The following transcript is provided by YouTube. Mistakes are present. To hear the podcast episode, click HERE.
[Music]
today’s show is brought to you by aliquot pro aliquot pro has so many neat features
and one of the features that i think is just fantastic is the smart scan feature
you can scan a qr code which will immediately take you to a service report
or you can view a controller page by placing a qr code on a testing station
or controller your customer can save time by doing the routine tests and
tasks you are asking them to do and then logging them seamlessly into the same
platform that you’re putting your data in making all of the data able to be
searched and you can figure out if there are issues where to start finding
solutions this and so many more features are available on aliquot pro you can
find out more about aliquot pro by going to scaling up h2o.com forward slash
aliquot [Music] welcome to scaling up the podcast where
we scale up on knowledge so we don’t scale up our systems i’m trace blackmore the host of the scaling up h2o podcast
and nation can you believe it it’s september already so i was thinking what
are some things that we have to look forward to in september and there are so
many things so of course labor day is september 6 and for our jewish friends out there
rosh hashanah is also september 6. in the united states we have patriots day
which honors all of the people that lost their lives in the 2001 september 11th
attacks at the world trade center in the pentagon and then also outside in
pennsylvania that one aircraft that the passengers actually took control over so
it couldn’t crash into a larger facility so we honor them
on patriot day september 11th september 12th did you know it it’s grandparents day
so honor your grandparents and let them know that you appreciate them speaking of our jewish friends again yom
kippur is september 15th and then september 17th is constitution
day and that’s where the united states celebrates the adoption of the united
states constitution which took place on september 17
1787. september 21st is international day of
peace and they ask for observances of moments of silence at noon
and that just allows people to kind of think about what’s going on around them
the autumn equinox occurs at 3 20 september 22nd eastern time and this is
approximately where we have equal hours of daylight and
darkness so there you go those are some things to celebrate during the month of
september and speaking of some other things happening in september and i’m so excited about this one in just a few
short weeks september 21st through 24th i will be in vancouver canada and i am
going to be at the association of water technologies annual convention and expo
i meet so many new scaling up members at that convention i hope i meet you let’s not take that by
chance look out for me i will try to look out for you but let’s make sure
that we meet and i would love to know your thoughts about the podcast i love
it when i hear that just people listen to this podcast so let me know that if you have any ideas i would just love to
thank you for being a member of the scaling up nation again that’s september
21st through 24th that’s in vancouver canada and if you’re a business owner
you want to come in one day early because the business resource committee
is putting on the business owners conference so if you own an industrial water treatment company and you want to
hear from peers that own similar companies that are going to share with you best practices things
that you should do things that you shouldn’t do and just meet a whole bunch of people that are in the same boat that
you are by all means go to our webpage scalinguph2o.com
and navigate over to register for that conference still plenty of seats left
and if you are a business owner make sure that you come in a day early i can’t wait to see you there some other
things that you want to put on your calendar the iwc the international water
conference november 6th through 10th in orlando florida the iwc is great they
were one of the first associations to reach out to me and asked me if i would
cover their conference and i did that a couple years ago and they were very gracious to me so thank you for being
one of the first supporters of the scaling up h2o podcast and of course we’re going to have more information
about their conference on our show notes page also on our events section so if you go
to the event section of our web page we have got every event laid out so easy
for you to follow so you can plan where you want to go next and then something
that my team and i are getting ready for i hope you are ready for it october 3rd
through 7th folks that is industrial water week and i believe this is year
six of industrial water week you are going to be celebrated for an entire
week one day was not enough and a month’s probably just annoying so we have an entire week to celebrate the
awesome job of industrial water treatment so we’re going to celebrate pre-treatment mondays
boiler tuesday cooling wednesday wastewater thursday
and careers friday we’re going to have a brand new episode each and every day
that week to motivate you to do something a little bit different to
learn something a little bit more and just enjoy being an industrial water
trader if you did not know about this fantastic holiday make sure you’re telling other people
about it the more people that know about it the better the celebration is and the only way we can do that is for us to get
out there and let people know that they deserve a week of celebration again that’s going to be october 3rd
through 7th one nation i had so many options to
talk about on today’s show thank you for all the people that write in that leave voicemails that let me
know what you want me to talk about and one of the things that have come up more
than others is our supply chain issues how much things
are costing how do we talk to our customers about that how do we
make sure our companies are healthy so we’re going to talk about that today so
if you own a company strap in you’re going to enjoy this if you work for a company same
thing the things that you do as an employee as a team member of the
company that is what makes the biggest difference so don’t think just because
we’re talking about corporate finances and all the things around that that you
can bow out of this conversation you are the most important spoke in the hub of this conversation
and we’ve gotten a lot of questions around it so i want to make sure that we talk about all the different options
that are out there and the fact that not making a decision
makes a very clear and not healthy decision that we’re going to talk about
a little bit later now some people have commented on episode 204 where we talked about being
profitable so i guess this is maybe an extension of that episode that’s where i
uh decomposed a hamburger and we talked about how to actually get the pricing
for everything that went into that and so many people have responded back that
was such a simple episode to understand everybody knows what a hamburger is and
when you think about all the extra things that you have to make sure that somebody is paying for otherwise the
burger place the company does not make money it’s changed a lot of people’s thinking and how they price things then
of course we did a supply chain update back on episode 221
we talked about all the things that are going on the supply chain and of course we are still living them today depending
on what day it is during the week we’ve got a different material that we can’t find that’s overpriced that is out of
stock you name it it just seems to be the way that we have been buying product lately
i hope eventually we go through it however everything that i read says that
this is how it is going to be so people waiting for the normal to come back all
the economists that i have read and listened to said this is pretty much the new normal and for people in the united
states one of the big issues that the economists refer to is the fact that we buy a lot of things overseas and when it
gets difficult to ship or there’s a pandemic who could ever think
of a pandemic whatever happened but it did when all those things happen we can’t control things domestically so a
lot of economists think that countries are going to go back to supporting
themselves more so they can control things more we’ll see if they’re right or not and who knows with when people
try to forecast the economy i just am fascinated with that and there’s so much information out there you know even if
one person is just one percent right i think that’s an amazing feat but if we don’t keep up with those things we can’t
be prepared for those things and i hope when you heard on the scaling up h2o
podcast that we were going to have problems with phosphate you changed how you were buying phosphate maybe you
didn’t buy one drum maybe you bought two now i hope nobody out there hoarded because that doesn’t help anybody but
the whole goal is that we are in an industry together and by sharing this information by working with each other
we’re not only going to get through it we’re going to be better by going through it together so we talked a
little bit about that on episode 221 and then on 243
we had an episode on price increases and how we actually talk to our customers
about price increases and i know that several of you are probably just turning me off right now that it is just too
stressful to think about going into one of your customers and saying we need to charge you more because you know you’re
going to lose that business and folks nine times out of ten that doesn’t happen but we’re going to talk
about the different scenarios today on what you can do
to help with company profit and the first thing that i want to uncover is
that company profit is not a bad thing if the company is profitable
they can sustain themselves if a company is not profitable well that company goes
out of business so there’s nothing wrong with making a profit so if you understand that
there’s nothing wrong with the company making a profit because that’s how the company pays
you and most people do not want to work for free and with that we’re going to talk about
how we can make sure our company is sustainable so we’re going to talk about
a term called ebitda and ebitda is a term you might be familiar with if you
ever talk about profit normally ebitda gets brought up it’s an acronym it stands for earnings before interest
taxes depreciation and amortization simply put those are the things that we can control
in our companies that tell us what our profit is
and if you have been under a rock for the last year let me inform you it is far more
expensive to buy everything today than it was a year ago today in fact on
average things are 30 percent more expensive today
than they were yesterday so just think about that statement if
you are in a company and you are charging the exact same thing
last year that you were charging this year most likely you’re paying 30 percent
more for the goods that you are having to build for your services so right
there that tells us that something is not correct so hopefully you lean in
and you think well wait a second if we know if we don’t have profit i don’t have a job we don’t have a company
then that is something that we all need to work into we all need to understand
we all have the responsibility to make sure that we have a job tomorrow and we
do that by making sure that the company is healthy well ebitda again
is profit so how do we increase profit well there’s three ways that we
can do that and we’re going to talk about each one of those so let’s say we
do price increases a price increase of five percent now
you’re probably having some price increases that you’re having to endure that are well over five percent but for
now we’re talking about our customers and i know what you’re thinking you are
thinking we are going to suffer attrition because customers do not want to pay
price increases so let’s just say that we had a company base of 5
million dollars and without a price increase our revenue would be five
million dollars let’s say it cost us four million dollars in order to create
that five billion dollars so that means our ebitda is now one
million dollars does that make sense okay that’s how much we made that’s what our profit was
it cost us four million to make the five million so what we have left over is 1 million that’s our profit or that’s our
ebitda now let’s go ahead and do a 5 increase
so that means we’re going to increase our current customers an extra 250
000 so instead of just 5 million we’re now billing 5 million 250
000 now we have the exact same cost at 4
million and if we look at our ebitda our profit is now 1 million 250 000
so what you just gathered and i’m apologize doing math over a podcast and
by the way i’ve got a white paper that i’m referring to that will be on our show notes page so you can see the
graphics of everything that i am talking about here today you will see that that five percent went
straight to the bottom line and that’s really the magic of that because when you increase
your cost there’s nothing in between that price increase going straight to
your ebitda or your profit so that’s one thing we can do is we can raise prices
another thing that we can do is we can increase our sales volume so let’s say here’s our
base again so the five million dollars that we’re starting out with it costs four million dollars to service it so
our ebitda is one million dollars so now let’s say we are going to go out and we
are going to sell more business so let’s say we sell 25
more business so in addition to our base of 5 million dollars we now just sold an
additional 1 million 250 000 so our total revenue is now 6 million
250 000 so that’s a revenue growth of the 25 percent however
we just added 25 onto that which means our costs go up so our cost went from 4 million
now to 5 million so we did not add all of that to our
bottom line like we did with just a price increase when we add new business
we also have to add new costs so our ebitda only went up
250 000 so it took an entire million dollars to
service that increased ebitda so i’m hoping now you are seeing that the old
adage that sales cures everything is not 100
correct sales will definitely improve to the bottom line but it is very possible and
companies do this all the time they can sell themselves out of business because
there are costs when you sell something if you’re not planning on those costs
you might sell yourself out of business now we didn’t do this in this scenario
but we only got 250 000 of extra profit where a lot of people thought we were
going to get 1 million 250 000 of extra profit so just remember
more sales equal more costs so the other thing we can do to increase
profit is we can reduce cost so here we are again our base
company sales of five million dollars that cost us four million dollars to
operate is now going to give us that same thing of 1 million of profit or ebitda
well if we cut cost by 6.3 percent
let’s go ahead and run those numbers and it’ll be apparent why i did 6.3 in a
second so we have the same million dollars of revenue that has not changed
it cost us regularly four million dollars to go ahead and
service that five million dollars however we reduce cost six point three
percent and the reason that’s done is because it comes out a very nice two hundred and fifty thousand dollars is a
decrease so actually what our costs are aren’t four million dollars anymore it’s three
million seven hundred and fifty thousand dollars and that means our ebitda goes
up two hundred and fifty thousand dollars so we reduce costs by 6.3 percent and
that was the same equivalent to when we sold an extra 25
more sales volume and it was the same thing that if we just increased our prices by five
percent so i hope you’re seeing the pattern the best thing that any company can do
is to increase their prices the second best thing that a company can
do is reduce their cost and then when all those things are running efficiently if we can sell more
even better so that would really be the trifecta if we can do all three of those
our companies can get really healthy but i’ve seen a lot of water treatment companies i’ve worked with a lot of
water treatment companies and water treatment companies just don’t understand their cost they do not understand how much it costs
to service their base of business so if you are involved in your company
where you can get very familiar with how much it cost you to make whatever you
make in a year’s time i’m going to urge you to dive into that because we can
always sell more and that’s always the answer but as you saw through this example
it’s not just selling more it’s using what you have
better and again the trifecta is raising prices increasing customers and then also
decreasing your overall cost now maybe you are the type of company out there
that is scared to have a price increase because your customer is going to shop
you around and i’m going to be brutally honest with every water treatment company out there
we are paying more for everything that we need within our companies and there’s
absolutely no way we can hold the same prices that we have been holding because
it’s costing us more money and don’t think for a second your clients don’t understand that now i
didn’t say they would like it but they definitely should understand it when was the last time you went to a grocery
store and you saw fully stocked shelves well folks that is the telltale sign
that we’ve got something going on with our supply chain it’s not a surprise to anybody else a bottle of orange juice
now costs about two dollars more than it did just a few months ago
chicken salad i love chicken salad you going to buy chicken salad it’s almost doubled what the cost is
and speaking of chickens how about eggs we had an issue with the chicken
population eggs have gone up like 300 percent
customers understand that the price of things are going up of course i didn’t
mention the price of gas so with all of that if we are truly
partners with each other having a conversation with somebody and
letting them know that you’re trying to do the best that you can however these are the parameters that you’ve been
given to do your best and something’s got to give and if you have this conversation maybe there’s even a fourth
solution out there that we haven’t even thought of yet but yet you can work out with your customer and that never would
have happened if you didn’t start the conversation so here’s what i want to run through
let’s say we go through 10 years of not increasing prices what does
that actually do to our profit so our same base company of 5 million
and of course we have the cost of inflation so if we look at the cost of inflation it’s normally about three
percent per so i’m just going to take our revenue of five million dollars and
of course we know it cost us four million dollars to service that and that
means our profit or ebitda is one million dollars well let’s say we stay the same for ten years
in year two we’re going to have inflation cost of 120 thousand dollars that’s going to be
added straight to our operating cost and that means our ebitda is now
880 000 where it used to be a million let’s go to year three so the next year
our inflation costs are now going to be a hundred and twenty three thousand six hundred which is going to add to our
operating cost that’s now bringing our ebitda to 756
400 year four inflation cost a hundred and twenty seven thousand three hundred and
eight that makes our new operating cost four million three hundred seventy thousand nine hundred
and eight that means our ebitda is now six hundred twenty nine thousand ninety
two dollars you can see how it’s really going down year five are five million dollars and now our
cost of inflation is a hundred and thirty one thousand one hundred twenty seven dollars that means our operating
cost is four million five hundred two dollars and that is bringing our ebitda to below
five hundred thousand at 497 965 folks if i fast forward and i go to
year 10 with all of that math we are actually in a deficit
it is going to cost us more money to operate than we are actually billing for
in fact we start going out of business somewhere in year eight
so if you are not constantly looking at your cost and i’m sorry to throw all those numbers at you i hope those made
sense i do have the white paper that i am referring to on my show notes page so you can see all
this so you can have conversations around it but just holding the same price for 10 years actually eight and a
half years will put you out of business so things never stay the same our prices
shouldn’t stay the same and with all of the extra work that we’re having to do
to find supplies it’s coming from somewhere and that means we’re not out working with our
clients because we’re trying to find all of these hard to find pieces of equipment and products so what do we do
about that and how do we actually minimize the time that we
need to spend on a customer location so we can do the things that we should be
doing at a customer location so let me tell you what i mean by that we are doing things as a professional
water treater that we probably shouldn’t be doing because we do not have the support we need on
the customer site and because of that we’re having to do a lot extra work
or and i should say and or there is not adequate equipment on site that allows
us to get the information to process the data to give us more parameters so we
don’t have to be on site in order to see what’s going on and by the way that’s the yin and the yang if somebody isn’t
on site for us getting us this information well then let’s automate that because it doesn’t mean we don’t
need the information it just means that we’re not getting the information and it’s making our job harder and we’re
having to do more corrections when we go on our regular basis because we don’t
have all of those things to begin with if we can explain to our customers what
it’s costing them not to have better equipment what it’s costing them not to
have people involved on site so they can be
part of the process if they don’t understand that they’re never going to understand price
increases because they don’t understand the true value that you are giving them
so it’s my hope that you’re not just sending an email that says see attached
report folks do not do that there is no value in that because trust me your
customers i’ll say most customers do not understand the value that you bring to
their facility each and every time that you go for a visit they don’t understand
that they are running clean systems and they’re facing all these same issues
that we’re talking about it costs more for them to do everything that they are doing as well
but it doesn’t cost them more because their system is dirty because they’re not getting good efficiency
you have to do what you have to do in order to bring them that benefit and
you can let them know if you didn’t do these things they’re going to be paying 5 or 10 percent more on their electric
bill to operate their chiller or maybe it was their gas bill for their boiler
because you’re doing your job right because you know what to look for because you know what products to use
because you know how to test for them that is saving them money and the same
wares that allow you to do that today that allowed you to do that a year ago
are now more expensive so have that conversation with your customer make
sure they understand your value and if it was up to you you’d probably do it for free i have no doubt of that
but unfortunately the company’s got to make profit and you like living indoors and eating
food so with all of that we’ve got to make sure that everybody is winning and when we understand the numbers when
we understand how much things cost and what those costs mean to our company we
can make better decisions each and every day nation if you’re wondering i’m actually
referring to a white paper that was put out by the yale school of management and
was actually put out the 15th of june of last year and it’s called on the nature
of price increases and it is one of the best white papers that i have ever read
on price increases because it really explains all of the things that you
always wanted to ask about price increases it even goes into oh no what if i lose customers because i
instituted a price increase and i’ve already thrown enough math and enough numbers at you so i’m not going to do it
again but what they actually show you in this white paper is that normally most people do not
leave and by the people that do leave it actually improves your profit because
it’s cutting down on your service cost and normally those are the customers that don’t believe in your product and
service to begin with those were probably the customers that were not
doing the things that you asked them to do making your job harder
pointing fingers at you instead of doing the things that they needed to do to improve the program so not only are you
going to be more profitable without them you’re going to have a better quality of
life without them i know this is very hard doctrine but just think about it
when when we all understand how the company works when we all understand what we need to do to make sure that
everything stays healthy everything seems to work out it’s when
we stick our head in the sands and we’re too scared to have the conversations that we know we need to have
and let’s face it you are scared to have them because you have not been telling
those customers about your value so now without the value conversation
the only conversation you’re having is we need to charge you extra well did you create that or did your
customer create that so if you don’t get anything else out of today’s podcast i
hope it’s make sure everybody knows the value that you bring as a professional
water treater and to be even better as a professional water treater here’s a brand new
thinking on water with james welcome to thinking on water with james
the segment where we don’t give you the answers we give you the topics and questions for you to think about drop by
drop now let’s get to it in this week’s episode we’re thinking about keeping chemical
dosing pumps primed how does the chemical product being pumped impact how well a dosing pump
stays primed is flooded suction always better than a suction lift or vice versa when would
one be desired over the other does the distance a pump sits above the liquid level matter
how might bubbles and gases that build up in tubing be removed how do you know when a pump has lost
prime can you tell by sound or touch how could a system alert you when
priming is lost take this week to think about keeping your chemical dosing pumps primed be
sure to follow hashtag tow22 and hashtag scalinguph2o share your
thoughts on each week’s thinking on water i’m james mcdonald and i look forward to learning more from you
scout nation i know numbers make most people ill and i know
it’s difficult when you’re driving along to keep up with all those numbers as i mentioned that yale school of management
white paper is on my show notes page i hope just by listening you see how
important it is for you to understand the impact that you make each and every day
one on people understanding what value you bring but also what value is needed
so you can continue to bring it for everybody that wrote in to ask me to speak more on this topic thank you for
that i really appreciate that i’m always hesitant to come up with topics that have a lot of numbers in them but when
you ask for it i know it is the very topic that you want to hear and for all of you out there that have a
show idea that have not shared it with me yet please rectify that as soon as
possible go to scalinguph2o.com navigate over to our show ideas page and
let us know exactly what it is that you want to hear when you do that i can put
shows out like this and i can make sure that the entire industry is getting
better one podcast at a time one water treater at a time have a great
week folks i’ll have a brand new episode for you next friday
[Music] scaling up nation if you keep doing the same things you’re going to get the same
results and that’s why joining a mastermind like the rising tide
mastermind is a game changer in allowing you to achieve different and better
results you have an entire team that combines to help you
get to where you want to go the rising tide mastermind is the catalyst to your
next level of success to find out more about the rising tide mastermind go to
scaling up h2o.com forward slash mastermind