Jeff Prager 6:13
Well, I’m a numbers guy. There’s no two ways about it. So giving an economic analysis was just like falling off a walk. And if you give the right information, and then I mean, subsequently, I learned a little bit about sales. Now turn it into an emotional benefit. And, you know, hey, this guy wants peace of mind. Think about what this could do for your taxes. Think about all these benefits you could have. Yeah, it kind of fell into place. So, you know, I do my fair share sales. Would I say I’m an expert at it. No, not at all. But I did become a CPA and started working with touche Ross, which was one of the big eight accounting firms back my started. It’s now merged with Deloitte. Yeah, That was a hell of an experience in seeing how other people ran their businesses without the financial exposure of it without financial risk of running my own business now, mostly
Unknown Speaker 7:15
serving other businesses and seeing what they
Jeff Prager 7:18
what were what made some work and what made some not work.
John Corcoran 7:22
Yeah, that’s I often had said that about practicing law, you know, you see the businesses that are failing, what they did that led to failure, that sort of thing.
Jeff Prager 7:30
But because of my background, I was three years before I finally got my wife all the way through college. It was amazing where people are auditing numbers. I’d go into the businesses and say, Tell me about your marketing and sales. Tell me about your operations. Tell me about your problems in inventory or, or cash flow or something of that nature. And before I knew it, my questions were leading me to do it’s now called forensic quantity, but we used to call it fraud auditing, and figured out a few frauds and a couple of banks during my career.
John Corcoran 8:08
You really Okay, so tell me that story.
Jeff Prager 8:10
Oh, well, I really can’t be honest.
But but but I learned one thing, I learned one thing that you’ll really enjoy, john, if you’re going to embezzle as lots of money, so they’re embarrassed to turn you into the cops in a few hundred grand. That’s that learned about embed?
John Corcoran 8:33
If you’re gonna do it, that’s true. Yeah, that’s one of those that I worked for a law firm were short actually after I left. Not too long later. It turns out that the CFO for the law firm had been embezzling and they didn’t even know it was went back so far that even know how much he had taken.
Jeff Prager 8:50
Right. And that’s a big problem when owners don’t follow their numbers, or know what the numbers are saying. They don’t know that they’re getting ripped off. And it happens more often than people would like to acknowledge.
John Corcoran 9:05
Yeah, it is quite common. That’s true. And so you were working for a larger CPA firm for many years, and then at what point did you start some of these other different entrepreneurial ventures like the golf clothing company? Did that come later after the home building?
Jeff Prager 9:25
Well, I know, um, what happened is I got an offer from one of my clients at two straws, and became a controller. And then I was hired as a financial VP of a real estate syndication firm. And that was the dawn of the computer age, if you will. We were dealing with micro computers and I started playing around with visicalc, doing financial analysis for the syndications and a bunch of the the clients that we worked with said, Hey, if you started We will fund you for at least two years of your business if you break out on your own. So it was through the financial modeling, that I really got my fame, if you will. And the reason I got into the golf clothing company is it was originally a real estate deal. And I can’t disclose much about it, but it was a real estate deal. And I told them, their model doesn’t work. And what we were doing it was so we we flew out to what they were modeling their model out, and I can see they kept saying, Jeff, you can’t be right. And we went there and spent three or four days observing the business. And they realized, Oh, my gosh, we can’t do it. And then john Ashworth as we’re flying back, everybody’s down the dumps. He goes, Well, what about clothing in the golf industry. You don’t know anything about clothing, but they go you know How to financial models. So a couple weeks later, we flew out to LA and we worked in this warehouse. And as they’re cutting material and stuff, I’m Job Costing, creating financial pro formas and I’m going oh my god, this works.
And that was the start of Ashworth golf clothing.
Unknown Speaker 11:17
Interesting
Jeff Prager 11:18
and, and it was out of Denver originally now and then they moved to Carlsbad, California.
John Corcoran 11:24
Got it. And background management services was another one your companies which it sounds like, you develop so in addition to golf clothing, in addition to real estate development, in addition to home sales, in addition to a CPA firm, we’ve got a software company also.
Jeff Prager 11:43
Wow, you really dug deep.
So here’s here’s what happened.
John Corcoran 11:50
To see someone who’s Can, can can straddle multiple different types of industries.
Jeff Prager 11:56
Yeah, but they were all related through my financial and And numerical experience. So I, I’m an economist by training, and I thought I was going to retire and become an A professor, an adjunct professor. And so I saw the crash coming in 2007. So I liquidated my homebuilding business. And, and, or the craft came, oh, that was by 2003 we realized something was wrong in the market in 2000. And the reason I know that’s accurate is because one night in 2001, my partner where and I were having dinner, and I got a call three o’clock in the morning, he’s dead. And that’s how I ended up owning 100% instead of the 50%. And my god, he was my best partner ever. And we were best friends. So, um, and then I told my I was a partner in a land development company as well as their CFO and everything and like kept saying we’re in for a crash. I don’t know what’s going to cause it. I don’t know how. But let’s get out and they said, You’re full of crap.
John Corcoran 13:08
You know, and what was what was telling you that?
Jeff Prager 13:12
Um, well, number one was the combination of the two businesses. And in the homebuilding business, and even as far back as 2000. We had our lawyers look into whether or not this financing program was legitimate. And at the very same time, our lawyers were were looking into it, The Wall Street Journal came out and said, even though it doesn’t follow the letter of the law, because the emphasis of the political environment at the time was to get more people into homes, they were going to ignore that it was violating the law. Not a good thing. Not a good thing. And, and so that was the beginning in 2000 2001. You could see how they were making the ability to own a Houses too easy,
Unknown Speaker 14:01
certainly.
Jeff Prager 14:02
And and so that started it. And then there were other indicators. And, you know, we look at employment inflation, world trade balance of budget. I mean, I’m an economist. And so I looked at all this crap, and I’m going, Oh, my God, this isn’t looking good. And so I told my peep my partners in the land development business having been through three cycles, look, if we’re not out of this, when the market turns, this stuff is going to be worthless, because land is either very valuable or worthless. You can’t get rid of it. And they go, No, we don’t agree with you. And I said, Look, I’ll sell out my ownership for 40 cents on the dollar. And I got my last check. May 31 2007. Wow. And then I went into the university to teach and after teaching the same classes for four semesters, I go, this isn’t what I want to leave. Live. And I was basically retired at 57. Just so you know.
John Corcoran 15:04
And so and what do people say when you were selling out of this business? I mean, we’re talking. This is before the real estate crash and real estate was crazy hot. In 2005 2006 2007 you’re selling out are people saying like, you’re not.
Jeff Prager 15:20
That’s a funny story to my office was in the Home Builders Association office here in Denver, and in Centennial to be exact, and I frequently lectured to the international builders conference and stuff like that. And for a couple of years there I was the resident dummy. And come the recession by 2009. I was the resident genius. And, and, you know, I could have been as wrong as I could have been, right? No, there is no crystal ball here. I am an accountant. Listen, I don’t think I have any more knowledge than anybody else. Mm. Just I look at things a lot, you know? Yeah. But I’m as wrong as I am right sometimes. Well, you got out. So that was good. That was when I was right.
John Corcoran 16:16
So your focus these days is on cash flow, and you’ve been named your company cash flow engineering. And that that is clearly that the focus and what you’re passionate about. Tell us a little bit about your philosophy behind that why you put it right there in the name of your company.
Jeff Prager 16:35
Well, a lot of business owners don’t know how to read financials, they don’t know how to look at leading indicators. And the story starts back when I had my home building business, and my partner Steve, he was a client of mine in my CPA firm, and I had just sold my stocks. I just sold my account Morning practice. And he came to me and said, hey, let’s start up. And I said, Okay, you know, I’m a hotshot accountant. I’m doing great, you know, yeah, I’ll help you get started. And within two years, we were upside down a million dollars, which means, you know, negative equity, we were suffering. And I’m telling you the aggravation, anxiety, the near old sir, the sleepless nights, everything that goes with it,
Unknown Speaker 17:29
came with it. And
Jeff Prager 17:32
so, I’m looking at losing everything. And I’ve got my oldest just about ready to go to college, and I go, I can’t live like this. And so I started looking back at all the clients I dealt with over the years, figuring out what made them successful. And I realized, after really studying it, that the reason we were going broke is I was running this on traditional accounting statements. How’s that for statement. And the skills to be a CPA are not the same skills to run a business. Yeah. And I started going back and I realized that the people that I thought were very successful, had leading indicators, lagging indicators. And they were knew their cash, they couldn’t care less about their profit. They knew their cash, and what was going to happen to their cash. And I started analyzing that and that’s where I came up with my seven number book and everything like that is it’s sort of like going to your pantry to you’re going to bake a cake and you go to bake the cake, you go into your pantry and you say, Okay, I have flour. You go into your refrigerator, I have eggs, I have butter, and then you may realize you’re missing something. So what do you do? You go before you start baking the cake, you go to the store and you buy the missing ingredients. Well, I went to look for my middle ingredients. I wasn’t monitoring my leads, I wasn’t monitoring my conversion rate. I wasn’t monitoring whether or not I was in the right niche. I wasn’t monitoring my customer journeys, the things you don’t learn as an accountant. I was monitoring my cash, I wasn’t doing everything wrong. And and through that exercise, we learned we were going after the one niche and and we changed our niche and got better. Okay, so then you got into my software company, which was we created, I could never find good home building software. So I created my own. It was a hobby after I turned 57 and retired. And then I sold that January 15, two hours before my wife and I were getting on an airplane to go visit our daughter in Australia and by the time we landed, I said, You know what, where I get my biggest thrill is turning People into millionaires. And so I’m going to create a training program to teach people how to run their businesses better, and show them that it’s it. It is a learned skill. But it doesn’t have to be as hard as we make it to learn how to financially manager company.
John Corcoran 20:20
Why do you think that the seven numbers that you put the emphasis on why isn’t there a standard, as you mentioned, a financial statement of some sort, that that everyone uses that uses these seven numbers?
Jeff Prager 20:37
Well, again, financial reports are after the fact. Before the fact you’re spending money and receiving money in real time you decide to go out to lunch with a colleague. That’s money going out. And what happens is accounting is focused on third party reporting, which is one of the bankers see what do investors see. But I was lucky at touche Ross and I got exposed to the public companies as well. And there are rules that are very different as to what they report to the SEC, versus what a private company reports,
Unknown Speaker 21:19
with more emphasis on Academy
Jeff Prager 21:21
image, more emphasis on management reports, and how they make decisions internally. Got it.
John Corcoran 21:27
Okay. So that and you feel like that is something that the private companies, private companies don’t do a good enough job of.
Jeff Prager 21:33
Right? Yeah. And what I find is that private companies don’t understand like, you can’t go to the bank or you can’t go to the grocery store and spend your accounts receivable can’t pay your bills with inventory. All right, and and they don’t get what’s going on on the balance sheet. A business owner thinks in terms of cash in which is revenue debt. Equity and cash out, which is Cost of Goods Sold salaries, overhead marketing costs, plus payment, Principal repayment and asset purchases. And so some of that is on the balance sheet, some of that’s on the income statement. Well, your accountant CPA is usually geared toward driving low taxes, which is low profit. totally ignoring that in the long term. If you don’t have cash, you can’t stay in business. So the emphasis isn’t a long term emphasis. It’s a short term, just like Wall Street, their emphasis is on the quarter the quarterly earnings, whereas somebody like Warren Buffett says, screw that. Our objective is long term growth. And that’s a different philosophy. And that’s why the seven numbers aren’t known. I mean, there’s no rocket science. If I tell people that they go Yeah, I know that What I found is 90% of the time I’m not teaching you something new. I’m teaching something you already know. But don’t have it into a system
John Corcoran 23:10
put into a system. Yep, I can see that. Yeah, because it is different. I’m reading over here, number of leads conversion rate, customer retention rate, average number of transactions, average transaction amount, variable costs, fixed costs, right? There’s
Jeff Prager 23:25
five of them deal with revenue, never in the financial statements. And the other two are cost and everybody goes lower your costs. Well, you really for the most part, businesses can only nickel and dime their cost. Unless they go for efficiency, or new technology or something of that nature. I find that, you know, like, a couple of years ago, I was dealing with a builder and he’s doing $9 million dollars, and his net revenue is gross revenue gross profit rather, is 10% of what you paid. The rest of his overhead overhead salaries and marketing. And he’s looking he goes, Oh, if I cut this one person, I can save 30,000. And I go, Well, what if you could get 1% more gross margin by raising your prices or getting more efficient? That would translate to almost 170,000 of profit right to the bottom line. But he was were taught to nickel and dime our own businesses, but the lowers your cost could be zero and then you’re out of business. Right, right. Well, another paradigm shift. Normally the biggest cost in any business, other than cost of goods sold is salaries. The number one salary, the name in the salary group, the number one employee should be yourself. Do you want to cut your costs?
Unknown Speaker 24:55
We don’t.
Jeff Prager 24:57
Right. So so you need to Focus on everything and, and what I found is there’s no magic bullet and turning a company around none. It’s a series of little things a 10th of a percent here, a percentage here, or something like that, that drives big gains. For instance, if you sell to your clients on average four times a year, and I’m just throwing this out, yeah, and your net profit is let’s say 30 grand, maybe that’s a month a year, whatever, that’s cash in the bank after you’ve paid all your expenses, getting it to 4.1 maybe generate and I had this happened with a doctor 4.1 generated another hundred and I think it was $28,000 directly to the bottom line. Well,
Unknown Speaker 25:48
so just by increasing the number of transactions from the existing client base, so that I point
Jeff Prager 25:52
one by point one,
Unknown Speaker 25:54
it’s tiny.
Unknown Speaker 25:56
Yeah. You know,
John Corcoran 25:58
we know things that then lead to Two additional trend transactions is what? led to that.
Jeff Prager 26:04
Right? Yeah. Right. And that’s the customer journey. And yeah, how you service them and what your employees are doing. And are they selling them? Yeah, there. Yeah, there’s so many different ways to do that.
John Corcoran 26:15
Yeah. These are all areas that the, you know, a typical CPA who’s not immersed in a business who’s just looking at numbers, who’s not really diving in with the client, helping them maybe isn’t as uncomfortable with or unlikely to want to even get into a conversation around.
Jeff Prager 26:33
Um, it’s very funny. I teach this course perfect. Next week, I’m doing it. I teach this course to CPAs I have a professional course three that I teach to CPAs and I noticed out of all, you know, it’s the same people coming to all three courses. And they’re very few CPAs who do it. They don’t know and and when I finally get through to them, they go Yeah, that’s great. But you know what I’m saying? busy doing tax returns, I have no time to help my clients.
John Corcoran 27:05
It’s almost like there should be a third person. There’s a CPAs. There’s accountants and bookkeepers, there’s a fourth person there is, what do you call this person? The cash flow?
Jeff Prager 27:15
The cash flow engineer,
Unknown Speaker 27:17
cash flow engineering.
Jeff Prager 27:19
And that’s what our name is. Is that is such,
Unknown Speaker 27:23
right? I’m so
John Corcoran 27:26
good. No, I have to ask you. So we’re recording this at the end of 2019. Getting newer towards the end of 2019. Since you saw 2007 coming, a lot of people there’s been a lot of talk about, you know, what’s going to happen. We were in about the 10th year of an up market. What are you seeing right now? Are you selling everything liquidating everything? Are you fearful Are you are you optimistic? What do you What are you feeling right now?
Jeff Prager 27:54
I’m cautiously optimistic. I could see. Here. Here’s what I’m afraid More than anything and and I’ll go where my strength is and where my or what I’m feeling good about what I’m feeling bad about
interest rates are getting to an all time low.
And we in America potentially are on the verge of having negative interest rates. We saw what that did to Japan in the 1990s and they still haven’t recovered. And that scares me. Will we have deflation? I mean, inflation is bad, but I think deflation is worse. And and that’s a hard thing to put my head around. Um, so that’s my big fear is that monetary policy may not be as effective as it used to be fiscally the other big hammer In the economy, in good times like this, the government had should have been saving money to get through the next downturn. In fact, our federal deficit has gotten bigger than it’s ever gotten. Now, the usual thinking is, well, I could borrow today and because of inflation, think about the 70s and 80s. Were interest rates were 18%. We could borrow today and will pay back tomorrow with cheaper dollars. So the government didn’t feel like there was a constraint, but we’re going into unchartered territory. So that’s the negative, the positive. Central banks are more aware of what they can and cannot do throughout the world. I think that Trump and I hate to say it like this will make a deal with China in order to get reelected and if so, So things will start flowing again to terms my go away, and American businesses stand to gain. So that’s the plus side. Okay. Now, you talk to 1000. Economists and how many different opinions will you get?
John Corcoran 30:20
The old data?
Jeff Prager 30:21
Yeah, so so please don’t use this as economic advice or anything. I’m cautiously optimistic, but I am telling all my clients to hoard cash right now.
John Corcoran 30:34
Yeah, well, the thing companies are doing right now apple and Berkshire Hathaway
Jeff Prager 30:38
of Berkshire is doing it in big time. Yeah. And right now, they’re not worried about the return on their investment because they’re getting positioned to buy out companies. When the economy fails, just like last time, just like last. They’re brilliant. They’re absolutely brilliant. Yeah, I’m telling all my customers to hoard as much Cash, as you can know, there’s two benefits of that. If I’m right, they’ll survive because you make markets in the bad markets. In other words, if you could stay in business during the bad markets, when you come out of it, your competitive competitors are chasing you. If I’m wrong, you have cash to take advantage of opportunities. Hmm. So it’s win win for my business owners. Yeah, right. Yeah. And if you look at some of the big companies, they’re hoarding cash, like there’s no tomorrow. Mm hmm. So, if I were to give a blanket statement is hoard as much cash as you can. Yeah, Ash? Yeah.
John Corcoran 31:41
Yeah. What else are you excited about right now is it teaching i think is a big part of what you kind of get excited about these days.
Jeff Prager 31:48
I love to teach them. That’s why I’m developing all my online programs right now, is I spend a lot of time visiting my children, my grandchild. And vacationing. In fact, my goal is 13 weeks a year. Nice. Yeah, that’s great. And I come close.
John Corcoran 32:08
But I love to teach and love to help other people. And I’m trying to create a vehicle instead of doing one on one teaching and helping, I’m trying to do it so that I could appeal to many, many more businesses at a much more reasonable cost. And that’s what we’re doing and hopefully everything’s going to be ready to launch by January 1. Well, great set so people want to learn more about all this can go to cash flow engineering, com with your base. But before we we wrap things up totally and I want to hear anywhere else people should go to learn more about you. I want to ask my last question, which is, let’s pretend Jeff we’re at an awards banquet, much like the Oscars and the Emmys and you are receiving an award for lifetime achievement for everything you’ve done up until this point. And what we all want to know is who do you think who are the mentors who are the friends In addition to family and friends and that sort of thing, but who are the who are the peers who are the business partners who are the Guru’s? Who are the mentors that you would acknowledge?
Jeff Prager 33:09
Well, the first one happens when I was a controller at the home building business right after I left two straws. His name was Michael Blumenthal. And he and I developed a relationship he wanted to build more homes. And he was one of the guys that got me started in my CPA practice. Um, there were a lot of people that I’m in contact to this day with from touche Ross that have been great mentors. Um, to be honest with you, I I really wish I had more mentors as I went along. I think I could have accelerated my growth. One of them was my father’s best friend. He was a CPA. He was the one who I mean he started his CPA practice, when you could do a tax return on a postcard and he said to me, hey, they’re not after you to save tax dollars or after you to make money. And there’s a huge difference. It’s like, I literally talked to a group of people, and there’ll be 500 in the room and you go, how many want to pay no taxes and everybody raises their hand. And I got let me tell you my goal. My goal is to one year Oh, a million dollars in taxes. Does that mean?
John Corcoran 34:28
means you’re making a lot? Yes, I want
Jeff Prager 34:30
to make a lot of money and pay minimum taxes on it. Yeah, but um, so those were my mentors. My partner Steve, the one that died. Literally, we had dinner and he died that night. He was a great friend. He was a great mentor. He was a great partner. But of all my partners, the one that means the most and you’re gonna laugh at this is my wife. We’ve been married for 48 years. We dated for two years before We got married, and I shouted About what?
John Corcoran 35:04
Nice round 50 this year then
Jeff Prager 35:06
yeah, yeah. And
she stood behind me. And honestly, even in the worst of times, she believed in me. She encouraged me and she still does to this day. So I would say my biggest things is to my wife, but there are there are so many people, Jerry Montiel, when we started Ashworth golf clothing, a guy named Joel Farkas and Harvey Dorje when we started the land development company. I mean, think about it. Everybody, I learned something from everybody. I talked to it. As you were introducing this program, john, I’m going I need to interview I need to interview you more. There’s more to learn. And and my hobby is always been learning. Yeah, and I There’s so many people. I mean, is that?
Unknown Speaker 36:03
Yeah, that’s why that’s why I talked to like you, you know, it’s because I feel the same way.
Jeff Prager 36:08
It’s like where do you start thanking people that share their knowledge. Right? Right. So So that would be my, if you will, I’m standing at the banquet, it’s you. The biggest thing is nothing I’ve accomplished can be accomplished alone. Nothing. And for me to take credit for all the successes is folly. It took my team, whether it be partners, whether it that you don’t accomplish anything by yourself. Yep. And if you want to be big at anything, just give up on the fact that you’re going to do everything yourself. Yeah, it’s insanity.
John Corcoran 36:55
Great, great advice. Well, Jeff, so cash flow engineering calm is where People can learn about you Where else can people go learn more about you the seven key numbers Anything else?
Jeff Prager 37:05
Well, um, the books are published in through my to build ebooks.com if you want them or you could go to my website and get them there, look under products. Um, and or if you want to talk to me go to JK Prager, PR a gr at cash flow engineering calm. And I’m going to give you an offer that I didn’t even think of till his very second if it’s okay with you, john, fine. If you email email me at JK Prager at cash flow engineering.com I will give you a free Excel spreadsheet. So you could start working your seven numbers, whether you buy my books or anything.
Unknown Speaker 37:47
Oh, that’s excellent. And I’m going to email you after we get off here.
Jeff Prager 37:51
You got it. I’ll email it before you probably email me, john. Hey,
if I given you a copy of my book,
Unknown Speaker 38:00
Don’t know that I have a copy of it. Oh, yeah,
Jeff Prager 38:01
yeah. Yeah, I did, because you gave it to Jeremy.
But I think I’ll get you another copy. Anyway.
John Corcoran 38:10
Well, Jeff, it’s a pleasure. And we’ll we’ll talk again soon. Thank you, sir.
Unknown Speaker 38:15
Okay. Thanks, john.