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Accounting Hotseat & Discussion

I just want to come up with what I want to do is show Show this next thing which is called the Bleed. So why don't you grab grab the seat there is Okay if we go over your numbers. Yeah, sure. I guess so. No, no, we're gonna do is pretty. Oh, and what you were saying? My number was big, and I mean, I was so happy. And then when it came down to the reality was nothing. It was just painful right Today has depression. Yeah, very. Really. Yeah. With problem with business is that it's sucking its living off of us. And until we flip it, enforce it to do this, it'll be it'll be high moments for a day in middle moments. For most of time, I actually can go to any entrepreneur and say Has business going. They look at their bank account, and either they'll be thrilled, which is rare, and usually say it sucks. I'm dying that this gets rid of all that stuff, so all right, so let's go through your numbers. Actually, you've been so kind of Hold this for me. Is the one that kind of re write this down. ...

Just want people to see that. So you're saying on a monthly basis, your goal, Your monthly goal is you want to get well, do from profit first. So you want to do $214 in profit? You didn't say this. I'm saying this is a bonus because you own a business. You deserve this. Use, uh, in taxes you're going to reserve 642 and taxes. You told me to cover your living expenses. You need $1500 in personal pay. And then I'm telling you that you have 1928 left to cover expenses. And that total operation is 4285. Okay. Thank you. Now, what I want to do is go through floor here. This is our goal. Now we have to do the discussion of reality. That's where the challenge comes in. So how much money do you make a month right now? Most months. Mm. $500. $5. Total revenue. Yeah, Most months. Most months. What? It's pretty infrequent. And then on the occasional or rare month, I could get $10,000 or $20,000. So okay, lets annualized it so we can look at an average. What was how much money you make last year entirely in your business, would you say, um, 50,000. 50. 50,000. So 50,000. That's perfect. Is divided by 12. Is 4000 1 60 Okay, okay. So you're making now. This is a guess. We don't know, but you're making 4001. 60. Um, how much are you paying yourself? Masked at the time? Nothing like I don't I don't celebrate anything. I never do nothing profit. But you're paying bills somehow. Yeah, barely. How much you need them late. Okay. I pay them on credit cards or I take cash advances necessary. Or call clients and ask them. Come on, pay. Please pay. Yeah, I nothing embarrassment. That's quite normal. And I can see instantly. Is you need at least this You're making too little to even support it, So that's normal. So let's say you're paying yourself. I mean, do you have expenses? 12 18,000 year expenses? More than that? Or is that right? I guess 18,000. So then you're paying yourself. You're still paying yourself 1500 So that means you're you're stealing money from yourself elsewhere. You take no profit. Uh, you pay your taxes? Not yet. Dont pay type chain my Texas, but not yet. Okay, you haven't played like that. Some of the estimates have come up and you haven't paid him. Also normal. Like my bills. You have to pay it when you can and can't. That's what I'll do. And so, usually do you pay taxes? April 15th 1 or do is like at the very latest that can't the last minute your normal, your normal And then how much you paying expenses? It must be more than it's the difference. Yeah, and expenses air way up and down to Okay. Okay. So 2500 just downright. Get your pain month. I feel like I feel like a lot of me, But here here's what's this powerful? Before you had this part, the kind looked OK, but now you're comparison. It's full. There's actually have you ever seen a go back to weight loss commercial years? These commercials where they come on, they're like, Oh, here's the new diet product and you see the before and after photo. I want you something. Next time you see it frees the screen and take a piece of cardboard and coverages, either picture and then look at the other one. When you look at pictures individually, you'll see actually very little difference. It's hard to see it when you remove the cardboard and you look at to simultaneously. You see the difference in our businesses what Debbie has been doing. Like all of us, we're all guilty of this. Haven't really this side I got. I got $4000 a month coming in this. How much going out? I'm just making it. I hate it, but just making it. When you look at both simultaneously, it's like Oh, God, when you compare the two and you see what you need to dio So we need to cut expenses. There's no question about it. Uh, you're taking enough and we're not devoting the proper attack and you're going cough by taxes. The difference between these points it's called the bleed, and she's bleeding money in three spots. She's not taking a profit. She's not reserving, preparing for taxes, and she's spending too many expenses. So what we do now is we go home or right after the session or during our lunch break. Maybe during our lunch break, to sit down and say, How are we gonna cut expenses? They have to be that this point or less. Then once we figure it, we can get these two up if you want to make more income. Um, and by the way, we also it is a bleed here. You're not making enough income. You're actually not doing too bad. You can You can achieve what? Your objectives are currently almost on your current income. We have increased sales by about 150 bucks a month. 1000 or 2000 bucks more a year. And that would make a difference for you. As our business progresses, these numbers will change what they reduce evaluation every quarter. There's a quarterly plan again. Be doing this. Evaluate your business. But once you do this profit first accounting, it's instantly clear. We got way too many expenses. We've got to cut expenses here by about $1000 that's going to support everything else. You want to start moving stuff here, so we're kind of Spence is. The second thing is when you go home tonight or when you're next online? I asked. He said, These accounts on your bank and I want you to start moving stuff over and to start with this low reserve 1% 1%. Even though we haven't got a single expense yet, this will start getting us in the habit. And once a habit becomes ingrained in us, everything's transformational. Yeah, from Amy tw in regards to these separate accounts her bank account actually, her bank charges her for each separate account. They charged fees, so she's asking if you know, maybe it's another banker. Maybe it's a way around these fees. Eso first of all, would negotiate. You can negotiate with any back. If you feel you're obligated toe a bank and you want stay with them. You can negotiate, we believe negotiate anything. If you've got a service charges in your bank, call your back and say, Listen to leave the bank because you're charging me this and many banks will acquiesce and take it back. Secondly, I have found this is just gonna be careful about bias here, But I love community, local banks. I love when I can go and meet the banker and shake his or her hand and say, How you doing? Here's my situation. Uh, I had a fraudulent check sent to me. Um, for a deposit, actually, in projects is an erroneous check that was sent to me as a deposit I deposited with a major bank. But I won't say their name. I got flagged. I just the same situation or a similar situation have with a community bank. They called me and said, We gotta wear situation going on this check and we stored on the phone. No problems. That's often the difference I find between community banks and large conglomerates. That's not true. All large conglomerates. Very tactful about how I say that. Is that going to taxes? expects. Okay, but sales taxes and expects. Would would you make another account to put all the sales tax? Yeah, I would. You sell a lot of products? You would. Yeah. I would set a separate account for that because recognize that's not even revenue. It's a There's an additional fee. We charge the clients in New Jersey at 7%. And by law, that money, when we collect it goes right to the right to the state, but it's on top of our revenue. So, yes, I would have a separate account for so intense when you deposit everything, you first take out your sales tax. I'm assuming because you collected it and it doesn't even count the deposit. That's kind of what's called flow through. A client gave you money to pay tax charge, in fact, and the law is that goes right to the government. So you treated that way. It goes right into a sales tax account and then the Net. Another net. But say he's charged $100 for a picture and you collected $107 because there's tax. The $7 going to your tax count on the $100 goes through this distribution. You still put it into the same big plated. Well, initially, the first day, everything's goes into one account, but you would have an additional sales. That's a great question. Thank you. Actually, just hit the question, is gonna ask, but I would always sit back down, See? Oh, thank you. Like which account do you recommend putting that initial deposit into, obviously minute the profit first cause that's the hidden account. That's really hard to get into, but right. So I have a main checking account. I almost want to put my own checking, but then the confidence you can't do it. I know you. Just your main checking account. Okay, so the one that you write checks from, that's the count where all the deposits go. Okay? That's probably the our operations, everyone's operations. Okay. And the nice thing to is, as money starts accumulating in there over the two week period between the 10th and 24th I Sometimes I go into my bank account, I check. I suspect we all do. How much money is in there? I then run the quick math. 45%. Whatever. Numbers in their most by by 45%. That's basically roughly the number I have available for expenses. So the great way to do instant cut checks you do a simple spreadsheet to Yeah, Maybe some clarification might be helpful here because J chic la Hope I got that right is saying eso do you have to have a profit margin higher than 60% to make this work? Otherwise, operations might be too small, perhaps, and some products only have a 50% profit margin, so that would not work. So he's talking about what a gross profit margin and the answer is absolutely right in so many people. He's saying. He's saying, if 45 those expenses, that means you have 55% assume it's we means, what 16 55% left available for this. Some people sell their products with such tight margins that they can't supporting their business. That is the lead indicator that you gotta change your offering. You've got to be able to get more price. One technique of you sell a product on and saying in a very competitive market, maybe WalMart your competitors and trying to make you on a 15% margin. You can do what's called an additive when it is to say you sell of the boots. Just really been picking on other lot. WalMart $100. The only way you think you can sell it for $ But if you didn't additive, maybe you create a video of different ways to clean your Uggs and to maintain your Uggs in different ways to put jewelry and stuff on. Like my daughter dies now you've an additive and say We don't sell our boots. We sell dogs with the use kit and now you can dictate a higher price. There's a little trick you can you album and my cost of goods is, let's say, $200 for the album. You're saying so markups should be 65%. So you're exactly so you're saying Cost of goods, which I mean, I'm just going to say, Yeah, now you have other caught cost of goods Typically would mean the album physically self and the time spent. But you also have rent. You have your photo equipment. So I'm just going to say cost of goods is all that accumulated. Okay, if it's if it's 200 bucks, I know, but I run in the math here. You gotta be selling for roughly for right, because that would cover these other other plates. Most of us will say this is the logic most of us use say it cost me $200 to make this album on a charge. 2 50 I'll make 50 bucks, and I'm telling that's not close enough. And that's the argument, by the way, in her head we were talking yesterday of the biggest arguer forgiving your price towns down Arguer is you Is arguer a word that doesn't tell your word? But the person that's really going like your prices are too high is Yep. I mean to low is you were too high. We got adjust the price up, we got a and I'm getting all confused myself. But you guys just price up. So if you're charging, if your costs are 200 bucks, this is telling as you guys sell for 50 and you find a way to justify that. If you don't think you can justify it, you gotta find a way to justify Yeah, you know, in my jewelry business, we started out when we were pricing, we would double the cost of goods sold. But what we realized was that we weren't taking into the account the time that we were spending designing and may and producing the jewelry. So we went back and we'd we determined that three times costs of goods sold was mawr was better was a better retail price for us because it covered the cost of our time, plus the actual So that's a mistake that not a mistake, but that's something that people do a lot. They just look at their actual costs. Well, I spent $5 on that pumpkin. I'm going to sell it for 10 but you don't take into account that you had to drive, you know, 10 miles to get it and you use gas times. So you have Teoh. If you come up with the right formula, it works. So how much do you sell an album? Cost you $200. How much are you selling it for? 800? That's that's great. Yes, Does the appropriate models are you selling other stuff where you don't have that mark up before? But we've reworked our pricing and I go sound yesterday. Since we have reworked it, people value the product more, and things were selling better. Actually, because of it, right, that's the perfect markup. When I say you have to go to 4 that's the minimum you got to go to. If you can go to 100 or 1000 you should, because people will appreciate it more and there's more profitability. And this is this is where this is a nice low target if you could get above this. Great. Great. You know, some businesses that I know. You said your business is still kind of struggling. Check, check. I suspect you're taking more than 35% of partner pay. That's often a trap. So if you're making, how much do you make in the business every month. How close to 5000? 5000. And how much were you taking on? Peih not very much. All right. Or actually, maybe weird. I don't know. I got a look at this. I'm not sure. Okay. Yeah, that's normal, Teoh. But 5000. This is telling us between the two partners, you and your husband, it's about $1700. You can take a month. And if you're taking more than that, you're putting the squeeze on the business. So and that often happens that we take more out here way crushed down profit. We don't pay taxes, we delay, we borrow from credit cards. And I think I'm putting too much. We actually for taxes? Yeah. How much? Weight of talk. 30%. Straight off the top. Yeah, It sounds like a reserving way too much. Consult with your counting. You know legal, professional, but controlled your account. But that sounds like way too much. Way too much. Congratulations. Just found money. Yeah, maybe her husband can come with you. Go. Other questions. Online community. And my situation is a little odd, because I do. Consignment. Yes. And right now I have a 50 50 with my client. Mm. That 50 is too low for me. I'm not making it on that. Interesting. And yet there really aren't any other competitors in my field because people just don't want to do this job. There's no competitors. So want change from 50 50 to 40 60. I think I need to, But its that I havent wanted to break that. I'm my own worst enemy. Who would pay that? Well, they probably would. But everybody around me is telling me to do it. Yeah, or could you produce in different way because there is human emotion. If I give you my ring and say, you know, sells $400 and you say, Well, take 60 year, get 40. I think that's my ring. So emotion plays in. But you can also get that money from me by saying I haven't afia base fee of 500 bucks and I'll sell your items for a month and they're getting the margin. Then we split 50 50. There's another way of getting that percentage without the emotional. That's good in any other questions coming in. And one that I think since we're talking about small businesses, is there a time of year? That is a better time to start a business. Yes, start a business or starting this started business. Start doing this when it comes to start doing this. The best time of year is today is always today. Start doing this immediately again. These percentages are target percentages. With the profit, it's I'm okay. If you start 1% taxes, you're gonna have to pay him anyway. Try to go 15% right away. Your partner pay inevitably work. We're paying ourselves too much, and we're stealing from credit cards or something like that. You're gonna have to adjust your lifestyle to support that. That's a tough one to swallow, but you're in 1/ so start doing that once 1/4. If you start lower than these numbers once 1/4 you readjust and you try to up or scooped up the number still, but bigger as your business grows in size, the distribution thes air targets going. These aren't perfect, but these are the targets we go for. As your business grows in size, the targets change a little bit. If you can squeeze more profit out of it, take it. Go for. And you know, I would love for someone calling back and say 5%. I'm taking 12% 15% on a start up and actually working confidence taking 17% and their right to 50 now. Um, because he's been doing this for 34 years now, cutting your operation cooperation costs. Oh, yeah, There's another thing I want to show you because someone mentioned this earlier. Yeah, so he's cutting operation costs is going more efficiently. He's reducing variability as business, and we talked about running on automatic. We're gonna dig into this a lot, but basically, this is the premise of the 80 2020% of your clients are yielding 80% of your revenue. That's 80 up there, 20% your clients dealing a percent revenue. 80% clients, as Christine Kirsten pointed out to us, make 20% of revenue right. She's got Amazon and the baby and down here, all the different clients. The other thing someone said I think was online is the product distribution. Well, the paradas rule plays here, too. 20% of your products make most of your profit. I suspect here some without. We didn't ask this about your business. But of all the different products you have there, certain ones that are more popular than others, right? And it's problems that that make the majority of profit and revenue for you, Right? Right. So it is kind of problematic, like people then will say, Oh, but you don't have very many like much variety right people by these 34 but they want to see 15 options. So, yeah, here's a way around that. A little trick for you. You can even use Photoshopped to do this. And I did it with another business of mine. We made by 50 variations the problem with different designs and stuff, but 30 of them we didn't really have. So he's listed out of stock, right? And so we saw a variety, although they currently have stock. But here this one's really popular. We just did a run of these and people like, thrilled with a variety. Yet we stayed focused. Alright, building on that, though there's what's called. I call the parade across over a portion of your best clients are buying some price. There aren't making you any money and a portion of your bad clients, ones that aren't generate much money occasionally by your best, your best price that make the most money. And in a certain circumstances, your best clients are buying your best products. And in certain circumstances, your worst clients me they don't generate revenue are buying your worst products when it comes to pruning. You want to get rid of these people first, right? It's people that are making any money for you there. Big distraction and a bicep doesn't make money in the first place. You get rid of them, then we want start focusing on these best clients and seeing if we can move them to buy more, more of a better products. Using a technique like that is shared with you. These bad clients. We want to see if we can move them up well, can they start buying mawr? We set spying standards for them If you don't buy 20 units a year, unfortunately could be able to serve you anymore. We try to move them up because they're buying good products, and that's how you address that and you focus up here. That's how you increase overall cash flow and revenue into your business, and then that will support this more and more just kind of conclusion. This is the system that will enforce everything you learned up to this point pruning your business, focusing on your sweet spot. This will force you to start playing those cards. So I implore on you, all of us watching online, all of us. Today we go home, we step four accounts with our bank, the limb charge fees that four counts of your banks and start doing distribution like this is a game changer for every business I've uses for. You know, Mike, it's been fun watching on the chat rooms. Everybody's really collaborating and helping each other, and they're asking while you're answering questions, they're also helped, and I wanted to give you a chance to talk about your the your website and what we have to get on, yeah, history dot com. Um, actually, I have about articles on my own site about this. So if you want to go Mike McCalla, what's dot com? You can check this out, but go to Mike McCalla with dot com. Backslash creativelive. I have free resource. Is there specifically for this group? I the notes from this entire presentation that's gonna be emailed to you, plus some extra bonus videos I prepared just for this group and you get in my newsletter. So I'll send you the latest tips as I come out with him as I make revisions and additions to this whole system. But I came up with, and as I write my book on it, you'll be the first to know. So that's what you do. Operation. I ive offline and make sure I talked about the collaboration thinks that thanks for the trigger their forgot. We also have a community. If you sign up it. Mike mcalary dot com slash creativelive. I'll daily access to this private community that Donna Vice have set up called the Entrepreneurs Enclave. We run in Facebook. It's invite only we're making available to everyone here in the studio audience and every online, and we have these exact discussions that are happening online here, on on there, talking about this and all these different things. It's a really supportive community. No standing selling allowed. It's all conversation and support. Yeah, yes. Spammers removed? Yes. So check it out side now for sure.