How to get Started


Manage Your Money for Maximum Profit


Lesson Info

How to get Started

All right, eh? So jamal are you with us harry are hey mike how you doing? Good. How you doing, wade? You quad monitors back there I do that that's awesome what you do is four monitors like that interceding with four monsters waste a paperless okay, good good. So just cause no one here knows you yet uh tell us what about you? I know you do accounting uh you're having people the land area just give us a little background I'm gonna dig into some questions with you, okay? We were in the accounting industry with client helping them I'm getting a little uh are you cutting out? I'm getting out okay? We can hear you pretty well so we just keep going and that works so in short, we work with small businesses on um managing profit cash uh, tax planning uh, general accounting from your experience when it comes tio cutting cost that's what we're focusing on today where did people spend with the businesses you've consulted worked with where does most their money go? What kind expenses are the incurr...

ing I would say is payroll and overhead payroll overhead? What what's overhead this I'm just unclear with what that means? Well, that would be everything including rent um you ever in payroll all the expenses that would that they incur every month telephone bills, utilities, things of that nature that aren't related tio the classical sold okay, so when you help businesses get kind of control of their cash, when when you try to help business to become more profitable, how do you dress things like payroll and rent what's the process to get businesses taking care of this stuff? First, that would be to assess where they are today and and look at the industry and see what the industries that and then come up with a thirty day planned on getting them to try and close the gap between where they are today and where the industry is. And so it was a happy when our live audience here, we want to know where our industries at how do you, uh, how do you know where your industries at like, how do I wouldn't even know how to get started? Like where's, my industry? Okay, most accountant should have access to a benchmark in tool that can tell them where they are regionally and where they are nationally. Okay, so what was that benchmarking, too? Because I don't know, I mean, quiz go, teo, are any accountant and say, hey, what's what's the benchmarking tool? Or we use the tool where your partner with a company called profit sets out of north carolina, okay? And they're one of the biggest, I guess, gatherer that data okay? And can anyone get so my account may not have profit sense? Could I go on profit sense and analyze my industry or is there other ways to do it too? Hey, analyze my industry. Yes, but the the assessment would be as good as the data. So, uh, the answer can any account get the information to do that? Yes, there is a free tool out there that protestants does make available to accounts. Okay, so I guess so. So what? Teo? Kind of right of companies and his expenses. The first thing you do is you ve sti where you stand today, you see where the other companies that are very healthy and industry or doing then what do you do then we put together a plan. Um and it might be, you know, putting together a tax plan or cut down expenses as faras eliminate employees. Um a lot of businesses don't have budgets put in place, so we try and assist with budgets together. Okay? So and you told me that you went to the biggest things that we I'm hearing over and over again payroll, payroll, payroll and rent. How does your taxes taxes and you got it to cut taxes down, but aren't taxes like unnecessary evil isn't if your business is really profitable, you're going tohave attacks, consequence yes, but there's a lot of things you should consider and like what for example if you have your business organized as a proprietor you paid our self employment tax on your entire profits so if your profits for the year one hundred thousand dollars for example right you're gonna pay fifteen thousand deranged dollars and some employment tax okay then you're gonna pay your income tax which would be probably about fifteen percent so for a small business owner earning one hundred thousand dollars and their bottom money yeah immediately nearly thirty one thousand of that's going to go to the government another five or six percent of that could go to the state okay, so I'm here to fix attack if you want to cut your tax liabilities that your structure you can change the structure of your business to reduce your tax consequences correct. Okay, what about payroll? I got your tell me most people have too much payroll going on what how do you handle that? And this is becoming a common theme how do you handle that? Well me personally I would start with the salary study you see what the owners being paid for the company and see what the employees in the position to keep the key employees what they're being paid and compare that to what the rest of the industry is doing. Yeah, you know, one thing I've heard and on a touchdown in the later segment is you know you get your best employees the top performers to retain people you've got to pay him with the industry demands plus some but at the same time a top performer can deliver the same amount of work is three average folks so so with his payroll study what I'm hearing is you're you're finding out what your best employees should be paid but perhaps you may have to lay off some folk stir that aren't top performers or restructuring with base salary in a commission based on there contributions to process okay so are you gonna restructure salary and then rent what how do you handle rent like you said get rid of it okay how do you say you work without people in your time get rid of their space right there you kidding me like can you do really do that more and more businesses the technology are going virtual yeah okay uh like today we're having a conversation with skype ah a lot of our business is done that way either stipe or going meeting but in a virtual environment where we don't have a large overhead and thus the cost to our employees are to our customers is cut and then when you one last thing I wanna ask you about is this going through this experience with customers so I know you've worked with a lot of customers you go through this baseline analysis you say here's we should be how long to take people to adjust to this how long it's taken to fix their businesses and get him back on track the small of the businesses they tend to go faster okay but we have a a thirty day use which consists of six five day work weeks okay um so the biz that's smaller and willing to listen and act faster can turn this around in three days interesting or west you can see results that quickly and yeah I hear you loud and clear smaller businesses are more agile and canada justice more quickly good. All right, jamal hey, man, it was a pleasure connecting with you females a profit first professional to based out of atlanta so good to see you. Thank you. All right, take care. Yeah, so it is it it's interesting and what I wanted to share with having guests come in jeff here is just sharing that there's common areas that business is really struggle is a business starts growing payroll rent and so forth these air common easy areas that we can we can tackle him push down who else wants coming for hot? See, I want to do one more before we wrap up the day uh okay here's in europe she saved you, she saved your way. Do you have a question I want to ask from zewdie saying zewdie makes their own clothing and they're bookkeepers said that they cannot count the fabric the labor except his colleagues until the garments are sold now is that correct on an accounting basis yes but on a cash basis you could meaning in your accounting system I'm sorry in your bank accounts you gonna count it immediately so at the end of the year you're counting will go do the accounting and track everything down your income statements submitted to the government for tax purposes but cash in the accounts you gonna count immediately the second deposit comes in you can allocate that percentage to cover the cost of materials okay thank you for that. Fine you're okay who so we were thirteen thousand was our revenue we could do fifteen that we want to fifteen flee right it's just a round number it's a nice round number like that number okay, so fifteen thousands that's put you in category you're costs a good sold well he says thirteen twelve ten okay we don't charge enough yes I'm going to show you something pretty cool that happens here so five thousand dollars is your real revenue that's what this number is so profit is in this charts is five percent goes to profit okay owners pay fifteen percent for tax and thirty percent here okay, this is where we're targeting um how much did you take currently yeah do I take a one hundred percent goes to operating expenses so you're paying I get zero ever you never take anything ever was a dollar says sorry paint doesn't know a thing intact should we lose money so I don't ever have taxes profit zero in five thousand dollars basically every year goes to operate expense okay, um let me tell you something this we're pretty normal you're pretty typical I hate to say it I'll tell you one blessing to a small but very small business that does this isn't nearly stressful as I know some large businesses that experienced this I know I have a friend uh at a five million dollars a year and the exact same numbers but he's got thirty employees and o are going on and the stress that comes with yeah oh my god! Because that's stressful to me of course is stressful. Of course this is stressful but the nice thing is the earlier you start this process of doing this, we're going to start clean this up so the first thing is starting q one are starting immediately we want to do um we want to do one percent since your profit account. Um your owners pay one percent and your tax one percent and just cut this down to twenty seven percent now here's the deal this is so insignificant ninety seven percent ninety seven percent of what's gonna happen this's literally fifty dollars right? This is fifty dollars to you're going to pay fifty dollars for an entire year yeah, the thing is this is only for the first quarter in a business that's that's this dramatically off we're going to do uh I want to see if we can move these numbers up much faster because we want to have you five percent fifty percent fifteen percent if the percentage is so small that they're gonna have an insignificant dollar impact the other rule is to start at the halfway point instead of going to one percent do the halfway point we started two and a half percent allocated here all right here could we say sent your pay to twenty five percent and can we set this to seven and a half percent and can we say you're operating fences to fifteen percent but before you do this you're gonna have to have a heart congress they're hard uh analysis around this five thousand bucks where you spending five thousand dollars right now if where's this go it goes to credit card that it goes to your serving debt goes teo the stuff that we need because it mostly like r park hogs I guess wilcox you told he's up here I know but that we don't have that separate account to where we put the money aside when we get the sale or whatever so that it goes into just are big account so when we have the money then we pay it and then when we don't then it goes more on the credit card and then so were in that never ending cycle and so it goes to that it goes teo every once in a great while we'll do like an ad and like a magazine um little ones like, you know, sixty five dollars you know, you know those recalled charity uh yeah don't do that well, I mean they're like they like the industry kind that go to stores and the like, you know, it's called I know charity don't do e said everyone so it was called you wanna punch me here? No, no way technically be considered marketing question is if it's not measurable uh you may not be a hand results and chances are you're not right usually marketing from my experiences you have to be in a constant area constantly it's consistently before you get return other thing though, is to key marketing if you don't know if you're getting returned, chances are you're not and then you're just throwing money out the window and that's very much brand marketing anyway it's, like you're building your brain, right? But if you're only doing it once in a while that's not really right right and that same one he got like the same money could be don't defend that same money is sixty five bucks could be going a little more into a design and ultimately the best marketing of a product is the product itself so you go now you know which is a three month flanking only altogether anyway it doesn't matter I I know that's one of those things too with like whether it comes with the discipline right you're like oh but I need this but oh do I really and that's kind of so here's what I want todo do with you can we do a homework assignment tonight yes okay give me one and then I will only give you one I'll give you one I want to know from your number's this five thousand bucks what this is for and I want to come back and say how you get us half that amount twenty five hundreds that cool so why are you spending five thousand bucks I always have the nose tomorrow we talk with you and then we need to get down to twenty five hundred bucks but here's the cool that I want to show you if you have a lot of cost a good sold manufacturers do retail stores when you adjust that costs a good soldier nothing shows three things at once don't try you wanna hold that you know you don't really need this play just okay maybe if you can that's beautiful van if you can uh cut your cost of goods sold you're gonna see the benefits significant so five percent of five thousand would be two hundred fifty bucks. Uh, profit. If we caught the custom goods cost of goods sold down just by, say, two thousand dollars and has eight thousand dollars, right? So now you're have instead of five thousand seven thousand dollars coming into your business, five percent of that is now three hundred fifty dollars of your profit. So just by cutting your cossiga sold by, uh, another ten, twenty percent or so, you have a much more than twenty percent leap here. Here, you cut it by twenty percent, but your your profit went up from two fifty three fifty, which is like a forty percent leep sow. The interesting thing with math is if you can cut costs a good soul, it skyrockets profitability, right? So I'm not gonna give you second homework assignment. I know unless you want it. No, but if you own a manufacturing business, if you subcontract workers out and so forth, if you have a significant cost, a good soul that's affecting your real revenue, one of the big questions is how do we cut that cost a good soul? Because the down line effect is huge, you know how to do it? I would just have to do it, and it would be hard because everybody cries when I d'oh well so what is it I e I would have tio cut down on the number of styles that I do because right now we have like fifteen different fabric patterns and so if I cut it down to six seven whatever then I would have I would be buying mohr one kind of fabric and so are manufacturer can make more off of each one than they do now because when it's a short bolt than they can't make money so we waste more fabric but then when I do that the stores complain because they're like but everybody woods you know, maur patterns and all that kind of stuff so that what's so is that really true though they say but they speak the truth I don't know they're the ones that are selling it well you're you're the ones they're the ones they buy it from you they buy all of them equally no so then they don't buy ammo equally they buys one designed more than by another design but then a different store will buy all of this one other design and not the other ones are saying stores better than other stores for us clients look them yeah think paradas principle we talked about it last time we hung out here creative life um on your am channel focus on your best so it's the twenty rolls they wouldn't hear familiar with the twenty eighty rule okay so anyone out there who's not wear you there you're twenty eight rules this that twenty percent of your products are yielding a percent of your revenue and that's not always true but it's generally true and eighty percent of your prize only generate twenty percent of revenue same thing as client with truth clients twenty percent declines your best clients or giving you eighty percent of revenue and the majority or clients actually give you the least so there's a thing called the prado overlapping I'm not dig into it in our next segment andan the next session but this is basically it if this is your clients, this is your products twenty percent of your clients are generating eighty the vast majority of revenue in twenty percent your products when we find your best clients buying your best products these the clients we want to focus on the most and I'll go into deep detail tomorrow so it sounds like you know the answer you're just kau tau ing to some of the clients down here and say we want we want these products you're saying ok but it's almost putting you out of business it's not right it's not it's just hard of course almost yeah the concepts he's like this is hard is how is hard as hell but you have three thousand people right now they're listening to you and supporting you and making this change it's the discipline of saying no. And when we run the numbers where I threw in the floor now when we run the numbers it's your business yelling at you, saying we have no profit, kirsten, I'm not even paying you your businesses shaking you saying no more of this b s no more of this b s we got to make a change here. You can make this change so you have one homework assignment, but maybe something bigger. I wanted to look at that lower five thousand and tell me how what it is and I want to be unkind, but I also want you to look at the cost of goods, sold a top and tell me if you had a drop products, what would be the products that you drop? Is that cool? And if you do that, we'll talk tomorrow. And you you might start healing your business tomorrow and then, hey, a fifteen thousand dollar business that takes home in profit and stuff for you. Seventy thousand dollars a year for you does awesome like your family's going to disney sister well, so you have a responsibility to do this? Yes. And I'm done, thank you.

Class Description

Ready to take full control of your business’s financial health? Join Mike Michalowicz, author of The Pumpkin Plan, The Toilet Paper Entrepreneur and his newest book Profit First, for an immersion into understanding the shockingly simple principles behind financial management and leveraging it to grow your business.

In this course, you’ll learn the core four principles of financial health and how to use them to create a profitable "rhythm" for your company. You’ll also learn about the psychology of managing your debt, whether you’re struggling with credit card debt, loans, or personal guarantees. Mike will also cover ways to bring new money into your business through cost-cutting, renegotiating, finding lost revenue opportunities, and much more.

By the end of this course, you will have escaped the panic-driven cycle of operating check-to-check and you’ll have a foolproof way of ensuring that your business becomes permanently profitable... from the very first day that you watch this course.


Ella Heath Photography

Wonderful class!! Not only is the content very impactful and life-changing but Mike's funny character made the class very entertaining - the marker on the forehead story made my husband and me laugh to tears!! We are implementing Profit First right away. Thank you CL for hosting such an amazing class.