The Home Service Expert Podcast - Making Sense Of ‌Your‌ ‌Business‌ ‌Numbers‌ to‌ ‌Ensure‌ ‌Sustainable‌ ‌Profit‌ ‌and‌ ‌Growth‌ ‌

Episode Date: December 8, 2020

Danielle Hayden is the co-owner of Kickstart Accounting, Inc. where she helps business owners with bookkeeping, financial analysis, and education. She is the author of the Profit Planner book series. After being a corporate finance officer for over ten years, she now assists female entrepreneurs in better understanding their numbers. In this episode, we talked about accounting, finance, bookkeeping, auditing, strategic planning, small business...

So the first hurdle that we always have with business owners is getting out of the overwhelm, right? 90% of business owners who went into business, they weren't trained in accounting, and that's perfectly normal, right? I don't love marketing. We all have a sweet spot, right? So we find that the first hurdle is just getting somebody from drowning in this dark cloud task of accounting. And so our first thing that we do when we come in is say, all right, let's take this off your to-do list, right? So it's not haunting you, right? You can now go out, handle your business. We take care of the numbers, but then as a business owner, it's your job to come back and look at them. Look at the seasonality, read the trends, take the time to analyze your sales, where they're coming from, where you're spending money.

Are these things aligning with your goals? So just learning as the CEO to listen to what your numbers are trying to tell you, and then most importantly, take action on that. Welcome to the Home Service Expert, where each week, Tommy chats with world-class entrepreneurs and experts in various fields, like marketing, sales, hiring, and leadership to find out what's really behind their success in business. Now, your host, the home service millionaire, Tommy Mello. Welcome back to the Home Service Expert. My name is Tommy Mello, and today I have a guest

visiting us from Cleveland, Ohio. She is an expert in accounting, finance, bookkeeping, auditing, strategic planning, and small business. She owns a company called Kickstart Accounting. And she started that in 2015. She's the co-owner. And she's got NAS Recruitment Innovation. She was the CFO. She's got Ganodine Biotech, the VP of Finance from 2010 to 2014. Ernst & Young, intern from 2008 to 2009. She also was an Enterprise Rent-A-Car Accounting Representative from 2007 to 2009. She also was an enterprise rent-a-car accounting representative from 2007 to 2008. And she's the co-owner of Kickstart Accounting Incorporated, where she helps business owners with bookkeeping, financial analysis, and education. She's the author of the Profit Planner book series. And after being a corporate finance officer for over a decade, she now works full-time

and realizing her mission to help female entrepreneurs better understand their numbers and achieve sustainable profits. Danielle, it's a pleasure to have you on today. Oh, thank you so much for having me. I'm super excited to be here. And it's interesting to have, listen to somebody else talk about your history. Yeah, there's a lot there. Look, it's a very successful history. So I'm glad that you got the experience and now you're doing your own thing and you're running with it, right? Oh, I love it. We are on a mission and it's the most fun I can imagine having.

So, you know, you did 10 years in the corporate finance world and now you decided to carve your own path and you've achieved success not just on your own goals but in helping other entrepreneurs as well. Do you want to just tell us a little bit about your history and what drove you to go start your own thing? Yeah, absolutely. So I actually loved corporate accounting. So I loved what I was doing. I got to work with several high-level management teams. I was working with the board of directors and the investors of these companies. And it was a ton of fun and I learned so much. But here's the number one thing that I learned was that there were so many entrepreneurs and business owners out there who needed the same information.

They deserve the same financial analysis that these bigger companies were receiving from me, right? So as I was gaining this experience, I quickly realized I love working with entrepreneurs and business owners who are in growth mode. And I loved growing businesses. And so our mission is to go out and help entrepreneurs, business owners, get the financial analysis that they need to grow their businesses. And so basically I get to do what I loved,

but at scale now, right? Because we get to impact so many business owners and getting so many people the information that they need. Yeah. I never loved our financial quick check we have every Friday, but when we really got to master it and I learned a lot more about what it means to my business and the P&L and really got to learn at the outlier. I learned a lot about outliers. And I got to tell you, financial literacy, even when we watch a movie or the show like The Profit with Marcus Lamone, or we listen to Shark Tank or whatever, we just learned that it's all about

these numbers and they literally tell us a story. And I never thought I'd say this and how exciting I am all the time by a financial quick check. But what do you focus on when you first start with a business? What are the key elements you're going to get from them and help them to paint a picture? Yeah, you know, you hit it on the nail. My catchphrase that I say all the time is that your business, your financials are trying to tell you a story, right? And it's your job as the CEO and the business owner to listen to that story, to step back and actually listen.

So the first hurdle that we always have with business owners is getting out of the overwhelm, right? 90% of business owners who went into business, they weren't trained in accounting and that's perfectly normal, right? I don't love marketing. We all have a sweet spot, right? So, you know, we find that the first hurdle is just getting somebody from drowning in this dark cloud task of accounting. And so our first thing that we do when we come in is say, all right, let's take this off your to-do list, right? So it's not haunting you, right? You can now go out, handle your business. We take care of the numbers, but then as a business owner, it's your job to come back and look at them. Look at the seasonality, read the trends, you know, take the time to analyze your sales, where they're coming from, where you're spending money.

Are these things aligning with your goals? So just learning as the CEO to listen to what your numbers are trying to tell you. And then most importantly, take action on that. Yeah, I agree. And whenever I had somebody that really knew what they were doing come in and look at the financialss. They're able to see why is your marketing in this city so much more than this? Why is your overhead so much more? Oh, we signed a big lease. So we're still trapped in that lease. All these things tell a story. And I love that piece of it. So you got to start your own business. And I was just on a podcast earlier, not my own. And they said, if you got to know

three things before you go out and start your own business, and I know these aren't scripted questions that you've had, and we've got an hour here, so we'll get through it all. But what are the three things that you really said, man, I wish I would have known that a little bit more, or just a couple of things doesn't need to be three or maybe even more than three. I think that as business owners, right, we could probably go on and on about this all day, right? The best thing I can do as a business owner is to recognize that I made mistakes and what I learned from them. So I've really embraced that role in looking at what I've done and what I could do differently. And here's what's really cool about what I do is that I can then take those experiences and tell my clients what I did wrong right and and tell other listeners as I come on

the podcast what I did wrong so I just encourage everyone to embrace those lessons that you're you're learning in in entrepreneurship for me the number one thing is getting out of analysis paralysis. When we first started, you know, you want the website to be perfect. You want the scheduling system to be perfect. You want to have the right team around you. You want everything to be right. And I find myself even today telling myself, all right, a B plus effort or B plus here and being able to say that it's done is better than striving for perfectionism and getting an A plus and whatever I'm doing and actually getting it done as a business owner. I'm not saying don't give people half that customer service. What I'm saying is get things done and you can better them as you move forward. But the idea is action. Yeah, that's a good point. I think that a lot of people really strive for perfection when they get

started. But a lot of people don't do enough. If you're like me, I was a good technician. I knew how to do the job. I didn't know about leadership. I didn't know enough about culture. I didn't know about powerful meetings. Who would have thought powerful meetings that matter? I wouldn't know. One of the things I challenged my CFO with two weeks ago, and we're going to meet up again about it this week, is tell me how to get to 30% net EBITDA. Is what would need to happen? And what's realistic to happen and what would we need to do to envision this and let's work it. How can we hit these goals? Maybe we can, maybe we can't, but at least we've got something to shoot at because we've already been able to

hit 20. So, but here's the question I have for you. And this is a tough one because it's all in the eye of the beholder at the time of the business. But I sometimes tell people it's more important to grow than it is to be profitable, depending on what you want. If you've got a three-year vision, 10-year vision, 20-year vision. But if you're a million dollar business, I'd rather get you to 10 million than worry about you staying at 20%. Shoot, even if you could average 8% and jump 2 million a year, you're still doing good. Do you have any advice when it comes to profit versus growth? I appreciate you saying that.

There's so many experts out there. And so I encourage everybody, take a little bit of what everyone believes and figure out what's right for you and your business, your family, and the timing of your business. So depending on how long you've been in business, what your risk tolerance is, how much you have on your line of credit, right? Or how much spending you have, how much you have in savings. Are you taking home a paycheck? So there's no secret formula here that's the right answer. I encourage everyone to set goals and then make sure that your growth and your spending align with your goals. We had a client last year who his number one mission was for top line growth, right? So he was traveling, he was going to trade shows and conferences, he was really beefing up his culture.

He had hired somebody in the office to really lead those meetings, as you mentioned, right? With the technicians and not always leaders. So he hired somebody in to help build the culture of his business. He was running Facebook ads, hired a marketing assistant. So really worked on top line growth. We knew that he wasn't making a profit that year, right? So every month when we sent him his financial statements and we said, all right, we know, we see you're taking a loss. We see that you're not taking home as much money to support your family this year,

but we planned on it, right? And we planned on growing your revenue. And we built up a savings for this. We knew that his family could tolerate this type of growth strategy. As we moved into the following year, we said, all right, now we're transitioning into profit, right? Now we need to really dial in what's working, what's not working. Let's cut back on the spending that's not working. Let's make sure that they're taking home a paycheck to support their family again. But it's strategic and it supports the goals. I hate when I see clients and entrepreneurs spending without monitoring and without analyzing and then not knowing what's working and not working. And so therefore,

you're investing in growth, but you may or may not be growing. However, you're not taking home that profit. So just make sure you're doing it strategically and analyze it as you go. I like what you said there with the risk tolerance and risk level, because I think when I've talked to some of the smartest people I've had on the podcast and just people I've got to shake hands with, they say to be a true visionary

and a really strong business. I'm talking history now. Risk level needs to be pretty high. I mean, you've got to, they're calculated risks, but I do see people spending blindly and they say, well, that's just the cost of growth. And it really isn't. You know, if they're like me, you get a big, huge warehouse

and think you're doing better by buying a bunch at a time. And the more I look at the lean concepts and read the book, The Two Second Lean, for those who haven't read that, check out the book of how to become leaner. It's not by buying more. It's literally the last thing you want to do is continue to just buy so much

because you've got so much waste. And I just feel like I try to go 110% of everything. When I bought something, I bought a lot of it thinking that was the best thing to do. And I went to Costco, which I do pretty often. And I realized it's very rare, unless you get canned food or ramen noodles or something that you're going to go through that much if you don't have a big household. So I think it's the same thing with business, but we can spend all day andaging that. But I want to get back into the financials because so many business owners have trouble handling them and managing them. So tell me a little bit about understanding your financials as far as being crucial for

achieving profitable growth. And is that sort of business owner can just let someone else worry about? Because I truly believe they need to be involved in marketing and their financial accounting. Those are the two things I think you can't kind of let go as an owner. Sometimes you get swindled. Yeah, absolutely. I think every business owner needs to understand their numbers, right? So that's our mission, right? It's to make sure that you understand the numbers. What I struggle to see is entrepreneurs trying to go inside QuickBooks and figure out how to process transactions and reconcile things and invoice clients and collections. Those are the types of weeds that you can hand off to somebody,

right? And when you do that and you get out of the weeds, you could step in as a CEO and you could step in as the CFO of your business, right? So one of the things that I learned during my corporate days is what CEOs need to know in order to grow the company, right? That my job was to give financial reports to the management team so that they could use that information to grow the business, monitor the business, right? And so I encourage everyone to have somebody who can access that and create those reports for you so that you can step in as the CEO and look at it from a high level. When you do that, you're really able to monitor the trends. You're able to see glaring issues, seasonality, spending areas of concern.

I encourage every single one of your listeners, set a budget, right? So set goals, create a spending budget. And then that way, at the end of each month, you can have your bookkeeper, your CFO, whoever's helping you with your finances, you can have them do two things. Analyze your financials compared to the previous month, the previous year, and then to your budget. Those are the best ways to see, did I hit my goals, right? Is my spending and my revenue in line with where I thought I was going

to be? If not, why the hell not, right? I need to know where I'm spending more money than I thought I would or why I'm not making as much money or if I'm exceeding my goals and revenue, awesome. What am I doing right? Let me double down on that. Compare it to last year, right? One of the things that we see with a lot of our clients, as you see your revenue uptick, there can be a false sense of security to go out and start spending. And again, if we haven't done that strategically, we could be outspending our revenue, right? And there might not be anything that's helping us serve our clients or get better

discounts on inventory or create a better culture. So really look at, are your expenses growing with your business and purposely? So compare your financials to the previous year. And then I always encourage people to look at your profit and loss statement for the last 12 months. That's where you're going to see the seasonality month to month. And you can see those big swings and start to ask yourself, CEO, am I okay with these spending swings? Is this normal? And will I expect this? And how do I weather any downtimes in my business? Does that make sense? It does. Makes a lot of sense. And I've not had a budget in place till about two and a half, three years ago. And it is, it's crazy. The bank loves me. I'm loanable. They love the fact that they get

to see that. And they, they actually see me hitting goals. And of course, every year I put a really kind of a good, better, best, and we try to hit it out of the park. And I think this next year is just going to be cranking because of some new marketing stuff we're working on. But you know, the bank, I think a lot of people forget when it comes to financials, the bank, you want to be loanable because if a business walks along and you can develop a business and buy it, you could create what's called arbitrage. It's making money out of thin air. It's literally, if there was a four times multiple of their EBITDA of their profit. And I know I'm not going to confuse the both, but for the layman term is profit sometimes it's EBITDA, of their profit. And I know I'm not going to confuse the both,

but for the layman term is profit sometimes is EBITDA. So if you could get, buy it for four times and you get a loan to buy it and the day you buy it, it's worth eight times, it's called creating money because you're a platform company and there's something special to be said about that. And I think when we talk about financials and what the bank wants to see, and then sometimes, you know, what we do, even if we didn't have a bank and literally the bank is helping us with our enterprise purchases, like we pay everything cash for the most part, but we have a building loan and we've got a million dollars of equity in it, but they still want to see financials and certain things like that. And I'll tell you that they love when they see us hitting our budget and they literally get

our, but they ask us now for our budget. They want to see the next year and if we're hitting it. And it's incredible because we become a good partner to the bank and other banks give us a competitive bid all the time, trying to earn our business. And is there any maybe color you could shine on this, a little bit of that relationship with a bank and what you're talking about getting set up when it comes to financials? Yeah, absolutely. So interesting. I was just reading a article by the blog about the SBA. And we've seen a lot of businesses go out and get loans during this economy downturn right now. And one of the pieces of the agreement says that you have to have bookkeeping, right? You have to be able to provide your books for any loan that you're taking out, right? Either at the beginning of any bank relationship, right?

If you're thinking about growth, you need to be thinking about your bank relationship. So who do you have as a bank relationship? Do you have current bookkeeping so that when you go to that bank, you can provide them with financial statements for the last three years? And then if you go for any additional lending, they're going to want to see business plans and budgets. So I love that you have talked about the budget. I know that this is something that feels very overwhelming for business owners.

You got to take it one step at a time. It's something that's so important and it's important for you to think about it now, not the day that your business is in crisis mode or the day that you want to make that large investment and now you need the loan, but you can't get it because you haven't had bookkeeping the last three years

or you don't have a budget in place. These are fundamentals that you need to put in practice now before you get to the point where you really need that loan or really want to that loan to make an investment. And keep in mind, it's not just with the bank. Maybe you want a private investment maybe you have somebody who wants to invest in your business you maybe you want to go into a partnership or find a round of investors who want to invest in your business they're gonna want to see the same thing they're gonna want a good clean bookkeeping financial statements and budget yeah absolutely I mean I would not and another thing I want to see when I walk into a business is manuals. And I know that sounds bad, but I want to know, does every employee know how to

play the game and do they know how to win? And if not, that's fine. That's just an opportunity that I could bring to the table. But I think it's crazy to think a business is going to run without any structure, any org chart, any depth chart. And the last thing for us is the financials as business owners, because I always say some people talk to me, they're like, it's not that bad to get into it. I said, do you love going to the doctor? And they're like, no. And a lot of people miss their annual checkup. They hate it. But when you find out something's wrong, you get to fix it right then and there. And I hate to compare it, but a lot of people say, I don't mind the financials, but they hate the doctor. It's the same thing. I remember, I never liked to look at the credit card balances. I was like, I know they're okay.

But now every single Friday, it's so important that the owner's looking at this stuff and knowing when you got almost 300 employees, like we're at, it's like, I don't have time to crunch these numbers myself, but I want to check. I look every day. I say, does the financial quick check match the bank account? All these little things matter. Do we owe more than our credit cards say? And I've seen people, especially in the finance department, been able to pull a mask over owners' heads. I mean, they create fake employees. There's all kinds of stuff as you grow. And it's a good habit to start right now on getting this stuff manageable because it doesn't get any easier the longer you wait. I think some of the time is it's hard to untangle the mess that's happened over the last

five, 10 years. And you know what I hear the most though, Danny, when I go to buy a company is, oh, well, I mean, at the latest, I'm at the 12th of last month. At the earliest, usually it's the 8th or 9th. And I like to get it down to the 5th, but there's still stuff happening from last month, like money coming in. But ultimately, some of these companies that I've tried to buy are back six months, back a year. You look at their finances, none of them make sense.

Yeah, you're not going to be purchasable if you don't have up-to-date financials. And up-to-date does not mean the previous year. It's unbelievable that they go, I'm so busy every day running my business that I don't really know if I'm profitable or not. And I don't know what kind of story the financials tell me. And I don't know if I should be investing as much in commercial versus residential versus my Home Depot versus my big clients over here. And I don't know if I should buy a new truck or not right now because I haven't looked at my financials and I have no idea. I keep paying the mechanic every other week to fix this old truck, but I don't know if it's best for my write-offs to buy a new vehicle and improve the morale of the company. All these things that they don't know about,

and they're sitting there going, I'm too busy to do it. And it's just, it's still the fact that I lived and breathed it. I would go back to myself and say, dude, number one rule, get comfortable with the financials and make sure they tell you a story. I like that you have a day, right? That you have a day that you do that, right? So you mentioned on Fridays that you make a point to review that information for you, for yourself, right? So I don't care if you have 300 employees or a technician then it's time to get somebody to help you do that because it makes decision-making really clear right so we call it a weekly dashboard that we do and it looks at your cash balance your credit card balance availability customers who owe you money who you owe money to right it's a weekly cash dashboard but it makes decision-making really clear,

right? So if I know exactly what my availability is or how many clients owe me money or who I owe money to, then when I go to think about that investment next week, or if I think about wanting to make a new purchase or a new hire, I know recently what my total picture is and it makes decision making much easier week to week. You know, I just pulled mine up. So I had it here. I've got everything and I'm just going to tell you exactly how mine looks. So every week I know exactly cash in the bank. We've got two different bank accounts. We use two different ones. Wells, Wells and Chase, actually one's Western. Then i've got my operational loans american express enterprise fleet one of my vendors on traumatic and clope and i've got

asset type loans the a1 new building mellow mode of my apartments we bought for the company so that's part of it and this is me and all my top executives this is is five plus me. So I don't hide this stuff. And then we have our variance to target. We have off-pace percentage target of every single month of every single market. Red means no bueno. Black means bueno. And then I have everything in bar charts because I like to look at a picture and say, how far away were we from our budgeted goal? And it's crazy, crazy the insight I get by this every single month. And a lot of times something pops out at me and I go, what the hell happened? And we look and we missed it by a big amount. Like, I mean, one of them on the monthly ones, I mean, you know, we're missing some things

by a lot and I go into them and some of them might be because the marketing ones. I mean, you know, we're missing some things by a lot and I go into them and some of them might be because the marketing, maybe our website, maybe our pay-per-click, we haven't got the advanced verification, but I like to dig in and say, oh, wow, this is really not good. And as you fix these little things, you turn the knobs a little bit and you say, okay, we need to top grade this guy. We need to work with this CSR. We need to figure out what the heck happened in Detroit that are marketing. Or for example, our pay-per-click employee that does all of it didn't turn it off in Kansas

when we told him to, it stayed on the whole month. And we just got lost opportunity, lost opportunity. It ended up costing us $20,000. So I had to have a very tough conversation. And he's lucky things still worked out, but he's never going to let that happen again. Can you imagine how many times this happens? You get the blanket taken over and you just don't know what's going on. And you don't even have this information to look into. So I think it's massive, this conversation we're having. And I think everybody, that's a hard conversation to

listen to, but it's the facts. Talk to me about some of the tools you could recommend to business owners for keeping track of their financials. Yeah. Number one tool is create a KPI dashboard that works for you. So we just talked a little bit about it, right? So you have a very clear cash dashboard that you're looking at. We have a few that we do for clients. We have our weekly dashboard that looks at our cash and our availability. I think the AR and the accounts receivable, so who owes you money and accounts payable, who you owe money to is really important. We see some clients who had no idea that they were having a collections problem and maybe their bookkeeper wasn't on top of it or they were trusting their clients to pay them.

And here they had people who were paying them at 60, 90 days. That's crazy, right? You want to be on top. The cash is king, right? We need to make sure that we're on top of our cash. Accounts payable, same thing, right? We have to make sure that we're on top of our cash. Accounts payable, same thing, right? We have some clients who receive early pay discounts. So maybe you want to take advantage of the one or 2% that a vendor will give you. So you need to understand where your money is sitting and who owes you money and how much you owe money to other people. So that's on a weekly basis. And then we talked a little bit on the monthly financials. The best metrics that you can possibly look at is in your accounting system, your profit and loss statement. Don't forget about your balance sheet. We had a client who came to us last month and he said, you know, look, my CPA has been doing this. I'm pretty up to date.

Everything looks good. And we looked at the income statement. There was no glaring issues, but we looked at the balance sheet and we said, Hey, you got this giant liability here for $200,000. What is this? Right? I have no idea what this is. And he had some assets on the books and equipment that he didn't even own. And he goes, I've never looked at the balance sheet. My accountant always sent me the profit and loss statement. And here they had incorrectly put equipment on their assets. They had never depreciated on their tax return. They had this giant $200,000 liability. Well, here the CPA was making a fudge journal entry to make the books match at the end of every year. This had been going on for four years,

right? So massive cleanup that needed to be done. So I don't say that story to scare you. I say that story to be aware, go pull your balance sheet, make sure that the assets, the equipment, the inventory, the things that you own are make sure that the assets the equipment the inventory the things that you own are showing up in the assets section on your balance sheet and the liabilities are correct you do not want a liability sitting on your balance sheet unless you actually owe somebody money so unless you owe a credit card a loan shareholders the bank line of. Those are the types of things you want to see in your liability section. If you're not sure what something is, make sure you're talking to your CPA, your bookkeeper, whoever's handling your financials. And then create some KPIs that

work for you and your business. So the financials don't end at profit and loss and balance sheet, right? People always say, okay, well, that's all my bookkeeper, that's all my CFO gives me. That's not where it ends, right? Think about what you need to analyze in your business. Is it employee effectiveness or profitability by employee? Think about your profitability, maybe if you're holding inventory. So not every KPI is going to be right for your business and tell your business a story, but I suggest to each business owner to start pulling KPIs, track them for three to six months. You can either go historical or moving forward and see what trends and what stories those key performance indicators can tell you. Don't just stop at the income statement. Make sure you keep diving in.

The nice thing is I've got an amazing neighbor who's really, really a good CFO as well. So once every once in a while, I'll go through the stuff with him. I'll bring it home. And he doesn't really ever find any problems, but he tells me, keep an eye on this, point this out. I like to have a third pair of eyes other than just my CFO and me. And I think it's important because they ask the tough questions. And a lot of times, most bookkeepers, they call themselves this advanced bookkeeper, but they know how to balance stuff out, but they don't really know where they're putting it. And I've seen lots of issues with a lot of mistakes with that stuff. Are there any other KPIs that we should have our eye on other than the ones you just discussed? Yeah. We talked about at the beginning, revenue growth versus profitability. So I know I

mentioned two profitability KPIs. Again, we both agree that running a business isn't just about profitability. So make sure you're looking at your marketing KPI so how much are you spending on your Facebook ads first their effectiveness and the revenue so remember to match the marketing and advertising spend to its effectiveness so KPIs can be anything from the profitability to those growth initiatives. So think about what's right for your business. Think about maybe some questions that are haunting you. We had a client last week who came to us and said, I just feel like I have one technician who is way outperforming the other technicians. And I am not sure if it is because they're so good at what they do and I should enjoy that I am profitable off of them, or if there is a quality issue that

I should be aware of. But I don't have numbers to say how much more is that person actually doing, right? So we had put together an entire profitability analysis for each of his technicians. And now it's something that we're monitoring on a monthly basis. So if we see one technician go way under or way over, we can have a conversation, right? We can start to learn the trends

and we can start to figure out why. Yeah, I just was on a conversation earlier with somebody and I said, you gotta study your out why. Yeah, I just was on a conversation earlier with somebody and I said, you got to study your outliers. What I've learned to do is I don't just study the means, I study the medians. And the means are affected by outliers, that's why. So we've learned to look at significant data outside of the standard deviation to a certain extent. If you've got a bell curve, like the way outliers. And I do have a couple of technicians. What I've learned is they're just really, really good at conveying a message. They ask things that others don't ask.

They replace things that others don't want to replace. They're not lazy. They'd rather work on one job than go drive to three more and just spend all their time and do it right the first time. Now, there are other technicians I know that they're outliers because they lie, cheat, and steal. So you got to be very careful. But I told them, I said, turn your manuals, go ride with the top guys, and take notes. Find out the questions they're asking. Find out when they go and ask the questions. Find out how they prep for the jobs. All these things should be somewhere because you want to replicate the top. Just like I said, I could go to McDonald's and the Big Macs made the same way every time. And it's just interesting when you've done it and I've done it. I'm not the biggest and best, but I know one thing I've

always done is I've studied my outliers and I've said, this guy's bad. Let's figure out what the heck's going on with him. And as you start to increase your bottom, there's two approaches, attack your top or grow your bottom. And I don't think one way is better than the other. I just think that sometimes you got to have your hikers and sometimes you got to have your campers and they both make sense. I'm a big fan of what's called a breakeven analysis to know how much money do I need to make per hour for my technicians to be profitable and to even break even. And most people don't understand those numbers whatsoever. And it fluctuates depending on how much you're hiring

and COVID and all kinds of stuff. But I can tell you, it's not a hundred dollars. It's much, much more when you think about the technician being in their HVAC unit or working on the roof or in the garage door is it's upwards sometimes of five six hundred dollars because there's drive time there's training time there's ride along there's go to get inventory you know you've got PTO you've got insurance you've got insurance on the building you've got insurance on the vehicle you've got the health insurance you've got all these other factors, workman's comp. And until you really break it all down, and it's nice to get a third party to look at it and say, I mean, I have guys that come in here and they said, man, we got to do something about your workman's comp. It should

be better. So we put some things into action to make it better. What do you know? It's gotten a lot better and our score is better, but it's crazy. Isn't it crazy what you could find? There's just so much, but people really think if I do $150 an hour, I'm good. I'm like, you've got way more overhead than that. You've got CSRs, you've got dispatchers, you've got trainers, you've got recruiters, you've got software, you've got cold air conditioning bills, you've got rent. You got to add all that stuff up before you can break even, right? Yes, you do. And I love that you talked about the break even point.

Not enough people focus on that. You know, I talked about the profitability analysis that we did for our client. And yes, it's what I'm paying each technician and how much I'm profitable by each hour. But then you have to create an overhead rate, right? So that's going through and determining what are all your fixed expenses? How much am I paying in rent? How much am I paying for benefits? How much am I paying for insurance?

And calculating all of that. So the best way to find that is from your profit and loss statement. So that profit and loss statement that I suggested, you run for the last 12 months, look at that, look at what your fixed expenses are, look at what your average operating expenses are, and start to apply that overhead rate to figure out how much you need to charge per hour or how many clients you need to see in order to even break even, to even hit that number. And you can increase your staff efficiency. I like that you've talked about creating a process. We read the book Built to Sell a long time ago. Great book if you haven't read it. But all about just as a service entrepreneur,

learning how to get out of the business yourself, right? And to create a process that your team can follow. And what I have found since we've implemented that, the training time has gone way down, right? I spent a ton of time putting together the process and the training and everything on the front end. But now when I hire, I can get bookkeepers up quick and they're efficient and they're effective and they're a good culture fit because they've had such a great onboarding experience. Yeah, I know. You know, what's interesting is I had the same conversation and I'm not going to put the cat out of the bag yet, but I'm using onboarding software. I'm using hiring software and then I've got everything,

it all talks to Paylocity on top of that. And then I'm running about five more softwares on top of that within those platforms. And it's all meant to be, you know, an employee is gonna choose if they're gonna work for you long-term within the first 30 days. And having manuals,

having a standard operating procedures, having checklists, having structure is what people want, especially when they come in. And then, of course, they want some freedom. They don't want it all to be just black and white. There's color in a job and they want to have insight. They want to have input. They want to help create some new standard operating procedures.

But that's so important. And that onboarding, I can't tell you enough. It's literally people have failed with me because they've been A players, but the onboarding, I can't tell you enough. It's literally, people have failed with me because they've been A players, but the onboarding was so unorganized. It's too fast of growth. And guess what happens? They decided to move on and you can't blame them. So I do think there's a lot to be said there. And that was a great point. I'm glad you brought that up. Let me ask you this. What do you think is a good profit margin for most companies? What's realistic? I don't want to say too big or too small. I want to hear what your perspective is. Yeah. So I always say healthy is a minimum between 20 and 30%. So that is a very

healthy business, but keep in mind, I want that to include the owner's salary so a lot of business owners will say to me well yes I'm profiting 30% and then paying myself no no no no I want a healthy profit margin you have to pay the CEO right so I want profit margin to be between 20 and 30 percent after you have paid yourself as a business owner see that's interesting because i've always said how much is it going to cost to replace you as the owner to get a great manager and the company's still got to make a good profit but technically i'm a w2 i pay other than my owner withdrawal so there's a separation here and i don't know if you agree, but I could take quarterly profit that get paid differently. I don't pay Medicare. I don't pay

all the FICA and all the crap that I got to pay. But when I'm the W-2 money and I kept this year, I gave myself a pretty healthy raise because of how well we're doing. And I want that money to come out to Medicare and Uncle Sam. But it's a little bit different than the owner withdrawals I take. But I don't, I've never really taken those. I've always reinvested them back into the business. So what is your take on that? So I love that you're a W-2 of your business. I love when I can watch entrepreneurs elevate from taking owner's draws to being on payroll, right?

You are not a self-employment tax anymore. You are on payroll of your business. You are now a business expense. You are lowering the amount of taxes that your business will have to pay at the end of the year. So I love when I get to see business owners transition onto payroll. You can take owner's draws with that. We see some entrepreneurs who will take a bonus or a commission as an owner, and other people will take owner's draws. I would recommend that you make that decision with your tax accountant. That's really important because your personal picture will look very different from, you know, don't go talk to your neighbor and your neighbor is taking 20% in owner's draw. So now you go take 20%.

I want you to talk to your tax accountants because your spouse could have a job or you could have two businesses or other investments that are going to change your tax picture. And so that will change how much you take on salary versus owner's draw. businesses or other investments that are going to change your tax picture and so that will change how much you take on salary versus owner's drive I always don't your margin to be after your salary so right it's whatever you're paying yourself as an owner on payroll that profit margin should be after that payroll yeah so you're not adding that back in on the w-2 side but obviously when you do the withdrawals the owner withdraws you're not adding that back in on the W-2 side, but obviously when you do the withdrawals,

the owner withdrawals, you got to throw that money back in to see what your profit margin was, right? Are we saying the same thing? Yep. Yeah, we are. There's so many accounting terms that it's interesting. We had a client last year that we kept on sending emails and having these calls and finally I said, okay, hold on. I think we're saying the same thing, but we're defining words differently because again, not everybody went to school for accounting, right? So some entrepreneurs call things different accounting terms. So again, when you're having a discussion with your bookkeeper, your CPA, your tax accountant, your CFO, always make sure that you're talking about the same

thing because they might be using a different term than you're using because they might have a different background. So I think that's a good point and lesson for every business owner is to make sure that when you're speaking to the staff that's helping you, if you're frustrated or they're frustrated, go back to how you're defining things because we see a lot of issues with entrepreneurs and not understanding their bookkeeper or their CPA because they're using accountant terms. Yeah. And I'll get to tell you, I wish during all my school, which I ended up getting an MBA, that they would have just used a garage door

company as an example of everything. Would have made my life a lot easier. You know, let's talk a little bit. This question always comes up is cash versus accrual. When you start dealing with the banks, they'd rather you definitely be on accrual. But do you want to talk a little bit about the difference of those? Yeah. So a lot of times when entrepreneurs start out, it's very easy to go on a cash basis.

Usually your tax accountant will prefer a tax basis unless they have a reason to put you to an accrual. All that really means is that you consider revenue, right? You consider your sales revenue and your expenses as an expense the day that the cash leaves your account. So a good example of this would be your invoicing system. So maybe you're invoicing through Square or QuickBooks or, yeah, a point-of-sale system, right? And you invoice a bunch of people on December 20th. Well, on an accrual basis system, you would recognize the revenue. You would claim the revenue on your tax return in December because you're at accrual. So it's when you build that revenue. On a cash basis, if you didn't get the money until January, you wouldn't actually claim that revenue until January. So it causes a lot of issues.

Make sure that your CPA is talking to your bookkeeper or that you're clear with both parties. If you have somebody separate doing your taxes versus doing your bookkeeping to make sure that your bookkeeper is recording things properly that's going to match your tax return. Love it. All right. Let's jump into the meat of it here because I want to hear about the profit planner. Tell me exactly about the book and what the purpose is of the profit planner. So we were working with clients and we realized that there is so much information out there and there can be so much accounting overwhelm and not everybody has a bookkeeper, but maybe you do have a team around you, but you want more, right? You want more information and you want to be able to dive

deeper into your numbers and really be able to use them to grow your business. So what we did was we took the framework that we use when we work with our clients and we created a 12-week planner where at the top of every week, we give a little bit of accounting background, some accounting explanation, but really the idea to take the accounting, the overwhelm out. So this is a very simple layman's terms to give you some background. And then every day we give you an action task to perform. We believe that action breeds more action. So every day is a small task that we ask you to complete and they really compound it on each other all those KPIs that I was talking about we build on the each exercise every day builds on each other and we help you build those KPIs and then give you a

really nice template at the back of the book to be able to track all that information so if you're somebody who's saying yeah I have this pieces of this but I want more I want to have a profitable business. I want to understand my numbers more. This is an excellent tool with small action tasks every day to get it done. So you guys have the Profit Planner Bundle, the Profit Planner for Financials, Profit Planner Financials Annual Subscription with four books, the foundations. What are the differences? What do we want? Financials versus foundations? What is this? Yeah. So foundations is the first book. It's to build a foundation. So we talk about systems. We talk about staff, bookkeeping systems

for earlier entrepreneurs. So that book is going to help you build the foundation for your financials. The financial book series is the next level. That's where we really dig into those KPIs and that cash dashboard. We had clients coming to us and saying, I want to do this all year. Can't I just have the book for the year? And so we created those bundles where you can buy them for the year so you could keep on doing the exercises over and over again. Awesome. Okay, so I see you got the bundle,

all four of them. Great. And then I always ask three questions before we end. So number one is, someone wants to get ahold of you. What's the best way to do so? Go to calendly.com slash kickstartaccounting.

You can book a time to speak with me right then and there. I love to talk to the listeners. Come ask questions. If you, I think you need more help with your accounting systems or you have questions about the profit planner, you can schedule time right there. Or you can go to the profitplannerbookkeeping.com. That's our website. And you can schedule time right there, or you can go to the profitblenderbookkeeping.com.

That's our website and you can learn more. Send us an email, contact us through there. Sweet. And then what are the three most impactful books that you think have kind of shaped your way into business? Doesn't need to be anything. Could be self-help, could be anything. A lot of people say the myth is always one of the three. That's one of mine, but maybe you could choose three other ones. Yeah, I got three. Built to Sell, I mentioned earlier, that book 100% transformed how I run my business. If I could gift that to everybody, every service-based business, I would. Scaling Up is another great book. If you'd like some of this financial conversation that we're having, they have four pillars in that book that will really help you step into your role as a CEO. And then the last one's more of a self-help book called The PMA effect. Just really love his no BS attitude on life and getting things done and

stepping into your true potential. Perfect. And this has been great. The last thing I ask is, I'm going to give you the floor. Usually what I ask is you tell the audience something to take some initiatives, maybe a good pointer, some gold at the end of it, but I'll give you the floor and give them some pointers on what they could do today to make their business better. Yeah. So I know we've talked about a lot here today and finance can be something that's really confusing to business owners. Give yourself some grace and take one thing that we talked about here. I would encourage you to start that weekly dashboard. So the one thing that I have seen transform business owners more than

anything is just learning to get a pulse on their business. Set a calendar invite, do it every Monday, every Friday, every Sunday. I don't care what it is, but start putting together that dashboard. Ask your bookkeeper for help. Go find the help that you need. If you're saying, Danielle, I'm too busy. I'm not going to do it. Then go get help and get that dashboard in your inbox every week because that's going to help you make better business decisions as you move forward. So if you're going to do one thing, I would like you to take the time this week to either get help creating that dashboard or do it yourself and get that dashboard done this week. I love it. That's great advice.

I really appreciate you coming on today and very excited to check out what's in those books. So this is great. All right. Awesome. Thanks for having me. This has been fun. Hey, guys, I just wanted to thank you real quick for listening to the podcast. From the bottom of my heart, it means a lot to me.

And I hope you're getting as much as I am out of this podcast. Our goal is to enrich your lives and enrich your businesses and your internal customers, which is your staff. And if you get a chance, please, please, please subscribe. You're going to find out all the new podcasts. You're going to be able to ask me questions to ask the next guest coming on. And do me a quick favor, leave a quick review. It really helps us out when you like the podcast and you leave a review, make it four or five sentences, tell us how we're doing. And I just wanted to mention real quick, we started a membership. It's homeservicemillionaire.com forward slash club. You get a ton of inside look at what we're going to do to become a billion dollar company. And we're just, we're

telling everybody our secrets basically. And people say, why do you give your secrets away all the time? And I'm like, you know, the hardest part about giving away my secrets is actually trying to get people to do them. So we also create a lot of accountability within this program. So check it out. It's homeservicemillionaire.com forward slash club. It's cheap. It's a monthly payment. I'm not making any money on it, to be completely frank with you guys.

But I think it will enrich your lives even further. So thank you once again for listening to the podcast. I really appreciate it.