James Blain: 0:27

I am super, super excited on this episode of the ground transportation podcast. We are going to be talking about financials. So yes, that thing we all love. Yes. What we all have and want to have more of right money. It is probably the one that I am most excited about so far. I know I'm kind of safety and customer service, but I don't think any of us do this for fun, right? I mean, I know a lot of us love to do it, so I'm super excited to have you guys joining us. Thank you for listening in. Uh, I can, what, how do you want to kind of set this up? I mean, this is really your world of expertise, you know, when it comes to the financial side, where do you kind of start?

Ken Lucci: 1:05

Well, you know, it's interesting to me. You know, listen, we've looked at 250 companies and everything from a million bucks to 150 million a year in revenue. I can show you million dollar companies that are fundamentally more profitable than 3 million companies. Um, so let's start with the profit equation. And, uh, This is something that when I was an operator, I didn't have a handle on because I didn't look at 250 companies. The profit equation is, is of total income what percentage of your costs go to turning the key and doing the job? What, what do you have left over, which is your gross profit margin? or it's also called net contribution. So what do you have left over to pay all of the other bills that are not associated with turning the key and doing the work? You're overhead. And then after that, do you have enough money to pay yourself and to show a profit? So the first thing when we look at a company's financials is we determine what their profit equation is. And here's kind of what they look like. Of 100 percent of revenue. So out of a million bucks you take in for a million dollar company, 60 percent of that should go to all of your costs associated with turning the key. We call it cost of goods, fleet insurance, fleet insurance, fleet equipment costs, driver labor, fuel, detailing, repair, maintenance. So it should be 60, no more than 60%. really healthy companies, 55%. It leaves you between 40 to 45 percent left over. So out of a million bucks, you have 400 to 450, 000 left over. A million dollar company should have about 25 to 27 percent overhead, including being able to pay the owner a decent W two income. Decent should be roughly two thirds of his total annual income. So a million dollar company, ideally, after all of those things, should still be able to turn a profit of between 000. That's the ideal million dollar company. As you go up from there, you know, a three million dollar company, you're caught. The challenge is to make sure that the metrics that you had as a healthy million dollar company, as you scale to three million, stay the same. But the owner now should be able, instead of 80 to 100 grand, you should be turning a profit of between 240 and 300, 000. Remember the bottom line number of 8 percent to 10 percent net ordinary income. Um, that's what the financial healthy metrics look like. And the way I look at it is, your blood pressure, your cholesterol, your heart rate, right? But sadly, a lot of companies don't even look at their financial metrics at the million dollar level. They just run it with their reservation system and they give what amounts to a shoebox full of information to the poor bastard they call a bookkeeper accountant. And this and unfortunately we get called. It seems a lot more lately. On companies that have unhealthy metrics can I constantly running out of cash, and I don't make a profit and I'm not able to pay myself. What's wrong? The numbers exist somewhere that the problem and the solutions exist somewhere in that equation, right? Either you're really high on your costs, right? And your overhead is too high, and that's usually if your gross margin is too low. I know that your prices is are most likely below market.

James Blain: 5:00

And let me ask you something, because one of the interesting things that I hear is As owners, the line between what the profit is and the company making a profit and their actual salary get kind of blurry, right? So there's a lot of times that I hear, Oh, well, you know, we have this percent profit, you know, and we're doing this on the owner salary side. What, what is the differentiation between those two look like and how, you know, obviously being a business owner myself, I can tell you over the years, that's kind of something that I've, I was struggled with because, and I think a lot of owners are going to appreciate this. A lot of times you say, I'm going to sacrifice profit. I'm even a sacrifice paying myself now. I need to put that money towards growth. I need to put that money towards building my business. So how do you separate those two out? And what does that kind of look like in the way you think about it? Ken?

Ken Lucci: 5:51

Okay. First of all, if you're sacrifice, if you're the last person to be paid and you're not paying yourself and your business is showing a loss because you say, I'm going to pour all the money back into growth. They, my question is always, are you sure you're throwing money at a An organization that is actually financially healthy. I'll give you an example. If one of those metrics are off and you have a cash flow problem, you really have to fix it before you keep throwing money at it. Okay, but if you or if you said to me, you know, I'm taking a nice W two, but you know what? I'm not going to take a distribution this year because I'm going to use that leftover money to buy a piece of equipment. That is a company worth sacrificing for, right? So my answer is to you is if the company is and is has the most healthy financial metrics you have, regardless of its size, right? And the key number is there is you're making money on every single trip because your gross margin is above 40 45%. Yeah, it's worthy of investing in computers, technology, etc. But if after you're done paying all your costs to turn the key, you get, you get 25 percent left over. You're just throwing good money after bad. Does that make sense?

James Blain: 7:16

Yeah, absolutely. And I, and I think help, help us kind of understand then. What's the difference then, if you're thinking about this as an owner, between the distribution and the salary? Because I see a lot of people that kind of fudge those.

Ken Lucci: 7:28

Yeah. Uh, yeah, 100%. I mean, I can show, I've looked at companies and, and, and, And my my business partner and I have a presentation we call a tale of two companies, and it's two companies that are 750, 000 apiece, which is, you know, the very small side of what we normally deal with. And you have one where the owner's taking on six figures. Okay, and he's taking 60, 000 of that in the W two, and he's taking 40, 000 in a year and distribution. You have company two, which is doing 750, 000 where the guy's not taking out anything, and he's taking out whatever's left over. distributions, monthly cash, whatever it is. Here's the problem with that scenario. Okay. One company is bankable. One company can go to a traditional lender and get a decent loan. The other company cannot afford to buy, buy inventory and repair parts, buy new equipment. Okay. And it's not traditionally lendable because the owner is not taking out consistent income. W two income. First, there's many benefits to it. Okay. And if if anybody gives you additional advice, I can tell you, I have to look at the 250 companies. They're not correct. W two income feeds your Social Security. It allows you to have a basis for a 401 K. The I. R. S. Likes to see business owner have 2 3rds of their total owner compensation in W two income, and then the final third being an annual distribution. And what those distributions do is kill the profitability of the corporation. Yes, you're gonna have to pay personal taxes on that. Okay, so let's break it down. If you're on a P. N. L. As a as an owner, and you're taking 50 to 60 percent of your total owner compensation out as W two, You're gonna have a nice net ordinary income from the business. At that point, you can choose what to do with that money. You can either declare a profit and pay tax corporate tax, which nobody likes to do. Well, you can use that capital for distribution where you pay personal personal income on it, or you can use that money to buy an asset, which now gives you a tax deduction for depreciation purposes. Okay, so There's so many reasons why you should not only you shouldn't exist just on distributions. Okay, banks don't want to lend to a company that can't support its owner. Right. And I know, I know, I know companies that are 5 to 7 million companies that make this mistake. I know companies that are 5 to 7 million that are that the owners have paid on a 10 99. And I'm like, Okay, well, wait a minute. You're not feeding your social security. You have no ability to take and create a 401 K. based on a piece of that.

James Blain: 10:16

Now, can you, you, you've mentioned social security, right? And, and I know that one of the things that I was taught, right, wrong, or indifferent early on was, you know, anything you can do to avoid paying social security, to avoid paying anything you can as an advantage. But you've brought that up twice now, right? And, and again, In my world, I've progressed enough to understand why that's different, but help everybody listening understand why that's important. Because there's a lot of people that are convinced we're never, you know, if you're, if you're younger, you're not going to get that anyway. Why is it important to be funding that? Why does it matter that you're paying into that

Ken Lucci: 10:48

Well, I mean, people have been saying that since the day Social Security was enacted, and I believe it was Franklin Roosevelt, which would be 1940s.

James Blain: 10:58

around that time?

Ken Lucci: 10:59

right. So I am a firm believer that planning for retirement should be threefold. It should be a base Social Security. It should be individual 401 case. And it should be outside investments. You know, that are tax deferred. That's just my opinion. entrepreneurs who don't pay into social security are betting on a future where they will be funding 100 percent of their own retirement. And I just, it's more of a personal preference. So if you said, Hey, as an entrepreneur, I don't want to do that. You have plenty of places to go. You can do a separate retirement funds, which is a self employed retirement fund. But the, the, the other piece of that is you, if you're not paying yourself as an, uh, as an employee or W 2, you're being watched in reference to your quarterlies. You, what you have to you legally at that point, you have to, you have to do quarterly declarations. You have to do quarterly pay ins. So you really have to, that's why the Irish. I hate to say rule. The I. R. S. Likes to see 50 to 60 percent W two and then the remainder of owner consideration as a distribution. Now, here's the beauty of being an owner, and I'm not giving tax advice here, but a good tax planner will tell you you can take a portion of your mortgage. And because it's a seven day a week business, and you're doing business from the house, Right. That that that's tax deductible. Your your your vehicle, your gas, your cell phone, et cetera. So let's not even talk about that. Um, but I don't want to go down the rabbit hole a lot on financials. But the number one issue I see with companies of all size is they don't understand what their individual profit equation is, or they have an unhealthy profit equation, which means they're underpriced. Their cost of goods, therefore, are artificially high as a percentage of income. They don't have enough left over after they pay all of the direct costs of doing the job to pay overhead to show a profit and pay for themselves. So, you know, the only reason why I'm a success at this is the math is simple. It's not trigonometry or calculus or, you know, anything advanced. And when you look at 250 of the same thing, You see that the equation of out of 100, 60 percent cost, direct cost, 40 percent gross profit. You know, we like to see 27 percent GNA and then leaving you like an 8 12 percent net ordinary income.

James Blain: 13:43

let me ask you, do those numbers are those things that you should expect to change in terms of your profitability based on size? Or do you see that typically the profitability is going to be that same target?

Ken Lucci: 13:55

Interesting question because you know, people say to me, well, I want to scale my business. Okay, scale to, the wrong definition of scale is growth in top line revenue alone. What you want to scale is a healthy profit equation, right? So the more revenue you add, your profits should not go down. That's the tricky part of this business. That's the tricky part where most failures occur. Okay. And I don't care if it's whether it's a small company, one or two cars trying to get the owner himself getting out of the business out of the front seat, or if it's a 1 to 2 million company trying to go to three, four or five. The problem is they, they, anybody can throw money at, at the business as they're growing and it will erode. It'll, it will erode the profits. The secret to scale is starting with good metrics. And then as revenue grows, those metrics stay the same. You cannot help, when you grow these businesses, and you grow the complexity of the equipment that we have in our fleets, that what's going to change is definitely the cost of goods. Uh, example. If you go into minibuses and motorcoaches, and you were traditionally a sedan, an SUV and maybe a van company You're going to find that the cost of of operating minis and certainly the cost of operating motor coaches are going to move the needle on your direct cost of goods equation. So what that looks like for a 5 to 10 million company is more out of out of 100 percent of total income, you're going to spend 70 percent on the cost associated with turning the key. CDL drivers are more expensive than chauffeurs, right? Repairman, right? So the trick there is when you're with you're dealing with a gross margin of between 30 and 35%. Now you better have a true economies of scale in your overhead, right? So your overhead is not going to grow exponentially with your revenue from three million to five million. Your overhead is not going to go up by the same percentage. So the secret there is a real tight infrastructure and and resisting the urge to add recurring expenses if you can.

James Blain: 16:18

So then what does that look like in terms of services? Because I know, especially kind of moving towards the future. There are a lot of companies that are viewing motor coaches and larger vehicles as a way to grow into, you know, more profitability. We're going to make more money. They're going to pay more for it, but what are the services that you should be growing and what are the services you should be staying away from? What does that look like?

Ken Lucci: 16:41

So let's start with the fact that is it, it is extraordinarily difficult when you're trying to make a volume play as a sedan SUV, what I'll call, you know, even if it's a high touch black car operator. If all of you do, all you're doing is providing sedan and SUV and you're doing a volume play where you're in the lowest price point in your market, you're not going to make any money. The secret to profitability in this business is diversification of fleet and diversification of services. I'll, I'll, I'll go to my grave. They'll probably put that on my coffin along with EBITDA. Uh, most people don't know what EBITDA is, but that's okay. You

James Blain: 17:23

and tell us real quick, what, if you don't know what EBIT is, that's okay. We're here to save you. What does that stand for, Ken?

Ken Lucci: 17:28

EBITDA is Earnings Before Interest, Taxes, Depreciation, and Amortization. It is the, the, the bottom line number, right? So you've got net ordinary income or income profit from the day to day operation. And then down below you have the EBITDA equation. And the EBITDA equation is what banks and guys like me look at to value businesses. So this, these businesses will trade on a month on a multiple of EBITDA. Now The EBITDA for these businesses, don't get me started, should be high teens to low 20s is healthy,

James Blain: 18:03

So if you had a million dollar company, what would you expect EBITDA to

Ken Lucci: 18:06

170, 000 to 220, 000, yep. Dimes to donuts, that's a healthy EBITDA. Yeah, now, most of the companies we see with single digit EBITDA, It's simple. They're missing the E. They're not showing a profit or they're, they're, they have an operating loss from their day to day operations. All right. Now don't make a mistake. I'm not talking about making a profit and paying taxes. I'm talking about posting a profit from the day to day operation of the business. Having 10 bucks left over after from every ride after you've paid the drivers, paid your, all of the costs and then paid all your GNA expenses. And, and that's what our industry is based around. It's if, if you have a million dollar company and you're paying yourself along the way at W 2 income, if you're posting a hundred thousand dollar profit from the operation, you're doing good, you're doing well, well, you're doing well.

James Blain: 19:03

And I, and I think you've kind of teed us up, right? Cause I kind of, we kind of went a little off track there explaining EBITDA, but I think the, one of the things that you've almost inadvertently teed up is selling value. Right? Because if you're trying to do a volume play, we are not going to be uber, right? You're not going to be able to go in there and do absolutely insane amounts of volume. So being able to have that higher price point, being able to live in that space is a huge deal, right?

Ken Lucci: 19:34

I pity the companies that are trying to go head to head with in the, in the sedan and SUV market with Uber on a volume play. It's it's

James Blain: 19:47

It's unwinnable.

Ken Lucci: 19:48

it's a suicide mission. Now, if you notice most of the companies in our industry, when Uber came in, we went through fighting with Uber and then the realization that maybe we might want to do some other things, meaning we might want to add the executive vans really exploded the mini buses, the motor coaches, so the sprinters. So the answer to your question is, if you want to be a financially healthy company. Diversification of services. Diversification of fleet offerings is critical because you can, you can spread and you can make more of a gross margin on your five to six hour charters compared to a sedan or an SUV trip to the airport.

James Blain: 20:32

Absolutely. And I think we see a lot of companies still that kind of think of that point as I'm going to escape to those bigger vehicles. And so I guess from a financial standpoint, if you're going to go to those larger vehicles, if you're going to focus on that more, what is kind of the impact there? Kind of back to that question we asked earlier. What, what do we grow into and what do we stay away from if we're looking to build a healthy company,

Ken Lucci: 20:57

Uh, good question. I mean, you know, if you're gonna use the your vans to do corporate shuttle contracts or shuttle contracts with airline cruises, what I see a lot of right and and you're gonna do a gross, you know, low, low, low, low gross margins. You're not adding any profit to it, right? We just looked at a company that had a 24 by seven hotel shuttle contract with vans. And when we finally did a PS, what we call a sidecar piano on it, they were making 18 to 20%. And I'm like, you might as well have stayed home. One accident, one risk and one issue and your profitability is gone. So the answer to the question is when you have diversification of fleet and diversification of services, you are in the position to charge. You'll have a blended gross margin much higher than a sedan or an SUV company. or a any kind of a volume play, right? Um, the other piece of the volume play is insurance companies don't want them. The insurance companies don't want 24 hour a day, seven days a week vehicles on the road. I mean, I'm seeing it with line run companies on the motor coach side. I'm seeing it on the hotel shuttle side. I'm seeing it on the corporate shuttle side because think about, think about it. Their risk is now literally 12 18 24 hours a day. So So my answer to you is if you're going to, uh, if you, if to you, success is volume of trip, volume of trip, volume of trip. You're not going to succeed anymore. The risks have gotten too high. The costs are very unpredictable. So my answer would be, is your, is growth in revenue per trip and a healthy profit margin of 40 to 45 percent or over. I mean, I have motor coach companies out there that are making 50 percent gross margins on specialty services like overnight tours or day trips or wedding services. We just did a pro form and working with a company that's buying motor coaches and they're charging on weddings with luxury motor coaches. They're making a gross margin on Saturdays and Sundays of 50 percent instead of having the unit set, they're making 50 percent margin on those units. And the beautiful part about it. they do, they, they're putting 40 to 50 miles on that piece of equipment versus, versus that motor coach doing a line run for a few hundred miles, uh, uh, and, and ma and making 20% gross. Right?

James Blain: 23:29

And I think you brought up a really good point because one of the first things that I was taught when I got into the industry is if you want to know how companies go doing, go into their garage. If the garage is empty, the company's doing well, but something that I've learned over time and you've kind of alluded to it is that if your vehicles are out there running and you're not making any money. All you're doing is racking up maintenance costs, racking up all those things. And so you are better off in most cases, in a situation like you're talking about, being able to have those higher margin trips and not running it for the sake of running it, then trying to keep that vehicle running 24 hours a day, right? If you're taking a hit on it, if you're breaking even running that vehicle, although it might look that way, what happens in the long run? Is more risk, right? More cost it. I found that it rarely ever seems to work out that way.

Ken Lucci: 24:21

And, and especially if you're pulling prices outta your ass. I mean, f for, forgive me for being, this is a podcast. I can say that, right? I mean in

James Blain: 24:29

And that's what a lot of companies do, right?

Ken Lucci: 24:31

they pull it out of their. Ass. I mean, I will have, I had somebody on a company that we had for sale say to me, Oh no, we make 45, 50 percent gross margin on that corporate shuttle contract. I'm like, let us be the judge of that. When you, when we added up, when we added up the fixed costs, they had to pay parking lot rent. They had to have the vehicles detailed by an outside company. Their dispatch supervisors spent 30 hours or 40 hours a month tweaking the schedule. We came down to it and said, You're making about 21%, which if you want to do that, that's fine. But we also calculated that you could actually do X amount of charter hours, right? Which puts on a third, a third of the miles in time. And you'd, you'd make more money, right? So the biggest, if you ask me some of the critical mistakes I see is the price coming out of my ass. Right. Or is the, no, no, I'm going to charge what my competitor charges. Wait a minute. I'm going to charge what the guys in my 20 group say. Okay. They don't have your cost structure, dude. I mean, how many times, you know, don't get me started.

James Blain: 25:45

Well, and, and it's really funny that you brought that up, right? Because I think one of the things that I've personally also seen is that you can have two types of companies that are almost identical. That are doing the exact same type of work, but because of the way that someone has structured the work or the way they've priced it or the way they're doing it, those numbers might look completely different and the way they approach it might look completely different and that to your point in the 20 group, you know, if if it's working for them, if you're not them, it might not work the same for you.

Ken Lucci: 26:17

I've, I've never met, uh, we do some benchmarking for 20 groups where people will give us all the data and we, we generically, company A, B, C, D, E, right? And we have to always try to normalize because the cost of structures are never the same. And rents are not the same, et cetera. But, you know, in general, if, if, if, if I looked at the companies that were the most profitable in the industry, based on what we review, whether they're retained clients or for banks or companies we've sold universally, they are all on the middle to highest side of their markets. None of, none of the companies that are low priced. have ever had much value or are able to have a decent profitability. You know, they're the ones always struggling with cashflow. Okay. So the profit equation, learning your profit equation is literally like learning what your heart and blood pressure should be based on my weight, my height, et cetera. And many people don't. I mean, we've been very successful with the financial course. We've got a couple of hundred operators on it at this point. But it's been, it's, it's a different getting them to think in a different mindset.

James Blain: 27:33

So speaking of mindset, I want to ask you your opinion on this, because this is something that I have heard from operators since the day I got into the industry, what would you tell an operator that comes to you and says, but Ken, I can't raise my prices. I'll lose my customers. I'll, you know, I, I won't have as much business, right? It's not there. That's, that's for me. And even, you know, Being in the industry as long as I have, it's something I hear time and time again, is there's this inherent fear of raising prices. Ironically, I don't know that I can think of a single story where someone has raised prices and any of those things have happened.

Ken Lucci: 28:09

Yeah. I mean, we do it every single day with people and there's, there's, for some reason we've been brought into recently, um, quite a few evaluation projects that have turned out to be what I'll call turnaround projects, which we've come in and we found some inherent problems where The cost of goods is way out of control, which always means all it means is the pricing structure is too low because, yeah, their fleet insurance went way, way up through the roof. They might have other problems, but you know, if your costs are above 70 percent and you're only left with 30 30 cents of every buck, there's no way you're gonna be profitable. So we've been brought in a lot of cases, and my answer is this a I understand that you have to be Competitively priced on what I call the milk and bread of the business, which is sedan and SUV trips to and from the airport. I get that. But there's still such a lack of quality above and beyond those vehicle categories that you can be more expensive. I, I, I've never found anyone who's left a company over 10 percent one way or the other, but the elasticity on the pricing of the larger equipment is much, much more plausible than. someone being able to say to you, well, how much is your airport sedan or how much is your airport SUV? They're not going to someone who prices you. They may price you on a motor coach and if they, if they're lucky, they're going to get a 20 year old motor coach and that's going to be cheaper than you let them have it. But to your point, if you're delivering value and you have to your clients and you have a relationship with those clients, that's based on, um, value, customer service and a solid relationship. Price is totally secondary. If someone stays with you only over low price, It's like, it's like being in an arranged marriage where she stays with you because you've got money. It's not, it's not a healthy place to be. Um, and we've helped people adjust their prices and we've never had anybody leave. We've done some analysis on people, with people and said, You've got a losing contract here. It's with an airline crew, for example. It's with a hotel shuttle. Um, it's a corporate shuttle and you either need to change it or you need to, you need to dump it because we'll deal with this in another episode. The risks are so high and the fleet insurance has gone way up so high that unless you're profitable, one accident or one problem could, could, could wreck your quarter. So, yeah.

James Blain: 30:48

And depending on your market, right? I was lucky enough. I was on a panel recently with, you know, an insurance carrier. I was on California Highway Patrol. You know, we were on that panel. And one of the things that was really clear there is, Hey, guys, you know, guess what? The insurance company can drop you. And if you're in a market where you've got insurance carriers pulling out and there's a limited pool to pull from, that one accident could be the issue. And To a wonderful point you just made, if it's on a contract, it's not a winner anyway, and you're just rolling wheels to roll wheels. Is it really worth the risk? Or is that time and money that can be put towards something that is going to be more profitable?

Ken Lucci: 31:28

And that gives us, that brings us to what kind of customers you should have. And my answer is definitely diverse, right? So, you should not have your revenue concentration, high revenue concentration with one, two, or three customers. You should not have more than 20 to 30 percent total with affiliate work only. And if you do have 20 to 30 It should be diverse over quite a few networks. Um, that's not as profitability is there on the affiliate side. It's not as much of an issue is pre pandemic. But if you have a variety of clients, you have some large corporations that may do an R. F. P. Every year, and they may really be attuned there. They're purchasing people may be really attuned with pricing. You might want to balance that out with professional practices like doctors, lawyers, private individuals that travel a lot. I love that high net worth people that love to travel 68 times of the year. You know, Mr and Mrs needs an SUV and you know, they go out of town 12 times a year. When they're in town, they use us to go out for birthdays and anniversaries. Um, so diverse diversification of services, diversification, the fleet offerings and diversification of clients is the key to to profitability. Um, I know I deal a lot with companies and we come in and look at financial health of them and they're doing an overwhelming amount of like 60 70 percent sedan and SUV work. They're just not going to be profitable unless they've like got no overhead whatsoever, you know, and the same thing will touch the holy grail. I mean, we'll touch that third rail. The companies that only do affiliate work, they don't have any primary relationships. Those are, those are the least profitable we see because They don't. They don't have enough protein along with those carbs. They don't have enough diamonds. They don't have enough higher profitability clients or service types. They're just solely doing affiliate airport and sedan work. It's very, very difficult

James Blain: 33:37

I'm going to trigger you, Ken, because I know this, this is something that you see that, that absolutely drives you nuts, but I think it's something that's worth mentioning. How many times do you see companies where they've got personal assets, boats or toys or things intermingled with the company? And. What is that real world impact? Right? Because I see a lot of owners, you know, they've got, they might, they go golf and they might have that golf cart with the logo on it, or they might go to the lake and they've got that boat with the logo on it and they've got that put into the company because it seems like a great place to keep it. But what's the real world impact to that?

Ken Lucci: 34:10

So, you know, you hit upon something that I deal with all the time. And what you've got there is a perfect definition of a lifestyle business. And it, I say this to people all the time, you know, all companies are businesses, but not all businesses are companies. And if you have a lifestyle business, God bless you, but typically it will die when you die. Um, the statistics on selling those kind of businesses, you know, are probably 1 in 10. If you, if you want to do that and then you have three or four good years where you've extracted your toys and you've played it straight on the financials, it becomes a sellable asset. I'll never forget. I represented a company in Nevada and it was not a profitable company and it had old equipment. And one day we, for some reason, Had a FaceTime meeting and I was, and they were in their garage and in their garage are four wheelers and snowmobiles and all kinds of stuff. Right. And like, what are you doing? And they expected me to sell it. And, and usually one goes with the other. Where they're they're running a lifestyle business, but they they think it's worth a pot of gold. And again, the axiom of not every company is a business. There's no question about it. Every company is a business, but not all businesses are companies. So if you if your goal is to run a lifestyle company, God bless you. But don't look to me to create traditional lending relationships for you or look for me to, you know, to try to sell the business because you're reducing your odds greatly by mixing apples and oranges, right? No one. Everybody knows that you you're hiding things in your profit in your financials. That's not the place to hide them. Okay, it's just you just you're gonna get caught.

James Blain: 36:08

Well, and I think kind of trying to wrap up and find the right place to kind of tie the bow here. One of the things that I think we all share is all entrepreneurs, all business owners, regardless of why we got here, we're all looking to be able to have the type of lifestyle that we want to be able to have the type of company, the type of business that we want, you know, just kind of closing thoughts here, bringing it together. What is it that you can do as an owner? That's going to allow you to have those nicer things to be able to take that money out. You know, if, if I'm trying to measure the pulse of my business, if I'm trying to figure out how we're doing as a business, where am I spending the time? What am I doing? What's going to move that needle? And then how do I get that money back out to enjoy it?

Ken Lucci: 36:53

I can't, you know, this may be over simplistic, but profit solve problems. And I think I'm gonna build some, make some t shirts about that profit solve problems. The most profitable companies I know where the owner every week is engaged with their financial metrics. And we have month end summaries with all of our retained clients who are on our program. And it's simple. If you focus on your critical financial metrics and you make sure they're healthy and you improve the ones that are not Okay, this is a good this can be a good business This can be a business to build your dreams and to build wealth By taking money out and doing other things with it the most successful own Buildings the most successful own real estate and the business is a cash flow vehicle But you can't have a cash flow vehicle if you're not profitable and struggling for cash. So my answer is, growth for the sake of growth is the ideology of the cancer cell. Growth for the sake of profit is where wealth is created. And growth, I would rather have a 1. 5 to 2 million dollar company with a higher NOI, net ordinary income, and a nice W2 for his owner and cash to pull out than a three, four or 5 million company because somewhere along the line, their scaling has failed them because they scaled on a foundation that was shaky to begin with.

James Blain: 38:27

And, and I think you've hit on something really important that we kind of want to close on here. And I think it's something that a lot of people keep trying to use for A new piece of debt to pay an old piece of debt. And what I think I'm hearing you say is if you are at that point where you keep scaling and scaling and you're convinced that if I get bigger, all the numbers will get bigger, I'll make more money, I'll do that. But you're not financially healthy. What I think I'm hearing you say is it's time to stop. It's time to figure out how to get financially healthy. And then once you're financially healthy, You'll reap those benefits of scaling.

Ken Lucci: 39:04

Yes. You, you have to build a foundation of muscle before you go out and you want to, you know, be a power lifter. You have to figure out your financial health at whatever level you are now in order to properly scale. And that is the misnomer in this business. That misnomer is the focus on the biggest fleet, the focus on the most revenue. The, the, the bottom line is, and we, if any of us found this out during the pandemic is 2019 was a top shelf, top line revenue. Everybody was had top line, top revenue money, but nobody was making it. No one was making a profit. Coming out of the pandemic, we all right sized our organizations and we did raise prices. The key there is to keep those metrics going for you as as you grow the business. I'd rather see business grow 10 percent a year and with optimum profitability than a business that grows 20 percent of the year that's constantly losing money. Something's wrong.

James Blain: 40:04

Well, I think that kind of teases off perfect because you actually have a financial course that's going to help companies do that and help figure out how to set that up. So I think the way we'll kind of close out is I'll let you kind of tell us about that course and how operators can connect with you.

Ken Lucci: 40:20

So, um, driving financial success. We launched based on the best practices of 250 companies that we reviewed. We looked at and we created the best tailored financial format for our industry that puts all of the numbers in order on your chart of accounts, and it allows you to pull out the critical metrics to manage. Um, you know, one, for example, is your driver. Labor should be between between 25 and 27%. New Jersey, New York, California, maybe 31%. But if you have it all lumped in in one payroll down in G and A, it doesn't work. So we separate out everything in a strict cost of goods format. And you, our program is three, you have three different ways to buy it. One is you do it by a do it yourself. And we'll answer questions by email for you. And you get one session to answer any questions you have about it. The second is you can buy the program with some hours, implementation hours. We roll up our sleeves and we help you. The third way to do it is give us the keys to keep your QuickBooks, give us access to your CPA bookkeeper, give us access to your reservations, and we'll do it all and we'll include all your KPIs. I promise you this, it, it, if you get your business into our format, you'll never look at it the same. You will know at the end of every month where to tweak things. You will also know how to grow it in the right direction because you're going to know the gross profit margin on every type of service. And to find out about it, you just go to driving transactions. com and driving financial success is not to be confused. We've got another one coming up, coming out on business development, but the driving financial success has been wildly successful. And with operators that actually implement it, they improve their profitability. They can improve their W2. They, they know where they, where to spend their money. They know if their debt is too high. They know where their problems are and you get them on the path to fix them. It's definitely fun. It's definitely the answer from a financial health perspective of the business.

James Blain: 42:28

So where do they need to go to get that resource to be able to jump on that program and start using it?

Ken Lucci: 42:33

Driving transactions. com. You can set up 30 minutes and I'll take you through the whole thing or you can buy the program. Do it yourself. Um, I like to do 30 minutes with people because I want to understand what their position is now. Um, if you're in dire straits, you don't want to do it yourself. You probably want us to get involved to try to fix it relatively fast. But just go to drivingtransactions. com.

James Blain: 42:58

Well, Ken, I got to tell you, this is, I don't know about you. This is the highlight of the week for me. So I'm excited to have done another episode. I hope that everybody's going to join us again on the next one. And, uh, thanks for listening to everybody.

43:11

Thank you for listening to the ground transportation podcast. If you enjoyed this episode, please remember to subscribe to the show on apple, Spotify, YouTube, or wherever you get your podcasts. For more information about PAX training and to contact James, go to PAX training.com. And for more information about driving transactions and to contact Ken, Go to driving transactions.com. We'll see you next time on the ground transportation podcast.