Let’s talk about working capital. What exactly is it, what can be included, and why is it important to your bank and bonding company? We’ll answer those questions and provide some tips to understand and increase your working capital on this week’s episode.
Topics we cover in this episode include:
- Definitions to know: asset, liability, and current
- Why working capital is important to bonding companies and banks
- Working Capital Ratio
- What bonding companies take into account when adjusting working capital
- How to increase your working capital at the end of the year
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[00:00:00] Rob Williams: Welcome to the Contractor Success Forum. Today we are taking a deep dive into working capital for contractors, because working capital is the lifeblood of our business, baby. We here at the Contractor Success Forum are here to discuss how to run a more profitable, successful, meaningful construction business.
And who do we have with us? We have Stephen Brown McDaniel-Whitley Bonding and Insurance Agency. And we have Wade Carpenter, Carpenter and Company, CPAs. And I’m Rob Williams with IronGate Entrepreneurial Support Systems and authoring the Pumpkin Plan For Contractors, which we were really stressing cash flow in all that.
[00:00:53] Stephen Brown: Today we’re stressing working capital.
[00:00:55] Rob Williams: Yes. Well working capital, which is, I, I think cash flow when I think of working capital, because you need working capital for cash flow. So.
[00:01:03] Stephen Brown: Well, first of all, I need you to know Wade, what is capital and how do you make it work?
What is working capital and why is it important?
[00:01:09] Wade Carpenter: Okay, well, let’s define what working capital is and why it makes a difference. Essentially it’s a measure that people like Stephen or a banker would use in evaluating a company, as well as you should probably think about evaluating your own internal company from this metric. But working capital is essentially a company’s ability to meet their short-term obligations, pay their bills. You know, It’s the amount that a company has to pay their expenses. That’s the simple definition.
[00:01:41] Stephen Brown: Mm-hmm.
[00:01:42] Rob Williams: I feel so strongly about this, that in pumpkin Plan For Contractors, the book that I’m writing, for us as contractors, I mean this working capital is everything. Especially if we’re bonding in things. Because you’ve gotta get the bonds and I’ve added that into my version.
That’s one of the differences of Pumpkin Plan for Contractors versus the other — because if you’re gonna grow a colossal business, and it’s, if you look at Jim Collins and he said the things that made a business go in a long term were the people that had those resources to quote, get lucky. So when you get lucky by having the right capital available to take advantage of these things.
So to me this is so important. And let me add one more thing. The motivation for this, when we were in our coaching business, coaches of all industries all over the world, were at this meeting with Verne Harnish. And Verne, well, first he said, oh yeah, the first thing you do is start with your people.
And then somebody said, well, what about the cash? I thought we started with the working capital drill, which we call the power of one or cash flow story, but it’s about working capital. He said, oh, well of course we do that first. I just thought that was like given. So yeah, you do really gotta know where you are in terms of your working capital, which you guys, you’re hearing this word and I bet we have a lot of guys that don’t even know what we’re talking about when we hear working capital. So what the heck does that even mean?
[00:03:08] Wade Carpenter: Well, yeah, let’s get down on basic level to start. And I won’t have to throw out a few definitions first, but the simple definition, the calculation is current assets minus current liabilities, and we’ll get into what those terms mean in just a second. But you know, if you have more current assets than you have current liabilities, you have positive working capital.
If you have more current liabilities than you have current assets, that means you have negative working capital. So if we can, let me just quickly kind of define those three things really quick.
What is an asset?
[00:03:43] Wade Carpenter: First of all, asset. What is an asset? Asset is something you own. It’ll be something like cash or accounts receivable, or if you have inventory. It also includes things like fixed assets, your, you know, desk and computers and machinery and equipment, vehicles.
What is a liability?
[00:03:59] Wade Carpenter: Now we’ll come back to– not all of that is included in this calculation. But let’s start with what’s a liability? Well, simple definition of liability. Stuff you owe. Assets are things you own, liabilities, things you owe. So things like accounts payable, bills you owe to your suppliers, your subs. You know, you may have things like payroll tax liabilities. You may have credit cards, you may have notes to the bank, lines of credit, those liabilities that you owe.
What does current mean?
[00:04:29] Wade Carpenter: And the last definition I need to clarify is what is the definition of current? Current means? It is going to become cash or use cash within 12 months. So things like cash and accounts receivable and you know, inventory, but not things like your truck and your equipment. That stuff is not stuff that you’re gonna expect to convert within 12 months. The liability side–
[00:04:58] Stephen Brown: Liquid assets. What does that mean?
[00:05:00] Wade Carpenter: Yeah. And we’re gonna get into that too cause I wanna talk about what the difference between, I mean, taking a deep dive on this one subject, I wanna talk about how a bonding company would look at it. I think Stephen can chime in on this. Versus a banker, and I think a lot of times a banker looks at things very differently as well, but.
[00:05:20] Rob Williams: I have a question for you on that because I think the way I learned about the current part, and I guess it was the way our bookkeepers did it when I was in my twenties and thirties, is we did it by what was current. I thought it meant in the calendar year, not 12 months, because that’s the way I guess everybody did it.
And I guess they probably just had a process back then that they would switch everything at the end of the year because they were only worried about the financials being right the last day of the year. So I always thought it was the current year, not 12 months. So will you clarify that? Is it 12 months or is it current year?
[00:05:56] Wade Carpenter: Well, it is 12 months, so I–
[00:05:58] Rob Williams: We didn’t do our book that way, so that’s interesting for–
[00:06:01] Wade Carpenter: Well, if we needed to give Stephen a statement in the middle of the year–
[00:06:05] Rob Williams: Yeah, I guess we just never did that.
[00:06:06] Wade Carpenter: We should, and again, coming back to things like notes payable, you know, a note payable, you may not have all of that due within one year. What that would be would be things like, you know, the principle that is due within one year, not the payments.
And there’s pros and cons and you know, things like that. But I see all the time where CPAs will kind of ignore that and they’ll just leave it all long term and then we go and give it to a banker or somebody like Stephen and then they start drilling into it and say, oh, well this is, this is really current, so we’re gonna have to throw this out. And it makes them not trust the numbers.
[00:06:45] Stephen Brown: We don’t–
[00:06:46] Wade Carpenter: Stephen, I–
[00:06:47] Stephen Brown: CPA when we have to do that.
[00:06:48] Rob Williams: That was the theme. I guess I keep referring back cause I’ve been at a three day retreat with coaches on there and we did have a lender talk to us and then we had a buy sell thing. And boy, the theme of both of those is if your books are wrong when you bring this stuff, you better know it and be able to say it before they tell you you. Because maybe you don’t wanna make these mid-year entries and understand that that’s tough, especially if you’ve got an outside person that you hired to clean these things up, understand these–
[00:07:19] Wade Carpenter: Well, it’s If you hired somebody to do this for you, it is part of their job to–
[00:07:24] Rob Williams: Yeah. Well see–
[00:07:25] Stephen Brown: Clean it.
[00:07:25] Wade Carpenter: Adjustment.
[00:07:26] Rob Williams: They only hire them for one day a year. You know, a lot of these guys.
[00:07:28] Wade Carpenter: Well, that’s true, but.
[00:07:30] Rob Williams: And then they don’t know. The contractor doesn’t know. And so a big red flag goes off to these lenders. Or if you’re selling your company, that’s even worse, but–
[00:07:40] Stephen Brown: Yeah.
[00:07:40] Rob Williams: Won’t know what you’re talking about.
[00:07:42] Stephen Brown: This is why you hire someone like Wade, Rob.
[00:07:45] Rob Williams: Yeah. Yeah.
Why working capital is important to bonding companies and banks
[00:07:46] Stephen Brown: He knows what the bonding company and the bankers want to see. But he also knows what needs to be represented for you to see. That’s more important. This should be important to you. Working capital is everything. You know, we talked about giving these old business terms sexy, new names like you know, Ferrari Flow or something.
I mean sexying it up a little bit. But capital that is working. Capital Cash. Cash. That is working. Working for who? You! You, the contractor. Why do banks care? Why do bonding companies care? Because they’re extending credit to you. So you do it for you. Sorry to get passionate guys, this is huge topic. Wade, thank you.
[00:08:26] Wade Carpenter: Well, that’s where you were. I was hoping you would go with this because for a–
[00:08:30] Stephen Brown: I’ve been just sitting here, just wound up, Rob. I–
[00:08:33] Wade Carpenter: Okay.
[00:08:34] Stephen Brown: Into a frenzy. Alright, real quick. A bonding company, a general rule of thumb, I’m gonna look at your financial statements and I’m gonna see if they’re done correctly by a construction oriented CPA. Are they percentage completion financial statements? Do they have a Work In Process report? Are there over and under billings? That’s number one. Number two, I look at the working capital. So I look at the current assets minus current liabilities. And Yep, wade, you said we were gonna talk about both those in more detail, but current assets being cash, anything that can be converted to cash is what the bonding companies look for.
[00:09:12] Rob Williams: Which would be inventory and Work In Progress, mainly.
[00:09:15] Stephen Brown: Well, inventory doesn’t count as cash.
[00:09:18] Wade Carpenter: Well, that’s, that’s the point I want to get into in a minute. Because–
[00:09:21] Stephen Brown: Yeah, they might give you some credit for it, Rob. But it’s, you know, if you have a cash value life insurance is considered cash. But anyway, say that you subtract the current assets from the current liabilities, and that statement shows there’s a hundred thousand dollars in it.
Well, bonding company conservatively would give you what’s called a 10% case, or you divide that by 10. So a hundred thousand dollars working capital will get you a million dollars worth of. Okay. That’s a very conservative look at working capital.
[00:09:52] Wade Carpenter: Yeah, that was one of the two rule of thumbs I was hoping you’d throw out, is essentially 10 times your working capital or 10 times your equity is one of those things that, you know, it’s, it is not set in stone and it depends on facts–
[00:10:06] Stephen Brown: No, it’s not. It’s there, if someone needs a bond and you see it’s there and there’s net positive, net worth in the company, and there’s a good statement, then I’m off and running getting your bond.
[00:10:17] Rob Williams: Yeah. And so, so you guys listen to this because for a decade I thought it was 10 times the amount of cash you had in the bank account because that’s what my contractor buddies told me. Nobody official told me that. And I couldn’t believe you guys bonded me because it was all these receivables that–
Working Capital Ratio
[00:10:35] Wade Carpenter: Well, so if we can, you know, the other rule of thumb I wanted to throw out is the working capital ratio, which is essentially your current assets divided by your current liabilities. And generally speaking, 1.4 to one is generally what I tell people is a healthy working capital ratio.
So I wanted to kind of explain what that working capital ratio is and maybe talk about ways you can manipulate that one way or another, and how that can be, you know, twisted but also, you know the, I wanted to also kind of spend some time talking about how Stephen would look at working capital versus a banker would look at working capital. So if that’s okay, let me kind of jump into the working capital ratio real quick. Essentially, we got current assets divided by current liabilities and just for easy math, let’s say we had $200,000 of current assets, a hundred thousand of current liabilities. We have a hundred thousand of working capital, but if we divide 200,000 current assets by 100,000, that’s two to one ratio, right? Now–
[00:11:45] Stephen Brown: That’s more than the 1.4 that you said was healthy.
[00:11:48] Wade Carpenter: Yeah, but let’s just say we took $10,000 at the end of the year and paid down our payables by $10,000. So now current assets is at 190, current liabilities is 90. So if we do the working capital ratio, your working capital ratio actually jumps to 2.11 times. And hope you see the, this can be manipulated. But I would recommend you talk to people like Stephen and a lot of times they wanna see so much liquid assets, you know, cash in the business at the end of the year. So we can kinda get into some of the details of that. But does that make sense guys, how we can kinda manipulate that?
[00:12:33] Rob Williams: Yeah, Yeah, it really does. And I, I’ll talk about some things more specifically, but I want, hopefully you’ll hit them first. But I’m making some notes, like some of the inventories and then the types of loans.
[00:12:43] Wade Carpenter: Well see, another trick I used during Covid and PPP when they were giving out these EIDL loans, these things were kind of a once in a lifetime thing, which if contractors realized what they could have done with it, and I had some contractors do it, is say we had that 200,000 and 100,000, but we got another a hundred thousand dollars EIDL loan, 30 years to pay it back 3.75% interest.
Well, so we stick that extra a hundred thousand dollars in the bank. So we’re gonna pump up– the example I gave you before, 300,000 of current assets. But our current liabilities are only gonna show what’s due in principle within 12 months. Well, that may be a thousand dollars. So in that case, at 10 times the working capital ratio, you raised your bonding capacity by a million dollars, assuming you had the equity to cover it.
[00:13:38] Rob Williams: I’m glad you said that, that’s what this lender was talking about. And he said he can do construction lending too, but he said the biggest thing, he said, use the right loans for the right things. So many people are using their lines of credit for these loans. The, yeah, to buy assets.
He said, line these up to correct– if you buy something with it, because, oh, and the big thing he said, he said, what is a line of credit for? Is it to buy a boat? He’s like, no, that’s what people do. Definitely don’t buy a boat. I thought that was pretty memorable with your line of credit, that’s gonna–
[00:14:10] Stephen Brown: What about a Ferrari? Can you buy a Ferrari?
[00:14:12] Rob Williams: Yeah, you buy Ferrari. Yeah, but, but buy your equipment. Get a long term loan that’s gonna be on there, that’ll just clobber you. It’s so easy to buy from your line of credit and that line of credit, a lot of times it’s just automatic because the owner may not even know, they just use the cash in their account to do it. Then the line of credit goes up and down. Then they don’t have that. And boy, he was just on there, just he said over and over and over again.
[00:14:37] Stephen Brown: Mention to your banker too, that you’re buying a Ferrari with your line of credit and they, they go running to see what kind of collateral they’ve got.
What bonding companies take into account when adjusting working capital
[00:14:44] Wade Carpenter: I’m glad you brought that up, Rob. I was kind of wanting to talk about some of the things that the bonding company would take in and out of the working capital. They basically will adjust their working capital. But, you know, Stephen I’m gonna ask you, I mean, if somebody had a hundred thousand dollar line of credit and it was unused, would you take that into account for your bonding?
[00:15:06] Stephen Brown: Here’s something interesting. No, the bonding companies don’t put into account, but the small SBA bonding program gives you working capital credit for unused bank line of credit. So what a great way to help a small contractor. You might say it’s because the SBA program is to help someone that’s trying to get to the position that a standard bonding company will bond them. That’s what they’re there for.
But cash is king, working capital is cash. But think about from their perspective, a bank or a bonding company is saying you have enough cash to get you through the year if you’re losing money on this job. You seem to be cash flowing your projects. You seem to have a history of making consistent profits on your work. Yeah, we’re all in. You’ve got positive working capital, you have positive net worth? We are all in.
[00:16:01] Wade Carpenter: I’ve seen that all the time. I mean, people are, a lot of times they, you know, they will kind of throw that in there. But there’s also things they’ll throw out. You mentioned the inventory situation and you know, a lot of contractors–
[00:16:14] Stephen Brown: Each bonding company does their own analysis. And sometimes as a bonding agent, we have to argue a little bit. Now, come on. You know, they’re an electrician and they have X amount of inventory that they’re gonna use on the next job. This is a job you want to bond and they don’t have to buy any materials. They got inventory. You gotta give them some credit for that. And they will. You just gotta fight a little bit, you know?
[00:16:38] Wade Carpenter: Yep. They’d throw it out or, you know, maybe give them half credit or something for it. But, you know, with, with covid and supply chain issues, we had a lot of, say electrical that you brought up. I mean, people would buy entire job up front because the prices and availability of the stuff was not there. So that was ensuring that they actually could do the job.
[00:17:02] Stephen Brown: Yeah. And bonding companies don’t care what your building’s worth or your equipment’s worth. It helps feather the nest when it’s there, but they’re looking at working capital.
[00:17:12] Rob Williams: Well that’s great. I get more and more ideas and stuff on here.
[00:17:15] Wade Carpenter: Well, let me throw a couple more things out of there that a lot of people don’t realize, and I know Stephen would say, you know, what if you see a loan to the shareholder sitting in that current assets? What do you do with it, Stephen?
[00:17:26] Stephen Brown: Well that’s, that’s thrown out so fast.
[00:17:30] Wade Carpenter: Yep. Exactly.
[00:17:31] Stephen Brown: I was talking to one of the ladies in the office, you know, because I’m on this health kick thing and I said, you know what I found out if you put coconut oil on kale, it makes it easier to scrape it into the trashcan.
[00:17:43] Rob Williams: Yeah,
[00:17:44] Stephen Brown: It is the same with loans to shareholders. It’s like coconut oil, kale. It’s just right in that trashcan.
[00:17:51] Wade Carpenter: Some of the analogies you come up with Stephen, I don’t know. But that’s–
[00:17:55] Stephen Brown: Well.
[00:17:55] Wade Carpenter: Anyway. Yeah, I agree. You know, but there are other things like prepays, like, you know, if you had a three month paid ahead on your worker’s comp insurance when you started a policy.
[00:18:05] Stephen Brown: Hey, they accept that. Yeah.
[00:18:07] Wade Carpenter: Well, a lot of times I’ve seen them throw out prepaids, like prepaid rent, prepaid taxes, things like that. But.
[00:18:14] Stephen Brown: Yeah, because they don’t understand. They don’t understand.
[00:18:17] Wade Carpenter: They don’t, but you know, one of the things that we would do a lot of times is if, say a contractor was gonna be getting some money back on taxes, instead of like calling it prepaid, we would actually refund it and, and they would have to turn around and pay it later, but we would put a income tax refund receivable that they would accept, versus putting a prepaid taxes that they’re gonna throw out.
[00:18:45] Rob Williams: Yeah. great. Great idea.
[00:18:47] Wade Carpenter: But a lot of these things that people don’t realize, like retainage receivable. You–
[00:18:54] Stephen Brown: That’s cash. You’ve earned it if you finished the job.
[00:18:57] Wade Carpenter: It is, but I see a lot of CPA firms even don’t catch this, but what if you got a three year job, and you got retainage on a job that’s not gonna complete for another couple years?
[00:19:07] Rob Williams: Yeah, because it depends on each contractor and which one their contract is. Most of these guys aren’t sophisticated enough to have the right contract, so they may not see that for years.
[00:19:17] Wade Carpenter: Yeah. But you know, a lot of times a bonding company would pull it out and honestly, a CPA should be pulling that out of the current assets.
[00:19:24] Rob Williams: Wade, I, what I would say to you is, see, you understand it from the most of the times when I’m dealing with the CPA is they don’t get it to the level. So if they understood it, they could pull it out or they could do the right thing with it, but they don’t even understand the process that the contractor’s going through with that. They just see that so many of these smaller contractors may not even ever get their retainage, you know, they don’t have a program. You get it so you know where to put it, but–
[00:19:54] Stephen Brown: That’s why Wade’s the best. That’s why–
[00:19:57] Wade Carpenter: Well, I wasn’t trying to get you blow smoke, but–
[00:19:59] Stephen Brown: Yeah. No, but I mean, no, I know you weren’t. That’s why we love doing it because you, you know, you get so embarrassed when we do it. But seriously. Keep going. Wade. These are great points. I hope other construction CPAs are listening.
How to increase your working capital at the end of the year
[00:20:13] Wade Carpenter: Well, I mean, as long as I’ve been dealing with these and, and dealing with bond agents over the years, I mean, there’s a lot of things that can be done to pump up your working capital before the end of the year, as well as thinking about where you are. So what I would say– and we didn’t really go as deep as I really wanted to in, in some of these things, but the calculations here, if you know how to plan for it, I say it all the time, but we take a three-prong approach.
It’s like number one, obviously nobody wants to pay more taxes than they have to. But if you can also look at the, what is it doing to your financial picture? As well as, what is it doing to your cash flow? That’s the third prong that nobody even talks about. If you don’t take that into account and you stop billing or whatever, and you screw up your cash flow in, you know, January, February, that may be the toughest time for you to survive that part if you’re seasonal.
[00:21:07] Rob Williams: Yeah.
[00:21:08] Wade Carpenter: So I feel like I’m preaching at this point.
[00:21:11] Stephen Brown: No you’re not. This is great stuff.
[00:21:13] Rob Williams: And it’s interesting because you’re so knowledgeable about it. I just got through some conversations again explaining about the construction industry and a lot of these really advanced consultants and even bookkeepers, they don’t really get what the Work In Progress is. They’ll like use the term in our Cashflow Story inventory, but it, they don’t mean that.
But where we have to put it is our Work in progress out on the job, some people would interpret that as they can only think of inventory, but it’s on the job and it’s actually in the building. Until you invoice that, it’s still an asset. It’s not a receivable yet, and it kind of disappears from some balance sheets or expenses off and stuff, and, and that’s really difficult, especially for the smaller contractors that go through here.
And when I was saying inventory, Wade, because I’ve actually been explaining to the people that don’t get it as much, I’m using the word inventory sometimes to mean work in progress to explain it to the other people.
But then we have the whole thing, I know Stephen, you and I when we were going through that course about what to count things in, is, is it, is it delivered? Is that inventory earmarked for the job? And sometimes it’s like, get it delivered, but, but sometimes you can put it on the ground. We used to do that. Sometimes we’d even invoice it when it was sitting on my, the trusses and wall panels. We’d invoice them sometimes when we had permission, but then it came a receivable when it was still on the ground on my thing, and then we had to mess with the balance sheet and stuff. That got really–
[00:22:42] Stephen Brown: There’s so many tricks to help you along your working capital and how it’s presented by your accountant.
[00:22:48] Rob Williams: I’ve forgotten that some people, Wade, they do have inventory back in the warehouse, and I don’t actually know the answer for that. Do you not count that? Because sometimes, you know, that might be a year or two’s worth of stuff, so it probably shouldn’t be working capital, but I don’t know what to do.
[00:23:04] Wade Carpenter: Yeah, but, but you also think about the money that’s tied up and you hit the nail on the head, and I’ve talked about it before. That is the great missing piece of the contractor working capital story. The cash conversion cycle consists of receivables, the payables, and the inventory terms. And the inventory is exactly that. People don’t realize how much money is really tied up in your Work In Progress, because you got money tied up in the people and the materials and it’s sitting on your P and L. It’s not sitting on your balance sheet. So it’s, I mean, I, again, we could, we could stretch this conversation out.
[00:23:43] Rob Williams: Been expensed. That’s how most of us did it. I did that in most of my things. It’s been expensed. Unless you’re capitalizing it somehow. And it just, you don’t have any revenue yet or receivable yet, so it makes your books look really bad when you don’t capitalize that.
[00:23:59] Stephen Brown: That’s right.
[00:23:59] Rob Williams: And it’s, I guess it’s okay if you’re not reporting in turn, but God, look at that. If you’re giving the books to a bank or if you’re giving it to a bonding company, man, that can just be a make or break part right there to, to getting the loan. Especially if you’ve got a lot going on and if you’ve got a slow receivable billing thing, like a lot of contractors do. I was guilty. I’d go months sometime when we had plenty of cash without invoicing something. So my balance sheet looked horrible.
[00:24:28] Wade Carpenter: Well, I know we’re, we’re kinda long on this one, but that was a point I really was hoping to make this time because bankers do look at it very differently than bonding companies. And bonding companies are actually a little more harsh about looking at it. But there are things you can slip by a banker, but.
[00:24:43] Rob Williams: You know what was so funny? The banker’s the one giving you the money. Maybe I shouldn’t say this, but who knows the least about what they’re looking at compared to the CPA, the bonding company, and the banker. I thought the bankers would know the most because they’re sitting there with the cash and they have the, the most starch on their shirt. So I, I thought that meant they knew the most and it’s just amazing how, and they speak with authority, you know. So.
[00:25:08] Wade Carpenter: Well, after we, we talked about like putting our–
[00:25:10] Rob Williams: Yeah, that’s —
[00:25:11] Wade Carpenter: –shirts, you had to put your sport coat on today, so I had to put mine on to keep up with you, but.
[00:25:16] Stephen Brown: Yeah. Well, I mean you, you two guys look like movie stars. You look fantastic. Let me say that first and foremost.
And second of all, let me say, working capital is working capital. It’s there to help you. If you have unexpected costs, do you have the money to pay the next year’s worth of debts that you have? Expenses that you have? And is there enough cash in your company to weather the storm when things get bad? That’s important to bonding companies. Working capital is not Ferrari capital. It’s there to work for your company.
[00:25:54] Rob Williams: Yeah, it’s great. And again, I wanna say the first thing that we have been told to do in our, in our Scaling Up coaching is get that cash flow story down to where you understand all these things and the cycle of what we would call our working capital. They use a little bit simpler terms because some of you might not understand that, but you gotta get that down.
If you don’t understand this, you can’t even get in your thing. I know this book, I will, maybe we’ll have Ami on our show or something, The Growth Dilemma, but about all that. And you gotta get this down before you can have a game plan. And that was one of the points is you can’t do your strategic planning unless you understand your cash picture and your capital.
Because why put a crazy growth rate when you can’t fund it? You know, you don’t have a way to do this. So I’m, I’m just huge on this right now because we’ve been–
[00:26:47] Stephen Brown: You’re wired, man. You–
[00:26:48] Rob Williams: Wired, baby. You got me excited. This is–
[00:26:50] Stephen Brown: Hey, working capital is sexy stuff, wade.
[00:26:54] Rob Williams: It’s sexy, baby.
[00:26:55] Stephen Brown: Not just to construction CPAs. It’s sexy to your bonding agent, but most importantly, it needs to be sexy to you, right?
[00:27:03] Rob Williams: That’s right.
[00:27:04] Stephen Brown: Your company.
[00:27:05] Wade Carpenter: Well, there’s several things I wanted to dive in deeper, but I did wanna offer, if anybody was interested, I, I put together a little contractor guide to understanding working capital. And we have some of the examples in it that I mentioned today.
So I hope that might help some people understand this a little better and why it’s so important.
[00:27:23] Rob Williams: I didn’t mean to not get you, let you dive deeper. I–
[00:27:26] Wade Carpenter: Well, that’s okay. No, I mean, I think it was a great discussion and you know, we can put in the show notes how they can get that.
[00:27:32] Rob Williams: And you know, to plug us a little bit on what we do, you know, and Stephen may have some people is, you know, Wade can run something on the Power of One and your cash flow and understanding it, not just for the bonding company, but what’s even more important is for you to understand. So, and, and that’s one of the advantages of Stephen and them requiring that. It helps you understand your own business more. But get us to run a cash flow story for you, power of one, something like this and, and get the picture from you. Ask your own bookkeepers and accountants.
But what I’ve found, Wade, is they might ask and, and the, they’re not gonna be told that the guy doesn’t know how to do it. But a lot of, especially people with bookkeepers, they just don’t get that. They don’t know who to go to advice. So ask the Contractor Success Forum them for some help here. And maybe we can get some tools for you to work on this. Because to me, that’s, that’s where everything starts.
You can’t plan unless you’ve got your cash picture and understanding of what’s gonna happen, especially right now with the government contracting. How many people have called you with a 300% growth rate right now, Wade? You know, something like this and it’s just, buddy, you gotta get this down.
What do they say? More companies dive indigestion than of starvation, you know? So this big business and understanding this working capital is just huge. You can tell I’m all fired up about it. So, well we are here on the Contractor Success Forum. Thanks for listening. Get your resources.
We have Wade, Carpenter Carpenter, and Company, CPAs. Give him a call, contact him, email or something to find out about this Stephen Brown. It’s amazing for a bonding and insurance agency that he knows all this stuff. That’s very rare that he can know these things. And then I am Rob Williams with writing Your Pumpkin Plan for contractors. And if you need a cashflow story, you can tell I’m all fired up about it.
So thanks a lot. Come back and see us on the Contractor Success Forum, follow us on YouTube. Subscribe. Do us a favor and share it. And, and I’m getting more and more calls and contacts about it that said, oh, they’ve been listening to every one of our episodes and contact us. It’s kind of fun to know that people are doing that.
And get your MBA in construction here at the Contractor Success Forum. Do us a favor. Follow it, like it, share it with other people, if you care about them. Right, Stephen? If you love them, baby, let them know about the Contractor Success Forum them because this is, this is all free to listen to this stuff.
[00:29:57] Stephen Brown: Hey. Working capital. Sexy stuff. Sexy, sexy, sexy stuff, Wade.
[00:30:03] Rob Williams: Alright, everybody have a good day and, and come back, if we’re not too odd and strange on the Contractor Success Forum, and see us again. Thanks.