsmen have the right tools with them. They don’t use them every single day all the time. But they’ve got it there. And if you get, you know, every building crew, how’s that old guy that has a nickname like a wizard or something like that, you know? It’s that 73-year-old guy. You’re like, dude, why didn’t you retire? He’s like, I just like building it. You know, he’s got some weird tool in there that no one else has. And there’s that time when he needs it. And it just changes everything. And that’s experience and understanding and knowing that you don’t always need the tools every day, but knowing that they’re there and that the time you need them is worth a lot more than going and trying to fetch it and blah, blah, blah, how much is your time? Or how much is the opportunity that you might miss worth? And how much is the peace of mind worth not having to deal with the stress? So Matt, thanks for joining me, man. I love what you’re doing and will chat with you down the road.
Matt Fruge 44:18
Thanks, man. I really appreciate you having me on.