Latest / The SmallBizChat with Melinda Emerson / Uncomplicate Your Financials with Ellen Rohr

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Uncomplicate Your Financials with Ellen Rohr · The SmallBizChat with Melinda Emerson

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  3, 10, 1, 0, ignition, liftoff,
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  Ending small business failure.
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  Welcome to the Small Biz Chat podcast with a number 1 small business expert Melinda Emerson.
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  Belinda's goal is to end small business failure, and she'll give you the information
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  you need to succeed and live the life you've dream of.
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  Now here's the small biz lady herself.
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  Melinda Emerson.
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  Hi, everybody.
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  I'm Melinda Emerson.
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  This small biz lady, America's number one small business expert.
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  Now the whole mission of small business chat is to end small business barrier.
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  We're all about helping people get peer to peer advice in a comfortable setting when nobody
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  goes through but asking a question on small risk chat.
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  The reason why we do this is because we wanna give you guys an up close and personal access
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  to some of the top small business experts in the country.
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  And tonight's show is absolutely no exception.
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  And we're really excited tonight because tonight's show is being sponsored by MixedMax.
• 1:08
  And let me tell you a little bit about MixedMax.
• 1:11
  It is a marketing automation tool that works on top of Gmail.
• 1:16
  So if you're like me, use Google Calendar, use Google Voice and use Gmail for your business,
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  mixmax goes right on top of it.
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  It shows you when people open your emails, it lets you email people your availability.
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  So you don't do that all back and forth thing, you know, trying to tell people when you can
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  meet with them.
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  And it's a great way for you to automate emails to fill out.
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  So check out mixmax.com.
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  They've got a free trial, check it out, and that's mix max.com.
• 1:46
  I want to introduce my guest.
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  Ellen Rohr, and Ellen is the owner of Zoom, Drain, and Sewer franchising.
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  She's a Ziegler certified legacy trainer, and the author of some unfussy business books,
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  including where did the money go and the weekend business plan?
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  You can learn more about Ellen atlenror.com, but I just wanna give you a quick disclaimer.
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  Ellen is one of the funniest and best businesses I first met her.
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  She was marketing herself as the former's wife, and that's how she learned so much about
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  numbers.
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  And I am so excited to have you, Ellen, here with us tonight.
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  I love you.
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  Ma, I'm honored to be here, and I love you.
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  I'm gonna learn something from you tonight.
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  I always do.
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  Well, I can't wait to learn more from you.
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  So let's get down to it.
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  Let's talk about those Efinancial report.
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  You know what I'm talking about?
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  That cash flow statement, that balance sheet, and what's the last one up that statement of
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  cash flow, the word hello.
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  Excuse me.
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  You see the P and L.
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  That sheet P and L and statement of cash flow.
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  Last time, all that.
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  I mean, we know we're supposed to be looking at that stuff every month, but you and I both
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  know.
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  And Donna Maria can amen join back in the car or Tuesday.
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  There's people that don't look at that stuff, but but tell me, what is the bare minimum that
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  business owners need to know to be responsible over the finances of their business?
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  Well, there's no judgment and only love here as I share what I've learned.
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  But once upon a time, as the plumber's wife, I quit my real job, I went to work with my
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  husband, the plumber.
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  Hey, I have a college degree.
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  I had a lot of business experience.
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  I thought it would be easy.
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  I would count the money, hit turn wrenches, and we would get rich.
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  And none of that happened.
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  None of that happened.
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  Instead, we went into debt, and we were hating on each other.
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  And and my experience is not unique.
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  There's so many mom pop shops, couples, partners who go into business together and then
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  it really wreaked havoc on their relationship.
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  And I was the poster child for disaster.
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  So for me, what happened is I was in debt up to my eyeballs.
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  I had no money.
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  I was absolutely willing to go out of business, but I wasn't willing to live that life anymore.
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  And that point of pain is what caused me to take the steps I needed to become good enough
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  at the financials.
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  Alright?
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  So I found a mentor, and that's what we're here tonight.
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  You know, no one is successful on their own.
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  You believe in mentorship.
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  You're always doing loving kind things to help assist your brother out.
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  And so I found a great mentor and he taught me this.
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  And if you remember one thing from tonight, you have to charge more than it costs to stay in
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  business.
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  To make money you deserve.
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  You gotta charge more than it costs, but for me and for many others, I didn't know how much it
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  costs.
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  I had no idea because I wasn't looking at those reports.
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  So how much time do you have to spend?
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  Well, at first, until you get your arms around the balance sheet, the profit and and then the
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  statement of cash flow is a bit of a mash up of the 2.
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  You know, until you get to that point, you might have to study up.
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  Like, if you were gonna learn to play golf, you'd have to take off lessons.
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  You get a golf pro.
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  You hang out with golfers.
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  Same thing.
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  You might find a mentor.
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  You might find a I love young people, a young progressive bookkeeper who's gonna get you
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  started.
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  And at first, you might spend some time, but literally right now, Melinda, I have my family
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  fortune, my business, Zoom Drain franchise, 11 franchisees, and I pay attention to all of
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  those companies in minutes a week.
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  Minutes a week because the does that make sense?
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  It does, but you need to break that one down to me.
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  How in the world do you pay attention to you know, 15 different entities in minutes.
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  Well, the the the the first part is getting to what I call a known financial position.
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  So that means you know where you stand financially.
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  And I hold that the highest standard is literally running the balance sheet and the
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  profit loss on a weekly basis.
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  Now start with a monthly basis.
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  Start with getting your taxes done for 2018.
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  Right?
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  You know, start start getting better now.
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  But, ultimately, if you are, you know, just paying attention to the few things that matter,
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  simplify your chart of accounts, simplify the balance sheet profit loss.
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  So the balance sheet fits on one page.
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  The profit loss fits on a page and a half.
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  Boil down the the numbers you're looking at for starters.
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  Most people make this way too complicated, and you are gonna need some help You're gonna need
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  someone who's been through this before.
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  I think my very best piece of advice is to find a business owner who struggled with this.
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  Someone with whom you don't compete.
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  Meet him at the BNI meeting.
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  Meet him at the mixer at the association.
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  You're gonna be visiting with 300 businesswomen tomorrow.
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  You know, encourage those folks to talk to each other.
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  Who here has figured this out, climb on to the person who has and sit elbow to elbow to start
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  to understand what's a balance sheet, what's a profit line loss, your asset from your elbow.
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  That's gonna take some time.
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  You might need to spend a few hours a week until you get to that point.
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  But now because my my companies are all simple and streamlined and I look at the numbers so
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  often, I can spot something that's weird quite quickly.
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  So I'm just saying for encouragement, it's not always gonna be hours a week.
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  Later on, it's gonna be minutes a week.
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  I get it.
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  I get it.
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  Now you say that the balance sheet is the most confusing.
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  Why is that?
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  Yeah.
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  Most people understand a profit and loss.
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  By the way, it's called a profit loss for an income statement, and I don't know why they use
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  multiple words for the same things just to confuse you.
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  QuickBooks called it a profit loss.
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  So let's use that or a p and l.
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  Okay.
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  So the profit loss is pretty straightforward sales, minus expenses, equals what's left over.
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  And if it's a positive number, it's a profit, and that's good.
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  People can get their arms around that.
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  Now the balance sheet's a little weirder, but it's the more important report The balance
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  sheet shows what you have.
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  That's your assets.
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  And then what you owe liabilities and what you own, and it's actually based on an equation.
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  What you have, your assets equals who lays claim to those assets.
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  Pretty interesting.
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  So think of it this way for your home, for for your personal fortune, you can have a balance
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  sheet.
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  The asset, for instance, would be your home.
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  Suppose you spent $500,000 on your home and then equals your Mortgage, 400,000, which means
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  you have equity of a 100,000.
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  So what you have, what you owe, what you own, these are good things to know.
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  We only have a little time, but I'm just teasing you with, like, it's not that hard.
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  Alright.
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  Alright.
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  Now here's here's my biggest beat though when it comes
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  to numbers, Ellen.
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  People confuse revenue and profit.
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  Well, let's let's define the terms again.
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  Revenue, sales, income, 3 words that mean essentially the same thing.
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  I know.
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  It's weird.
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  All of those refer to total sales, like all the money that's coming into your your company.
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  Then there's expenses Labor materials, computers, pencils, cars, all that.
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  Legal marketing And the number one expense is usually the people should be.
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  Alright.
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  So all those expenses and then what's left over is profit.
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  Profit if it's a positive number, it's a loss if it's a negative number.
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  Now, if you're paying attention every week, if you're paying attention every month, you can
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  make changes in your behavior to make sure you operate in a profit.
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  And if you operate in a profit, you don't dig a big pile of debt.
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  If you operated a loss, you're gonna go into debt.
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  Mathematically, it's the only thing you can do.
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  This is a business is not that hard.
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  And if you will get your arms around some of these basics, you'll make better decisions.
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  Now profit often gets confused for cash.
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  So just because I sold this much And these are my expenses, and this is what's left over.
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  That number may not equal what I have in the bank account, and that gets a little tricky
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  too.
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  Because they may not have paid you yet.
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  You might have that cash back in accounts receivable or you might have already turned
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  around and used that cash to buy something else.
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  So profits and cash, you know, the the few numbers that make all the difference, the two
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  numbers that I watch like a hawk every week, What am I making a profit and do I have enough
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  in cash to pay my bills?
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  Isn't this easy?
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  Like, I mean, is that that hard?
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  Didn't you know that already?
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  And I don't pay attention to a lot of other stuff.
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  Yeah.
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  Well, listen.
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  Did I make money and do I have enough cash to pay my bills?
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  Good to know.
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  Every every every every week.
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  That's that's a good thing to be concerned about.
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  Now how do we want I know that we need to get people more focused on profit.
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  Yeah.
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  We'll focus on revenue.
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  You focus on sales.
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  I'm like, mhmm.
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  Let's how do we get people to our focus on profit?
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  Like, what is the right way to do that?
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  Okay.
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  So if if you're a sports person, think of it like offense and defense.
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  Offense is sales.
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  Off into sales.
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  What do I gotta do to make more on the top line?
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  Revenue.
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  And then defense is controlling expenses.
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  What do I not waste money on?
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  What could I wait till next month to buy?
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  Right?
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  So you're gonna make decisions every day as to what's gonna increase sales and what's gonna
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  control expenses.
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  Now with sales playing offense, I ask people all the time.
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  They say, well, you know, people don't wanna pay my prices, so I kept keep lowering the
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  price to which I will respond.
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  Have you ever taken a sales class?
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  Like, taken a class on how to sell better and they say no.
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  Now if you wanted to play golf, you would take a lesson at some point if you stunk at golf, if
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  you're seeing good sales, if you it can't get your prices.
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  If you're not selling, if you're getting a lot of notes, a sales class is a really great idea.
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  I mean, none of this is that challenging.
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  So with making it fancier than it has to be.
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  You gotta sell at the right price.
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  How do you know how much you have to charge?
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  Well, if you're paying attention, your balance sheet and profit loss and you're not making any
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  money, you could raise your prices.
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  Top line gets higher.
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  Expenses stay the same, and you'll make more money.
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  Ah, it's a beautiful thing.
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  It's a beautiful thing.
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  Listen, Alan, I'm gonna put a pin in that.
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  We're gonna go to a commercial break, but when we come back, We are gonna talk about private
• 12:23
  first and a lot more on Melinda Emerson, and we will be right back.
• 12:27
  Since we implemented mix our open rates are 86%, our reply rates are 52%, and our RSVP,
• 12:34
  yes, rates 41%.
• 12:37
  My advice for other companies interested in Mixmax is definitely go for it.
• 12:41
  It's also a really easy onboarding process.
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  It's very user friendly.
• 12:45
  It's easy to get in there.
• 12:46
  I wish we had started using it a lot sooner, and it's it's made my life much, much easier.
• 12:54
  We've just been talking with Ellen Roar.
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  She is the founder, owner of zoom drain and Sewer franchising, and she is a great small
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  business expert.
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  She's a She's a money lady, and I love I love money, honey.
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  Let me tell you.
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  So we're so excited to have Ellen back with us.
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  Now Ellen, you know, in my book, fix your business, I had an opportunity to intro
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  interview our good friend, Mike Michalowids, and he talks about how in addition to
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  understanding you know, your profit and loss and profit and all this stuff that you need to
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  have a profit first account.
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  Can you talk to us about that and what that is and how people should be thinking about that?
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  Yep.
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  Yep.
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  Yep.
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  Love Mike Michalowitz.
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  He's spot on great.
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  I'm glad we're mutual friends with him.
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  So his his basic concept is to pay yourself first.
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  To pay yourself first.
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  And if you wait until you've made all those other expenses, you might neglect to pay
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  yourself, and it's a very good discipline.
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  So what he suggests is that you actually take maybe 10% off of every payment that someone
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  makes to you and you squirrel it away.
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  Now what I would suggest is that you literally move that money from one checking account to a
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  savings account or to another account.
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  So that you literally are are are financial your your bank accounts match what you have in
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  QuickBooks.
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  In other words, just don't make a phony baloney accounting move, but literally make a deposit
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  into that other account.
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  And then when you reconcile your checking accounts every every month, they're gonna be
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  true.
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  Like, I want those numbers on my quick folks to be real.
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  And so yes yes yes on profit first and go that extra mile to actually set up those accounts
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  that he's recommending.
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  Love him.
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  Okay.
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  I completely agree with you.
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  Now I know you talked earlier about how people can get a mentor to help them learn about their
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  numbers, but I didn't have a mentor to teach me about the numbers actually hired a really
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  seasoned bookkeeper who taught me how to understand the numbers in my business way back
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  in the day.
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  It was 2 100 years ago.
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  But now if somebody has a little budget and and they wanna get some professional accounting
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  help, what should they do?
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  Well, I at first, when I was so broke, I literally could not afford to pay an
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  accountant.
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  So I got an accounting program.
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  I read the little primmer.
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  It took me way too long to learn it mostly because I was like, I'm too creative.
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  I shouldn't have to do this.
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  All that nonsense.
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  And when I finally just buckle down and learn how to do some data entry myself, I realized it
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  wasn't that big a deal.
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  Then when I could afford an accountant and had everything to do with raising my prices, I
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  worked with her and I said, I could do the day to day.
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  You could check my work.
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  Then I hired somebody.
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  But going through that process when I didn't have any money, actually learning enough about
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  the bookkeeping to know what was happening I cannot be bamboozled, and that is a brilliant
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  place to be.
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  So if you have to learn it yourself, it's not that you don't have to do it forever, and you
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  will not regret having learned that.
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  Alright.
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  Well, we gotta we have to wrap up soon, but I wanted to ask you What is the best borrowing
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  advice you can give a small business owner?
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  Because a lot of times you know, it's one thing to be making money, but what if you need more
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  money?
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  What is the best borrowing advice you can give?
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  I'm gonna move fast.
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  I'm gonna say 2 things.
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  One is don't borrow money to pay yourself.
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  Sorry.
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  That's not how it works.
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  You could borrow money for a vehicle or equipment and a secured loan like that is gonna
• 16:36
  be much easier to get because they could come and take that vehicle or that equipment.
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  You're probably more likely to get that loan.
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  Might need to borrow some money in order to make some marketing investments.
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  However, I'm a bootstrapper man.
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  I like to sell something sell it for more than it costs and use that money to fund my company.
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  Now having having said that, if you do need more, your manufacturer, you need a line of
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  credit.
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  You've got you do have some legit reasons for borrowing a little more money.
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  Have your banker help you?
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  What are you looking for on my balance sheet that you don't see?
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  What do these ratios need to be for you to say yes?
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  Your banker can really help you understand what they need so that you can get that loan.
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  I'm working with 1 of my franchisees right now for an SBA loan, and we're having that exact
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  conversation.
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  What do you need to say yes?
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  And then we can massage the numbers and and and work to get those.
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  I'm not talking about fake numbers.
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  I'm, you know, to change the numbers so that you can say yes to
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  a loan.
• 17:37
  Alright.
• 17:37
  Well, Ellen, that was really wonderful.
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  Alright.
• 17:41
  You guys, I thank you so very much And this will not be possible tonight without our
• 17:45
  wonderful sponsor, Mixmax.
• 17:47
  If you use Gmail, you need Mixmax, and I'm just saying it like that because that's what I use.
• 17:51
  For my business, the mission of small business chat is to end small business failure.
• 17:56
  I am Melinda Emerson's small business lady, your host, until next time, remember that you
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  never lose in business.
• 18:03
  Either you win or you learn.
• 18:05
  God bless.
• 18:08
  Thank you for listening to the Small Biz Chat podcast with Melinda Emerson.
• 18:13
  For more resources and small business success strategies, visit succeed as your own boss.com.
• 18:19
  Subscribe to this podcast wherever you listen to podcast and join us next Wednesday.