Mastering Cash Flow Strategies for Scaling Businesses with David Miller

Brent Peterson (00:01.332)
Welcome to this episode of Uncharted Entrepreneurship sponsored by EO Minnesota and the 2025 Entrepreneurs Rally that happens at the Mall of America, May 8th, 2025. Today I have David Miller. David, go ahead, do an introduction for yourself. Tell us your day-to-day role and some exciting things that you have going in business.

David (00:23.746)
Hey Brent, thanks for having me. First off, as far as what's going on in my part of the world is, scaled a couple of businesses north of eight figures and took a step back to figure out what that next mountain was to climb. So that next mountain that I'm climbing right now, as an entrepreneur is advising and coaching.

people that were formerly in my position, small business owners and how do they scale their business smart, wise, and in a way that's as fast as possible.

Brent Peterson (01:04.436)
That's awesome. You know, one thing I forgot to tell you, I should have, is that I do this thing called the free joke project. I'm going to tell you a joke and all you have to do is give me a rating eight through 13. So the eight being the worst 13 being the best. Uh, and then, uh, then we'll move on to content. I, apologize. I forgot to tell you about the free joke project, but here we go. I'm just going to tell you a joke. Give me a rating eight through eight through 13. And I do have a startup joke that's rising right now. So here we go.

David (01:33.739)
Okay.

Brent Peterson (01:34.792)
We tried to start a hot air balloon business, but it never took off.

David (01:40.942)
I'll go with a nine.

Brent Peterson (01:42.42)
All right, good. Thanks, David. Yeah, I usually prep people in the green room, and I completely forgot to prep you today. All right, so tell us the scaling up. We talked a little bit about you're going to speak in Barcelona with Vern. But tell us a little bit about, tell us your background and what business you had and how that transition went going out.

David (01:45.166)
Thank

David (02:04.206)
I got caught up on the hot air balloon joke there and the scaling not being from from one to ten. So forgive me if I gave a give a poor scale there. I'm to give that some more thought. But so can you ask that question again about Vernon scaling?

Brent Peterson (02:20.98)
Yeah, sure. Tell us a little bit about your new adventure now. Tell us, but just start with your past business and your exit and how you've now gone into what you're doing now.

David (02:35.618)
Yeah. So I'm originally from Knoxville, Tennessee, small town, East Tennessee. And, started in the financial realm and took me about eight years to figure out how to run a business. once I actually figured that out, after making mistake after mistake, after mistake, I scaled it. So it took me about 15 years to scale my first business, north of 10 million.

And after I sold that business in the financial industry, I bought another one in tandem and a completely different industry, a cannabis industry and vertically integrated and scaled that to North of 10 million and under three years. And after I had scaled that business, I realized that, Hey, you know, there are a lot of strands of similarities here. Eerily, eerily. So when it comes to how do you grow a business and what are the, what are the, what are the

principles in doing that. So I'm focused more now, not necessarily, not scaling my business, but focusing time on scaling businesses for those that are, as you could say, in the earlier stages of their entrepreneurial career. And I really got into that because of the support that EO has given me since I joined in 2013.

and just the wonderful people that I've met along the way, not only business coaches that have helped me, mentors and forum members, just everybody in the business community.

Brent Peterson (04:13.524)
Yeah, so EO has a program called Accelerator, which I joined, think, in 2014, that helps you get to that next level. Tell us how maybe some of the background you have or what you're doing to help newer business owners scale to get to the next level. And are you working with Accelerator members?

David (04:33.964)
Yeah. So, EOA is a program that was really successful in my local chapter, in Atlanta. And one of the things that, you know, we teach EOA candidates, those that aren't familiar with under a million wanting to get to that million dollar figure and beyond is how do you grow right from the beginning? And it comes down to Vern's four principles that you're

familiar with Brent, the people strategy, execution and cash. So what are those brick by brick steps that you can take and lay out so you can experience that scaled growth in a shorter duration of time?

Brent Peterson (05:19.508)
Give us an idea what you'll be speaking about or what your theme is now for this upcoming session.

David (05:27.022)
Well, I'm going to be talking in for EO Barcelona. I'm to be talking about scaling up cash. We have somewhat Vern talking about compensation. Another lady talking about the people aspect. So I'm focusing on cash, specifically the power of one and cash conversion to cycle how a dollar moves through your business and how to maximize your profit and cashflow with that. But also have some proprietary formulas and concepts that I've

created over the years, I call it CapEx Flex. So how do you allocate strategically the capital that you invest in your business? And I kind of take Jeff Bezos' approach of his mastery of cash flow and capital allocation management and kind of simplify that down to how a small business owner can maximize their cash flow and invest smart, and it'll save them years.

in years of headache and heartache.

Brent Peterson (06:26.504)
Yeah, I want to key in on two parts of that. Number one, I like the aspect of how in EO, in EOA, and for the quarterly days, you do walk away with action items. don't just like, it's not a bunch of theory that somebody's spitting at you. And I'm assuming that for EO Barcelona, this is sort of like the quarterly day where you're giving some of that background on that. And people are actually leaving with things to do, right?

David (06:53.388)
Yeah, and at the end, actually have a checklist of things that they can write themselves on red, yellow, or green, or just check the box if they've done it. And if they haven't, then that's a clear action item that they can start implementing with their team.

Brent Peterson (07:09.3)
The cash flow part is, I think a lot of business owners overlook the cash flow part. They look at having cash flow as being something that they just look at from a day to day basis and maybe that cash flow then doesn't happen because they're just looking at a snapshot and they don't think about cash flow as actually something you need to look for into the future as well into the past to kind of predict what happens. Tell us about your cash flow models and how that works.

David (07:39.212)
Yeah. I mean, when it, when it comes to that, that cash component Brent, and these numbers are just top of mind because of my talk with the Barcelona chapter, but there's about 2.8 million businesses in Barcelona, small businesses, which comprises about 46 % of the, total output there. That's 9 million employees. And when you look at those 2.8 million businesses, they're only averaging $156,000.

in annual revenue. And that's a big reason why, eight and a half percent of those businesses are almost a quarter of those businesses fail each and every year is it's not getting to that 750,000 or even the million mark. It's, it's getting above that 2 million mark. Cause that represents just the businesses that are 2 million and above. two to 50 million million in the small business space.

That only accounts for about 5%, 6 % of businesses and businesses between the 10 and the 50 millions actually less than 1%. So that cashflow management, how do you allocate that capital? Like I said, with Jeff Bezos, his model is, you know, he had a very clear plan and he wowed everybody because he was doing it on such a large scale, but it's actually what almost all small businesses do intentionally or not.

is they're allocating this capital into their business. And if they don't have that plan, know, that quote Jeff Bezos plan of how do you, how can you turn on and off the faucet when things go quote bad, then, you know, you'll be in that eight and a half percent if you're not careful.

Brent Peterson (09:25.396)
Yeah, from a a experience standpoint, I was involved or talked to a business owner who didn't plan for that cash upfront, and then suddenly ran out of cash. then the employees have the feeling that you're going out of business. And without that planning, that going out of business isn't really going out of business, you could be doing great. You could be selling to, you know, millions and millions to Costco or Walmart, but

you don't have any cash because they're not going to pay you in 90 days. Tell us the importance of that. I attended a talk a couple of months ago where they broke it down very simply that you can create cash flow statements and cash flow predictions just from your P &L and your balance sheet to determine what cash you may need. It's always going to be a little different, but you can at least get an idea what you should be looking at.

David (10:21.846)
Yeah. One of the basic things that I have used from the beginning is, with, the whole concept of cash is the oxygen for a small business growth in a small business sucks cash. Cash is king. Revenues, vanity and profit is sanity. If you just look at your monthly employee overhead and

get a one to two year cash reserve in place as a small business. So you can cover that overhead. The amount of problems that solves in and of itself is more than 90 % of them. So if you're, you know, generating a million bucks in revenue, you got 400,000 and employee overhead. Well, a good goal to start out with would be, you know, having 400,000 in cash reserves. If you want that, you know, one year employee overhead level.

So you're running about $30,000, $40,000 a month there in payroll. Some of the best businesses out there from a cashflow standpoint, they're able to utilize those strategies because they had that initial cash reserve in place. And that can be very confusing whenever you take a look at companies that actually manufacture widgets or manufacture goods as opposed to a services industry, because if they don't understand how

the working capital in their business. If they don't understand how the cost of goods sold and the influx of money there comes with the accounts receivable, then they may have 600,000 in the bank and think they're doing great. then two months later, well, it was just a cash cycle thing. We actually only have a hundred thousand in the bank. We got some problems. want to make payroll. So it mitigates that whole roller coaster stress that you were talking about, Brent.

Employees can sense when you're nervous and concerned about things in the business. If they're worried that they're not going to get a paycheck because you're not managing cash flow, that's not a good problem for them to worry about because they're not focused on helping you run the business.

Brent Peterson (12:31.144)
Yeah, another aspect of that too is when the employees are involved in that process, but they have no control over it, asking them or telling them, hey, we're out of cash, just go ahead and tighten your belts without a plan in place, it makes it even worse, right?

David (12:48.076)
Yeah. gas on fire there.

Brent Peterson (12:50.708)
When you look at some of that forecasting models, do you have some simple strategies that business owners can do to just make sure that they've had enough cash in the bank? And then talking about banking, one thing you hear is you go to the bank when you need the cash and they don't want to give it to you. When you don't need the cash is when you should be asking the bank for a line of credit, right?

David (13:17.922)
Yeah. Yeah. So can, what was that first question again, Brent? I'm sorry.

Brent Peterson (13:23.312)
Just talking about the the fact that maybe communicating downstream isn't always the best idea when you're out of cash, right like Communicating to the fact that you're really busy and that you're doing successful Is what you want to be telling your employees? not that you're out of cash because a lot of employees that put out of cash as we're going out of business and Then the second part of the question is when to ask for that line of credit from the bank

David (13:49.986)
as far as like some very simple things that do from a building cash standpoint is making sure that it comes down to the power of one. That's, that's a basic one-on-one step and that's just making a 1 % improvement or a one day improvement in your pricing, in your revenue and your overhead expense.

in your gross margins or a one day improvement on those accounts receivable or the accounts payable, compressing the ability for you to realize cash quicker. And those are, if you just, and if you take a look at almost any company doing a 1 % change in those areas, I think I only mentioned six of the seven, but if you do just a 1 % change in those areas, that can be for, you know,

$4 $5 million business, that can be a difference of a couple hundred thousand dollars in profit. And those are just some small tweaks you can make. So you can take those steps just to improve cash flow so you don't have to worry about payroll and are you on or on track with your budget and a lot of those things.

Brent Peterson (15:06.132)
And then I did mention the fact when as a business owner you should be going to the bank to ask for a line of credit just to cover the low dips. Is it the best time is when you don't need it?

David (15:19.47)
You know, in my, in the service industry that I, um, my first business, I never utilized the line of credit. Um, they asked me, I, I, you know, I had one, but I focused on cash from the beginning. Um, and I think if you focus on cash from the beginning, then, you know, the line of credit will be there. I'll granted it wasn't in a widget producing industry. Um, it wasn't a goods industry.

And if you have larger contracts or larger projects, sometimes it's imperative to have that line of credit. just building up that cash in the beginning, there's never a great time to go to a bank because banks have their own way of doing things and it's typically not in alignment with

maximizing your profit. It's more about how they can protect themselves.

Brent Peterson (16:21.448)
Yeah, I think just to comment on that, I did talk to a business owner who had bought a business and he said, you know, his previous business that he had managed to do what you had had create this large cushion of cash. And after three months, he was out of cash in his new business. And I asked him how much cash did he inject and he hadn't injected anything. And he expected that he would be able to have this kind of cash cushion. so the goal and the goal on that point is either

Inject a bunch of cash to make sure you have the cash or go to the bank and get a line of credit, right?

David (16:55.458)
Yeah. Yeah.

Brent Peterson (16:57.79)
So we have a few minutes. What kind of advice would you give from your experience that would resonate with some of the entrepreneurs out there from a cash standpoint, going to quarterly days, even as an EO member going to the quarterly days, because I think they're generally for EOA members. But what would you have that would resonate with some of our entrepreneurs, listeners out there?

David (17:22.828)
Yeah, one of the many mistakes that I made Brent in the beginning was thinking the faster that I ran and the harder that I worked, the better output that I would realize. you know, having been through this a couple of times, I tend to take things a lot slower. And I know when I need to run fast and I know when, you know, you need to put your nose to the grindstone, but

You know, we're already juggling so much as small business owners, you know, especially in beginning when you have less than five employees and you don't have someone assigned to every specific job duty and title. And to an extent, everybody's kind of got a kitchen sink type mentality with, with what their, what their job is. it's, it's just being able to take a step back, breathe, knowing that everything's going to be okay.

what are small incremental steps that you can take? And I'll finish on this point for that point is, someone told me that, and I believe this having looked at other businesses and my businesses in the past is people usually...

overestimate what they can accomplish in a year and underestimate what they can accomplish in three to five years. So when you're looking at your business and the decisions that you're making, is this a short term decision that you just want to happen because you think it needs to happen so you don't fall behind in your business or is it more speculative and you really don't know?

And having balance and being able to take a step back and breathe allows business owners to see that in a clear way, at least in my experience.

Brent Peterson (19:13.588)
And that's fantastic. And you brought up the running analogy. So I do run marathons and I do pacing for marathons. And one of the things that people say when they first do their marathon is, just want to finish, right? So if you're in business, I just want to finish or I just want to get to this point. But I believe that you have to have some planning and you can't go into your marathon thinking I'm going to run a 10 minute pace or a 9 minute pace or an 8 minute pace, especially if you haven't trained for that. And you want to do training. You want to make sure you're planning.

if we take some analogies that work across both the areas. And that when you overdo it in the middle, and I've done that before where I've said, I can hit this. And by the time you're halfway, you're like, yeah, I feel great. But then 3 quarters of the way through, you're like, jeez, I'm running out of steam. I'm running out of cash or whatever those things are. That planning and that.

aspect of it that has to go into the cash portion of your business is so important and I'm going to say that that the part of the important your cash flow planning is is as important as any other part. So maybe last last question or last resident your last reflection. Tell us a little bit about that planning for just cash flow in your business.

David (20:32.974)
You know, whenever I was an analyst, when I was 19 and 20, you know, we did super complex cash flow analyses and on public companies and looking at their 10 K's and 10 Q's.

And you know, you can get mired in a lot of the confusion and a lot of the details that at the end of the day are important, but they don't matter that much on a higher level, especially when it comes to just having sound cashflow. so I think for having sound cashflow, it's just having that cash, that cash reserve that we talked about having a year and OpEx or employee overhead expenses.

six to 12 months as a goal to start out and increase that to a year, two years plus, that's gonna help mitigate almost all the problems there. Because if you're budgeting and you're doing your budget to actuals with your team on a monthly, quarterly basis, what have you, and you see where your cash flow is, then knowing you have that buffer of cash already, you can take corrective action and you're not gonna have to be reactive.

and start causing unintentional problems because of the lack of cash.

Brent Peterson (21:50.802)
Yeah, perfect. David Miller, really appreciate it. Tell us how people get a hold of you.

David (21:57.742)
come knock on my door. no, I've, yeah, just Instagram is David Miller.Buzz and, I would say LinkedIn, but there's way too many David Millers on LinkedIn. Good luck finding me. but my, my company websites, alchemy of scale. so you can go to that and get in touch with me as well.

Brent Peterson (22:22.494)
Perfect, I'll make sure I get those in the show notes. David Miller, it's been such a great conversation. Thank you so much for being here.

David (22:28.504)
Yeah, thanks so much for your time, Brent. I appreciate it. Love the shirt, by the way.