REAL AF with Andy Frisella - How to Manage Cash Flow, with Andy Frisella - MFCEO143

Episode Date: May 9, 2017

One of the common killers of inexperienced entrepreneurs is not knowing how to manage your cash flow. In this episode, Andy Frisella talks through the typical mistakes that he himself has made and the lessons he's learned from doing business for almost two decades. From not paying your invoices before they are due to finding innovative ways to generate cash, The MFCEO's advice will help any entrepreneur and any business avoid a cash flow crisis.

What is up guys you're listening to the MFCEO project I'm Andy I'm your host and I am the motherfucking CEO guys this is your first time joining us welcome this is an entrepreneur podcast it's gonna be mixed in with all different kinds of things, lifestyle, motivation, inspiration, tips and tricks on how to think. Everything that you hear on this podcast is going to be practical to your growth. Some days we're going to talk more about, you know, actual specific tasks that you need to do as an entrepreneur. Some days we're going to talk about mindset. Sometimes we're going to talk about how you should react in certain situations, but all of it is going to contribute to your personal development, whether you are an actual business owner or whether you're somebody who works within the structure of somebody else's business. Thinking like an entrepreneur is how

you become successful these days. So with that being said, I'd like to welcome my co-host, Vaughn, the pastor of disaster. What's up, my man? I'm good, man. But I've always wondered what response I could give you in these opening lines that would actually make you laugh or completely shock you. Yeah. So what would that be? Well, if I have to tell you, it's not going to make me laugh because I want to know what

it is. But I mean, like if, you know, you said what's up and I said something like, well, I was going to cuss, but I'm not going to. But, you know, if I said like- This is funny in its own, right? I know it is a little funny. I just can't think of anything that I do that would shock you. I don't get shocked.

Yeah. You know what I'm saying? Like, and I don't, even in conversations with people that i don't think you could like i'm not somebody who gets surprised like that like i just sort of roll with it maybe if i if i responded and i was like yeah bud or something like that that one might it might i don't know it might you might need to work on that a little bit yeah especially since i since I said bud, not boy. Yeah. Yeah. So what's up with you? You got the cough drops out? You got, what are you, sick?

Yeah, I'm a mess. You remind me of one of those kids that was probably allergic to a lot of shit. Bubble boy. Yeah. Bubble boy. No, it's just that time of year. Yeah, that time of the month? Yeah, exactly.

I walked right into that one. Yeah, you did. So, yeah, no, but I have to. So, what are we going to talk about today because we don't have like a specific set outline we're going to talk about cash cash straight cash cash straight cash millionaire homie that's right yeah see you like that i do like that was a pretty good rap i do like reference so so i think that's a good thing to talk about because I feel like the, and I know this for sure, that the biggest reason that most small businesses ruin themselves is because they

fuck up their cashflow. They don't understand how to manage cashflow because, you know, like it or not, when we grow up in school and we go to business school and they try to teach us about business, they never fucking teach us how to manage cash flow. They talk about it in these big, crazy, un, uh, you know, comprehensible terms that nobody knows what the fuck they're talking about. And it, you know, people go out and they start a business and then they have no idea what's coming down the road. And they end up running out of money, not because they don't have money, but because they allocated on the wrong things. So I would thought that, you know, us kind of addressing some of these things and telling you guys some of the stories that, that, that we've screwed up on might help some

of these guys who are just starting out because managing cashflow guys is the lifeblood of your business. You know, you're going to have to understand that it's not this thing where you go out and sell product and then you've got $10 million in the bank tomorrow. It's, you've, it's like a river, man. And you've got to learn how to like guide the river into the, into the power generation dam that you want it to go into. And that shit takes skill and it takes experience. And unfortunately, most business schools don't teach us how to manage it in a practical way. So I think, you know, this could be a very helpful podcast for some of the guys who are just getting going or just starting out or within the first couple years. You know, it took me probably, it probably took me and Chris 10 or 11 years to figure out how to manage cash flow to where it's responsible.

And apparently this is the number one problem for new entrepreneurs and new startups because statistically, it's a killer of most businesses. So if you do struggle with it and you're listening, I mean, you're not alone. No, everybody does. A lot of people. Right. And you see these companies who who even big giant companies have problems with this because it's always changing. And the amount of cash coming in is always changing. And you have to learn to see the 10,000 foot view of what's going on within your company so that you can make adjustments as you go to where the cash flow will still allow your company to operate. Um, you know, Mark Cuban has a saying that he says all the time that I agree with a hundred percent,

uh, you know, sales cure all and they fucking do. All right. So let's just start with that. Too many people out there right now. And too many of you guys listening and too many of the new quote unquote internet entrepreneur mindset, they think they're going to come up with a product or a service or something that sort of like tricks people into buying it. And it's not something that really, truly, honestly solves a problem. If this is your product, if you look at your product and you think, well, it's sort of solves a problem, but you know, not really. And you think you're going to make up the rest by like some fancy marketing scheme. You're going to fucking lose. Okay. That's step number one, your product, your service,

your business, whatever concept, if you, if it does not solve a legitimate problem for people, that is going to, that's going to solve the problem in such a way that they're going to talk about it with their friends. You've got the wrong business model. Because I can tell you from experience, you have to have something that's going to be organically shared for your company to scale. And that means people are going to have to say, oh, wow, I really like this product. It solves this problem perfectly. And go out and tell their friends. I mean, let's look at something as simple as the fucking Snuggie. All right. The Snuggie is probably

the dumbest looking fucking thing on the face of the earth. All right. But what'd it do? It solved a fucking problem, a simple problem. When you got a blanket on, you can't use your fucking arms. So they made a, they took a robe and they turned it backwards and they made, they called it a blanket with arms and they made fucking hundreds of millions of dollars. So I'm not saying your product has to solve fucking world peace, but it's got to solve a legitimate problem and a clear problem. And if it doesn't, and you think you're going to make up with it with some creative marketing, you're going to lose. That's just a fact of the matter. So before we even get into cash flow, if you're in the early stages of your business

and you're one of these people who's looking at their product and they secretly know it's not what it should be, then don't fucking do it because you're going to get your ass beat. That's the foundation. Yeah, it has to be there so um so let's say you do have a product that solves a problem and you have cash coming in and you're trying to grow and scale a company and that could be very overwhelming and very confusing to somebody who's never done it especially someone who doesn't have someone that they can rely on to help coach them so my number one recommendation would be find someone that you could talk to on a regular basis

that can help direct you like a mentor on how to scale your business properly and help prioritize where you need to be spending the money. Because the first thing people do when they get a little bit of money coming in is they like to take it because there's a saying out there that says pay yourself first. All right. And I 1000% disagree with that statement. I don't even know why it saying out there that says pay yourself first. All right. And I 1000% disagree with that statement. I don't even know why it's out there. Because if you're the pay yourself first guy, then you're going to end up owning your employees, you're gonna own your vendors, you're gonna own all the people that you need to pay. And eventually your business is going to end.

So you're gonna have to realize that paying yourself last is the reality of entrepreneurship. It just is pay yourself a decent livable wage, bonus yourself out at the end, whatever, you know, whatever's left and that's it. Um, so I've got a number of steps here that I'd like to go through. And one of them is number one is, you know, people always hear that there's always that saying, right? It takes money to make money. So they spend their money on things that they don't really need to spend it on because they think they need to be playing business. All right. You see this a lot with like younger entrepreneurs, like they'll go out, they get a little bit of cashflow coming in and they go spend it on like office furniture because they want their name on the fucking door. Um, or they go spend it on, you know, uh, a new office space or a new this or a new that, or a new forklift

because they want like the new shiny forklift to run through their warehouse whenever the people come see it. Like they become proud about shit that doesn't really even matter when it comes to running a business. And you have to realize how to prioritize those things. Okay. Your job is to make a company. Your job is to sell shit. Your job is to reinvest the money that you make from selling the shit until you get the company to a place where you want it to be. Now I call this playing business. All right. Playing business is, you know, going out, starting an LLC, getting business cards, putting your name and a nice shiny plaque on the office, you know, and like people who have never been in business, they think this shit really matters and it doesn't.

You know, they want to walk in, they want to see their fucking name on the desk. They want to see their nice little arrangement of pens. You know, they want to have their special pen That they sign documents with Their Mont Blanc, you know what I'm saying And they want to fucking act like they're some sort of business dude And that's called playing business And people who play business never fucking win Alright, I've never seen one

The guys I know that do well, the guys I know that succeed The guys I know who are out there Making millions and millions and millions and millions of dollars Don't give a fuck about any of that They're focused on one thing and one thing only and that's how do i fucking solve a problem okay so quit spending your money on dumb shit doesn't matter what do you what do you think about the guy that says well perception is reality andy so i have to you know i have to put it on a good you know presentation i have to be in the minds of people really well put together

so that okay there's certain businesses where that's required all right like if you're in a financial uh you know some sort of financial business and you need to meet people and there's traditional uh business practices that are that are the standard of how business is done um i think that was relevant phrase earlier in time. More relevant. Yes. Like the guys I know, like right now, like the guys I know lending big money and bar borrowing big money, they're doing it over fucking barbecue. You know what I'm saying?

It's not in a bank office where you walk around with fucking business cards in your pocket. Yeah. It's, it's, it's becoming outdated. Like people care more and more and more about what you're really doing. And so like, while I agree that perceptions reality in certain things, it's it's it's becoming outdated like people care more and more and more about what you're really doing and so like while i agree that perception is reality in certain things it's becoming less and less relevant of a concept and people get so caught up in the perception of reality is that they that they spend all their money on the perception none of it on the reality you know and they end up in a situation where they can't they can't run their business so

um i think everybody listening knows what I'm getting at with these points. Just scrutinize where the fuck you're putting your money when it comes to operating your business. Put it into inventory. Put it into your product. Put it into improving the product. Put it into fucking salespeople that go out and sell the product. Do it into things that are going to generate revenue, not things that are going to create a perception of revenue. So that's point number one. That sounds like the number one criteria. I love that. I just want to draw that out again, invest the money in things that

generate revenue, not things that create the perception of revenue, which is internet culture right now. Right. Um, number two on my little scratch outline here is people, they pay for things before they need to. And what I mean by this is like, you know, and I'm not talking about your bills. Like you should always pay your bills on time. Uh, you should always pay your invoices, uh, you know, on time, but there's no need. And there's no need to like pay that shit two weeks early or three weeks early. Cause you're trying to stay ahead. You have to be cognizant of the flexibility that working with certain partners allows you. So utilize the timelines you're given the proper way responsibly. Like don't, don't, don't go to somebody like for a long time, you know, Chris and I would never, would never utilize terms because we were afraid

because we never had any money. So like companies will offer us 30 or 60 day terms and we wouldn't use them because we were afraid that 60 days would come and we fucking wouldn't be able to pay and because we were we were poor at managing cash we were inexperienced so the worst thing i could imagine is 60 days come and do and me not being able to pay my bills like you know what i mean like Like that to me, like that's embarrassing. Some people can live with that shit. It's not my thing. Um, but we used to do it to a fault where it caps, it capped our growth to where we couldn't use the, the, the flexibility and the timing to finance our company the right way. So you have, you know, don't be, if you've got a legit, like if you've got the basis we talked about, if you've got a legit product, you're investing in things that

create revenue, don't be afraid to utilize the flexibility that your other vendors and your other companies are willing to lend you. Now, on the opposite side, don't abuse them either. Because a lot, I think a lot of people abuse those things. You know, they get 30 day terms, they start paying on 60 days and dude, that's a death sentence. You can never get out of that trap. You know what I mean? Pay your bills on fucking time, decide what a reasonable amount of time is and use that time effectively. You know what I mean? Yeah. Yeah. So I guess that's your second and third point. You just kind of brought them together. Yeah. Yeah. Basically. Yeah, that is. So, um, I mean, we, right here we have, we have basically two different kinds of people. We have people who

want to pay real early. That was always me. All right. And that limited, I probably could have got ahead by three or four more years from where I am now, if I would have figured this out earlier. All right. Cause I always wanted to pay early. I never wanted to have any debt. I never wanted to pay anything. And you know, even to this day, um, you know, I get fucking, I can get 180 day terms with anybody anybody that we work with because I know we're going to pay. I still only utilize 30-day terms at maximum because I just don't feel comfortable outside of that zone. So you have to decide what's going to be comfortable for you and be a responsible human with your cash. You can always tell if somebody started their business with with their own money because this is they think like me if someone started their business with somebody else's money they'll get out there on the fucking 60 day 90 day 180 day terms and try to fucking you know

stretch that shit out you've just got to be responsible but you know some people that pay ahead i obviously my main point is is by paying you're, you're limiting your ability to grow just by just the same you would be if you paid late. Gotcha. That's my point. Yeah. You know what I mean? And, and it may be more responsible and you might feel, be able to sleep better at night, but remember you're also limiting your ability to grow and we're only in this game for a certain amount of time. So you've got to capitalize on the time. Does that make sense? Yeah. So it makes philosophical sense, but it makes no practical sense. Pretty much. Yeah. Um, I mean, it's just a matter of comfort, you know, like, dude, we started out so fucking broke that even to this day, I even made a status about it yesterday. Like I wake up every day terrified

and I've got a lot of money. Like we got a lot of money in the company. I got a lot of personal money. You know, like if something happened to me, I could live for fucking many, many, many, many, many years, if not life without having to work, but I'm still freaked out about it, you know? And that's because I started with nothing and you guys listening who started with literally nothing and they, they, they know what they feel, what I'm talking about, you know what I mean? And, um, but having that super cautious mindset about your terms and your business partners that you work with can, can severely limit your ability to do things, uh, you know, that would otherwise help your business. What if you could pay two or three

salespeople, uh, for a month and, and by not paying your bills on 15 days and paying them on 30 days, how much more would you sell? You see what I'm saying? Things like that. So you just have to think those things through and you have to understand that there's a price to every decision that you make. And it's always something that you need to like really sit down with somebody who knows what the fuck they're doing. Dude, having a great CPA, a great bookkeeper who's experienced, you know, that can make a huge difference. Like, like dude, our accountant, uh, who's run our books since day one, you know, he was young when we, when we started. So we've gone through a lot of like, and I, and dude, he's a great friend of mine. So I don't want this to sound the wrong way. Like he's grown with us and learned with us and

dude together, we've made bad mistakes, like hundreds and hundreds of thousands of dollars that we didn't have that we lost by doing dumb shit by just making poor decisions. And, you know, I'm thankful for that now because I know things, but you know, and I didn't have a choice because he was so cheap. I couldn't afford a real CPA or real bookkeeper. But my point in this is that if you can afford somebody who is experienced, make that investment in a CPA and a bookkeeper because they can really help you figure out how to maximize your flow. Yeah, that goes along, in my mind, that goes along with your first point, which is make sure you pay for things that are going to help revenue. If somebody's helping you manage your money well, then obviously that's going to benefit you. Right. But that's a big balance, right? A lot of people see those things as expenses and not investments because they don't see the downside. Like having a great CPA, having a great bookkeeper who's experienced, that's not

a cost. That's an investment. You know, having amazing salespeople, that's an investment. You're getting a return. You know what I mean? Having super effective marketing, that's an investment. You know, having amazing salespeople, that's an investment. You're getting a return. You know what I mean? Having a super effective marketing, that's an investment. That's not an expense. It might be an expense on your fucking balance sheet, but if you're doing marketing the proper way, it should be providing a return. And it's all how you think about, I think you're giving me your fucking cough here, bro. But it's all how you think about it. And too many people look at things as expenses and not as investments. So, you know, and a good CPA, a good bookkeeper, and eventually a good CFO, that's a huge investment because you get huge returns on it.

Right. So you've identified two bad practices that both have to do with paying for things. But what about the other side of receiving payments from your customers? Is there a typical bad practice? Yeah, that's a great point. Because I think a lot of people, especially when they're in something where they have receivables, they're not good at collecting money. They're scared to ask for the money.

And they don't have the policies in place that they, you know, impose because let's face it, there's no, there's no a quote unquote policy enforcer company that goes out and enforces your policy. You've got to enforce it. So, um, you know, when you're a young business or you're just getting set into, into your ways, you have to take the time to develop a clear policy, you know, a fee penalty, you know, after late payment, stoppage of service, one, two, three steps, you know, this is what happens at 30 days, this is what happens at 60 days, this is what happens at 90 days. And you have to go develop the policy of what's going to happen if these people don't pay.

Because, and you have to have them sign off on that so that they understand that upfront. Because if you don't ever enforce payment, like we went back to a couple of points ago, there's a lot of people out there that will stretch you out until, you know, you can't even operate your business because you're not collecting money to operate. So you have to be firm in your policies about how people are going to pay you. Now, let me add an asterisk to this because there's going to be situations, especially if you're in business for long enough, where you've done business with somebody for 10 years or eight years or seven years, and they've always, they've always been there for you. And they're going to come to you and they're going to say, Hey, look, I need to work something out because business is fucked up right now. And I would encourage you

to be very flexible in those situations because at the, at the end of the day, business, especially small business is so much reliant on relationships. And dude, I could tell you every time I've ever cut somebody a break or did something right, the nice, the quote unquote, right slash nice thing for someone. It's always come back later tenfold, not just financially, but friendship, relationship in every other way. So be firm, but also, you know, be fair and flexible to people who have earned your trust. You know, what goes around comes around. That's right. I believe that. Yeah. So, um, uh, so yeah, so you have to have, you know, a very clear plan. I don't think people put enough time into thinking about how they're going to collect their money.

They just assume everybody's going to pay. And, you know, when you have receivables, I would say 70% of the people will pay on time. And you're going to have to fight for fucking 30%. So you need to have a clear – you're going to have to. So you're going to have to put a clear policy, X, Y, Z. This is what happens if you don't pay on this timeline and enforce it. Would you actually encourage people to go to small claims court? I would encourage people to put everything in the policy that they need to get their money and stick to the policy a hundred percent. So you find a good lawyer that can help you write up a

great policy and figure out how to collect the money and whatever it takes to collect the money within that policy. That's what you fucking do. So, you know, this is not just about you have to remember, it's not about you buying a car. It's not about you buying, going to the casino and spending 10 grand. This is about you paying your fucking employees. This is about you putting food on their table. It's about, that's the part of being a CEO that people don't really understand is it's not just about all the glorified shit. You have tremendous responsibility to other people to run your business in a, in a responsible way. And collecting money is just one of those parts of

business. There should be nothing personal about it. You should never, and this goes for you guys who are employees too. You should never feel bad or weird or awkward about talking about money. You should never feel like that. You know, money's not a four letter word. Money is an essential part of, you know, life. It's an essential part of our existence. It's an essential part of your existence and you should never be afraid to talk about it. So whether it's with a customer or whether it's with a vendor or whether it's with an employee or whether you're an employee and it's with your boss, money's just a part of the deal, man. There's nothing weird you should feel about talking about it. That makes sense. So let me recap here a little bit. So the cash flow mistakes that small

businesses make or which are common is number one, they hear it takes money to make money. So they spend money on things that they don't really need to spend money on. Number two, they pay for things before they need to. Number three, on the other hand, they don't pay for things on time. So they end up getting penalties and fees and that sort of thing. And then number four is they don't have set policies in places for late or non-payment for customers, and they aren't proactive about getting customers to pay. Right. All right. So number five, a big mistake that people make is that they rein in spending in places that they shouldn't.

Okay, so like they freak out because cash isn't there, and they're like, Oh, I'm gonna slash all this shit. And instead of slashing things that they don't need, they slash the things that I spoke about a minute ago that are investments that are going to make a return. So what I mean by that is this, they'll say, Oh, you know, we're 30 grand fucking short this month. We got to make adjustments this month. So they'll go out and cancel all their fucking marketing, right? Because their marketing budget is 30 grand, right? Or they'll go out and they'll cancel, uh, you know, sales people's budgets for travel or this or that, or they'll do something that takes away something in their company that's actually producing a result or in the process of producing a result. And, but they'll do something that takes away something in their company that's actually producing a result

or in the process of producing a result and but they'll keep their personal assistant and they'll keep their leased bmw and they'll keep all the shit that makes their daily life comfortable and that's the shit that you should be cutting the fucking personal assistant the fucking uh you know the luxury car the the the expensing the travel uh all the shit for you so you start cutting that shit out first and you let these other people go out and do their fucking job so we can get out of this cash flow issue you know but many many many businesses make the mistake they'll fucking cut marketing they'll cut their sales staff they'll cut things that are actually going to produce a

result. And when in reality, what you should be doing is probably reinvesting more into those people, not just money, but time and energy to help them be more effective. So stop cutting the shit. That's an investment. Start cutting the shit. That's a legit expense. In your experience is the thing that usually goes first. Is it the marketing? Yes, always. Because people don't know how to market. So nine out of ten of the people listening right now that are in business, their biggest challenge is marketing. Their biggest challenge is getting attention. Because they've read all these fucking marketing books that are written 20 fucking years ago that make no fucking sense and they're not relevant in this time. Or they didn't read anything and they just do what their competitors do okay and you can never win like

that you can never win long term like that you have to build an identifiable stand on its own brand that brings people in gets them engaged makes them feel a part of your company and makes your company feel a part of their lives and makes your company feel a part of their lives and you have to build a real brand and that shit is not easy you can't just do that with uh you know copying what your competitors do you know it's like copying a test in fucking high school like you're you don't know the answers so you're looking over at the dude next to you and you're copying that motherfucker well you don't know if he fucking knows either you know what i mean and chances are when we talk about marketing he doesn't know so you're going out copying some dude that doesn't know instead of going out and teaching yourself

the skills that you need to learn to win and that is it that's a huge problem and people don't understand it because because they don't put the time into it so when it comes time to cut something they're not seeing an effective return on their marketing, so they just fucking cut it because they don't know what they're doing. You see what I'm saying? So like, oh, well, and sometimes it's working and they don't even know it's working

because they don't know how to track it. What do you say to the person who's like, well, you know, stands in front of the staff and says, you know, you guys just aren't doing what you need to do, so life's going to get a lot less comfortable around here. We're going to can the, I don't know, coffee machine, the free donuts, all that kind of stuff. Is that just cutting off your nose to spite your face? No. I mean, dude, I'm a big believer in making things very fucking tough on your employees when they're not doing their jobs. But there's a difference between making

things tough on your employees when they're not doing their jobs or making things tough on your employees when they are doing their jobs. And you're just too dumb to realize that they're doing their fucking jobs. And trust me, because I've done both. You know what I mean? It's very easy to blame everybody else. At the end of the day, it comes down to being responsible and taking responsibility for the company. If the fucking numbers aren't there, it's not their fault. It's your fucking fault. If it is their fault, it's still your fucking fault because you didn't stay on top of them, coach them, give them the skills that they needed to have, give them the, uh, the autonomy to do the job. There's a million things you could be doing wrong. But at the end of the day,

if the numbers aren't there, it's you, it's not them. So you've got to figure out how to make the numbers there. And you know, I'm, I'm all for, if I truly think that my employees aren't doing their fucking job, I will make shit uncomfortable. And they know that, but if they're doing their job, I don't even care if they come to the fucking office or do whatever, just do the fucking job. You know what I'm saying? So like there's pluses and minuses on both sides, but no, I'm, you know, Hey, you know, if we've got, when things are good, everything's good, you know if we've got when things are good everything's good you know making it comfortable is great but uh the minute things start to go bad you know i make them uncomfortable shit so they appreciate the times when it's good and they want to make good again so i don't have a problem

with that but i think a lot of people blame their employees for shit that's actually their fault i think a lot of people and dude you know i used I used to do this a lot, you know, I would I would just get so pissed at them When in reality I wasn't giving them the proper things they needed to do to do their job you know, and that's You know, that's years ago. But the point is i've been through that so I know what that feels like And it's you know, it's counterproductive because then they end up fucking hating you So you have a whole staff of people out there Trying to fucking do the job for you and you're just screaming at them all the time,

tell them how much they suck. That's not going to end well for you as a business owner. So you've got to be very, very in tune with what the real issue is and handle the real issue. And another thing I'll say too is like, let's say you have a staff of 20 people or 30 people or 40 people, and you've got three bad ones. Don't yell at the whole fucking team. Pull the three bad ones aside. You know what I mean? A lot of people do that too. And I've done that too, where I've yelled at the whole company for fucking, you know, 10% of the people that needed to get yelled at, so to speak, or smacked in the ass, however the fuck you want to say it. You know what I mean? Right, right. So I'm looking at the photocopy of your notes here, and I'm actually a little surprised that point number six is they don't take advantage of credit

cards because I guess the way I think credit cards are, at least in America, a very abused thing. And you're saying the opposite. You're saying that they don't take advantage of credit cards. There's huge benefits to some of the way that the cards are structured. For example, like a lot of my friends, they use a fucking black card to buy their inventory. All right. The Black American Express. Yeah. Let me tell you about the Centurion card.

Let me tell you about it. It's $5,000 a year. Okay. To even have it. It's made out of titanium. When you go to the bar and you're going to pay for a meal, you look badass. You throw it out, it clinks on the table, everybody thinks you're a fucking baller. But it gives you no real benefit other than what the Platinum card gives you.

And it costs $5,000 a year. So American Express has this other card called the Plum Card. The Plum Card is a cash back card. You can get up to 2% back on whatever you buy. Well, I don't know about you, but I'm in business to fucking make money, not pretend to be a baller.

So I would rather get 2% back for every fucking hundred grand I spend and be able to, at the end of the year, I'm able to pay multiple people's salaries out of the cash back I get off that car. And you know what? I don't get to go to the fucking, uh, to the bar and pretend like I'm a fucking baller and click my card out. Like I'm some kind of fucking big dick motherfucker, but I'm also paying two or three other, four other people's salaries off of what I spent on the car. So it's depends on what your priorities are, I guess. But my point being

is that there's tremendous benefits to some of the cars for small businesses and people don't, you know, you've got to be savvy when it comes to finances, because I don't know about you guys, but you know, I sure as fuck don't have all the money in the world. I know you don't either. So you have to pay attention to the things that you can utilize and 2% back on a year's worth of buying inventory. Think what that would do to your company. If you bought a million dollars with intro, what would you do with an extra 20 fucking grand? You know what I'm saying? Yeah. And I mean, as I'm thinking, I'm thinking, even if you don't spend the money, it's a 2% extra margin on your fucking product. Right. You know what I mean? So like, dude, you, you know, people just, they,

you just gotta be savvy, man. You've got to be aware. You know, I'm very lucky to have a great business partner who's very aware of these kinds of things. But, um, you know, whoever it is, whoever you deal with, whoever, uh, you know, you're in business with, you know, make sure you surround yourself with smart people, not people who just want to play business like that black card thing. Like when I see somebody with a black card, I fucking laugh at him. I'm like, you're a dumb motherfucker. You pay five grand for a fucking car. Don't be shit.

And anybody can get it. If you spent like anybody with a small business could, you know, could get one. Basically, if you're if you're a decent, you don't have to be decent sized. Right. It's just a it's a it's a fucking be decent sized. Right. It's just a fucking show off thing, right? I know that there are people out there who would say, oh, 2% doesn't sound like a lot. But like you pointed out, if you're spending hundreds of thousands of dollars. I pay for my whole creative team off my plum card.

Yeah. I mean, and the thing just goes down to the principle of really successful entrepreneurs say every little bit it counts it does every little bit yeah dude i have to pick up fucking pennies when i'm walking down the street people laugh at me you know i'm afraid that if i pass it like i'm sending the wrong message to the universe like fuck dude that means the universe gonna think i don't need any more money you know i pick up everything then my last vacation was all reward points yeah exactly flight hotel cruise yeah i mean it's people don't uh people don't um take it seriously and there's serious benefit to it um the next point i want to cover though

this is a big this is a huge point um because i really fucked this up in my business and I want to stress how important it was. So many of you guys, you wait until you actually need a line of credit or support from a bank or a financial institution to go look for it. All right. And let me explain why this is a bad idea. When you need money, you're risky. The banks see it. They see it in your books. They see it in your face. They hear it in your voice. They know you're fucking desperate and you need it and they don't lend people money that need it. Okay. So you have to be very aware and you have to be very prepared ahead of time and you have to develop a great set of books. Okay, that's a point.

That's that's point seven a. Okay, a lot of small businesses don't take books serious. If you don't have books, you don't even have a business. If you don't have a legit set of books, your business doesn't even exist. So make sure that you spend the money to get the proper reports. Learn how to read financial documents, learn how to read a profit and loss, learn how to read a balance sheet, learn what all the shit means and have your books ready to go all time. Because I didn't even have a set of books

in my business for, for like seven years and I had to go back and fucking recreate them. You know what I mean? Like we had to go back and dissect all, it was a huge expense. And, um, you have to basically understand that that shit is important because if you don't have a great set of books, nobody's going to lend you any money. All right. And, and people, people lend money on facts, not on what you're going to do or what you did. They lend money on what the fuck you have right now. And if you wait until you're in a situation where you need the money to get by, you're not going to ever get it. So secure the credit before you need it. Create a relationship with the bank, even if you're never going to fucking use the money. Even if it's a $10,000 line of credit, start a relationship. And then over the time of two, three, four, five years,

you can grow that $10,000 line of credit into a million dollar line of credit. But if you go in and say, I need a million bucks right now or business is going to fail, you're not going to get a million bucks because it's a risky thing. So you have to make sure that you're preparing yourself properly for the situations where you're going to need the credit ahead of time by securing it ahead of time. So what's your, what's your experience regarding the pros and cons of national banks versus local banks? Look, uh, we've only dealt with one bank and it was only for a few years. Uh, it was a small bank. Um, you know, they're a local bank. They were great to us. They treat us very, very well.

We used them for four or five years and then we ended the relationship because they sold. And then we haven't used one since. But so I don't have a lot of experience with big banks. A lot of my friends use big banks. You know, when you get into that mid market cap where you're anywhere from, you know, $50 million to $500 million in revenue, you're going to need to go to a big bank to get the proper line of credit. For most of the people listening now, they're going to be able to go to a small community bank. And this is why small community banks exist, is to help people like us. So you've just got to have your shit together. That's all I'm saying. Yeah. Makes sense.

And what I like about a small community bank too, is you can call and talk to the person directly. We had the person directly. We had the same guy. His name was Tony. We had him for the whole time we were there. He's still a friend of ours. He took care of us. He gave us good advice.

He taught us a lot of things. We're the anomaly, right? We've done it without much financing. A lot of people have to have it. And I would recommend building a relationship with a bank from day one. Like even if you have, even if you have nothing to get from the bank, go into the bank and meet with their loan officers and say, Hey, the commercial loan guys and say, Hey, look, I just started this business. I don't really know what it would take to work with you

guys, but I would like to become a company for you to work with down the road two, three years from now. So maybe I could come in once every quarter and talk to you about where our company is, show you our books so that they can begin to trust you. And so many people wait. They walk in off the street. It's the same as some dude walking up off the street to me and say hey dude i need 10 grand i'm like fuck you man i'm not giving you 10 grand it's the same thing the banks do you know what i mean they gotta know you so you know start that process proactively from the beginning it's a there's nothing bad that can come of it you will learn a ton of stuff you know i i have recently been reading up on the uh the story behind, I don't know if you ever watch anything. You probably don't.

But Chip and Joanna Gaines, they had the big empire. It was a real estate empire. It's Magnolia, and they've got a home improvement show on HGTV. But at one point when they were developing their real estate empire, they were short something like $100 thousand dollars for the project that they needed that was, that was supposed to be covered by the bank. And I was a little surprised when, as they told their story, basically their contact at the bank who they had a really good relationship with basically said, Hey, listen, I'll work with you. And I think maybe what people don't realize

is that there aren't these hard and fast rules. No, right. Exactly. Like there's a human element there. There is what, when you get into bigger banks, it becomes more rated because there's more financial restrictions. And, and to be honest, the commercial restrictions on, on business loans have gotten way more strict than they used to be.

But with small banks, there's all, if you can develop a relationship, like I'm talking about, there's huge amounts of flexibility that they can offer you. Like, dude, they don't want to lose their investments. So if, if you can develop a relationship, like I'm talking about, there's huge amounts of flexibility that they can offer you. Like, dude, they don't want to lose their investment. So if, if they, if you have a hundred thousand or $200,000 line of credit with a bank, and let's say you're out on it and you're short and you go to them and say,

Hey man, uh, we're, I know we're out on loan, but we need like another 200 grand because we're going to do this, this, and this. That's, that's what they, that's what they essentially want. And that's how they want to grow the line. They don't want to grow the line when you don't need it. They want you to use the money. They want to earn the, you to earn their trust. They want to understand your business and they want to know if they give you another 200 grand, not only are you going to fucking use the 200 grand, uh, the 400 grand that you now have, but you're going to go out and you're going to come back in a year and your revenue is going to be triple and you're going to need another $200,000. That's what they want.

But it's the opposite of what people think, right? That's how they make their money. So they just want to do it without you going out of business. Right. But the success of that is driven by, well, obviously driven by the success of the- All the things we talked about. But you have to start the relationship early. Yeah, you got to have the relationship. Right. But the success of that is driven by, well, obviously driven by the success. All the things we talked about, but you have to start the relationship early. Yeah, you got to have the relationship. Right.

Definitely. So another thing people do with cash flow to fuck up their businesses, and there is two sides to this, and I want you to listen very carefully. The first side is they hire employees before they need them. And I'm going to preface this. They hire non-essential employees. Okay? This goes back to the playing business shit. They hire a fucking secretary. They hire the, do we still don't have a fucking secretary to answer the phone here? You know what I'm saying? Uh, they hire a cleaning crew. They hire this instead of doing that shit themselves. Okay. So they hire non-essential employees too soon, and they hire essential

employees too late, all right? And essential employees are this, people who sell your product, people who service your customers, okay? Frontline people, all right? You have to look at them as an investment like we talked about earlier, because when you put people out there, and let me just, you know, preface this with, let's say you're a company and you put people out there and let me just, you know, preface this with, with, uh, let's say you're a company and you're doing outbound sales out of your, uh, out of your office. Okay. And you have three sales reps and let's say each sales rep sells, you know, let's say you do 60 grand a month. So they're each doing 20 grand. All right. You're not going to get to a hundred grand. If those people are doing eight to 10 hours of work a day and maxing out at 60 grand until you add people in.

So what I'm saying is people will say, well, when we get to 100 grand, we'll add three more people. Well, look, you're not going to get to 100 grand without adding three more people. So you got to look at it as an investment. And a lot of people don't do that when it comes to people who sell for them or people who serve as customers, customer service reps, real ones like in not fucking India. I'm talking about in America that can actually help your customer. Those people are just as important as your actual outside sales rep because they could provide such a great customer experience with your existing customers that those customers will go out and organically share the story, which will help grow your transactions. You see what I'm saying? Yeah, that makes sense. So, uh, the both sides of this don't

hire non-essential employees until you actually fucking need them. All right. So let's use this example. Let's say you're, you're to a point where, uh, you know, you have the three sales reps and they're all instead doing 60, they're only doing 40 grand a month. So they have a little extra time to clean up the office. So you don't have a cleaning crew, right? Um, that's how you should do it. Okay. For a number of reasons, why it makes sense financially to, it teaches everybody discipline. It teaches everybody to be humble. It teaches everybody that this is a team effort. There's a lot of cultural reasons there that I'm a big believer in. Um um but let's say you got those three people

and they're doing 60 grand and they're working fucking 12 hours a day busting balls and you still got them cleaning the office well now it becomes a math thing right do you want the fucking office clean or do you want the sales and clearly the sales are more important so you can either add more sales people in bring their volume down and can still clean, which is actually what we do. Because I believe in the culture of benefits of cleaning the office. We don't have a cleaning staff. Or you can add a cleaning staff to relieve the pressure off these people and let them do their jobs, which is what most companies do. I'm just kind of fucking weird because I believe in getting your hands dirty.

Well, we used to, but we reversed it. Yeah, we did. No, it goes back to what Vaughn said about making people comfortable. We used to have a cleaning crew and, and, and these motherfuckers in the office got too comfortable.

So I fired a cleaning crew, made everybody go back, clean the office. That's, I mean, it is funny that they used to also have personal fucking parking spots out here. And I pulled up one day and fucking put them all in the back of my pickup and drove off without saying shit. Cause everybody thought they were fucking celebrity because they had a

little fucking sign out here with their name on it yeah you know what i mean it's kind of one of those paradoxes that you when people work hard they get to a level where they they feel like they've earned comfort but then when they start experiencing the comfort they get lazy they get right and it undermines that's right yeah right. Yeah. So, all right. I don't even know where we were. You had, well, let me recap. Okay. Let's see.

Starting with point number five was they rein in spending in places they shouldn't. Number six is they don't take advantage of credit cards. Number seven is they wait until they need credit to secure it. Number eight is they hire employees before they really need them. Or you said the flip side of that is that they don't hire employees that they really need soon enough. Right. And then number nine is your next point. Okay. They aren't innovative in finding sources of cash, okay, or avoiding expenditures in cash. All right, look, and what I mean by this is this.

If you're short on cash, you're driving around in your brand new car, you're a fucking idiot, okay? Sell your fucking car, invest your money in your business, buy a cheap, reliable car, and pay your fucking dues like every other motherfucker in the face of the earth that's built a successful company. People right now, they see, you know, they don't want to take a step back. Gary Vee says this a lot. He talks about people, uh, and I agree with them a hundred million percent on this point. And you know, I don't agree with everything he says. I love Gary. He's my boy, but this is something I 1 million percent agree with is that you take a fucking dude, you take your step back, you make yourself uncomfortable and you fucking put money where it's going to make money. All right. It's a lot of people like even me, you know, I'm into cars. I like the flashy shit. It's just my personality. You know, it's the shit I dreamed

about my whole life. I'm in a position where I can afford to do those things. So they see me doing those things and they think that's what being an entrepreneur is about. Well, let me tell you, I spent far, far, far, far, far more years driving hunks of shit, living like a fucking bum dude for years and years and years. I had, I had, I don't even know how many more employees, all of them make more money than me. All of them. That's what being a CEO is about a real CEO. Okay. So you have to take your step back. You have to understand that like, dude, I'm gonna cut the shit that's non-essential

and I'm gonna fucking figure out how to make some cashflow happen. And that's part of the journey. I get questions all the time. I was looking through some of the questions for the Frisella Factor YouTube show and these people are like, oh, well, I don't wanna move out of my,

I just got to this new house and now I'm having trouble with money. Well, fucking move out of it, motherfucker. You know, cause that's what it takes. They don't want to take a step back. They don't feel like that's the right. And you know what? Uh, that's just part of being an entrepreneur. It's part of being a CEO. You're going to have to be the first guy to make sacrifices and you're going to have to be the last guy to reap the fucking rewards. And that's just the way it is. You know what I mean? Because if you're the dude driving around a brand new car and none of your other motherfuckers can even afford to pay their fucking rent,

guess what? They're going to fucking hate you. That's what struck me about your story, yours and Chris's story, that early on you're strapped for cash and you're not even living in a really run-down apartment. You're not living in an apartment at all. No. Like you're staying overnight at people's houses.

Yeah, but, Vaughn, I'm telling you, dude. Showering in the gym. I tell that story, and people think it's bullshit. Right. You know what I'm saying? I tell people that, and they think it's bullshit. They think it's made up. Because, like, dude, every motherfucker on Instagram right now

has a quote-unquote story of rags to riches. I'm going to tell you right now, we live that shit. Now, everybody else can fucking say whatever they want. You know, I see these guys tell you right now, we live that shit. Now everybody else can fucking say whatever they want. You know, I see these guys like, Oh, 14 months ago I was living in my mom's basement and I'm a millionaire. Bullshit. You know what I mean? We did it. We lived it. I got people who, I mean, numerous people who know us as that. And, uh, you know, we're still doing it. And that's why, you know, you could tell that we really did that because both him and I are scared shitless that we're going to lose it every fucking day, you know, and I don't want to go back to

that, you know, and that's a great thing. That's a great thing, dude, to have that hunger, to have that intensity, to have that fear that you're going to go back and be broke when you've already started to do some good things. What do you think makes you want to do better? What do you think gets you up in the morning? Because when you start with somebody else's money and you invest it and you turn it into something, you never really experienced those hard struggles. You never really experienced that fucking grind, the real grind. And because of that, you're never really afraid because you don't know what it's like. And that fear is the biggest driving force that I could even comprehend at this point in my life. And I hope that it stays that way for my whole life. You know, I don't want to ever be comfortable. Like, dude, I enjoy the nice shit. Like I enjoy the

flying on the private plane and driving fucking Lamborghini or whatever. I enjoy it, but I don't ever take it for granted. I don't ever say this is my life. Like every day I get in my nice car, I drive somewhere, I go on a trip and I meet some successful people. I try to step back and be like, God damn, dude, if they only knew I'm just some broke ass dude from South St. Louis County. You know what I mean? Like that's how I feel about myself, but I don't want to ever lose that. You know? Yeah. No, that's important. Yeah. I'm just belaboring the point here, but what year was it that you guys started? 99.

So 99. So what do you think the average apartment costs in 99? Down in Springfield. Our first apartment that we had was like 400 a month or something like that. So 400 a month. For a three bedroom. Right. For a three bedroom. So 400 a month, you know, probably a hundred, a hundred dollars in, in utilities a month. For a three-bedroom. Right, for a three-bedroom. So $400 a month, probably $100 in utilities a month.

Yeah. I mean, that's what? That's over five, six grand a year. Right. And again, people say, oh, five, six grand. But they were doing a manufacturing business in a retail store. That's a lot of money. Yeah.

Or it's just every little bit counts. Yeah, but dude, we lived like that. But we still run our business like that. People don't understand that. Because they look at it like, let's just every little bit counts. Yeah, but dude, we lived like that. But we still run our business like that. Like, people don't understand that. Because they look at it, like, let's just say, like, let's just say, you know, I've got fucking, like, 10 cars now. And they look at, like, let's say the Aventador. And they say, dude, that's a $600,000 fucking car. And they're like, you know, they think of it in their terms.

So they're like, God, dude, to afford a $600,000 car, that would take all my money. So I'm sure that's taking all his money. No, I live very fucking responsibly. You know what I mean? We're doing very well. So what I spend money on, I know it doesn't look like from the outside, but in relative terms, I'm very fucking responsible with my money. You know what I mean? So we still live in the same way where we're not spending not even close to what we make and we're taking most of our money and putting it back in our company. It's just that our company's gotten so big that the little money that we do take is a lot more money than most people fucking make.

It's relative. Right. It's all relative. So you know what I mean? You have to think of it like that. No, absolutely. So this is related a little bit, but one of my favorite posts that you ever posted in the last couple years was you posted something about it. And I don't know if it was when you were still doing, what was that social media platform? Periscope. Yeah. But you posted the fact that you got a speeding ticket. It was like a $200 ticket. And some guy posted, and I don't blame him, but he posted like, no big deal, eh, Andy?

And your response was, yeah, it's a $200 parking ticket. And 200 bucks, 200 bucks is 200 bucks. It doesn't matter if it was when you were starting out or now. And again, the longer I'm around you and I confess I've had to learn this in my life, but the longer I'm around you, people who are wealthy and stay wealthy, they don't look at it. Oh, it's only $200. Right. They put a name on everything that they spend. Right. And if they had to spend $200, like they know, it pisses them off. Well, that's actually a great transition in the last point, which is, you know, and it's, it is the most important point. Okay. You've got to know where every dollar is going and this is basic shit. Right. to know where every dollar is going and this is basic shit, right?

I know where every dollar is going, but dude, it's amazing to me that when I sit down like with other entrepreneurs or young business guys or young business girls, and I start asking them questions, they don't even know the basics of a cashflow report or, uh, you know, or where they're, what, how much they spend on marketing or how much they spend on uh payroll or like dude i could tell you to the fucking pay period how much i spend on payroll i could tell you to the fucking penny what i spend on marketing every week i dude when i look at my fucking cash flow report that i get every single morning it's like the matrix like i fucking see shit that people would never see i can look at our cash flow report because I've been doing it for 17, 18 years now. And I could tell what my, I could tell what questions my fucking sales reps are asking when they're talking to people. I could, and I could tell what, cause I could tell what products they're selling and not selling. I could tell if they're following up with their customers. I can tell all kinds of crazy shit by looking at the numbers. And so you have to start discipline yourself to get yourself the proper reports on every single day basis.

Know where your money's going. Know what it's doing. Things are going, and you'll have, you'll start to develop this amazing, like 3D comprehensive vision of what's going on in your company to where you don't have to go and sit with your sales reps to find out what they are or aren't doing. You could just see it on the report. And that's what you need to get to. So, you know, a lot of people discount, you know, oh, you know, that was only 50 bucks or we went to lunch and that was, that was, you know, a hundred bucks or we did this and that. And they don't have the discipline to really learn the numbers. And I think a lot of people like, I think a lot of people would be surprised like how, how much of

a numbers person I am. Like I, I'm, I live and die by the numbers. You know what I mean? Uh, and I didn't learn that shit in one day. I learned it a little at a time over the course of time. And so even if you're just starting out and you, you, uh, are selling two or three or four items a day, you need to develop reports. Cause if you could develop the reports now and dude, you, they're going to, people are going to say, well, where do I develop these reports? Dude, build out an Excel sheet, learn how to use Excel. Excel is an amazing tool. All right. Um, as you grow to a midsize company, you'll have, you'll have a company come in and help you develop custom reports and software. But I mean, those are

expensive. You know, I think our last software was over a million dollars, but, but until that time we were doing on Excel, which was free. So don't let the lack of understanding how to do this, stop you from doing it. Build out a basic Excel sheet. Oh, you don't know how to use Excel. Well, there's this amazing tool out there called YouTube. It'll teach you all you need to know about Excel. Don't you hate math too? I do. I was terrible at math. Like when I, when I, on my ACT, I scored above 30 on every single category except math. I've got a 19, but that's because I rely too much on reports and not enough on actually,

I rely too much on technology. But the point is, is that, you know, I love math. I love math when it's money. But if it's math or other shit, I don't like it. You just like counting Benjamins? Right. Right.

Right. So, you know, guys, take that last point serious. know build little reports do them yourself you don't need to hire somebody to do that and if you have questions you can usually find the answer through youtube and just start building through excel and eventually you'll be able to create these reports for your company to look and you'll be able to see everything that's going on and and you it's going to make you a better business person. Guys, if you're not following Andy yet on Instagram, he has a newly minted verified account.

Yeah. So, at Andy Frisella on Instagram and Snapchat. Are you still MFCEO-1 on Snapchat? Yeah, on Snapchat. And then Facebook.com forward slash Andrew Frisella. That's right. All right. And make sure you go to AskTheMFCEO.com, submit your questions for Frisella. That's right. All right. And make sure you go to askthemfceo.com,

submit your questions for Frisella Factor. We've got a couple of shows already taped. We're trying to build up a little bank before we start putting them out. That's going to be, well, it already is for us a lot of fun. So if you have a question, like we don't really do a Q&A segment on the podcast too much. So if you have a question for us, if you want to know something, you know, this was a good podcast on practical knowledge. If you have a good practical question, if you have a mindset question, whatever question, we're going to answer them all on the show. So askthemfco.com, check that out. And guys, as always, you know, I don't monetize this platform. I do this because I love it. And I'm not saying I won't monetize it at

some point. I just don't now. And you know, if you found this podcast valuable, uh, please, you know, reciprocate that value by bringing us at least one friend, sharing the podcast, maybe make a post for us. Uh, just do something to help us grow this because the reality of what we're doing here is that we're teaching the shit and helping people do things in a realist way. Okay. We're taking the real things for real experience and teaching people how to grow themselves and their businesses, their financial income and the rest of their lives through the principles of entrepreneurship. So if you know someone who would enjoy the podcast, you know, turn them on to us. Is that it?

I got nothing to add to that. All right, guys. Thanks so much. We'll talk to you next time.