The devil’s in the details: Top 3 strategies for financial forecasting

Charley Burtwistle (00:05):

What is up, everybody? Welcome back to another episode of “The Building Code.” I am Charley Burtwistle, here all by myself. Once again, Courtney is not here, unfortunately. Or I guess fortunately, if you are listening and you don’t like Courtney. Just kidding, of course. Everyone loves Courtney. But today, we have a super interesting topic. We’re going to be talking about cash management. Definitely a topic that I’m super interested in, and I know a lot of our listeners are as well, too. So, we have a fantastic guest to tell us all about it, Gene Marks, founder of The Marks Group.

(00:36):

He’s renowned keynote speaker, a national business columnist. Speaks at over 70 live events every single year and also hosts the THRIVE podcast, which is a Paychex podcast. Paychex.com\podcast, if you want to check that out. But super excited to hear Mark or Gene Marks. He has talked with many, many, many famous influential people and is an absolute guru when it comes to cash management, specifically in the construction industry. So, I will not ramble any further. Let’s go ahead and get Gene in here. Hey, Gene, welcome to “The Building Code.” How are you doing today?

Gene Marks (01:14):

Doing good, Charley. Thanks for having me on.

Charley Burtwistle (01:15):

Absolutely. Appreciate you making the time. I was doing my research before you came on today, dug through your website pretty extensively. Super excited to talk to you today. But for our listeners joining in, always like to just start with who you are, where you came from, and how you got to where you’re at today.

Gene Marks (01:31):

Sure. Very quickly, I am a certified public accountant for anybody that might see pictures or videos of me as we speak. That should come as no surprise. I run a firm outside of Philadelphia. A lot of clients in the construction, and remodeling, and home building business. But in addition, I do a lot of writing. So, I write every week for “The Guardian,” “The Hill,” “The Washington Times,” “The Philly Inquirer,” the “Chicago Daily Herald,” “Forbes” and “Entrepreneur Magazine.” And I cover public policy, workplace and technology, for all those different outlets as well. And then I do a lot of speaking around the country in the construction industry and beyond, on different trends and topics and issues that I encounter.

Charley Burtwistle (02:15):

Yeah, you definitely seem to like to keep yourself busy. That’s very transparent here. And also, it seems like that’s taken you to meet some pretty cool people. Just scrolling through your website here, I see Seth Rogen. I’m a huge basketball guy, so Isaiah Thomas, Grant Hill. That was awesome. I was a little intimidated to interview you today, but definitely a pretty impressive wall of fame.

Gene Marks (02:34):

Yeah. I interviewed Queen Latifah, how about that? Pretty impressive.

Charley Burtwistle (02:40):

That is impressive. It’s very impressive for sure.

Gene Marks (02:44):

She’s great.

Charley Burtwistle (02:44):

I’m fired up to talk to you today. Tell me a little bit more about what inspired you to go down this avenue of helping small businesses as a man that clearly can do many things and does many things. What is your inspiration to dialing into that vertical?

Gene Marks (03:01):

You and I talked before we started recording about how you getting into podcasting as a way of just mixing it up, mixing up your day, from your normal day job and how much you love it. I had the same thing. I mean, I’m running a firm. We do consulting work. Back in the day, when I got into this, it was mostly technology services. We did a lot of Microsoft work. So, I had a choice of either doing something to diversify my day or become a very heavy drinker. And I decided to diversify. So, I started writing at the time for “The Philadelphia Business Journal,” the “American City Business Journals,” just with advice, and tips and things I’ve learned about running a business, sometimes venting. And then that led into other columnist jobs, like with “The New York Times,” and “The Washington Post,” and now with “The Guardian” and others.

(03:47):

And then those jobs led me into speaking at a lot of places and now doing consulting. I go around the country and I help businesses identify areas where they can grow, and profit, and then see those areas through. So, it was just like, it didn’t happen overnight, but it happened as things evolved. And as a business owner myself, I have to say that everything that I do was selfishly motivated. So, Charley, all the things that I wanted to do, I wanted to make sure that I learned from them because it just helps my own business. So, that’s been the journey that I’ve been taking.

Charley Burtwistle (04:27):

Yeah, that’s awesome. And it’s definitely a relatable thing. Like you said, anytime you’re blessed enough to have the opportunity to speak to these businesses and owners of businesses, you learn just as much as you give, oftentimes. And it’s a great way to just constantly grow, and have that growth mindset, and continue to not pick up a heavy drinking habit from boredom. That’s for sure.

Gene Marks (04:53):

And then you do learn. I mean one of the things I’ve learned doing this and advising businesses is that, I mean, I get educated every single time. There are just so many smart people that are out there running businesses. So, again, I don’t want to say this has been all altruistic. I mean I love writing and covering issues for businesses. I love advising my clients, but they all help me run my own business and my own life. And that’s been a real big thing.

Charley Burtwistle (05:18):

I love it. And I have my notebook and pencil ready to go through this interview, so I’m sure I’ll take, I dropped my paper, plenty of notes throughout this process. But the reason we wanted to have you on today is talk about effective cash management, the cornerstone in the construction industry. Super tight margins, fluctuating project demands, a lot of financial challenges those can create. And I’m sure you as a certified accountant can speak to and relate to construction financials are drastically different than a lot of other typical businesses and verticals, where other accountants may be able to just come in and plug and play. So, super excited to hear your unique vantage point. And it’s something that our listeners and industry is really honing in on over the past five to six years, especially different conferences I’ve going to, different people that we’ve had on the podcast.

(06:13):

This is the name of the game of what can make or break a business and take a good business to a great business. So, super excited to start today. So, maybe just start at the top. Obviously, we’ll get into some job costing stuff as we continue down, but I think a super overlooked part in the construction industry is your overhead costs. So, I’d like to start there, and then hoping you can maybe explain the concept of overhead in the construction industry, and why managing it is effectively the most critical thing to profitability.

Gene Marks (06:45):

And I don’t want to insult the intelligence of your audience, because people listening to you and I speak, I mean they’re running businesses. Some of them are starting up, but a lot of them have been doing this for years. We all know that maintaining our overhead is critical in our business. And the companies that have the lowest level of overhead are the ones that are able to price the most aggressively. And it’s all about winning jobs and then doing them profitably. So, overhead to me is everything outside of the materials and labor that you’re directly using on a job. So, when you are doing any type of a project, you are going to have core things that you are buying, core supplies and core materials that you’re going to be using on the project. And you’re going to be using specific laborers on this project as well that will be doing work by the hour.

(07:32):

Those are specific costs that you are applying and charging to a job. And that’s what creates your margin, and that’s all fine. But what you have to do is you have to make sure that margin is going to be greater than what your overhead is. And your overhead are all the other costs that you have in your business that you need to run your business. So, these are the costs to keep the lights on. This is the cost of rent. This is the cost of leasing. This is the cost of maintaining your debt. It’s the cost of compensation of not only yourself, but also your office workers, like your accounting team or your marketing team or other people, customer service that are doing the work in the back office as well.

(08:14):

And then, of course, there’s also the benefits that get applied to all of them as well. Health insurance, and retirement, and paid time off, and other things that you are incurring. So, your overhead is the structure of all of these costs that are supporting the people that are in the field using the materials to build the jobs that you’re ultimately selling to your clients. And the key is figuring out what that overhead is, controlling that overhead and making sure the margins on your jobs are exceeding that overhead so that you can turn a profit overall on your business. I hope that makes sense.

Charley Burtwistle (08:51):

Oh, yeah, it makes perfect sense. Easier said than done for sure. When you’re helping different businesses or doing consulting or talking to any of them, what are some common mistakes contractors make when it comes to calculating their overhead costs? Because like you said, that’s the make or break, is if you’re going to come out and be profitable at the end of the day. So, if you’re not sure what your overhead costs even are to start with, that’s where I’ve seen talking to certain people, people run into issues.

Gene Marks (09:20):

The biggest mistake that I’ve seen over the years is when business owners in the construction industry ignore these costs because they’re boring, or they don’t like it, or it’s not just something that they prefer to be out there building projects and working on customers. But you know what? When you run a business, there are things that you have to do that you might not like to do, but they’re critical to the job. So, when it comes to the numbers for overhead, the devil’s in the details. So, some of the smartest clients that I have know this, and they get into the details a little bit. So, let me give you some advice on those details. For starters, every business, you have an accounting system. And in your accounting system, you’ve got your accounts. Your general ledger accounts. Some of these general ledger accounts are overhead accounts.

(10:08):

These are the expenses that I just mentioned before. They’re your rent expense, your repairs and maintenance, your supplies, your health insurance, whatever they may be. So, those accounts are all part of your general ledger. And whoever’s doing your bookkeeping for you, they’re recording those expenses, so that those expenses get paid. Well, once a month, my advice to you is to get a printout. And I do say a printout, although that might say old-school. It’s just the way I like to work. I like to get a printout of all of those overhead general ledger accounts in my business and the details of what went through them during the course of this past month.

(10:43):

Now, for most businesses, maybe this is 20 pages, 30 pages, 40 pages. I mean, it’s not that this is voluminous amounts, but it is the details. And my recommendation is that you sit down with a cup of coffee, or depending how the month went, maybe a shot of Jack Daniel’s, it depends. But you pull out the red pencil, and you read the accounts. This is a diary of your business, a diary of your overhead. And let me tell you something, you’ll find things in those accounts that will raise some of your eyebrows. Why are we spending money on this? I don’t recommend this supplier. Why does this invoice appear to be in here twice? Why does this seem higher than what I’m used to it being? You’re going to have questions.

(11:24):

So, you circle, you write your questions out, you give them to your bookkeeper or your accountant, who’s ever doing it. And you ask for them to reply to those questions. And I’m sure 99% of the time they’re going to reply with reasonable answers. But these are answers that will enable you to better understand what is running through the detailed level of your accounts. And trust me, you’re also going to find some mistakes and some problems as well, or get to thinking like, “We’re using this supplier, but I’m pretty sure I get a better price from that supplier for these goods as well.” Or, “Gee, my travel expenses this month, what’s Henry doing out there traveling to San Diego? We don’t have any clients in San Diego.”

(11:58):

That kind of thing raises those questions, so that you can address them and fix them going forward. That to me is the best way to get your overhead under control, is to dig into the details. And again, for most of the companies that I deal with, the size that they are, it’s a very doable thing. It’s an hour of your time a month and it’ll have an enormous impact on what your overhead is.

Charley Burtwistle (12:21):

Yeah. I think as you and I were talking to about before we hopped on here, I spent the first five years of my career doing data science here at Buildertrend. And people always like to over-hype. I mean, data science is incredibly over-hyped right now. Rightfully so, maybe. But the biggest impact that I was ever able to make at Buildertrend is the really, really boring stuff. And exactly what you’re talking about, is just giving visibility into what’s happening every single month. You don’t need to make some predictive model to go out and say, “Hey, you should cut costs here or implement.” That’s cool and sexy, if you can do it. But that’s not going to make or break you right there. It’s what are we doing? Ensuring the right people have eyes on the right thing, and spending time holding people accountable in a consistent process of doing it every single month. Just get in the rhythm.

Gene Marks (12:21):

Agreed.

Charley Burtwistle (13:12):

It may be agreed painful the first couple times, but you get used to it. And exactly, you’re the business owner. You’re always going to be smarter than a computer when it comes to the intangibles and knowing what you should be doing to run your business. Just get in a consistent process and cadence of doing that.

Gene Marks (13:30):

It makes a huge difference, just remember the devil’s in the details. That’s really important. Now, I’ve got two other bits of advice when it comes to running cashflow. Can I offer them? Is that okay?

Charley Burtwistle (13:38):

Please do. Please.

Gene Marks (13:39):

Okay. So, number one, and again, like I said to you earlier, Charley, when we were talking about… this is all stuff that I’ve learned from my clients. I did not come up with this on my own. I’m not that smart enough to do that. But here’s one thing, everybody should have what’s called a flash report. If you’re running your company, you’re in the construction business, there’s a lot of moving parts, you need to have a flash report. This is a report that you should probably be getting every day, at the very least two, three times a week. It should have key metrics in your business. Cash, receivables, open billings right now, maybe overtime to date or payroll to date, or open jobs to date, or material purchases to date, or certain expenses, what they’ve incurred to date as well. But this is updated, again, a couple of times a week.

(14:30):

It’s just numbers that’s being pulled out of your accounting system. And whether it’s delivered to you by email or on a piece of paper on your desk, you should have your thumb on all of those numbers and know them off the top of your head as you’re running your business. And the key part of having that flash report, Charley, is making sure that you’ve got historical numbers along with it. So, if you’ve got cash, what it is today, you probably want to know what your cash was say at the beginning of the year. Are we up or are we under, or are billings to date? It is this so far this year, what was it at the same point last year? So, somebody in your office should be trained, and obviously, you can lean harder on your accounting system to do this, to deliver that information to you two, three times a week so that you’ve got your thumb on those numbers all the time.

(15:13):

If you are paying close attention to those key metrics in your business, I promise you, you will not only have a better control of your overhead, but you’ll improve your cash flow as well. So, that’s number one that I think should be done. Number two, and again, I’ve learned this with some really smart clients of mine as well. They forecast. They forecast. I mean, if you don’t know what your cash is going to be 90 days from now, just 90 days from now, and this is the case with a lot of companies that I see, that’s like a real problem. It’s like you’re operating your business in the dark.

(15:47):

How can you possibly grow your business or control your overhead if you can’t even see ahead 90 days? So, you do a forecast. I’m not saying that you do this for a year in advance or two years in advance, because there’s some black magic involved in that. But come on, for 90 days, you know what your overhead is going to be over the next three months. You know what your rent is, your debt payments, your salaries, your benefits. I mean you know what they’re going to be over the next few months. You know what an average margin is going to be on your jobs. Maybe you close out each month and it’s a 30% margin. Remember, those are your materials and your direct labor. You can come up with an average. It’s not an exact science.

(16:26):

What you’ve got to figure out, of course, is what jobs you think you’re going to bill and collect over the next 90 days. So, that’s maybe easier said than done. But if you’ve been in business long enough, you should be able to figure out what you’ve done in the past. You can look at your backlog of jobs. You can look at your receivables. You can talk to your project managers and your sales managers. With a little bit of due diligence, you can figure out what jobs you will either be billing or most importantly, collecting cash from in just the next three months. So, now you know what your cash receipts are going to be, you know what your margin is, average margin, you know what your overhead is. So, you take your beginning cash at the beginning of the month, right now, and then you add up those three months and you know what your ending cash is going to be 90 days from now.

(17:11):

And if you know that that ending cash is going to be lower or potentially in a problem zone, you’ve got some time to fix it. If you know it’s going to be up, then you’ve got some time to figure out what should we be doing with that extra cash. So, the smartest people that I’ve met when they’re growing their business and controlling their profitability, they’re always looking ahead at least 90 days, and I can’t recommend that much. So, have a good flash report and make sure that you are forecasting your business. Take an hour out and do that once a month, or have somebody do that for you. It’ll make a dramatic impact on what you’re doing.

Charley Burtwistle (17:44):

Yeah. I mean they’re going to have to do that work sooner or later. So, it’s either do you want to be proactive and figure out where your business is going to be three months from now, or do you want to do at the end of the year when you’re reconciling everything and figure out where your business ended up when you have zero opportunity to go back and change anything there? Obviously, adjust ahead. We’re recording in January right now, so hopefully a lot of people have some good new year’s resolutions of what they’re going to do for the year moving forward.

Gene Marks (18:08):

It’s funny that you say that. I mean the end of the year is such bullshit. I mean by the time you put your end of the year numbers together, it’s like it’s ancient history. You’re in February at this point. I mean, what good does that do you? You know what I mean?

Charley Burtwistle (18:19):

Yeah, yeah, exactly. So, why not do the work where it can actually be impactful and you can make changes live and on the fly?

Gene Marks (18:27):

Look ahead. Look ahead is what you want to be doing. Seeing what’s coming down the pike.

Charley Burtwistle (18:31):

Yeah. I jotted down five different questions as you were talking there, so hopefully I can remember them all and go through. But one thing that you had mentioned, which the only reason I bring it up is, like I said, I was going through all your website and stuff before this. But you also do some consulting on the pre-sale, like CRM side of the house as well, too.

Gene Marks (18:50):

I do.

Charley Burtwistle (18:50):

Is there some opportunity? You mentioned forecasting stuff out of understanding where your pipeline is at, what jobs you think are going to be closing when. Is that something that you often help businesses with?

Gene Marks (19:01):

Yeah, 100%. So, I mean every business should have a CRM system. CRM, by the way, is customer relationship management. And it’s 2025. There are many good and affordable ones that are out there. We implement at our firm, Zoho, to our clients. But Insightly, Nimble, Microsoft, Salesforce, of course, every business should have one and every business should lean into them. And a CRM, it’s a database of everybody who touches your business. So, there’s follow-ups, and there’s notes, and there’s history with those people. They accumulate emails, all that good stuff. Any opportunity that you run into in your business, any bid that you put out, any estimate that you do, even anybody that you meet at the golf course that says, “Hey, we got a job coming up next month, you might be interested in bidding on it in a month from now.” All of that goes into your CRM system. And what that does, as you had said, Charley, it builds on a pipeline. And you have this pipeline of opportunities going forward for the next two, three, six months in your business.

(20:00):

The pipeline report is the most critical report that you’re getting out of your CRM system because that is telling you all the things that can happen in the future, the amount of what the value is of those things. This is a $10,000 job, this is a $50,000 job, and then you come up with a system for weighting those jobs. This is a cold job. I don’t know if this is ever going to happen. This is a warm job. It might happen sometime in the next three months. This is a hot opportunity. We have a quote out or a proposal out for this job and it could close in the next 30 days. When you have that pipeline, then it gets back to that forecasting. You start then recognizing what jobs are going to be closing.

(20:39):

You can make some assumptions based on that. And then based on your typical job, you’re like, “Well, typical job, we take a deposit up front and then we bill out every month,” or, “This job should take 60 days to do or 90 days to do and billing would be X, Y and Z.” You incorporate that into your forecast, so you’ll know what your future cash is going to be. So, the pipeline report is critical in a CRM system. And again, the smartest business owners that I know in this industry in particular, they lean heavily into those CRM systems to look into the future.

Charley Burtwistle (21:14):

Yeah, that makes perfect sense. It’s the start of the entire funnel. Going all the way down till you close out a job, final walkthrough, and you get your final paycheck in there to see where your margins spit out. Unless you understand how many of those are going to be coming and when they’re going to be coming, maybe more importantly, especially in a cash dominated industry like construction, the cash flow can get really wonky unless you have a really solid understanding of what that pipeline looks like and ensuring you have that steady state. Which leads me to my next one is another thing that you hit on in your previous answer.

(21:48):

When talking about understanding when payments are going to be coming in, I know a lot of times that can be a frustrating piece for some contractors where they have a really good understanding of their pipeline, they’re executing the job at a really good clinical execution, and they have solid margins, but then they’re waiting for payments to come in from clients or those are potentially delayed. Is that something that you see people often deal with? And any advice to make sure they’re staying on top of those and collecting the time of …?

Gene Marks (22:17):

So, a couple things on getting payments in. Obviously, and again, I’m sure I’m preaching to the choir, but the most amount of money that you can get upfront, you go for it. If you’re able to charge 50% on a job before you start the job and a client’s willing to pay for it, then by all means, you want to do that. So, cash is king. Taking payments in, depending on the kind of construction firm that you are, if you do more home constructions or smaller type jobs, don’t walk away from using credit cards to get payments. I mean people will be like, “Oh, it’s a two and a half or 3% fee.” You can build that fee into your costs as well, so you’re not losing money on that. But getting a credit card payment in is cash in the bank, and you should not be walking away from that at all.

(23:00):

There are companies out there as well, I can refer them separately if people are interested, that do factoring. It is not uncommon in the construction industry, particularly if you’re working for governments or school systems, or places that are notorious for long payments, you can factor out an invoice. I mean you pay a fee for doing that, but then the factoring company takes that invoice. They’re the ones that go and collect the money, and that way you get the cash in the bank. And again, if you’re going to be charged a fee and you know that this is the kind of client or customer that you’re going to be factoring an invoice, you want to build that cost into your estimates, so you’re not losing money on doing that.

(23:39):

And finally, I know people walk around being debt averse. And I understand why you would want to be debt-averse. I mean, obviously, who wants to be in debt? But you look at any big companies, growing companies, successful companies, they all have financing. They all have debt on their balance sheets. This is not a bad thing. I mean, we live in a capitalist society and banks provide capital. So, if you were in a position to get working capital loans and the place to go is the small business administration, by the way because they have a new working capital loan program that is specifically useful to people in the construction industry. You get a working capital loan, which means that if you’re waiting on an invoice, you can still take the money out to finance your business and then, obviously, pay it out when you get your invoice in.

(24:23):

I mean, you don’t take a loan out for something that’s speculative, obviously, that might never be paid back. But if you know the invoice is going to be paid in 60 days, but you can benefit from the cash being in your bank now to fund other operations, fine. That’s what working capital loans are all about. There’s nothing wrong with that. And yeah, I get it. Prime rate is 7.5%, so it’s historically a little bit higher. You’re probably paying a couple points above that, but that’s an annual rate. So, if you have a working capital loan out for 30 days or 60 days, you’re paying two twelfths of that annual rate. It’s not a killer. And again, it gives you the cash in the bank to fund your operations. So, these are all ways to navigate your way around slow paying customers before you pull out a baseball bat and go visit them at their homes. But that’s entirely up to you.

Charley Burtwistle (25:12):

I love that. It’s funny you mentioned that. You mentioned a couple things there. I was just down at a conference last week and was listening to someone give a talk over pretty much exactly what we’re talking about right now. And the two things that they recommended that people could be doing that aren’t taking advantage of, is make it as easy for your customers to pay as possible, which you just hit on. You should accept credit cards. If there’s additional fees, you can bake that into the contract that you’re going with. Make it as easy as possible to receive that money. And then two is the external financing, which you were just hitting on there.

Gene Marks (25:45):

Charley, I have to interrupt you and say that person that you heard speak, that person was a very smart person. I just want to say that because they agreed with what I just said.

Charley Burtwistle (25:53):

Yeah, absolutely. Well, as you were talking, I’m like, there’s no shot I listened to Gene speak. You weren’t down at the Dominican Republic two weeks ago, were you? But no. To tie back to something you mentioned earlier with that external financing, which can be extremely beneficial if used the right way. And again, I’m by no means an expert. I just have my opinion on other people’s opinions. But the crucial part to going after that external financing is what you hit on earlier, is you have to understand what your forecast looks like moving forward to ensure that you’re able to, ultimately, pay that back. And correct me if I’m wrong, but whoever you’re getting the loan through or whatever, that’s what they’re going to expect you to come to them with. You’re going to have to have that before you can get that financing, correct?

Gene Marks (26:39):

Yeah, 100%. I mean banks are in the business to make money. And by the way, there’s plenty of private lenders that will lend you money as well. Lendio.com is a really great resource we recommend to clients. Higher interest rates, I mean higher cost of financing. But again, if there’s return on investment, that’s fine. It’s just a cost of doing business. Whatever place you’re going to go to, to get financing, their question is, “Think about it? Okay, do you have the ability to pay me back? When will you pay me back and how much money will I make off of this deal?” You want to answer those three questions to whoever is giving you the money. And if you can do that satisfactorily fine, and it gets me back to working capital.

(27:15):

If I was going to go to a bank and say, “Hey, I want to borrow money so I can invest it in crypto,” a bank might have an issue about the riskiness of doing that. But if I go to a bank and I’m like, “I got this invoice that’s outstanding. It’s from the government of Milwaukee, the City of Milwaukee, and they take 90 days to pay and I need the cash now,” any bank would be like, “Okay, we’ll give you a working capital loan to bridge you over. I mean, you’re due the money. We’re going to get paid back, so fair enough.”

Charley Burtwistle (27:43):

Yeah, absolutely. This is fantastic. We’re already getting pretty close to time here. I have a whole slew of other questions I want to ask you, so I’m trying to pick through the ones that I think would be the most impactful. But something that you had just hit on when working with other potential clients or vendors out there, do you see a lot of people renegotiate terms? I think that’s something that we’ve seen our customers get really good at, whether they’re working with a specific lumber provider or software provider. But oftentimes, if they go to them and bring some of their financials with how much they’re ultimately paying and how much money they’re bringing in, they’re able to get a lot better terms and reduce that overhead or job costs, wherever side of the fence that lands on. But ultimately, bring their expenses down bottom line.

Gene Marks (28:29):

Yeah. I mean, everything’s up for negotiation. I mean, good luck with that. It depends on who you’re negotiating with. Sometimes I feel like when I’m going to go to my … Can I renegotiate my monthly Netflix fee with Netflix? Probably not. So, there are some entities that you might be up renegotiation and others that may not. My only advice is that if you’re going to go to renegotiate something, stop thinking about yourself and think about the other guy. That other person needs to make money off of this deal, and you have a contract and an agreement with them. So, you have to be thinking, why would this person want to renegotiate this? What’s the benefit of them doing this? You know what I mean? What cards do I have and how can they benefit from this deal?

(29:12):

And if you’re able to answer that satisfactory, then by all means, everything is up for renegotiation. Banks can do this. I mean, really, financing is very common. That’s on a personal mess. I mean, Charley, you buy a house now, 7% mortgage rates, they go down to 6%, by all means, go and renegotiate your mortgage. People are used to doing that. So, there’s no question that you can’t ask to do that, but just be aware that it depends on who you’re trying to negotiate with.

Charley Burtwistle (29:41):

Yeah. It’s funny you bring that up. That is definitely a part of my morning routine, is wake up and see where interest rates are at today.

Gene Marks (29:48):

…

Charley Burtwistle (29:48):

I bought a house last year, a year and a half ago now. And just a classic marry the house date, the interest rate while I’m still dating the interest rate.

Gene Marks (29:55):

Do you know why interest rates have not gone down, even though the Fed has reduced interest rates? Mortgage rates have gone up.

Charley Burtwistle (30:04):

Yeah, please tell.

Gene Marks (30:05):

The other reason why is just because the mortgage rates of the banks, they base their mortgage rates off of the 10 year treasury. And 10 year treasuries, when you buy a treasury, the yields on that, you want to make sure that you’re staying ahead of inflation. So, the yields in the future is going to change based on what inflation is. And right now, as you and I are speaking, the markets are thinking that inflation is going to stay where it is. And in fact, might even tick up over the next year or two. So, if inflation is ticking up, the treasury yields are ticking up and no bank wants to give a mortgage where the interest rate that they’re committing to now is going to lose money because inflation has gone up, their cost of capital.

(30:42):

So, that’s why mortgage rates right now, they’re not coming down even though the Fed is lowering this because the banks are looking ahead, which gets back to what you and I talked about earlier. I mean, these are banks. This is what people do. They’re always looking ahead. Your own banker is looking at these 10 year treasury notes to determine their costs of doing business. You and I should be looking at our forecasts so we can determine our cash flow and our costs as well. That’s what I’ve just learned over the years.

Charley Burtwistle (31:10):

Absolutely. And every time I talk to someone on the podcast here in your space around construction-specific accounting and cash management, I always just in the back of my head is like, “Okay, Charley, you need to be better about your personal finances. Everything that he’s saying right here is directly applicable to you. I should be budgeting better.” So, thank you for the motivation. I’ll go home and spend some time doing that. I’m sure my wife will love it for the next couple of weeks, for sure. Like I said, Gene, we’re getting really close to time here. Last question I always like to end with here is you have a ton of free resources out there on your various websites and through all the different things that you’re due.

(31:46):

If someone is listening to this and they’re having the same epiphany that Charley’s having right now, is like I can be better at this, I need to devote more time to it. Where’s the right place for them to start? Do you have any resources that you recommend people to go and constantly learn from? Or what’s the right next step for someone that’s ready to really dial in their cash management?

Gene Marks (32:06):

Places, I mean, I cover this stuff all the time. I write about this for all these different places. If you go to genemarks.medium.com, all the different places that I write, whatever media appearance I do, podcast, it all goes to my Medium account. So, you want to keep up on everything going on in your business and learn this kind of stuff as I learn it? Go to genemarks.medium.com. If you’re interested in any consulting services as well, I mean, I’ll just give a pitch. If you go to genemarks.com/consulting, I visit a bunch of businesses during the year and make recommendations and then see them through so they get implemented. So, if that’s something you’re interested in, you can check out those services there.

Charley Burtwistle (32:44):

I love it. I’m on your Medium site right now. I’m going to be scrolling through this for a while for sure. We will link both of those in the show notes for people that are listening. Gene, before we sign off here, any last notes to end with?

Gene Marks (33:00):

The only thing I do want to say is small business confidence is at a six-year high right now, which is all great as we head into 2025, a new administration. But there’s a lot of challenges facing the construction industry this year. We all know that. It’s going to be a really tough year for labor shortages. Interest rates are going to stay high, inflation sticky. A lot of workplace regulations still up in the air. So, watch your pennies, forecast your money, read your general ledger, have that flash report. Be a good steward of your business because you’ve got a lot of people that are relying on you to make the right decisions. So, that’s my advice.

Charley Burtwistle (33:34):

Yeah. That’s a great note to end on, because what we always say is when times are tough and we’re faced with some of those adversaries that you had just mentioned, is the opportunity for the cream to rise to the top. And if you have your financials in order and you’re appropriately forecasting, you’re going to get through it and be in a better space than a lot of other people that aren’t.

Gene Marks (33:53):

Indeed.

Charley Burtwistle (33:54):

Gene, thank you so much for the time today. It was an absolute pleasure. I appreciate you. I got my notes written down, so I’ll go home and start working on my finances. But seriously appreciate the time.

Gene Marks (34:04):

Yep, fair enough. And your wife can thank me, okay? You’re fine.

Charley Burtwistle (34:07):

Love it. Thanks, Gene. Well, we just heard from Gene Marks, founder of The Marks Group. Lived up to the hype of the interview for sure. I wrote down, if you’re watching on YouTube, just a whole page of notes as he was talking there. Again, all of us, I guess I don’t own a business, but all the business owners that are listening to this podcast, a majority of them are for profit businesses. The goal is to make money. And you cannot make money unless you have a good understanding of your financials. And I thought Gene did a really, really well job. Really, really good job of jamming a ton of information. I think the interview was 33 minutes, if I looked at the clock correctly. And it was nonstop, from everything from managing your CRM appropriately to making sure you have a good influx of jobs, to making sure that your overhead costs are calculated correctly, making sure that the costs of those are going to outweigh your margins at the end of the day and forecasting things out.

(35:01):

I think that was probably my biggest takeaway from the interview, is making sure you have a good understanding of where your financials are at currently and where they’re going to be 30, 60, 90 days from now, to understand if there’s any changes you need to make. I really liked how he talked about external financing if you need an influx of cash, but only if you understand when that cash is going to be able to pay back and where your business is going to be three, six, nine months from now. So, again, we’re still early in the year. It’s an appropriate time to make New Year’s resolutions, not just personally but for your business as well, too. So, I would highly recommend one of those resolutions being a better understanding of your finances moving forward.

(35:38):

Because like you said, it’s going to be potentially a tough year, but it’s a great opportunity for businesses to grow and take advantage of the situation. And I think a lot of our listeners have a growth mindset or are excited about the opportunity to continue to drive their business forward. So, that will do it for me. Charley Burtwistleon “The Building Code.” Make sure to like, review, subscribe, leave a comment, leave a thumbs up. I would really appreciate it. If you want more, you can join The Building Code Crew on Facebook. Otherwise, I will see you next time. Peace.