Acquiring Isn't Always a One-Way Door

But other than that, I mean, we did everything else logistically ourselves. They didn't have to pick up material from different vendors, which is usually a challenge. Right. For customer modeling projects.

So they had a good thing going with us and you know, it was just a mutual benefit that we were making good money. They were making good money.

We hear so often in construction that working capital, that the working capital feature of the business is a weakness. Bad working capital dynamics. But that's when you're a sub, because the GC is, you're waiting for the GC to pay you.

That's not the case. At least in residential remodeling. Gcs actually have great working capital dynamics. Right, so talk us through that.

Exactly. So it's a negative cash flow where you, you, you earned your, you earn your cost before you even actually like execute the project. So just to give an example for, for every project we had to get an upfront deposit from our clients. That's half of the project total cost.

So if in average a master bathroom was $20,000 or so, we always get 10,000 up front probably like a month before to order materials and get the project scale in our calendar. And then the 10,000 will get it once the project was completely finished. And we will use the 10,000 to pay our contractors and then one month later pay our material.

So it was, it's a double edged sword. You have to be very careful with how you, you perceive cash flow because you, you can earn a lot of revenue upfront and thinking that, that that month was a great month when in reality you're always one month up front in terms of revenue, but not on actual costs because of that reason. So yeah, it's a great, it's a good problem to have to earn your cash flow…

So you never really, if you scale everything right, you should never run out of cash to fund projects and to

schedule projects, which is just really profound. As regular listeners will know, the working capital management in a small business is, is deceptively difficult. Of course dynamics change from industry to industry.

But what you want is to get paid upfront and, and then pay out whatever your costs to deliver the service or product later. And so that's a great feature of a business. Your point though is that it doesn't make it easy necessarily.

You get this revenue up front and you have to be really careful and cautious about how you deploy it because you may think you're earning more money than you are because as you accept revenue, there's still a lot of expenses that you're then going to have to pay for as the project unfolds. So be careful.