Ep 227: From Chaos to Clarity: Understanding Your Business Finances

Have you ever had a money or career question you really wanted to ask, but didn't know who to go to, or just felt uncomfortable even bringing it up. You're not alone. Talking about money can feel intimidating, even scary, and that's exactly what I'm trying to change. That's why I created a free virtual coffee chat, a casual, no pressure, twenty minute conversation where you can bring one thing you're wrestling with and we'll talk it through.

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I'm Michelle Perkins, your host. My search for more fulfilling work led me to career in business coaching, where I stumbled upon a game changing discovery. Money issues often start with our mindset and habits. You see, our relationship with money is the key to overcoming those frustrating financial obstacles.

As an entrepreneur, coach, and problem solver, I'm passionate about helping you create a great relationship with money, because turns out that's the foundation for a limit free life. Each week on Money in You, I speak with amazing guests about all things money, mindset, practical tips, and everything in between. We're here to give you new insights, education and empowerment, so money can be one of your favorite relationships. So join us for some lively conversations and let's transform your financial life together.

Hello, Hello, and welcome to another episode of The Money and You Show. I'm Michelle Perkins, your host, super excited to bring you another episode that I think you'll really enjoy. I've got somebody on who I know as an expert. I know him personally, so sometimes I do, sometimes I don't.

In this case, I do. And so Walter is going to be here with us today to talk about many many things, especially for entrepreneurs. If you're an entrepreneur, he specializes in you business owners in terms of just financial preparedness, readiness, how to really manage your finances in the best possible way. That said, if you're not an entrepreneur, you will still get a tremendous amount of value out of this because you can apply it all to your personal life.

So without further ado, I'm going to bring on Walter Miller, and he is the founder and owner of Norman Professional Services, which will started in two thousand and four as an accounting, advisory and bookkeeping practice named after his dog, Norman, who you can see on his website. While the adorable Schnauzer poodle has long, oh long since past. I'm sorry, that isn't him. The commitment of Walter and his team to their clients to provide financial clarity lives strong.

We'll check with Walter. Maybe that is him still on the website. They've transformed to provide actional CFO guidance to owners of professional service companies who are ready to learn about their numbers and ready to grow their companies. Today, the team brings a combined fifty plus years of experience in accounting and financial analysis.

By embracing their core value of learners who teach, their mission is to nurture prosperous relationships as trusted teachers, growing financially literate business owners and their companies. Welcome Walter, thank you for having me. Michelle. Let's clarify.

The most important thing is that Norman on your website. It's a picture of Norman, and Norman is no longer with us, so but it is a picture of Norman. Okay, oh, I love that so well. Thank you for coming today.

I know you are just a wealth of knowledge. You can answer a lot of questions for people. I actually wish this was a show where people were just calling in questions, because you would be absolutely great at answering those. But we've spoken, and I was really impressed with a lot of the stories that you have around people coming in and having certain situations.

So I really loved the idea of you sharing some sort of case studies of what you see out there in the business world and the kinds of problems, questions, challenges people come to you with and how you help solve them. So let's just start, though, because I do know that you have an interesting background, and talk about how you ever got into this in the first place. I got into accounting as an actor, and you heard that correctly. When I was much younger and you could still find hair on my head.

I was a struggling actor. I hated being an actor and a waiter, absolutely hated being a waiter. So I went back to school and took some accounting classes. I'm an English major by degree, went back and took some accounting classes, and then I started working in public accounting, and first in Virginia, where my wife and I were living, and then in the Chicago area when we moved here, and we've lived here since eighty nine.

The firms I worked at were very similar in a couple regards. One is I totally lucked out. I had a series of bosses who were incredible teachers, and I wasn't looking for teachers, but fortune placed me in front of bosses who were really great teachers, and I have tried to pay that forward myself as a boss. So I think that's a part of my background.

I'm not a CPA, but I did all their grunt work for close to seventeen years until I had one too many tax seasons. The firms all served a very similar kind of client base. It was all small, closely held companies. I don't think we had It was pretty rare that we would have a company that had revenue north of fifty or seventy five million dollars.

So I saw many many business models. How people made money, lost money, saved money, spent money, what worked, what didn't, and had to spend a lot of time explaining things to business owners. We were dealing with people who were not trained as business people. They were trained as roofers or attorneys or dentists, and so there was a lot of financial education that went on.

I had one too many tax seasons. The stresses is awful, the hours are brutal, and the tax part of the work was never the most interesting part of it to me. So the next thing I did was I found a job as a controller in a really interesting food related company and had a great boss, great co workers, wasn't planning to do anything, really enjoyed the job. But not long after I started that job, these bookkeeping I guess we'd call side hustles.

Now they sort of appeared in my life magically. I have three adult children. My children weren't teeny at that time, but they were young enough that side money was interesting to me, and so I said yes, said yes again and again and again and again, and what started out is like beer money became really good single malt Scotch money. I had twelve clients in about ninety days, and that was astonishing to me.

That never happened to me before. And when I caught my breath and realized what had happened. I discovered I'd wandered into outsourced bookkeeping, and I was attracting opportunities for organizations that needed bookkeeping help. It just wasn't a full time job.

And my experience, when you describe organizations with those criteria, they are countless and they can be found everywhere. So I had started networking as part of profess development, and so what was coming to me by accident I began to see contentionally that very quickly led to successful referrals. And then pretty early in the game, I went back to my boss and I said, Hey, would you like to be a client instead of an employer? And he said yes, And he was a client for about nine years, and that formed a template that's still true today, which is that for a portion of our clients, we are their entire accounting department.

So I always say everything that ends in the phrase take it to the people in accounting, that's who we are. Where those people in accounting, we're sitting in bookkeeper seats, controller seats and CFO seats. And so we started as a bookkeeping company, but I pretty quickly realized that the clients were asking us for things that were above and beyond bookkeeping. The last firm i'd worked at, we did a lot of small business advisory work.

They were almost always asking me stuff I already knew how to do. And I am smart enough to listen to clients when they ask me if I can do something and say yes, and I think it. One of the stories I was telling you that really clicked for me was fairly early in the company, when I was still out in the field, still working as a bookkeeper, which is something I don't do much anymore as I managed the company, but I was still in the field, and I put a set of financials on the desk of my client and I said, hey, man, congratulations, your margins are really kicking ass.

And he said, Walter, come here and close that door. And he said, Walter, I got to tell you, man, you are the third person in two weeks that's used that word margins, and you're the only one I trust well enough to say, I don't know what you're telling me. I think it's good news because you've got a big smile, you got the thumbs up. But I whatever you told me, I don't understand.

And so he and I sat down and started at the top of his income statement, and I just shared what I was seeing in the information. And after about twenty minutes, when I got to the bottom line, he said, Wow, you've taught me more about my business than anyone ever has. And I love to teach. And so that really was a foundational experience realizing that there was value to be delivered beyond the bookkeeping.

That many of these clients they knew they needed the bookkeeping work, but they didn't really understand the output. In fact, one of the I don't know it's funny to me at least, is I will often ask clients for financial statements, and then I'll test them. Do you know what I'm talking about when I say give me your financial statements? And most of the time they know I don't really, I just asked my bookkeeper to give you financial statements, and so we talk about what a balance sheet is, what an income statement is, those kinds of things.

I love that. I love your background. I love those stories. I feel like you're so much more equipped to have these conversations with people because of your English slash actor background than the average accountant.

So I kind of love that. I think That's a great story and really illustrates how normal it is for people to not understand this stuff unless you went to school for it, unless you've been reading a lot about it and teaching yourself or having teachers like you did. Why would you? So, I think that is, you know, and I tell people all the time to ask their accountants or their bookkeepers questions, and they sort of are like, oh, well, I don't know that I can bother them with that, or I don't know, you know, they get very reticent to just call them with some very basic questions.

And what you're saying is that's part of your role. I mean, that's part of what you're there to do. Yeah, it's funny, Michelle. When I tell that story and I'm in a group of say, bankers and financial planners, I get a lot of people sort of shaking their heads, and I can tell they're thinking, God, what an idiot that guy was.

When I tell it to a group of entrepreneurs, I see a lot of head shaking. That's me or that was me or so I think there's a lot. My experience is there's a lot of embarrassment, sometimes shame awkwardness around what business owners do and do not know, and that awkwardness actually very perversely, it gets harder to conquer the more successful the business. Is this The gentleman that I talked to who didn't understand his margins had a very profitable business, So it was not his lack of education, had a financial education, had nothing to do about the way the business performed, right, right.

And I think it's you know, that's the case with a lot of entrepreneurs. They're not going into finance. They're going into, you know, whatever their product or service is that they're an expert in, and so the finance piece comes along and grows with the business, but they're not trained in that. And so I, you know, you and I talked about this.

I really like this show to be a little bit different in the sense that we talk about people's relationship with money, and when you talk about shame around money or just embarrassment you know that you don't know things, but they're not really taking being open about that and getting the answers you need. I mean, that's all part of this relationship with money. You know, this this idea that while I should know I should already know these things, I shouldn't ask anybody that would be weird, and I would make me look, you know, bad.

All of that is such nonsense, But that's kind of the thinking out there. And when you talk about money as much as you and I do, you realize that it really is silly to waste your time and energy trying to hide what you don't know. I mean, it makes less and less sense as I go along down this path, but I get it. I remember it, and I understand it.

But talking about money is one of the big missing parts of the whole puzzle. We don't talk about it enough. In our society. Were so expected to just know know things and do things right, and so we're very afraid, you know.

And the more successful we are, I think sometimes the more afraid we are to kind of go there and just let people know there's a lot we don't know. I know, in my family, my parents taught me a lot more about sex than they did about money. So I'm not sure what to make of that, but I know I'm not the only person. Now there is this very isolating feeling.

I think I was sharing with you this story. I was with the client one day and she was I could tell she was she was bummed out. She was not feeling well, and when I asked her and I probed it, she said, you know, I went to this networking meeting a couple of days ago, and. Everybody's business is doing great.

And I said, what do you mean? He said, well, you know, I asked people how everyone now wants to know how's your business? And they all, everybody's business is great. And I said, well, wait, wait, wait, let's just stop for a second.

You're telling me that everyone in the room except you how a business is doing great. She said, yeah, that's right. I said, well, I understand why you feel bad, but let's just cuddle up to the thought that statistically, it's almost impossible that you were the only person in that room who has a business that's struggling. So you were dealing with some of those people were lying to you, and they're lying to you because of this stigma and this fear we have around it.

Can it feel very vulnerable for a business owner to uh admit, admit their ignorance and to share business performance if it's anything less than stellar. Yeah, yeah, that's a that's a great point. And I love that story because I've been to enough networking meetings where it's pretty easy to walk out of there thinking, wow, am I the only one? And you're right, people are just covering up all the time.

I mean, it's also interesting because as he was describing that, I was thinking of people. I was throw my husband under the bus on this. But like him, who's a dentist who, if you say, how's business, he doesn't really know his numbers? I mean, as unfortunate as that is, he doesn't.

It's not interested in that. And he thinks by virtue, whether you know enough new people are coming in or whatever. You know, he knows his his production numbers and that's it. So he doesn't looking at the profitability or anything.

But so that's his gage as to whether things are going great or not. And I don't think that's you know, I don't think it's just him. I think a lot of people they're deciding whether their business is doing great without actually knowing how that plays out in the financials. Do you see that?

Absolutely? And I think that. They're typically looking at one and maybe two numbers. They're of course looking at the gross revenue number, and they're really excited if it's bigger than it was last month or bigger than it was last quarter.

That means they're doing well. And often that does mean they're doing well, but it doesn't in and of itself mean. They're doing well. Right, And then some of them are smart enough to look at the bottom line and see if that's a positive or negative number.

But all those numbers in between are just lost to most of these business owners as just a sea of numbers negative. Yeah, that's a great point. And what do you I mean, you're right, and there are a lot of numbers in between. I mean, there's a lot going on in there.

So I love the way you put that. So what should we be doing with those numbers in between? Well, we spend a lot of time with our clients in the early part of an engagement is really around financial literacy and teaching them. I mean, the example I use all the time is teaching them the difference between a crule basis accounting and cash basis accounting.

Our clients are all service providers. They're somehow converting time into money, and for most of our clients that means they carry receivables, so that means they're delivering services today they get paid at some future date. Well, if you make money like that. Understanding how your business functions on the accrual basis is very important because it's not and I don't want to go too far down the weeds of accounting speak for your listeners.

But in a in a cruel war, in in a cruel basis. Accounting system, we are not subject to the whims of when money comes and leaves and enters the bank account. We're really looking at the economic activity. And so.

That's a conversation that we will have over and over and over with our clients. And my favorite example is a painter we worked with for many years and after about four or five months of working with them, we were looking at something. He goes, hey, wait a minute, Walter, are we looking at. Cash or a cruel here?

And I said, oh, it worked, I got it. Oh that's great. Yeah. Well, so okay, when you when you talk about so there's the bookkeeping aspect, and then what do you think for people who are used to having a bookkeeper and then just having that information sent to their tax accountant, you know, who really aren't getting involved, what would you say they should be doing differently?

Well, I think the first thing is to know what good tax accounting service looks like. We see a lot of clients suffering through bad accounting services, not because they're not because they're stupid, but more because they don't know what good accounting services look like. And so for the record, I would say, if your tax accountant is not doing a couple of the following things. One is, are they meeting with you two, three, maybe four times throughout the year.

They're not just meeting with you two weeks before the filing deadline. They're definitely meeting with you during the fourth quarter when there's still time to take actions on tax strategy kinds of decisions. As we've talked earlier in this conversation, you should not You should have an accountant that allows you to feel comfortable asking questions, that. Doesn't make you.

Feel silly or stupid for asking questions. I also think that you should have an accountant who encourages you to call with questions. Fewer and fewer do we see the accountants who you know the meter starts ticking just as soon as you call the call the phone. Those used to be quite prevalent.

They're less and less prevalent. But I think that should be part of the engagement you also want to see a tax accountant, I believe ideally who's doing both your personal and your business returns, so they're seeing the entire financial picture, especially if you if your business is structured as an S corporation. Sometimes i'm ways of structuring transactions that if it sits in the personal side, it's to your benefit from a tax standpoint, If it sits in the corporation, it's a different benefit.

And so it's very I think important that someone is seeing that entire picture. And then I also think it's important to understand probably what you should not expect from that person. That person is can be, but it's not always necessarily a good business advisor. I sometimes joke with my clients that my job in your engagement is to create really good problems for your tax prepare to solve.

So I have very little interest in the tax planning part of it, wagging the operational dog. I feel someone who does what I do, my job is to help you make profit, increase cash flow, and if we do our job correctly, you're going to have some really interesting problems for a tax prepared to solve. The flip side of that is, I don't think so I don't think the tax dog should be wagging the operational tail. I'm not sure for got that metaphor right, but tax tail wagon the operational dog.

And I see this sometimes in clients who will spend December just draining the bank accounts at the advice of their CPA, with very little regard as to whether that money is being spent on things that are prudent, things that are necessary. And it's all about lowering taxable income. And sometimes it's about lowering taxable income and draining the cash accounts to such an extent that when we move into the next year, we're short on cash to meet things like payroll. Yeah, and I think lastly, I guess it's kind of like a doctor.

You want someone with a good bedside matter. Another thing I tell my clients is, you don't want to be the largest client for your accountant, but you don't also don't want to be the smallest. You want to be I guess the Goldilocks model. You want to be working with someone for whom you are probably one of their twenty biggest clients, but not the largest, but definitely not the smallest.

Yeah. Interesting, I love that, Walter, and you brought up something that I want to touch on more, which is the cash part, because cash has a funny way of getting sort of neglected, you know, cash flow management has a way of getting neglected in all of this. You know p and L and tax work. So how do you you know when people, you know, maybe their p and ls show that they're profitable and they're doing well, maybe they're taxes, you know, they're taking advantage of all kinds of tax opportunities, and but maybe they still feel like I never have enough cash, Like what is going on there?

And how how do you address that? Well? There could be lot There's could be multiple reasons. We think of every business as like a little a little cash machine.

It's got inputs and outputs. The outputs are cash, and we need to understand how that machine functions. I would say, broadly summarized, when when we see a business with cash flow problems, it's usually one of three types, and sometimes it's a combination of them. Sometimes they're simply not charging enough the business.

The pricing is too low and there's not enough money coming in for the value that they're delivering. I think a quick way to test this hypothesis is if no one absolutely no one is objecting to your prices. We don't need to do any high powered studies. You need to raise your prices.

You want, you actually want about fifteen percent of the world objecting to your price. That's a good metric to tell you that your prices are correct. And by the way, Michelle, that fifteen percent is going to include the people that I call the grumblers, the people who complain about how high your services are as they hand. You the check or their credit card.

And so that's one is that the prices are there's a pricing problem. Number two is you could have collections problem. So you could be very profitable, but nobody's paying you on time. Every invoice you send to a client should have terms.

People like to put doue on receipt I would say behaviorally. Behaviorally, almost no one pays due on receipt, so I find that an almost useless term. I think that it's more effective to say pay me in five days rather than pay me due on receipt behaviorally, whatever your terms are, if you have a consistent way of collecting and you're setting those expectations, you can probably rely on getting paid in n plus. About ten or fifteen days.

What do I mean? So, if you have terms of NET fifteen, on average, you're probably going to get paid between twenty five and thirty days. If your terms are NET thirty, you're probably going to get paid on average between about thirty and forty five days, and so on and so on. Some people will pay you early and some people will pay you late.

So again we're talking about the average. So if part of the cash problem is a collection problem, and how would a business owner know that, Well, they would know that because they are grumpy at their clients because they haven't paid. We see this a lot in law firms. I don't know why it is, but people as valued and respected a profession as law is, the lawyers are often the last people to get paid, so it's very common for law firms to have a collections problem.

So prices collections, and the third could be a spending problem. Could be you're just there's too much money going out and that requires a little finer analysis. And as a practical matter, show what we often see. It's not one of those it's a little bit of this, a little bit of that.

And a little bit of that. Yeah, I was thinking even you were talking about law firms, and yes, I understand that, even as a user of legal services, I understand that. But I. Think with for example, medical ordental offices, you know, you have a collections problem because in many cases you're waiting for insurance money.

And then you also can very easily have some spending problems too because it's just an expensive operation to run. So then there's this timing issue that and I think that's one of the most interesting and challenging aspects of cash flow management is to figure out, you know, you might not be overspending overall. The percentages might come out, you know, my marketing percent of revenue looks pretty good or whatever, but it's that timing. Marketing always has to be, you know, taking care of early in the game so that you can reap the benefits and then money is coming in slowly, and I find that to be a very challenging area to navigate.

Well. We do a metric that is very common that we teach our clients that we call that I mean we call accountants called days of cash or months of cash. And it starts to get at your formula. And the formula is pretty simple, and this could be done even for an individual.

This is not I'm going to describe for a business, but this could the same could be done for a household. What we're trying to do is to figure out how much cash a business or a household consumes in an average day. So let's make the math easy. Let's say a business is spending one thousand dollars a day.

Well, if I have fifty thousand dollars in the bank, I have fifty days of cash in the bank. So how do we calculate that? Well, you can pull out your bank statements, add up, and when we do this with clients, we use a year's worth of records. Add up literally the number going out on the bank accounts.

So the disbursements for twelve months, divide that by three hundred and sixty five. Then you have a day of cash. The slight qualifier there is if you have multiple bank accounts, you need to zero out the transfers between the accounts or you'll overstate that amount. But that's usually a fairly easy, not to time intensive calculation, and again that would work for a household as well in a business.

Once you know that number, for a service business, you want about a month and a half to two and a half months of cash in the bank that's considered prudent wise safe. I call this the sleep at night number, and I will often ask clients, what's your sleep at night number? Now, what I'm trying to do is get to how many days of cash? Sure they want, but they usually don't think of it like that.

They usually think of it as some function of their business. I want four payrolls, or I want to be able to operate. I want a year's worth of rent in the bank. So very often it's a function of some you know, I want my payroll plus my rent, I want my my I want to be able to replace my inventory.

Whatever it is is that their their their way is thinking, and then it's our job as the accountant to translate to okay, well that's this many dollars and this is that many days of cash in the bank. Now, why is the day of cash a really useful metric? It's useful because as the business changes in size, as it grows, we're still left with a metric that allows us to compare an apple to an apple. A business that's small and spends one thousand dollars a day has fifty thousand dollars in the bank has fifty days of cash.

A business that is ten times that. Everything's going to be ten times right, So the bank balance is going to be much much larger, but it's still fifty days of cash, and so that can be a really useful way for a business owner to get their arms around. What it should feel like. Now, if we add receivables, which we talked about earlier, and les making the assumption that receivables are being collected fairly, predictably and fairly regularly, that's usually about another thirty to.

Forty five days of cash. So for a lot of service owners, between their cash and their receivables, they're looking at anywhere from about a month and a half forty five days of cash to ninety days of cash. Three months of cash. That's the prudent amount operationally.

Now, there are some business owners who will want way more than that, usually an emotional. Component. I had a client who wanted a million dollars of cash in the bank, and a million dollars for his business was about ten months of cash. And as we discussed it, he began to what I realized was he was raised by two parents who had survived the Great depression barely.

And the household he grew up they never threw anything away. They were always afraid that the next can of beans wasn't going to be there next week. And so for him, the magic of a million dollars was he had formed this idea as a kid that well, you have a million dollars, you're never going to have to worry about where food is coming from. So I was able to demonstrate to him that operationally there were better things to do with some of that cash.

But I could never get him below about half a million. I was never going to get him to what would be operationally prudent for some other business owners. And that was because of because of the emotion that he had tied to it. And that was an example of once we got that out into the open and we were able to discuss it, we could temper, we could make better use of some of his resources, and I could have respect for I knew where to stop.

I knew where to stop. That's okay. If I poke it a little bit more, I'm getting to a sore spot in the sky. Well, that is such a great story.

It also speaks again so much to people's relationship with money. And how our decisions are made from an emotional place and not necessarily a rational place. So that was beautifully illustrated. And I love what you said about the days of cash.

I have honestly never heard that before, and that is so powerful because it just again makes it so understandable for people to see the value and just to you know, kind of just understand their business so much better. I really love that, and you're right. From a household budgeting standpoint, it's also really great. Yeah, people don't think to look at things on a daily basis numbers anyway, and I like to do that too.

When you you know, I help people to kind of envision what they would want in terms of an annual amount and then you know, we break it down into a monthly, weekly, and then daily amount because it's so different, especially if you're service based, to look at what it is, you know, what that annual goal looks like on a daily basis when you're seeing clients or whatever. So I really love the daily cash needs perspective. That's great. I really think everybody should do that so, and it does that would really help with the cash management piece when you're talking about, you know, putting the money away for whatever your needs are in that matter, What are we doing there?

I think that's it? And maybe you know, do you feel like maybe this is not part of what you do, but do you help people figure out? Okay, you're going to have half a million dollars sitting somewhere. Is it a city?

Is it earning some you know, some money? I mean what we do a couple of things. The first what we do not do is we're not personal financial planners. So if our client does not have.

A good financial planner, we will often work to connect them with someone who can do that. And similar to I think what our function is relative is the tax planner. If we do our job, well, we're going to create some really interesting scenarios for the financial planner to solve. Okay, we generally want advise our clients to keep whatever that sleep at night number is in the business, so anywhere from one to three months of cash.

If they are an anxious business owner, well we'll tell them to keep more of it. But a lot of our clients will have rolling CDs, so thirty sixty ninety day CDs, so they're earning a little bit of interest. They can tap that money fairly quickly if they need to tap it. But we do.

Create a threshold number and outside of that, listen, it's okay for that money to leave the business and that should be going to your financial planner, your second home. However it is you on the personal side of your of your ledger want to want to use it. I think the only exception to that is businesses that have a longer vision and are planning for growth. A business owner who may say, you know, I hope to acquire a business someday.

Then we'll say, well this money. You please take this money and put it out, but just know that there may come a time two years from now when you want to put some of that money back in. So if you keep it in a mutual fund, that's one thing. If you keep it in a boat, that's not going to be as liquid.

Okay, Well that's. Really the exception, I think, rather than the rule. Yeah. Yeah, And as you see businesses doing better and better, you know, they're your clients.

You are with them, holding their hand and helping them for a period of time. You know, it's very easy for business owners to just take that additional money that they're they're now getting and just reinvested in the business. Do you kind of look at that and help them to see that maybe, you know, we all know the business owners who don't pay themselves or don't pay themselves enough. I mean, are you are you talking to people about that as well?

Well? I definitely think that owner compensation. Owners should and need to be compensated for the value of their time, for the value of the risks that they're taking, for the value of the w two opportunities that they could have taken but didn't. And so.

I think there's a couple guidelines we give people there. One is that if they're in an escorp, we're typically corroborating the advice that they're getting from their tax repair and that the IRS expects them to take a reasonable salary. So if their company is doing ten million dollars and they're paying themselves twenty five thousand dollars as the CEO of that, that's probably not a reasonable. Salary for that expectation.

And there are all kinds of resources and tables and databases where a business owner can go to see what to get some ballpark ranges of what a reasonable salary is for what they do. That's one metric. I think the other is sort of what they I'm interested in what the business owner thinks about compensation, not only for themselves, but what they think about for their staff. So one business owner.

Had had difficulty realizing that the salesperson that they had employed was getting paid more than they were. They were no longer the highest paid person. And I said, well, that salesperson has had done really well, had had really not only knocked the ball, had knocked multiple balls out of the park. And I said, well, you do realize that you're only paying that person out of money that they helped generate, right, That's not if that money hadn't been generated, that compensation would not have triggered in.

And so that was an example for that business owner of sort of getting over their ego. And seeing it in a different light. So I think there's the again, to come back to themes we've been talking about, there's the emotional side of money. Some business owners need to be the highest paid person in the company and that's okay, and some people don't.

They should definitely not be the low, you know, on the lower end, in my opinion, and so some feel that everybody should be paid before them. I don't know if you are familiar with Mike Michael Lewitz's book Profit First, which a lot of our clients have read and I've read and I've used some of his techniques, but I think his particular recipe is too fussy and fastidious. But I think the main takeaway from his book, which I think is profoundly important, is that the business owner should be one of the first people paid in the business.

Yeah. Yeah, that's great, Walter. And there's so much interesting, you know, wisdom that you're bringing here. I see you as much of I mean, I see you as an accounting service provider, but also kind of a business coach in many ways.

Is that how you view yourself at all? Or well, I think it is for our particular kind of client. And I describe our clients as accidental entrepreneurs. That's one leavel I give them.

And I describe their businesses as teenagers. And so what I mean by that is a couple of things. The accidental preneur is. The type of people we work really well with are typically people who are very smart, extremely good at what they do, and they work very hard.

And because of that combination of characteristics, these people build businesses organically. They almost never have a written plan, They almost never have a budget, a forecast. They just start delivering services, whether it's law, architect building houses, cleaning houses. And because of their.

Hard work, their ethics, their charisma, you name it, they attract more business clients come back all those things, and so they're building a business organically. We're usually encountering them at a couple different places where they start to get overwhelmed and the business is consuming their life. There's no work life balance, and so a lot of that is educating them about how their business runs and what is normal and what is abnormal. So that is if we could use the word coach, we could use the word mentor we could use the word guide.

I sometimes feel like we're translators. Accounting. It literally has its own language, and if you if you don't speak that language, it's hard. It's hard.

It's hard to understand. It's not even just hard to understand the answers. It's hard to even ask, know what questions you need to answer ask. I often say, your business is a really interesting conversation partner.

It is awake twenty four to seven. So all those questions that are keeping the business owner up at night. The business is right there at two o'clock in the morning, ready to answer that question. It will answer it completely honesty.

It's incapable of lying. With the caveat that if all it has is garbage, it will answer in the most honest garbage you've ever heard, but it will still be garbage. And unlike your children, it's not going to roll its eyes and engage in sarcasm. It's not going to.

Give you lip or feedback, you know, but it has. The other main caveat is that all these questions that you might want to ask of your business, it's going to answer in its language. Its language is numbers. So if you don't understand numbers, that's a conversation you cannot participate in.

And so that's what we do. We help our clients participate in that conversation. Once they've participated, and once they know it, then we can start to ask even more interesting questions. Because I think the most common thing I discover is that once we get a business owner financially literate, the questions don't stop.

The questions just become more nuanced or sophisticated, more far reaching, more long, more strategic, and Basically what's happened there is that this person who was an architect or a homebuilder has now gained those skills that somebody who went and got an MBA or someone who's worked in a fortune one thousand company up through the management level, they've now gained some. Of those that awareness, that ability to. Look at their business through its numbers and discern what the business is telling them.

Yeah, yeah, that's great, Walter, Yeah, I love this, And I want to just touch on this before we go here. When you brought up your business being a teenager, we had an interesting conversation about this in the different phases of business, and sometimes I don't think business owners are aware that their business is growing like a kid might and has the different phases. And the reason I call a lot of our clients I call their business teenagers is that like a teenager, some components of the business are very mature and fully developed, and other components of the business are or lack that maturity.

Usually, if the businesses lasted a while, usually the operations part, whatever it is they do, is fairly mature. They can they're pretty good at building houses or cleaning houses, or producing estates, and trust whatever the services. They can do that pretty consistently. The other thing that's usually pretty mature is the business owner, either intentionally someone's helped them or most often accidentally, they know how to recognize their customer.

So when an opportunity crosses their path, experience has taught them, oh, that's an opportunity. They figured out how to close that opportunity. Again. Sometimes they've had teaching in that, and but most often they've just sort of figured it all out.

But other parts of the business are very immature. There's usually no HR department. If sales. If they know how to close sales, they're probably it's the business owners the only person in sales.

There's no sales department, they're just the business owner. There's probably no marketing accounting. If they're talking to us, accounting is immature. Now.

The problem that I see is that a lot of business owners, like the woman I talked about earlier in the conversation who had been to the networking group and felt like everyone else had figured it out, except she hadn't. These business owners get imposter syndrome because they think that they're supposed to know all this stuff, and I say, well, your business is a teenager. Right. We don't blame a teenager because they have acne.

We just say that's part of being a teenager. Right. So your business is growing, Let's acknowledge the parts that are doing well and are mature. Let's figure out the parts that are immature and that need to be brought up to equal strength.

Yeah, way, I love My business is still a teenager. My business is twenty something years old, and there's still parts of my business that are underdeveloped. So I think one of the things that makes our firm work really well with these kinds of clients is, other than understanding numbers, we are walking or have walked, many of the same paths. That they've walked.

Thank you so much. I think this has been one of the more interesting accounting discussions we've had, and that's to your credit. Thank you. And I want, if you will, to tell the audience how to get in touch with you.

You do work with people all over the country remotely, so. We work remotely. Our website is normanproft dot com, Norman n r M A n PROF First Letters of Professional Owner Professional Services. I can be found on LinkedIn and uh, you know, there's probably the two easiest ways to find.

Us, okay, And if people are listening thinking, oh, I would like to have an accountant like you, or I need, you know, bookkeeping services that sound like what you're describing. Can they just call you? Email call, There's a there's a contact us forum on the website. Uh, you can.

I'm pretty consistently on LinkedIn. You can just message me on LinkedIn and initiate a conversation that way. I have been seeing some interesting clips of you on Instagram as well, describing a variety of accounting concepts, and I think you do a great jop talking about things that people you know. I just heard one on deferred revenue.

How many people really think about that or know what that is? So yeah, great little little snippets of good accounting information. So okay, Well, Walter, I so appreciate you being here and spending your valuable time with us today. And I think people can really get a lot out of the show.

And I just boy, I really love the Day of Cash. That's my takeaway from the show, but I'm sure there were many many other interesting ones that people have taken away. So thank you so much for your time conversation, and thank you audience for listening to the Money and New show. We so appreciate you and we would love it if you would share this show with some of your business owner friends.

I think they would really benefit from this, and also if you would subscribe like review the show, that always helps us to continue to bring wonderful shows to you. You can find us on all the podcast platforms, on the Limit, Free Life YouTube channel, and other few other variety of places, but those are the main ones. So thank you so much and we'll see you next week.