Two Common Mindsets That Might Be Holding You Back!

Stop saying these two things if you want to get more profitable and improve cashflow in your restoration business!

1. Hurry up and start the job - don’t worry about a budget and don’t worry about the money- it’ll work itself out.  Geez!
2. I got the job done - someone else on the team will worry about getting the money - I’m on to the next job. GEEZ!

If you've got the sense that you could be doing better from a profitability and cashflow standpoint, you're probably right. I want to share with you a couple of mindsets—one around profitability, one around cashflow—that really hurt businesses. I'll also give you simple solutions to let you know what your top-performing peers in the industry are doing.

First, let's talk about profitability. A very common mindset is: we've just got to hurry up and get started, and the money will work itself out. We will end up doing as well as we could do. This is really unhealthy. Your top-performing peers in the industry have a predetermined gross profit target. They have a documented budget before they start the job. They have agreed-upon pricing with subcontractors before the job is started. They have production managers who are incentivized to hit the gross profit target and don't get that incentive until the job is paid. This way, they also have an incentive to ensure that the cash is coming in.

Now, let's move on to cashflow. This ties into the first point. A very common mindset for production managers is: my job is to get the job done. Somebody else worries about collecting the money. But do they? The owner is always worried about collecting money, right? But who's actually doing it, and with what frequency? How's it being done? Or is it just being done when there's a panic situation, and the owner says, "Oh man, we've got to collect some money because if not, we're going to have a very hard time making payroll, or I'm going to have to dip into my business line of credit, and I don't want to do that. So all hands on deck, we've got to collect money." Not a good approach, and not what the top-performing companies in our industry are doing.

They've got somebody who is accountable for collections. It's being measured. There's an acronym you may or may not be familiar with called DSO (Days of Sales Outstanding). It's a measurement of how long it's taking you to collect money. So it's being measured. In some cases, people are being incentivized to hit the DSO goal each month, and there's a documented procedure.

Let me just recap and encourage you to take some action around this. If you're going to be as profitable as your most profitable peers in the industry, you've got to set a budget. You've got to have a gross profit target, and you've got to make sure that your production managers know what it is, are involved in the process, and I'd argue you have an even better chance and get them more engaged if there's an incentive program around this.

Next, how can you improve cashflow? Make somebody responsible, and have a documented procedure. If you need help on the budgeting side, there are great resources available. The production management CRM platform that you're using—maybe it's Iris Store, maybe it's Dash, maybe it's one of the other ones in the market—should all be able to help you with the budgeting process. If you reach out to them and strike out, get in touch with me, and I'll help you.

For cashflow, document expectations by role in your company. One of those roles has to ultimately be responsible for collections. Measure it using DSO, incentivize it, and pay attention to it. Make it part of your weekly meeting rhythm to go over it and understand where you're at and where the potential problems are. If you have any questions, don't hesitate to reach out to me.