鈥溌槎勾� Talks鈥� hosts top professionals from different sectors of the lumber and building material industry to share their expertise, with a heavy emphasis on practical, tactical strategies to help you serve your markets and grow your business.
Join 麻豆传媒 Talks host, Thea Dudley, as she brings her razor-sharp expertise to dissect trends, regulatory changes, and offers real-world advice for credit professionals. In this episode, Thea sits down with Todd Sawyer, who possesses the dual perspective of being both a 麻豆传媒 dealer and contractor. Todd鈥檚 knowledge will help you understand the bigger picture of your transactions and how to do better business with contractors. Connect with Todd
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Prefer to read about it instead? Take a peek at the transcript below for Episode 11: Perspective From a Dealer/Contractor, with Todd Sawyer.
(Editor鈥檚 note: Transcript is AI-generated and may include some errors.)听
Thea
Thanks for joining another edition of 麻豆传媒 talks credit. And today鈥檚 topic, we鈥檙e going to go down a little bit of a rabbit hole. It鈥檚 a tale of two perspectives, same person, though. So I鈥檓 your host, Thea Dudley, also known as the credit Overlord, and if you鈥檝e read my columns or attended my webinars, you know I鈥檓 a huge advocate of knowing your customer, especially how their cash flow works. If you鈥檙e a dealer and you don鈥檛 understand contractor and subcontractor credit or vice versa, you鈥檙e going to have a lot harder time. So my guest today is someone who has a very unique perspective on things. Not only does he own building materials supply house up in New Jersey, he also is second generation insulation contractor and took over his dad鈥檚 company, sold it, and then went back in and started another one. So there is, what鈥檚 cool about this is it鈥檚 such a great perspective to have both sides of the fence, and I love that he understands the challenges and can speak to those so before I go any further, I would love to introduce Todd Sawyer. He鈥檚 been a great friend, an amazing customer and wonderful mentor relationship. I love getting to bounce stuff off him and vice versa, because I always learn something, and it鈥檚 always a perspective that I鈥檓 like, Yeah, I didn鈥檛 quite see that coming, but that鈥檚 pretty cool. So Todd, welcome.
Todd
Thank you. Thea. I鈥檒l start the conversation by saying, Thea and I go back quite a few years, and when I discuss her with other people, they鈥檙e like, you鈥檙e friends with the head of credit at wherever we happen to be doing business at the time. And I always thought it was funny that, you know Thea and I would discuss credits very, very difficult, and it鈥檚 tough. You got to be tough on people, and the fact that she and I became so close and such good friends speaks to her and her ability to develop relationships. And I don鈥檛 want to break my own pat myself on the back, but when you understand credit, it鈥檚 easy to understand a credit manager or director of credit?
Thea
Well, I know. Thank you for being very kind. Not very many people are. I consider it very smart to befriend the credit whoever鈥檚 in charge of credit, wherever you are buying from, because we can make or break things. We can help make things happen. And once you get to know that person, and you get a feeling for, excuse me, we get a feeling for how they move forward and what they鈥檙e like, it says a lot about their character. And trade credit is very different than bank credit and how we look at it. I don鈥檛 usually have guarantees or, you know, some kind of property I can take back. It鈥檚, it鈥檚 really, here鈥檚 how you鈥檝e paid in the past, and I am placing a bet that you鈥檙e going to continue to be that person. So getting to know them on a different level really does help. So Todd, I got to hear you on a podcast called I think it was entrepreneurs on fire, and I loved that one because it spoke about overnight success, and everybody looks as and I get that a lot now from different people in the industry, where they, you know, younger generations, they see things different, or people will come up and say, I want to do what you do. And it鈥檚 like, I would love for you to do what I do, but do you know what I do? And that鈥檚, it鈥檚 like, I collect money. It鈥檚 not that glamorous. It is really fun, if you make it. But those are some of the things where, when we talk about that entrepreneurial spirit, you can really start that in your whatever role you鈥檙e in. And, you know, we鈥檙e speaking about cash flow and money. And so I want to circle back and talk about that a little bit more, but, but I, I really want to talk about, you know, how that supplier, dealer or contractor mentality, you鈥檙e sitting in the same position you鈥檙e you鈥檙e loaning money to contractors, and yet you are a contractor. So how do you balance and reconcile that? Does that make you nicer to people or kinder, or does it make it like I know the stuff you say as a contractor, so don鈥檛 even start.
Todd
Yeah. I mean both, you know, you can call somebody out pretty quickly, but you also do have a better understanding. And you know, since we鈥檙e on, I鈥檓 on both sides of it, I really get a true picture of what contractors you know, what challenges they face, and what they鈥檙e up to, and how they have to do business and honestly, the best solution is always transparency, honesty and working together, if we鈥檙e giving credit to a framer, for instance, and the framer is giving credit to a General, General Contractor. We鈥檙e giving credit to the general contractor. You know, ultimately, if the general contractor doesn鈥檛 pay, you know, the vendor, the vendor can鈥檛 pay us.
Todd
So the more information you can get about, especially if it鈥檚 a large project, about the ultimate customer, the easier it becomes for a lumber yard or supplier of some kind. So when you approach that, and I know you get to work with a huge cross section when you鈥檙e talking to other contractors, because this is where I think it becomes so valuable. I know, when I ask a contractor for a credit application, they鈥檙e like, especially if I鈥檓, I鈥檓 a contractor talking to a subcontractor or a GC, and the GC is like, why I gave you a I gave you a purchase order, or I, you know, I gave you a contract. I don鈥檛 know why I need what does a credit app get me? Yeah, well, I need to know who I鈥檓 doing business with, just because you throw your name up there on a PO I still got to know all of the backstory. You know who takes care of your billing? Who do I call for money? What鈥檚 your legal name? And I don鈥檛 know you from Adam鈥檚 house cat. I don鈥檛 know if you鈥檙e worth anything. The best people to do business, whether people that you know, people that you鈥檝e developed a relationship with that. You know you鈥檝e done a bunch of projects with or, you know, have years of experience. Once you have a personal relationship, you really can understand the the customer a lot better. You know that, being said, we鈥檙e always going after new business. We want to hang on to the business that we have and continue to grow by getting new business. And you don鈥檛 know who you鈥檙e dealing with. You know, there鈥檚 a million small contractors out there. There鈥檚 a, you know, 1000s of mid sized contractors out there, and honestly, some of them are good and a lot of them are bad, and it鈥檚 very hard to decipher on the surface, who鈥檚 going to be a problem and who鈥檚 going to be easy. You know, I used to tell my sales staff all the time, they would come in and say, Oh, no, he鈥檚 a good guy. He鈥檚 a really good guy. I said he鈥檚 that term, that term guy, until he鈥檚 not. You know what I mean? Like, it only takes one job or one project for that good guy to no longer be a good guy. And you know, a lot of times it鈥檚 because maybe that customer is just not sophisticated enough, and they put their butt on the line for something and lost. And you know what they say, it rolls downhill. And so the you know the vendor, the supplier, is going to get caught in it, rolling down the hill. So as as granting credit, as a dealer, and I happen to know your credit manager, Donna, she鈥檚 fantastic, but as a as a dealer, does it make you more empathetic to contractors when you are looking at granting credit, or does it make you ask a different set of questions, like, if you were to give advice to dealers on working with contractors, what are some of the key things that you鈥檝e learned and discovered that would help them? First and foremost. You foremost, you have to do research on a new client, and it鈥檚 running a credit check, Googling the principal鈥檚 name, Googling the company name. If someone鈥檚 real bad, you鈥檙e gonna you know, you can Google ABC construction lawsuits, and you might get a list of different lawsuits that pop up.
Todd
Beware, you know, you may see nothing at all, no website, nothing, no footprint on the on the internet. Is this even a real company? And you know, no D and B now, nothing. Well, they鈥檙e not real. They started this business just to do this project, and they have zero credit history, all right. Well, who鈥檚 the principal of this entity? Then you do a little bit of research on that person, you know, and you have to figure out who the heck it is you鈥檙e dealing with first. And you know, if it鈥檚 a salesperson, they need to help in that process. But sales people, as we know, and again, it鈥檚 the nature of the business. They鈥檙e there to sell. They鈥檙e not they don鈥檛 want to hinder the sale by, God forbid, doing a little bit of research and getting some information to see if we get paid. That鈥檚 not the important part. The important part is making the sale to that until we don鈥檛 get paid, and then they don鈥檛 get paid. But, you know, so, so it鈥檚 do your research, make sure that there鈥檚 some kind of relationship and set expectations. You know, we鈥檝e dealt with some people that had some stuff come up, you know, where they they had some prior lawsuits, they had some prior judgments, and I just had a conversation as as the owner had the conversation and said, Listen, I don鈥檛 have to tell you something. You don鈥檛 know there鈥檚 some some shady stuff that鈥檚 out there.
Thea
Do you say shady? Do you actually say to them? Oh, absolutely shady. Or do you screw them out a little? It鈥檚. Like, because the contractors have big egos.
Todd
You know what? Though, when I was young, I鈥檓 52 I鈥檝e been in this game a really, really long time. When you鈥檙e a young guy in the in the business, you gotta be a little bit more careful. Most of these guys are younger than me now, so now I鈥檓 the guy that鈥檚 been around, maybe the voice of reason. Listen, you Google may, there鈥檚 going to be some good stuff that comes up. So, you know, we had a situation not too long ago where, further along in the process, a guy company owed us a bunch of money. They were just dodging every phone call, not answering emails. I picked up the phone, left a voicemail message, and 10 minutes later, I got a phone call back, and I鈥檓 like, I appreciate you calling me back. My people have been, you know, really trying to get a hold of you. And he鈥檚 like, No, I just didn鈥檛 have new information, but I Googled you. And I鈥檓 like, Okay, well, I can appreciate that that, you know, I鈥檝e been around and I know how things work, and ultimately, we set up a payment plan, but I went off track there for a second. So, you know, at the end of the day, you got to know who you鈥檙e dealing with. You got to be honest, be transparent, and ask some tough questions. Are you going to be able to pay me in 30 days or 60 days? Who is it that you鈥檙e working for? Are you funded? You know, are you being funded by an owner or a bank? Do you? And sometimes they鈥檒l they鈥檒l get annoyed and run away, and that鈥檚 okay if, if someone doesn鈥檛 like the questions I鈥檓 asking, they don鈥檛 have to do business with me. But I鈥檓 not going to just roll over and hope that we get paid.
Thea
Hope is not a great business model, no. But you also said something that that I found really interesting, a couple of points that you touched on, and one of them is, and I think it鈥檚 the the greatest question that most credit managers or sales people won鈥檛 ask, and that鈥檚, who鈥檚 are you funded, who鈥檚 funding you, and that a lot of these contractors will set up different LLCs for every project. So when you pull up a credit report on one of them, you鈥檙e like, Okay, this is, this was started about a minute ago, and there鈥檚 nothing here, but yet it links back to something else, and you want a cross corporate guarantee, and it鈥檚 like, Look, your company is basically a shell because you set up. So there were two things that I found really interesting there that you know, you鈥檝e experienced and as a dealer coming into that would have never been something that you might have touched on as a contractor. So when, when you look at those guys that are, you know, hey, you set up individual What are what鈥檚 that conversation look like? Are you?
Todd
Are you just going, Hey, tell me some stuff. Tell me some stuff. But also, we require, at, you know, as a lumber and building materials dealer, we鈥檙e, we require a personal guarantee, if you want credit for me, you鈥檙e going to sign up a PG. And that鈥檚 just the way that it is.听
Thea
You get a lot of pushback on that, because that鈥檚 one thing that credit managers are always like, I鈥檓 never going to get this. And it鈥檚 like, what鈥檚 your company policy?
Todd
I see, well, then you can pay as you go. That鈥檚 okay, no problem. You can pay as you go. You can come in every day. You can pay with a check every day. You can try. You can do electronic transfer every day. You can pay with a credit card every day, although we charge you a processing fee now, or you can personally guarantee it. And my philosophy has always been, anyone who鈥檚 not willing to personal guarantee on a credit app, again, we鈥檙e not it鈥檚 not going to hit your credit it鈥檚 not going to screw your credit up. But if you鈥檙e not willing to do a personal guarantee. You鈥檙e not sure if you鈥檙e going to pay like IPG everything. So the new company, you know, I鈥檓 back in the insulation business, as you said in your introduction, and it鈥檚 a brand new company. So there鈥檚 not a lot of credit history there. Granted, people, a lot of people know me, and they were, it was very easy to get credit.
Thea
That鈥檚 gonna say, Todd, I don鈥檛 think that was a big struggle for you.
Todd
I give you credit, yeah, but I was willing to personally guarantee it, because I know that it鈥檚 going to be paid. So you know, no matter what I鈥檓 like, I don鈥檛 care. I鈥檒l sign it. Just put it in front of me. I鈥檓 going to read it to make sure you鈥檙e not giving him, you know, one of my kids.
Thea
There are days I鈥檒l pay. Was like, yeah, maybe I鈥檒l give you one of them because I鈥檓 not too delighted with them.
Todd
Today, you are collateral. There鈥檚 that鈥檚 an option, but I know it鈥檚 going to get paid. And again, that鈥檚 something that was ingrained in me from when I first got in the business, you know, from my father, who never cut a bill by a penny. And, you know, I came in the business in the very early 90s. He went through in the late 80s, you know, getting to a point where he almost lost his business, and everybody around him was cutting deals to pay 30 cents on the dollar.
Todd
And he paid every nickel that he owed to his all of his suppliers. It took him a little bit of time, and, you know, and he taught me for years, if you鈥檙e honest with people, and you communicate with people, and you do the best that you can and pay what you will, eventually you鈥檙e going to earn their respect. And that鈥檚 something that I tell guys, you know, some guys get in trouble and it鈥檚 not their fault. Maybe again, maybe they ran into something that they hadn鈥檛 anticipated. Maybe they鈥檙e not getting paid. And sometimes guys will say, I didn鈥檛 get paid, so you鈥檙e not getting paid. And my response is, it doesn鈥檛 work that way鈥�
Thea
Like nobody I鈥檓 getting paid.
Todd
Guys, yeah, other guys will say, I want to pay you. I just don鈥檛 have it. I don鈥檛 have any money to pay you. And I say, Okay, here鈥檚 what I鈥檓 going to ask of you. You need to call Donna or your sales person, or our manager, our manager, Eric at at the lumber yard, every single week, you got to check in. And you have to say, hey, so and so and so I鈥檓 just going to check in. I鈥檓 not running away. You know, nothing really has changed between last week and this week, but I鈥檓 hoping that within a couple weeks, I鈥檓 starting a new job, and I can maybe, you know, pull some money from that and start paying you. And I owe you 10,000 but I can send you 500 I鈥檓 okay with that. I鈥檓 okay with that. But when somebody is they鈥檙e scared or they鈥檙e annoyed that we鈥檝e called 100 times and they鈥檙e, you know, they just go dark. I鈥檓 out now. You鈥檙e gonna deal with, you know, who鈥檚 the bad one, Dr Jekyll, or Mr. Hyde. You鈥檙e gonna deal with Mr. Hyde, I guess is the bad one? I think so. Yeah, remember, I鈥檒l work with anybody, and I get it, I understand if you鈥檙e doing your best and you don鈥檛 disappear, then I鈥檒l give you the benefit of the doubt.
Thea
Yeah, well, I think it goes back to look, I didn鈥檛 give birth to you and I didn鈥檛 marry you, so you know, those are my two obligations to take care of. But we did our part. We delivered material. I expect you to step up, and I hear from contractors. Well, the I didn鈥檛, you know, I didn鈥檛 have anything good to say, so I just decided I wouldn鈥檛 call you. It鈥檚 okay. Now I have the worst case scenario, and I still have to make a decision. So yeah, I love Hey, touch base. Don鈥檛 make me chase you, and鈥�
Todd
Nothing worse.
Thea
A little bit of money at me, you know, a couple 100 bucks, just to show because you know you鈥檙e you鈥檙e still eating, your lights are still on, and you you鈥檙e talking on a phone. So somebody鈥檚 getting paid.
Todd
Well, my favorite is when they say, I don鈥檛 have any money, but I鈥檒l pull you in two weeks when I get back from my vacation. What did you just say? You鈥檙e going on vacation, but you don鈥檛 have you can鈥檛 shoot me. 500 bucks, 1000 bucks, and then, honestly, again, as somebody that鈥檚 been around, I鈥檒l give them election. I will say, You know what, it鈥檚 a bad look. Then you should be ashamed of yourself when you owe money to a lot of people and you鈥檙e taking, well, I鈥檓 entitled to take a vacation. I said, No, you鈥檙e not. You are not entitled to take a vacation, as a matter of fact, to disgrace that you鈥檙e taking a vacation when you owe people money you should be pumping gas at night, whatever it takes to get the money that you need to pay your debts.
Thea
I love that you shame them. I love some credit shaming. That鈥檚 absolutely that鈥檚 like, that鈥檚 a pet peeve with every credit manager I know where it鈥檚 very well he鈥檚 out of the country or he鈥檚 on vacation. It鈥檚 like, are you? Are you? Are you kidding me, right now, you took a vacation and you owe me a bunch of money, honey, you do not you. You don鈥檛 deserve a vacation. No, pay me.
Todd
You know, circling back around is, it鈥檚 a tough business. You know, this business that we鈥檙e in, it鈥檚 tough. It鈥檚 not easy. You鈥檙e constantly chasing money. Your customers are constantly chasing money. And, you know, I get it like I understand, but it doesn鈥檛 make it any easier when, you know, when you own a business and you鈥檝e got all the liability and you鈥檝e got, you know, all the stress and all the money invested, and someone says, I鈥檓 not going to pay you, or I can鈥檛 pay you $10,000 what they need to understand is that 10,000 isn鈥檛 my profit. You know, my profit, maybe is 1000 so nine grand, I just, you know, literally flush down the toilet, and it hurt you.
Thea
It was, it was this unexpected generosity for me. But, yeah, I do want to talk a little bit about because so is Donna. Is getting close to retirement, isn鈥檛 she?
Todd
Yeah, she is. She鈥檚 been such an interesting story the lumber yard, or lumber yard Park, union lumber. So during the late 80s, when the building industry hit a wall, and my father鈥檚 insulation company was struggling and there was just no money in the house, so talk about. Not taking a vacation. There was no going out to dinner. There was certainly no vacations. There was, we鈥檙e selling the Cadillac and getting, you know, a Dodge, you know, the most basic dodge car that there is. My mom went to go. She needed to get a job to help the household. You know, I was in high school, and she got a job at this little lumber yard called Park union lumber, and she worked there probably for 10 years. And on her way out, she trained Donna, and Donna was there since then, the owner of the of that business, you know, our family had gotten to know, and he, then, many years later, got into a little bit of trouble. This was like 2013 or 14, and called me for help, and we ended up purchasing the business, saving it from bankruptcy, and turning that, you know, turning that company around. And ironically, Donna was still there. So my mother trained Donna, and ultimately I ended up buying the company, which I think,
Thea
I just think that鈥檚 such a cool story, I mean, and it does show you that in this, because we鈥檝e said this a lot, this, once you get into the lumber and building material and contractor world, you just, it鈥檚 like a tar pit. You just never get out. Any event, you鈥檙e you鈥檙e just, you鈥檙e in, you鈥檙e a lifer. And it鈥檚 really, it鈥檚 a good thing. But so when, so when Donna retires, how are you replacing her?
Todd
So we brought in, so she was, is a dynamo. I mean, when we started in that business, it was very, very, very small. Again, on the verge of bankruptcy, we were able to infuse a bunch of new clients. We brought in systems and processes that just didn鈥檛 exist, and started to grow the business, but prudently, not, not too quick. And then we ended up, you know, hiring a general manager, young, young guy who, you know, started at the bottom in the yard and was so ambitious and so smart, he worked his way up and and built a beautiful team of people. And so, you know, Donna had spoken for the last couple years about, you know, ultimately, eventually, I鈥檓 going to have to, you know, have to retire. I鈥檓 going to want to retire. And we said, we get it. And it was just an open conversation for the last couple of years. We brought in another person that is now working with Donna, side by side by day, to get trained and understand all the processes and all the procedures that we have, and things are going really, really well with that. You know, Donna may stay and do some part time stuff in which we said we would love that so, but the key is transition. You don鈥檛 want to wait until the last minute. We got lucky. We hired, you know, young woman who is really, really good, but you never know. Sometimes you go through two or three people before you find the right fit. They might be great people, they might be smart, but maybe they鈥檙e just not the right fit. We found somebody. We got lucky. I found somebody right out of the gate, and it鈥檚 a transition, and as we continue to grow, we鈥檙e going to hire more people, but now our our key person is in place.
Thea
I think that鈥檚 really healthy that you brought somebody in so far in advance that you鈥檙e able to get all of that training and and take that knowledge and have the ability for someone to grow, and if they鈥檙e going to fail at something which you know, you make a million credit decisions, some of them are not going to be spectacular, so you鈥檝e given them a safety net, which is really cool. I do want to circle back around to that podcast that you did and that entrepreneurial mindset. I thought that was it was really empowering. It was really pretty great to hear, because I know a lot of credit managers out there are like, look, I鈥檓 head of my department. I don鈥檛 know where I can grow from here, you know, and they鈥檙e like, or I鈥檓 in a smaller family business, I there鈥檚 nowhere for me to go. And one of the things that鈥檚 so frustrating is, where do you want to go? Because no matter where you are in a company, there鈥檚 only so many, you know, President jobs, there鈥檚 what do you want to do? Where do you want to grow? And success doesn鈥檛 always look the same for everybody. So, you know, growing out, and I know that we talked a lot about, you know that fostering the autonomy and moving forward and how you inspire people, especially knowing that you do have some family businesses and so how do you make those people feel like, Hey, you you own this job and you can go anywhere you want in the company. It it doesn鈥檛 have to look traditional.
Todd
Your first point was spot on. First you need to know what it is they鈥檙e looking to do long term. Them with their lives. How far up the chain do they want to go? Like, what? What鈥檚 their dream? What鈥檚 their goal? Some people are very happy and don鈥檛 want the extra pressure or the stress or the responsibility, and they鈥檙e like, listen, I just want to do my job. I鈥檓 going to come in, I鈥檓 going to do my job. I鈥檓 going to do it well, I鈥檓 going to cooperate with everybody, and it鈥檚 going to be great. But when I go home, I want to punch the clock. I love this analogy. I use it in every podcast. Slide down the Brontosaurus tail, you know, and go home and whatever it is, you know, whatever, whatever hobbies I want to do, my woodworking in the garage, I want to be able to coach every sports team. Okay, great. Like, that鈥檚 awesome. Other people say, I want to continue to grow. I want more responsibility. I want to be able to, you know, contribute more and help the company grow. And with that, you know, I want to obviously grow my compensation and make sure that, you know, financially, I鈥檓 secure, and maybe more than secure. And once you find that out, then it鈥檚 you need to coach people so that they understand that being here for a certain amount of time isn鈥檛 going to do it. You know, putting the time in isn鈥檛 enough. It鈥檚 what can you make happen? How can you grow your department? Make your department more efficient? How can you grow the overall company by working with your your co workers and teammates, you know? How do you earn it? Like you said, there can only be one president, but there can be seven division managers, if you can, if everybody can, grow the company to that level. So, you know, a mom and pop family business might not have as much opportunity unless Mom and Pop say we鈥檙e willing to support any growth that. You know, the team can make happen, but the team鈥檚 got to make it happen. You know, I鈥檝e always said that one person can鈥檛 build a company. Can鈥檛 build an empire. It鈥檚 who you surround yourself with. So if you surround yourself with amazing people, the business takes on a life of its own. It just needs the captain to steer it in the right direction. But the captain isn鈥檛 running around, painting the hole and, you know, fixing the motor and doing all the things that need to get done. He鈥檚 just making sure you鈥檙e on the right course and that, you know, your missions get completed.
Thea
I think that鈥檚 important for a you know, when, when you and I talked offline a couple weeks ago, we were talking about how if, if credit managers viewed their department as like, if this were, if this department were my business, what would the decisions I would make? How strongly committed Am I to them? What does this look like? And I think that was probably one of the most poignant things that I pulled out of that conversation, was you鈥檙e gonna get out of it, what you put into it, and maybe spending some time, you know, in that same vein as getting to know your customer, where you spend some time out in the field, and maybe you understand how they do their billing, and you understand how their cash flow looks, so that you鈥檙e able to support one another.
Todd
So I love that so and again, listen, you know, because credit and accounting and financial analysis is something that I love to do it. I don鈥檛 mind helping customers understand their statements, understanding their their cash flow, helping them do a cash flow analysis. I think that鈥檚 something that a vendor can offer their client as a value added service that listen. If you鈥檙e willing to accept it, I鈥檓 willing to help you with your business for no extra cost, but you gotta open up. You gotta show me your books. You gotta let me have access, and I鈥檒l be a no cost financial coach for you in return for, you know, you buying from me and me giving you credit, but I gotta, you know, in order to help you, you gotta give me the information.
Thea
Hey, look at that. Look at that, right there. Todd, bringing the value, just putting in there. It鈥檚 like, Look, I just gave the credit department. You might not create money, you may not sell anything, but here鈥檚 the value you bring where we can have these services for you, because no one鈥檚 going to do it better than your vendor.
Todd
Absolutely, absolutely. And again, there鈥檚 some very sophisticated business owners out there, but there鈥檚 a lot of unsophisticated business owners that would probably jump at the chance to have somebody come in and give them some financial coaching and help them understand what a financial statement means and how to read it and understand, you know, balance sheets are just as important as you know, income statements, you can be a very profitable company and go, go belly up because your your balance sheet is out of whack.
Thea
I think that鈥檚 true on the cash flow. Side of things, and that鈥檚 looking at some of these guys. When you offer, you鈥檙e like, hey, you know, let me, let me come in and do this, when I can tell right away if they鈥檙e pushing back a whole bunch. And they鈥檙e like, Oh, I鈥檓 good. The I just need to get through this one project. It鈥檚 like, now we鈥檙e going to get you cleaned up, and then we鈥檙e going to invite you to buy, you know, cash in advance, or cod, because you are, you are not going to learn anything. You鈥檙e living job to job, and you haven鈥檛 figured anything out.
Todd
Absolutely, absolutely. So just to touch, you know, on on something that you talked about before bringing it, you know, the entrepreneurial spirit to a credit department, something that I really believe in is, you know, profit sharing programs, and each, you know, for each person or each division, that might be a little bit different, but when someone鈥檚 got a little skin in the game, it kind of changes their mentality a little bit. And if you it鈥檚 based, you know, if part of their comp package is based on net profitability of the business, then one, they鈥檙e definitely concerned about sales. So you鈥檝e got credit. Now, they are interested about sales, but they understand that if you make the sale, but we don鈥檛 get paid, that鈥檚 going to work in the opposite direction. So now they鈥檙e looking at the whole the company as a whole, which is more entrepreneurial, and they鈥檙e going to, you know, maybe be a little bit more creative, and how they they go about giving credit and that they just don鈥檛 want to push somebody away and say, You won鈥檛 do this, or this came up on a report, so we鈥檙e out, or, you know, kind of hit in between the eyes, and you might be more inclined to develop a relationship with them, because you want their business, but you also want to make sure that you鈥檙e getting paid.
Thea
Well, that鈥檚 I think the easiest thing for a credit manager do is to say no, and it鈥檚 like, Nope, there. I found a problem. Nope. I found a problem. It鈥檚 a lot more steps, and it鈥檚 a lot harder to find a way to say yes, but I, I鈥檝e always held that look as a credit team. If you can say, look, I did everything that I could try to find a way to get this, this company, credit, I just can鈥檛. Here鈥檚, you know, we鈥檙e going to do cod, or let鈥檚, I鈥檝e offered everything I possibly can. I want my sales team to have faith in me that if I tell them no to an open account, they know it鈥檚 a real No, because they know I busted my tail to make it happen. And I think that鈥檚 the difference between knowing that you鈥檙e a sales organization and yes, we鈥檙e there to support but I also don鈥檛 want someone to go, oh God, we have to go to the credit department. She鈥檚 such a drag. She says no to everything. She doesn鈥檛 understand how hard it is out here. And it鈥檚 like, look, I understand how contractors get paid. I understand how subs get paid, and I also understand how that ties into us. So tell me what you don鈥檛 think I get.
Todd
Yeah, and I think it鈥檚 very important for your sales team to also be on the same page with expectations. You know, they bring a client in. He鈥檚 a great guy. We know he鈥檚 a great guy. You run the credit. It鈥檚 It鈥檚 okay. You鈥檙e not going to turn the guy away. But you know, there鈥檚 some red flags. You set expectations with the client and with the salesperson that says, Listen, we鈥檙e going to start at 20,000 not 100,000 that they asked for. We鈥檙e going to start at 30 day terms. On day 31 we鈥檙e not bringing any more material to you, or we鈥檙e not going back to the job to continue working there. If everybody agreed to that ahead of time, you can鈥檛 come back to me later and say, Oh, but we just got to ship one more order. Oh, but, you know, next week, but you got to send your crews back tomorrow, but we鈥檙e going to get paid next. We had the discussion. Everybody agreed to it. I鈥檓 not the bad guy. Now, you shouldn鈥檛 have agreed to it if you didn鈥檛 think that you could get it done. So, and then you gotta stick to it, you know. And if you say 30 days, it鈥檚 30 days. If you say 45 days, it鈥檚 45 days, everything stops. And honestly, people that are kind of kicking the can down the road, you鈥檇 be amazed at how quickly that check comes when they have a timeline, and you鈥檙e like, listen, we discussed it. We agreed that you are going to be cut off at 45 days. You鈥檙e on 30 day terms. I鈥檓 going to give you a grace period of 15 days. On the 45th day, the 46th morning, we鈥檙e done until you pay everything.
Thea听
And then it鈥檚 not just stuff that鈥檚 passed away. You had me. You had me until 15 day grace period. Yeah. Well, you had me till 15 day grace period portal. Get out there and get my money in it.
Todd
Listen, that鈥檚 where we鈥檒l circle right back to the beginning of the conversation where being a vendor and a contractor comes into play like 30 days. Is what I want it to be. But in reality, when, when my contracting business is billing a big client, it鈥檚 an AIA document, you can鈥檛 get paid in 30 days. It鈥檚 it鈥檚 45 days minimum to get your money from the developer or owner. And even then, sometimes that 30, which turns into 45 turns into 60. So understanding that my my lumber customer is waiting for his money for more than 30 days, and he can鈥檛 pay until he gets paid. Me cutting off that job is just I鈥檓 spiking myself. I鈥檓 cutting off my nose to spite my face, because now the contractor can鈥檛 go back, and he can鈥檛 cut it off because it鈥檚 in the system. It鈥檚 on the next bank draw. So you really have to understand again, who your clients are, who you鈥檙e dealing with, how the how the payment is going to work. And then give a little bit to, you know, your contractor customer, understanding that it鈥檚, it鈥檚 a he can鈥檛 pay until he or she can鈥檛 pay, until they get paid. And then again, there鈥檚 a million things that you鈥檝e gotta you look through a contract, and it鈥檚 absurd. A lot of the contracts that are look they鈥檙e just insane. You know, the pay when paid clauses, it鈥檚 it鈥檚 everything against the person, quote, unquote, lending money. And you鈥檝e gotta navigate your way through these contracts and pick your battles and and squash them the worst ones, and then take a shot on some of the other ones. Again. You can鈥檛 go into this business saying I鈥檓 going to have no risk because I鈥檓 going to my credit is going to be so tight that I鈥檓 never going to have risk. You鈥檒l never get a job. Sometimes you got to agree to stuff that you know is not great in a contract, and you鈥檙e that鈥檚 part of being an entrepreneur. You鈥檙e taking a risk. You want to limit your risk, but and you want to communicate these risks, but you still have to take true.
Thea
And that鈥檚 one of those things where, if you don鈥檛 understand like as a dealer, if you鈥檝e a dealer credit manager, if you鈥檝e never read a contract, an AIA Contract, or understand AIA billing, or read a PO from a builder to a subcontractor, subcontractors really have it the roughest, because they鈥檙e basically financing everything, because they鈥檙e waiting for everybody to pay them. So I really, I any credit managers out there, I really urge you, you know, get your hands on a contract and read it. It will you鈥檒l be amazed at what subcontractors and contractors have to do. But Todd, I know we鈥檝e been on for a while, and I hate taking up some okay, I don鈥檛 hate taking up hanging out with you. But if you had, like a couple of pieces of information to give to dealer credit managers, what would it be? What would you think the most poignant things are?
Todd
Well, that is a good question. Again. I think it goes back to communication and transparency. You know, those are the two in life. I think those are two of the most important things that you can do to succeed. You know, communicate with your sales force, communicate with your clients, make sure that everybody鈥檚 on the same page, and be transparent. So a lumber dealer credit manager needs to set, you know, set standards and and set rules, and just be honest. If you don鈥檛 think that you can get this done, we鈥檙e going to have to, you know, try to figure out how we鈥檙e going to try to do business together. You know, set the expectation of you鈥檙e going to pay interest if it goes past and that interest is going to compound. Are you cool with that? Are you going to sign for that? Yes, no, I refuse to pay you interest. Okay, well, I鈥檓 not an interest free bank. So if you, you know, if you don鈥檛 pay and you鈥檙e not willing to pay interest, we can鈥檛 do business. So again, you pick your battles, but to just do it, slap a number on it that says we鈥檒l give you 20 grand, 30 days. And I didn鈥檛 really speak to anybody. I just looked at a credit report, and I don鈥檛 really know anything about them still. And then get pissed off when stuff doesn鈥檛 go as planned, you kind of set yourself up for that. So communicating with everybody and letting everybody know what the expectations are, I think, is the most the two most important things.
Thea
I think that that鈥檚 beautifully said, the communication and the transparency I know I鈥檝e worked with credit. Managers before that have said, well, you know, I don鈥檛 know, kind of wait. It鈥檚 like, okay, if the file looks like this today, it鈥檚 going to look like that. The next time you look at it, it鈥檚 going to look like that. Tomorrow. It鈥檚 going to just stop stretching somebody out. Just have the hard conversation and tell them, Look, I looked at your report. You鈥檝e got some liens and judgments out here. Let鈥檚 talk through what they are. Once you get through it, it might not be just as it appears on paper, but having those conversations and setting those expectations are huge.
Todd
Absolutely I listen. I鈥檝e had the conversation. I鈥檝e seen stuff come up and called a client and then, like, Listen, you know there鈥檚, there鈥檚 open judgments against you. And they鈥檙e like, What are you talking about? I鈥檓 like, Yeah, here it is. And they鈥檙e like, can you take a screenshot of that and send it to me or the link? And I鈥檓 like, yeah, they had no idea that their credit had problems, yeah? And they were actually grateful, you know? And then there were other guys that were like, Oh, I know this thing just keeps coming back to haunt me. It was 15 years ago, and here鈥檚 what happened. And, you know, but I鈥檝e been great since then, and I haven鈥檛 had any issues. And it was the customer, and you could tell if you鈥檙e in the game long enough.
Todd
Yeah. I mean, listen, I know when someone鈥檚, you know, singing me a song and and giving me a story versus someone that truly is trying or or is being honest with me, and that just comes with experience, and it comes with with time and listen, I鈥檝e been burned more times than I care to remember.
听
Thea
Okay, I love that you admit that. You admit that there are so many guys that are like, I鈥檝e never, I鈥檝e collected every dollar. I鈥檓 like, Oh my God, you鈥檙e such a liar. No, you haven鈥檛. Nonsense.
Todd
It鈥檚 not, listen, nowadays our bad debt is next to nothing.
Thea
Listen, we鈥檙e careful to better on the front end, it鈥檚 like, you鈥檙e not gonna, you鈥檙e not going to solve problems the way that you want to on the back end if you just did the due diligence upfront.
Todd
Yeah, exactly. And listen, there鈥檚 people that that we just won鈥檛 do business with, and they鈥檙e good, they鈥檙e still good guys. I just won鈥檛 do business with them. I won鈥檛 give them credit. I鈥檒l do business with them. And then, honestly, there鈥檚 some other people where I鈥檓 like, they鈥檙e like, they鈥檙e not even allowed in the building. I don鈥檛 even want to see them in here, even if they鈥檙e paying with a credit card, because they鈥檒l probably dispute the charge.
Thea
The second credit card you鈥檒l dispute it, your check will bounce, unless you鈥檙e coming in here with green dollars.
听
Todd
Just don鈥檛 they鈥檙e just not good people. But you know, you got to know who you鈥檙e dealing with, and be able to also know is a very powerful and very liberating word. Yes, we all want to grow our businesses. Yes, we want to, you know, take more market share, but you can do all the work in the world if you don鈥檛 get paid. What鈥檚 the point? We don鈥檛 need to practice.
Thea
What is it volumes for vanity, profits or prosperity? It鈥檚 like, how it鈥檚 like, I just, I don鈥檛 want to take all the orders off the street. And then it鈥檚 like, Yes, I had a hell of a charity day today, so that was awesome.
Todd
Yeah, I mean, listen, same goes with it鈥檚 a whole different discussion. But, you know, understanding your market and understanding your soft cost, your hard costs up, cost of goods sold versus variable overhead, fixed overhead. Lot of people are not only taking risks with credit, but they鈥檙e not even making money if they do get paid. Now you鈥檙e getting double whammy. Now you鈥檙e the credit problem. So everybody has credit and gives credit right down the line. Yeah. So, you know, listen, as a contractor, they鈥檙e getting credit from their supplier. The supplier is getting credit either from the the larger distributor or manufacturer. The manufacturer is getting credit from a bank and or PE money, or if they鈥檙e public, so everybody is or both things at all times.
Thea
Yeah, it鈥檚 kind of that. It鈥檚 just like a circle. It鈥檚 eat or be eaten. So you鈥檙e just kind of chicken and egg in it. There鈥檚 no stopping point. But you know, Todd, I thank you for spending so much time with us today. I mean, the 麻豆传媒 community is is so dependent on introspective and credit and figuring out how we can do a better job, how we can move things forward, what we can do different, how we can change the viewpoint. And everyone gets so excited about tech, and don鈥檛 get me wrong, I love that there are things that we can do now that is is much more, you know, peeling off the transactional pieces. But what it comes down to is the key, the two big things that are takeaways for me are the communication and transparency. And you鈥檙e not going to get that from Ai. You鈥檙e going to get that from relationship building, and you鈥檙e going to get that from from learning and growing and knowing your business absolutely, absolutely so thank you for being. Here, and this wraps up another episode of 麻豆传媒 talks credit. I鈥檓 Thea Dudley. We are so glad you鈥檙e here with us. We come out every other Tuesday, and we鈥檙e available on Spotify, Amazon music and apple. Until next time, keep watching your cash flow.
听
