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Cash Flow

That brings us nicely to this, cash flow, cash flow, cash flow, why do I think cash flow is such a dramatic thing? Because it completely makes or breaks a business. It is so much more important than I think a lot of creative entrepreneurs know. Cash flow is everything. It really is. A cash flow crunch can be a cash flow disaster and a business ender. Businesses go out of business, not because they aren't making money, but they can't get their hands on it. You can have an incredible amount of receivables out there, but if no one's sending you the cheque for what they owe you, you can't pay your rent, and you have to leave the studio space that you just beautifully put together. Cash flow comes up time and time again, and I've noticed that in my business. I have noticed that there are times where, I've mentioned Beautiful Together, I spent a bulk of this year volunteering happily on purpose, my choice, love doing it, so meaningful to me. But I noticed after that and the studio build out ...

and the coffee shop, somewhere around the middle of the summer being like, oh it's comin'. I better ramp up the revenue again. 'Cause you can have these projections of where you are from a cash flow perspective, and do the math months out and say, you know what, if I don't change something right now, I'm gonna be in trouble in November, December, January. Having an eye towards cash flow and realizing how it's always moving. Money is always moving, and it's gonna move through your business left right and center, but it's the idea of having an eye on what's coming in, where it goes out, and how do you maximize what you have as soon as you can get it, as soon as you can get it. Because it doesn't matter how much money you make if you can't access it when you need it. It doesn't matter! If I can't get it when I need it, I've lost the opportunity, or the studio, or the gear, or anything that was keeping me afloat, because it's out there, but I can't get my hands on it. And that makes a difference. So some of the things we do in our business that I think really make a difference is, first and foremost, I talked about session fees. We collect session fees up front, and usually well in advance of a shoot. So all things being equal, I have my $500 session fee in February for a shoot in September, and it keeps happening like that as we go. I'm committed and dedicated to that, I will make sure that I more than show up for what they paid for, there's never a question of that on my end, but if I waited 'til August, September to get that money, everything else, I use it to secure the shoot and people value the shoot better, but if I waited 'til then, I'd have a big shift in my business from a cash flow perspective, away from where I want it to be. I want money upfront, early and as full a payment as I can get, because I wanna have that for investments as I go along. The difference between having all my money come in in February and March versus September, October changes the entire strain of the year. I wanna get money up front and soon as I can, which is why a lot of businesses, you see that out there, a lot of people have sales, and say, but if you pay up front, 5% off. Because they know it's a lot smarter to have business in the bank earlier, 'cause you can access it then, and you can ride out other issues that you might have otherwise. The other thing is invoices and receivables, try to never have to collect on something you've already given. You always want all the money before you give them the product, and you can shape your business accordingly. But if you give them the product and you just wait to get paid, you can be in for a world of hurt, and oddly enough, we've had this happen a few times now. By and large our rule's the same, you pay and when everything's been paid in full, you then get the product, but we've had a few times now where just for one reason or another, randomly, I mean a few times over 15 years. So very little, but almost every time, they got the products and we didn't have the money in, we never got the full money. I don't know if it's just a crazy coincidence or what, but it is a rule of thumb, you don't get the things until we get the things. I won't order prints or framed pieces or canvases, or anything like that until I have at least half up front of the order. I won't place an order until I have at least half up front. Not that I think that my clients are bad or not out to get me or gonna welch on me, or whatever the case might be, it's because I need to think about cash flow so I can keep my business in business, so I can keep being there for them for the next time we wanna do a shoot. So cash flow is massive, and it's a really big deal. There's ways to, like I said, make sure you get money up front, but you also have to think about when you pay for things and how you can tier out your expenses to pay as little as possible until you absolutely need to. So receivables, if somebody wants my money and I owe them, I always try to push it back as much as possible. Great example is the coffee shop, we work with a lot of local bakers who bring foods in, they're so good, the food, but they bring food in and we get an invoice. And right away when we started, and this is the same business is business is business, right away when we started, we wanted to have a good credit relationship. So we paid immediately right when they dropped things off. Over time though, we said, we've gotta get our books in order, we've gotta be a little more streamlined about how we do this, we're gonna switch to 14 day. So you're gonna drop everything off, we're gonna get it, you will get your checks paid in 14 days from now, and they do, consistently we do, but we also negotiate vendor by vendor what the best terms can be. So one of our vendors is 100% on credit card, but initially they said we're gonna charge you fees, and said okay well if you're gonna charge me fees to use a credit card, then we're gonna go back to check, but now it'll be 30 days. It's like negotiating in a way that allows you to get what you want, but is respectful to the person that you're working with. So we went back to credit card, but zero fees. And think about that, that's like playing defense, time and time and time again. What is every expenditure that I am paying for, and how can I set it up from a cash flow perspective so I'm getting money early and I'm paying late, but also being respectful to everybody involved? One of the coolest transitions in our business was kind of an accident. When I started transitioning most of my sales to my studio director, I'd always said, okay that'll be half up front, and we'll give you the other half when you come, we'll take the other half from you when you pick up the products, but before you walk out with them. And so that was the way we did it, and then one time, she just randomly said, you can pay half up front, or if you wanna pay it all in full and not worry about it later, and that one line, like at this point, half of our clients pay it all in full up front. And that might not seem like much, but now we have a six to eight week turnaround on when you place your order and when you get your products. So now all those funds are coming in two months earlier, which when you're going in through your dry spells, coming in through the portrait and going into that first quarter of the spring, January through March, when it's historically the lower amount for portrait photographers, you now have all that cash flow built up from a really busy season. Do you see how impactful that can be? Alright, so I do have a question. I'm not sure if you're going to get to this, but Kristen Clancy had said, so how do you pay yourself? So I guess kind of that bigger question of-- No, that's fair. You've got this business, you're new, but how does that actually work when you're paying yourself? Yeah, so you hear it all the time from business entrepreneurs, pay yourself first. When I first went into business, I paid myself last. I made sure everything else was covered, and if there was anything left over, I tried to take a little bit of it. And that's how I did business, and when I finally got into a studio and I set it up, I said okay, I'm gonna pay myself first, 'cause I was paying my employees. I'm gonna pay myself first, but I'm gonna do a smaller amount, so I don't tax myself from a cash flow perspective, I don't find myself in trouble, and anything that's left over, after I know everything's not only paid now, but the visibility to what's coming in next, then I'm gonna give myself a bonus, and I'll do that every pay period. And I did that for years, and then things would get a little more secure, a little more solid, revenues were coming in better, the cash flow was better, expenses were better managed, and then I gave myself a raise, and I have myself a raise. And I'm at the point now where I will have the payroll, my salary goes out of payroll just like everybody else's, and based on where we are in the cycle, I'll take either quarterly bonuses or end of year bonuses, or sometimes every two weeks again, based on where we are. And so that's, I always pay myself, because that's I think even just symbolically, you wanna feel like you're makin' money, you do. And even if it's a small amount, especially if you're paying payroll anyway, it's worth having it land in your account ever two weeks. If it's something you're moving the money, move it into your account first. Magically when you pay yourself first, you still, usually, can pay everything else off, but you're thinking more about what to pay and how to pay it. So if maybe I might pay a vendor the second they deliver something, speaking of, when you're working with vendors, try to get every vendor on credit card with no processing fees, as much as possible, moving away from cash and checks, and giving yourself a 30 day window until you have to pay. We pay everything, our credit cards off in full every 30 days. Paying a credit card fee or an interest rate kills me. I think it's just unnatural, it's such a waste of money. If you can find ways around it, we'll talk about that later when we get to loans. But try and have everything on credit card, 'cause everything's trackable, it's so much easier frm an inventory perspective. And you can see where you're money's going, you can run a spreadsheet so easily. It's a lot easier than trying to track out all these other ways of paying for these. But when you pay yourself first, you look at what's left, and if you can't pay X amount of framer for another week or to weeks, you negotiate that, and you go along, out of respect to everyone you can go along, but otherwise you would've filpped it, you would've paid them in full early, and then you woul'dve never gotten your money. That pays time and time again. That make sense?