Believe it or not, this is a perfectly true story. Only the names have been changed to protect the innocent.

Once upon a time, in the mystical city of Los Angeles, where dreams are made and occasionally crushed under the weight of reality, there lived a chap named Tom. He was the proud owner of a small retail construction business. Our story begins on a fateful Tuesday, with a phone call that would eventually transform Tom’s business life.

Tom was referred by a former client, who probably warned him about my questionable jokes and unconventional approach to problem solving. Nevertheless, Tom would not be deterred.

He described his business dilemma – good reputation, steady business, but as dynamic as a sloth on a lazy Sunday. He wanted to grow, but alas, his business was stuck in the metaphorical mud.

He doubled as owner salesperson, had two crews and was the office manager. Basically he was the chief cook and bottlewasher. His premises were just the right size for his current operation – in other words no room for expansion.

His grand plan? Add a third crew, move to a bigger lair, get another truck, more equipment, hire an extra crew and salesperson – essentially, the business equivalent of going from a bicycle to a rocket ship. But there was just one teeny tiny issue – finances, or rather, the lack thereof.

When I asked about his financial resources, Tom looked at me like I’d asked him to explain quantum physics. “Resources… what resources?” Not the most promising start, but hey, at least we were starting!

Tom was wise enough to recognize that timing is everything – a bit like trying to catch a subway train with the doors closing. He couldn’t invest upfront without risking his business turning into the next big disaster movie.

He considered financing but was as enthusiastic about that as a cat in a bath. He feared turning his pride and joy into the aforementioned financial black hole.

I knew I had the answers but whether I could persuade Tom to proceed was debatable. As I pondered over Tom’s predicament I waxed lyrical:

“I guess I’m just a lumberjack. Give me six hours to cut down a tree and I will spend the first four sharpening the axe.”

Now maybe a wise person said this, or maybe it was just a really dedicated lumberjack. Either way, it was my approach to problem solving. You’ll see what I mean.

I then shared one of my other gems with Tom:

A guy named Farshad Asl the renowned writer once said:

“A 20/20 mindset produces clarity, joy, and peace in your life.”

Tom either looked relieved, or maybe he was just happy I stopped quoting!

Anyway, to continue. His relief that he could maybe achieve his growth without risking everything was palpable, and he hadn’t even heard my proposal… insanity or trust – you decide.

I said to him “The approach I’m recommending is that we reverse the process. You need to get on top of your cash flow first and investment second.” Like putting socks on before shoes or underwear after trousers. Whatever floats your boat.” I suggested a two-pronged approach: make the business changes first and then start what I call an Expansion Fund – sounds great? right?

Tom continued with the questions.

“How am I going to do that?” “How will I know what kind of changes? Where does the money come from?”  He grew a little concerned that this would all be new to him and had no idea where to start. As far as he was concerned, he was doing the best he could and couldn’t see a way to make a significant difference in the business.

I explained that the plan was straightforward, or as straightforward as the Ninja ride as Six Flags Magic Mountain. “This is where I come in.” I explained. None of this will be easy and does mean a number of changes in the way you do things, but I told him not to worry as I would be there for him for as long as he needed me to keep him on track and answer his questions. I then outlined my plan. Let’s break your things down a bit. Let me show you how you can generate working capital:

“Firstly you need to raise your prices – your business has a great reputation; so increasing your top line is a relatively easy first step. I’ve often found with good businesses that a modest price increase never has a negative impact.” Ok he said (good sign):

“Next let’s talk about your cost of goods – you need to negotiate better terms with your key vendors. Tell them you’re planning on expanding and they’ll start to see an increased level of business. Ask for better prices and better settlement terms (a second OK – even better sign).”

“Now that takes taken care of your gross margin.”

So let’s look at your overheads. You need to carry out a zero-based budgeting exercise.”

“Zero what?”

“Zero-based budgeting – sounds complex, but it’s just fancy talk for cutting the crap out of your overheads.

First thing? Turn off the lights!

I think I must have yelled it as he took a giant step back and stared at me.

“Let me explain – you have to start from scratch and produce a budget eliminating EVERY and I mean EVERY non-essential expense. As with your vendors, get need to get better rates on things like your rent. Speak to your landlord – if you know him well enough tell him your plan and, if he’ll help you with your rent, tell him he’ll be your first choice when you start looking for bigger premises (he was on a year-to-year lease – so it doesn’t get any better!).”

A small step for Tom, a giant leap for his bank account. It’s amazing how much you can save when you start thinking like Scrooge McDuck.

Every cent saved needs to go into the Expansion Fund, a fund so sacred, even thinking about touching it is taboo.

As far as other expenses are concerned. cut back on your telephone, vehicle and any other expenses wherever possible. And don’t even think about buying that new car or any other non-productive capital expenditures.

Finally let’s talk about utilities – YOU NEED TO TURN OFF THE AFOREMENTIONED  LIGHTS!

“Oh back to the lights are we? How’s that going to help” he asked.

I’d left this to the end because in my opinion it’s one of the most important items. I know it sounds counter intuitive, but you have no idea what secondary benefits mount up when you encourage your employees and yourself for that matter, to think cheap. They often come up with ways to save money that you never even thought of.

Finally work out every cent you’re saving and salt it away in your expansion fund. DON’T EVER TOUCH IT! Just let it accumulate.

We ran through it again and I could see that I think he had got the gist of it! I think he could actually see a risk-free way forward.

He didn’t yet fully understand that running a lean business is cleansing for the soul; it says, I’m in control.

That was a revelation to come!

I explained to him that if he did this, he will also have created one of the most important things in life – a safety net. If, for any reason he has any unexpected problems either of a business or personal nature, he will have something to fall back on. I know I told him never to touch the fund but in life you never ever know. Think Covid-19!

I had one question that he needed to answer as honestly as he could as it was central to my recommendations.

“What if I told you that you could achieve my plan, but it may take some time. Would that be a problem?”

“Define time?” he asked.

“Up to two years” He thought about it for a second and nodded. Third ok – he was on board!

Finally calculate every cent you’re saving and salt it away in your expansion fund. DON’T EVER TOUCH IT!

He didn’t yet fully understand that running a lean business is cleansing for the soul; it says, I’m in control.

That was a revelation to come!

I explained to him that if he did this, he would also have created one of the most important things in life – a safety net. If, for any reason he has any unexpected problems either of a business or personal nature, he will have something to fall back on. I know I told him never to touch the fund but in life you never ever know. Think Covid-19!

You see, deep down, I’m as conservative as Tom.

Final quote coming up. From yet another writer – Mort Walker

 “I like a happy ending. That’s what I aim for all the time.  I do like to make people happy”

Fast forward eighteen months. I’m sat in my office minding my own business (if you can believe that) and practicing my acceptance speech for the “American Best Business Advisor” award (a guy can dream, can’t he?), and the phone rings. It’s Tom! He’d achieved his goal six months early and was ready to expand. He was ecstatic, full of energy, and wanted to thank me with a gift. I declined, saying his success was gift enough.

So, that’s it – the tale of Tom and his construction business. From a stagnant puddle to a flowing river, all it took was a bit of humor, some wise(ish) words, and a whole lot of patience. And remember … here comes my lumberjack, the best way to move forward is to think like a lumberjack. Plan, plan, plan. Spend time sharpening the axe and watch your fingers!