May 14, 2025 • 26 mins
Are you stuck in a business plateau despite working harder than ever? This episode reveals why proper financial systems are the missing key to unlocking sustainable growth and higher profitability.
We share real stories of entrepreneurs like Rachel and Marcus who transformed their struggling businesses by implementing three critical financial frameworks. From Rachel’s home improvement company drowning in spreadsheets to Marcus’s consulting firm trapped on a revenue treadmill, discover how these business owners broke free.
Learn the practical systems that can transform your business finances:
-
True Project Profitability tracking to identify which clients and services actually drive your bottom line
-
Profit First implementation that ensures you build wealth, not just generate revenue
-
Financial dashboards that translate accounting data into actionable business insights
Key Quote: “Your business isn’t broken. Your financial systems are.”
Listen now to discover how implementing the right financial frameworks can help you make smarter decisions, increase profitability, and finally get off the revenue treadmill.
Plus, get our bonus “Financial Systems Diagnostic Tool” by joining the Wealth Wisdom Financial Community as a Premium Member. www.wealthwisdomfp.com/community
00:00 Introduction: Transform Your Business with Financial Systems
00:46 Welcome to Wealth Wisdom Financial Podcast
01:24 This Month's Theme: Growing and Scaling
02:01 The Importance of Tracking Profit
02:29 Rachel's Story: Revenue vs. Profit
05:15 Marcus's Story: Financial System Deficit
07:19 Implementing True Project Profitability Tracking
11:23 The Profit First System
18:21 Overcoming Common Financial Misconceptions
22:10 Conclusion: Building Financial Systems for Growth
Watch on YouTube: https://youtu.be/Kki_swKvs-A
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:01):
Are your financial systems holding back
your business growth?Or did you just
think what systems?Today we're
talking about how the right money
management framework can transform
your business into a profit machine
rather than a cash eating
monster. Stay tuned to discover why
(00:22):
most entrepreneurs are looking at their
numbers all wrong and how to
fix it.
In a world where chaos seems to reign
supreme, where uncertainty lurks
around every corner and financial
markets are now more unpredictable than
ever. There's one place you can turn to
(00:44):
to find clarity and control.
Welcome to the Wealth Wisdom Financial
Podcast. Hey, I'm Brandon. And I'm
Amanda. Join us as we dive deep in the
world of personal and business finance
to assist you in navigating through the
chaos and building the financial future
you deserve. We believe when conventional
financial thinking doesn't get you where
(01:06):
you want to go, you need wealth wisdom.
So if you're ready to take control of
your financial destiny. Tune in to the
Wealth Wisdom Financial Podcast. Because
in that chaotic world, your money
shouldn't be. Subscribe now and never
miss an episode.
So welcome to this month's theme, growing
(01:26):
and scaling. We chose this month's theme
because we're passionate about helping
entrepreneurs like you build businesses
that generate true wealth, not just
revenue. This month, we're focusing on
breaking through barriers and building
sustainable financial success through
some smart business systems. So last
(01:46):
week we talked about three mindset shifts
that unleash a business owner to
grow their businesses. We shifted
from income to assets, from owner to
operator, and from revenue to profit.
Today, we're digging into how to track
profit rather than solely tracking
revenue. Profit is actually a
(02:09):
much better indicator of business
success, yet less than 17%
of businesses are profitable.
I mean, that's crazy. Less than 17%
of businesses are actually profitable.
So let's dig into why, and more
importantly, what you can do about it.
(02:29):
Okay. I'm gonna tell some stories today.
We're gonna start with Rachel. I remember
sitting with Rachel in her office. She
was surrounded by spreadsheets and
financial statements she had prepared to
make sure we could talk them through and
so forth. Her home improvement company
had grown to $680,000 in
revenue, but
something wasn't adding up. So I was
(02:50):
there to help her figure all this out.
She said, Look at these numbers, pointing
to the piles. We're bringing in more
money than ever, but I'm taking home less
than I did two years ago, and I'm working
twice as hard, and I just can't figure
out why. Rachel's situation
might sound similar to you or
familiar. You might know a business
owner. Maybe not you, but maybe somebody
(03:11):
you know. Rachel's business was growing
in terms of top-line revenue, but her
profit margins were shrinking. Her cash
flow was unpredictable, and she felt
increasingly anxious about her financial
future. Side note,
if you're not hearing this from your
fellow business owners or your favorite
business owners, check in on them.
(03:32):
Great thing, right?They often do surveys
to think of consumer sentiment. Are we
feeling hopeful or worse about the future?
There's the consumer price index where we
track inflation. There's not those same
kind of metrics or they're not talked
about as much for business owners who
experience the same kind of thing.
Inflation impacting their profit prices,
the employment, right, or non-employment
(03:53):
and all the things. So check, check in on
your fellow business owners. It's a rough
time for them right now. And if and if
you're not even the business owner,
you're a customer. Check in. Ask, ask
how, how they're doing if you like them.
Like I think about that as a coffee shop
owner back in the day, people would just
say, I like my coffee. You just do it
because you love it. And those kind of
(04:13):
things. I'm like, yeah, but I still like
to eat and those kind of things. And, and
being a good person, um,
and saying, how are you doing?Really not
just how are you doing?Give me my,
what you call it. Yeah. Okay. Now back to
Rachel. Um, here's what she admitted to
me. Quote,I don't even know if we're
profitable on most client projects. We
(04:34):
just keep chasing more revenue, hoping
things are going to improve, end quote.
And here's what I told Rachel, Your
business isn't broken. Your financial
systems are. Especially looking around at
all those papers, it was pretty clear she
needed a better way to do things. And I'm
betting that many of you listening right
now are in the same boat. Now, the
difference between struggling at six
(04:54):
figures and thriving at seven isn't
just working harder or landing bigger
clients. It's having the right financial
systems in place in the 1st place.
These are just nice to have spreadsheets.
They're the essential infrastructure that
allows your business to scale
profitably. OK, so we talked about
(05:15):
Rachel. We're going to also talk about
Marcus. So you get a couple of different
examples here. Marcus runs a
consulting firm that was stuck around
550,000 in revenue, just 50,000 above
Rachel. His team is busy, his clients are
happy, but at the end of each month.
Marcus would look at his bank account
with confusion and frustration. Where's
all the money going?He didn't have any
(05:35):
spreadsheets. He just had a bank account
that he would open and look at it, right?
Little bit different than Rachel. And
here's what he said. He said, I feel like
we're on a revenue treadmill.
Treadmill. Treadmill. Not treadmill.
You came from the South. I did. Maybe.
Maybe Marcus is from the South. We keep
running faster just to stay in place.
That's what you do on a treadmill, right?
(05:56):
You run faster and faster, but you're not
going anywhere. Yeah, this is a
classic sign of what I call financial
system deficit. When your business
lacks robust financial tracking and
decision-making processes, because you
don't know how to do it, right?So then we
don't have the growth that can
actually decrease profitability instead
(06:18):
of enhancing it, right?We We don't know
how to track that stuff. For Rachel, it
was overwhelming options for financial
tracking with piles of spreadsheets. out
of the wazoo. For Marcus, it was the
more common bank account budgeting system
with one big bank account budgeting
and there are no spreadsheets or
(06:38):
tracking. It simply opened the bank
account app and the phone and decide
from there, can I buy it?Can we do it?Oh,
we look big. You know, all this other fun
stuff and really just making a big giant
guess and saying, well, I'm profitable.
And you tell your fellow business owners,
look at this. which doesn't even make
sense, but you know, whatever. Yeah. So
(07:01):
here's what's funny. The
financial system, the first step that
both Marcus, with his lack of
any reporting in systems, and Rachel,
with our overwhelming amount of reporting
in system, not systems, but more just
reporting, they both needed the same
first step. And that first step is what I
like to call true project
(07:23):
profitability tracking. Like many
service business owners, they were
looking at overall monthly profits, but
had no visibility into which specific
projects or clients were actually
profitable. So they worked with their
accounting people and their team members
to design and implement a simple but
powerful one-page report that
(07:43):
tracked direct costs associated with each
client project,team time
allocation across projects,
non-billable time spent on client
management, and profit margin by project
type and client. This is basically a P&L
almost for each project that they took
on, accounting for the direct cost, the
team associated, a portion of the
(08:05):
non-billable time, and then it would give
them their profit margin for that
project. And if you are a business owner
and you don't know what a P&L is,
reach out to us, we'll gladly tell you.
Or And your accountant should be able to
help you do this. You don't not have to
do this alone. Yeah, hopefully that you-
And if they don't, contact us. Yeah.
Okay, anyway, go ahead. So So the results
were eye-opening. Marcus discovered that
(08:28):
his three largest clients, the ones
he was most proud of landing, were
actually the least profitable. The
demanding corporate clients with
impressive logos were eating up team
resources with endless meetings and
scope creep. Remember, we talked about
that in past episodes, that scope creep
idea. Meanwhile, his
(08:49):
mid-size clients in a specific industry
niche were consistently
delivering 40 to 50% profit margins
with minimal headaches. Now, which way
would you go?And then Rachel realized
that the Mcmansions that they worked on
were the least profitable because they
had fewer selections of high-end
materials. So they were, they were
(09:11):
limited in the profit margin that they
can make. Instead, renovating starter
homes for owners who were upgrading and
selling had fast turnarounds, right?They
had to get them done quickly and then
more flexibility in terms of where they
can source materials from and what kind
of materials they could use. Armed with
this data, Marcus and Rachel restructured
their offerings and client acquisition
(09:33):
strategies. Marcus implemented tighter
scope boundaries for the larger clients,
adjusting pricing on low-margin services,
and focused business development on the
industry niche that data showed was
most profitable. Within six months,
Marcus's revenue had grown
modestly to 620,000,
(09:55):
but his profit had increased by nearly
65%. He was working less
and taking home more. So that's
Marcus's story. Rachel, what did she do?
Well, she adjusted her business's
marketing strategy and spent time
building relationships with realtors who
specialized in selling starter homes.
They often had a few months heads up that
(10:17):
people were going to put their homes on
the market, plusWho are these homeowners
going to for advice about the upgrades
they should do to get a better sales
price?They're Realtors, right?So it's a
natural extension for the realtor to be
like, you know, if you redid your
kitchen, you could maybe spend this much
and you'd get this much more value in
your home. They could, you know, share
that and then they can introduce them to
Rachel to actually do that work. And then
(10:40):
Rachel went realized soon thereafter she
got two jobs out of that one referral
because not only was the seller selling
their starter home. But they were often
purchasing their forever home close by
and they wanted to make some immediate
improvements right when they moved in or
before they moved in. When she
amazed them with the her work on the
first home, because she was an amazing
(11:01):
home improvement person, they were way
easier to work with on the second home.
And you know that lead to acquisition
cost, right?That it's hard to get that
first. sell, but that second one is
easier, but that made it so much better.
She didn't have to spend anything to get
that second one. She said to do great
work on the first. But project
profitability was just the beginning. The
(11:22):
next financial system that changed
everything for Marcus and Rachel was
implementing Profit First. Now here's the
thing, I've heard so many people who
read Profit First, they say, Well, I had
the book and the success rate on just you
implementing it by yourselfIs
very low, very low. But by working with
(11:44):
somebody who is qualified, like we are
profit first certified to be able to
think through. It's not just about making
the right systems, but understanding the
mindset which we're talking about and
having those power partners there. That's
why we do this. So yeah, not just reading
the book. But having somebody like
us to help you implement it is a game
(12:06):
changer. Yeah. So like many business
owners, Rachel and Marcus had been using
traditional accounting equation, revenue
minus expenses equals profit. The
problem, profit was an afterthought.
Whatever happened to be left over after
all the expenses are paid?Somehow
there was never much leftover. Go figure.
(12:26):
So when they started to implement the
profit first, they flipped that formula.
It's now revenue minus profit equals
expenses. This wasn't just an accounting
trick. They did set up those five
different bank accounts at their local
credit unions income where all the
revenue initially landed, materials and
subcontractors, mats and Subs for short.
With that project profitability one
(12:48):
pager, they knew exactly how much revenue
to set aside to pay for materials and
subcontractors, leaving only their real
revenue in their income account. And then
from that real revenue they could then
move 15% to profit.
Untouchable for operating expenses, 20%
to owners pay that would give. Give
them their consistent compensation, 15%
(13:10):
to taxes set aside for
income, tax obligations and then
the other 50% of that real revenue to
operating expenses. This is the money
available to run their business, you
know, pay for those non billable hours,
their website, you know, all those kind
of things. So money would come in, and
then on the 10th and 25th of each month,
they'd transfer it by those predetermined
(13:31):
percentages to each account. And this
created artificial constraints that drove
better financial decisions. Marcus could
open his bank account and know how much
he had in operating expenses to make
better decisions. And it wouldn't show
all of it. It would only show the part
that was still there. That was 50% of the
real revenue. Now I do want to say on
those percentages, it depends on the size
(13:54):
of the business. And so some don't don't
just say, Oh well, I just make 20% or
whatever depends on your size. And that's
again why you work with somebody who kind
of knows because your size,
if you have a bigger team, probably
bring in a lot more revenue, your pace
may be a little less than if you're like
(14:14):
just a solo entrepreneur, business owner.
So initially, Marcus panicked. There's no
way I can run this business on just 50%
of real revenue. But here's what
happened. When his operating expense
account became the constraint instead of
his revenue, he started making smarter
decisions. And we all want to be smarter,
right?He audited all subscription
(14:37):
software and canceled tools they barely
used, just like we did in the other
episode. He renegotiated with
vendors. He scrutinized new
hires more carefully, and perhaps most
importantly, he raised prices on services
where his value exceeded what they were
charging. The profit system created
immediate financial clarity, which is
(14:59):
important. We all want clarity in our
businesses. Marcus knew exactly how
much money he was available to
operate the business. He knew what was
happening. His personal compensation
became predictable and consistent,
and the untouchable profit account began
accumulating wealth outside the
day-to-day business operations. So he
(15:21):
kept growing that account. Within one
year of implementing the financial
systems, Marcus's business had grown to
820,000 in revenue, with a
consistent 22% bottom
line profit margin. His personal income
had doubled, and perhaps most
importantly, he accumulated over $90,000
(15:43):
in a separate account.
More wealth building than he'd managed to
in the previous five years combined
because of what he had done and how he
built that system. Now what about Rachel?
Well, after implementing all this, she
noticed her contractors were much happier
working on the projects that they starter
(16:04):
homes and the clients they would interact
with there. She was able to buy
materials in bulk. Because they're
working on the same consistent types of
houses and the material they could use is
more consistent across them. And
remember, she started with a project
profitability and implementing a
financial system called Profit First, but
it gave her a huge marketing idea because
(16:27):
she was actually looking at the numbers.
Of course, you know, home improvements.
Rachel's in a male dominated industry.
Her competitive advantage now is that
she can grab a glass of wine with the
majority of female real estate agents and
build relationships with them that her
male home improvement counterparts can't.
She's having a lot more fun with
marketing than she used to because she's
(16:48):
using that competitive advantage,
building those relationships with real
estate agents that are working with for,
you know, starter home sellers moving to
their forever home, which is a great
market for those real estate agents to be
in. And the more they do, the more she
can do. And she's loving it. Yep. This is
just isn't just Marcus's or Rachel's
story. We've seen these financial
transformations happen over and over with
(17:10):
business owners who make the shift from
chaotic money management systems to
financial operations that work
systematically. After the break, we'll be
chatting through some of the roadblocks
that get in business owners' way and keep
them from a similar transformation.
And again, you might have experienced
some of these roadblocks.
(17:39):
Ready to take the next step towards
securing your financial future?Whether
you're planning for retirement, saving
for your dream home, or you just want to
make your money work harder for you, the
team at Wealth Wisdom Financial are ready
to assist you. And now it's easier than
ever to see how we might give you a boost
on your financial journey. Schedule a 15
minute discovery call with one of us
(18:00):
today and let's discuss your questions
and your financial goals together. Don't
wait any longer. Your financial freedom
awaits. Schedule your discovery call at
www.wealthwisdomfp.com/call.
(18:21):
Now some of you may be thinking. And I
heard it from Rachel, from Marcus, and
countless other entrepreneurs and
business owners. Well, I'm not a numbers
person. That's why I have a bookkeeper.
I've heard that one before. No, I don't
have time to look at financial reports. I
need to focus on serving clients and
growing sales. I've heard that one many,
many times. Oh, let me put on my Southern
(18:41):
accent. My business is too
unpredictable for strict financial
systems. That wasn't that good. Anyway,
you know what I mean. Yeah, I've heard
that one, I think just yesterday.
These concerns sound reasonable,
but they rest on a dangerous
misconception that financial management
is separate from business growth. Yeah, I
(19:02):
remember working with, um, another
Sophia. We love using this, this
acronym, this, uh, pseudonym, Sophia, a
talented designer who avoided her
finances at all cost. I just don't have a
brain for numbers. I'm an artist, she
insisted. That's why I hired an
accountant, right?And pay them the money
I do. For her?Yep. Yeah. But here's the
(19:24):
problem. Her accountant was producing
these beautiful to me financial
statements that were absolutely ugly to
her, right?To Sophia. But also
those financial statements would tell her
what had already happened. Well, Sophia
needed financial insights to make better
decisions about what to do next. So
Sophia implemented this one-page
(19:44):
financial dashboard in partnership with
her bookkeeper. Sophia discovered that
she had a brain for numbers after all,
when those numbers were presented in a
way that connected to her business
reality and her artistic sensibility.
Colors, you know, fun graphs,
charts rather than just numbers. She
didn't need to become an accountant. She
(20:06):
just needed her financial systems that
translated accounting data into
actionable business insights.
As for the time concern, this is often
the most expensive misconception.
I worked with Jeremy who ran
$700,000 service business. He was too
busy with clients and team management
(20:27):
to waste time on financial reports.
I, again, another thing I hear all the
time. I just don't have the time. Six
months later, Jeremy reached out in a
panic. His business had grown to nearly
900,000 in revenue. He did something
right, rightBut he had to take out a
personal loan to make payroll. So what
happened?Without proper financial
(20:48):
systems, he had been making growth
decisions based on revenue projections
without understanding the cash flow
implications. He calculated that
his lack of financial systems had cost
him over 120,000
in preventable expenses,
lost profits and unnecessary
(21:09):
interest. That's an
expensive way to save time. And again,
This is why I think the work we do is
so important. And people are like, just
say, I don't know, I don't have the time.
And I'm like, it's going to cost you.
Yep. You pay them one way or another.
Yep. Yeah. And let's talk about
that unpredictability excuse when your
(21:31):
business is up and down, you know, the
revenue's up and down all over the place.
Well, that's why you need robust
financial systems. Pretty much every
business has highly variable revenue
throughout the year. That was true for
Mia, a short-term rental operator. She
believed her unpredictable cash flow made
financial planning impossible. But once
we implemented proper financial systems,
(21:52):
Mia discovered that her business actually
followed predictable seasonal patterns.
Go figure. And with this visibility, she
could build cash reserves during peak
periods and to sustain operations during
slower months. What had felt chaotic
became manageable through proper
systems. The reality is this. If you want
to break through to higher levels of
(22:13):
business without financial anxiety,
You don't have a choice about whether to
build financial systems. The only choice
is whether to build them deliberately
or deal with the consequences of their
absence, because financial systems are
there. It it is a system if it's
not a system still. And so we shared
earlier about Marcus's transformation and
(22:35):
Rachel's transformation, but we left out
one of the most important parts of
Marcus's change. The most
telling change is Marcus himself. He
now has a clear understanding of his
business finances. He makes decisions
with confidence because he knows the
financial implications. He sleeps better
at night because cash flow surprises have
been virtually eliminated. Here's what he
(22:57):
told us. Quote, For the first time, I
feel like I'm building wealth, not just
running on the revenue treadmill, or
treadmill. Yeah,
this is the power of financial systems.
They transform anxiety into confidence,
chaos into clarity, and revenue into
actual wealth. And here's the good news.
(23:18):
You don't need to overhaul your entire
financial system overnight, right?Start
with just one system. The one that would
create the most immediate relief in your
business. Maybe it's a project
profitability tracking system that helps
you identify which clients and services
actually drive the bottom line. Or it
could be implementing profit first to
(23:40):
ensure you're building wealth, not just
generating revenue, which a lot of
businesses are doing. Whatever you
choose, start small, get the basic system
in place, and use it consistently for 30
days, and then refine and
expand. The path to scaling isn't about
working harder or even selling more.
It's about building financial systems
(24:02):
that transform revenue into lasting
wealth. So Are you ready to start
building financial systems that will
unlock your growth and give you insights
into what's next in your business?Then
join us in the Wealth Wisdom Financial
Community. Today we shared in the
community a practical framework called
the Financial Systems Diagnostic Tool. To
(24:24):
get that framework, you can join the
Wealth Wisdom Financial Community as a
premium member, and it could be the
turning point that your business journey
needs plus. And this has been there for
quite a while. Every Premium member
gets our seven step series to
build your success dashboard, which
we have given you a beta version of a
(24:44):
Google Sheet with some of our best
business growth and tracking tools that
you can mix and mingle and work with your
accountant and make into your own
one-page dashboard or maybe couple page
dashboard with beautiful things
color-coded as Google Sheets only camp.
Also, if you didn't know, we share
practical wealth buildingEvery single
Wednesday in the Wealth Wisdom Financial
(25:05):
Community. Call it Wealthy Wednesdays. If
you want to transform your business
finances from chaotic to streamlined,
join us a premium member at
wealthwisdomfp.com/community
and we love to see you in there. You get
what we publish today, that
business dashboard, success dashboard,
seven step series, and everything we
(25:27):
publish since we started that community a
few years ago. And we use that dashboard
regularly like. So I don't know how long.
Every 10th and 25th and under Rock
Reviews. Yep. So hit that
subscribe button and don't miss next
week's episodes that's geared towards
helping you avoid burnout along the way
of growth to growth and scaling.
(25:49):
Thanks for joining us. Live long and
profit. The stories in today's episode
are based on real life, but just like Law
and Order, they are fictional and do not
depict any actual person or event. The
topics presented in this podcast are also
for general information only and not for
the purposes of providing legal,
accounting, or investment advice. On such
matters, please consult a professional
(26:10):
who knows your specific situation.
Are your financial systems holding back
your business growth?Or did you just
think what systems?Today we're
talking about how the right money
management framework can transform
your business into a profit machine
rather than a cash eating
monster. Stay tuned to discover why
(00:22):
most entrepreneurs are looking at their
numbers all wrong and how to
fix it.
In a world where chaos seems to reign
supreme, where uncertainty lurks
around every corner and financial
markets are now more unpredictable than
ever. There's one place you can turn to
(00:44):
to find clarity and control.
Welcome to the Wealth Wisdom Financial
Podcast. Hey, I'm Brandon. And I'm
Amanda. Join us as we dive deep in the
world of personal and business finance
to assist you in navigating through the
chaos and building the financial future
you deserve. We believe when conventional
financial thinking doesn't get you where
(01:06):
you want to go, you need wealth wisdom.
So if you're ready to take control of
your financial destiny. Tune in to the
Wealth Wisdom Financial Podcast. Because
in that chaotic world, your money
shouldn't be. Subscribe now and never
miss an episode.
So welcome to this month's theme, growing
(01:26):
and scaling. We chose this month's theme
because we're passionate about helping
entrepreneurs like you build businesses
that generate true wealth, not just
revenue. This month, we're focusing on
breaking through barriers and building
sustainable financial success through
some smart business systems. So last
(01:46):
week we talked about three mindset shifts
that unleash a business owner to
grow their businesses. We shifted
from income to assets, from owner to
operator, and from revenue to profit.
Today, we're digging into how to track
profit rather than solely tracking
revenue. Profit is actually a
(02:09):
much better indicator of business
success, yet less than 17%
of businesses are profitable.
I mean, that's crazy. Less than 17%
of businesses are actually profitable.
So let's dig into why, and more
importantly, what you can do about it.
(02:29):
Okay. I'm gonna tell some stories today.
We're gonna start with Rachel. I remember
sitting with Rachel in her office. She
was surrounded by spreadsheets and
financial statements she had prepared to
make sure we could talk them through and
so forth. Her home improvement company
had grown to $680,000 in
revenue, but
something wasn't adding up. So I was
(02:50):
there to help her figure all this out.
She said, Look at these numbers, pointing
to the piles. We're bringing in more
money than ever, but I'm taking home less
than I did two years ago, and I'm working
twice as hard, and I just can't figure
out why. Rachel's situation
might sound similar to you or
familiar. You might know a business
owner. Maybe not you, but maybe somebody
(03:11):
you know. Rachel's business was growing
in terms of top-line revenue, but her
profit margins were shrinking. Her cash
flow was unpredictable, and she felt
increasingly anxious about her financial
future. Side note,
if you're not hearing this from your
fellow business owners or your favorite
business owners, check in on them.
(03:32):
Great thing, right?They often do surveys
to think of consumer sentiment. Are we
feeling hopeful or worse about the future?
There's the consumer price index where we
track inflation. There's not those same
kind of metrics or they're not talked
about as much for business owners who
experience the same kind of thing.
Inflation impacting their profit prices,
the employment, right, or non-employment
(03:53):
and all the things. So check, check in on
your fellow business owners. It's a rough
time for them right now. And if and if
you're not even the business owner,
you're a customer. Check in. Ask, ask
how, how they're doing if you like them.
Like I think about that as a coffee shop
owner back in the day, people would just
say, I like my coffee. You just do it
because you love it. And those kind of
(04:13):
things. I'm like, yeah, but I still like
to eat and those kind of things. And, and
being a good person, um,
and saying, how are you doing?Really not
just how are you doing?Give me my,
what you call it. Yeah. Okay. Now back to
Rachel. Um, here's what she admitted to
me. Quote,I don't even know if we're
profitable on most client projects. We
(04:34):
just keep chasing more revenue, hoping
things are going to improve, end quote.
And here's what I told Rachel, Your
business isn't broken. Your financial
systems are. Especially looking around at
all those papers, it was pretty clear she
needed a better way to do things. And I'm
betting that many of you listening right
now are in the same boat. Now, the
difference between struggling at six
(04:54):
figures and thriving at seven isn't
just working harder or landing bigger
clients. It's having the right financial
systems in place in the 1st place.
These are just nice to have spreadsheets.
They're the essential infrastructure that
allows your business to scale
profitably. OK, so we talked about
(05:15):
Rachel. We're going to also talk about
Marcus. So you get a couple of different
examples here. Marcus runs a
consulting firm that was stuck around
550,000 in revenue, just 50,000 above
Rachel. His team is busy, his clients are
happy, but at the end of each month.
Marcus would look at his bank account
with confusion and frustration. Where's
all the money going?He didn't have any
(05:35):
spreadsheets. He just had a bank account
that he would open and look at it, right?
Little bit different than Rachel. And
here's what he said. He said, I feel like
we're on a revenue treadmill.
Treadmill. Treadmill. Not treadmill.
You came from the South. I did. Maybe.
Maybe Marcus is from the South. We keep
running faster just to stay in place.
That's what you do on a treadmill, right?
(05:56):
You run faster and faster, but you're not
going anywhere. Yeah, this is a
classic sign of what I call financial
system deficit. When your business
lacks robust financial tracking and
decision-making processes, because you
don't know how to do it, right?So then we
don't have the growth that can
actually decrease profitability instead
(06:18):
of enhancing it, right?We We don't know
how to track that stuff. For Rachel, it
was overwhelming options for financial
tracking with piles of spreadsheets. out
of the wazoo. For Marcus, it was the
more common bank account budgeting system
with one big bank account budgeting
and there are no spreadsheets or
(06:38):
tracking. It simply opened the bank
account app and the phone and decide
from there, can I buy it?Can we do it?Oh,
we look big. You know, all this other fun
stuff and really just making a big giant
guess and saying, well, I'm profitable.
And you tell your fellow business owners,
look at this. which doesn't even make
sense, but you know, whatever. Yeah. So
(07:01):
here's what's funny. The
financial system, the first step that
both Marcus, with his lack of
any reporting in systems, and Rachel,
with our overwhelming amount of reporting
in system, not systems, but more just
reporting, they both needed the same
first step. And that first step is what I
like to call true project
(07:23):
profitability tracking. Like many
service business owners, they were
looking at overall monthly profits, but
had no visibility into which specific
projects or clients were actually
profitable. So they worked with their
accounting people and their team members
to design and implement a simple but
powerful one-page report that
(07:43):
tracked direct costs associated with each
client project,team time
allocation across projects,
non-billable time spent on client
management, and profit margin by project
type and client. This is basically a P&L
almost for each project that they took
on, accounting for the direct cost, the
team associated, a portion of the
(08:05):
non-billable time, and then it would give
them their profit margin for that
project. And if you are a business owner
and you don't know what a P&L is,
reach out to us, we'll gladly tell you.
Or And your accountant should be able to
help you do this. You don't not have to
do this alone. Yeah, hopefully that you-
And if they don't, contact us. Yeah.
Okay, anyway, go ahead. So So the results
were eye-opening. Marcus discovered that
(08:28):
his three largest clients, the ones
he was most proud of landing, were
actually the least profitable. The
demanding corporate clients with
impressive logos were eating up team
resources with endless meetings and
scope creep. Remember, we talked about
that in past episodes, that scope creep
idea. Meanwhile, his
(08:49):
mid-size clients in a specific industry
niche were consistently
delivering 40 to 50% profit margins
with minimal headaches. Now, which way
would you go?And then Rachel realized
that the Mcmansions that they worked on
were the least profitable because they
had fewer selections of high-end
materials. So they were, they were
(09:11):
limited in the profit margin that they
can make. Instead, renovating starter
homes for owners who were upgrading and
selling had fast turnarounds, right?They
had to get them done quickly and then
more flexibility in terms of where they
can source materials from and what kind
of materials they could use. Armed with
this data, Marcus and Rachel restructured
their offerings and client acquisition
(09:33):
strategies. Marcus implemented tighter
scope boundaries for the larger clients,
adjusting pricing on low-margin services,
and focused business development on the
industry niche that data showed was
most profitable. Within six months,
Marcus's revenue had grown
modestly to 620,000,
(09:55):
but his profit had increased by nearly
65%. He was working less
and taking home more. So that's
Marcus's story. Rachel, what did she do?
Well, she adjusted her business's
marketing strategy and spent time
building relationships with realtors who
specialized in selling starter homes.
They often had a few months heads up that
(10:17):
people were going to put their homes on
the market, plusWho are these homeowners
going to for advice about the upgrades
they should do to get a better sales
price?They're Realtors, right?So it's a
natural extension for the realtor to be
like, you know, if you redid your
kitchen, you could maybe spend this much
and you'd get this much more value in
your home. They could, you know, share
that and then they can introduce them to
Rachel to actually do that work. And then
(10:40):
Rachel went realized soon thereafter she
got two jobs out of that one referral
because not only was the seller selling
their starter home. But they were often
purchasing their forever home close by
and they wanted to make some immediate
improvements right when they moved in or
before they moved in. When she
amazed them with the her work on the
first home, because she was an amazing
(11:01):
home improvement person, they were way
easier to work with on the second home.
And you know that lead to acquisition
cost, right?That it's hard to get that
first. sell, but that second one is
easier, but that made it so much better.
She didn't have to spend anything to get
that second one. She said to do great
work on the first. But project
profitability was just the beginning. The
(11:22):
next financial system that changed
everything for Marcus and Rachel was
implementing Profit First. Now here's the
thing, I've heard so many people who
read Profit First, they say, Well, I had
the book and the success rate on just you
implementing it by yourselfIs
very low, very low. But by working with
(11:44):
somebody who is qualified, like we are
profit first certified to be able to
think through. It's not just about making
the right systems, but understanding the
mindset which we're talking about and
having those power partners there. That's
why we do this. So yeah, not just reading
the book. But having somebody like
us to help you implement it is a game
(12:06):
changer. Yeah. So like many business
owners, Rachel and Marcus had been using
traditional accounting equation, revenue
minus expenses equals profit. The
problem, profit was an afterthought.
Whatever happened to be left over after
all the expenses are paid?Somehow
there was never much leftover. Go figure.
(12:26):
So when they started to implement the
profit first, they flipped that formula.
It's now revenue minus profit equals
expenses. This wasn't just an accounting
trick. They did set up those five
different bank accounts at their local
credit unions income where all the
revenue initially landed, materials and
subcontractors, mats and Subs for short.
With that project profitability one
(12:48):
pager, they knew exactly how much revenue
to set aside to pay for materials and
subcontractors, leaving only their real
revenue in their income account. And then
from that real revenue they could then
move 15% to profit.
Untouchable for operating expenses, 20%
to owners pay that would give. Give
them their consistent compensation, 15%
(13:10):
to taxes set aside for
income, tax obligations and then
the other 50% of that real revenue to
operating expenses. This is the money
available to run their business, you
know, pay for those non billable hours,
their website, you know, all those kind
of things. So money would come in, and
then on the 10th and 25th of each month,
they'd transfer it by those predetermined
(13:31):
percentages to each account. And this
created artificial constraints that drove
better financial decisions. Marcus could
open his bank account and know how much
he had in operating expenses to make
better decisions. And it wouldn't show
all of it. It would only show the part
that was still there. That was 50% of the
real revenue. Now I do want to say on
those percentages, it depends on the size
(13:54):
of the business. And so some don't don't
just say, Oh well, I just make 20% or
whatever depends on your size. And that's
again why you work with somebody who kind
of knows because your size,
if you have a bigger team, probably
bring in a lot more revenue, your pace
may be a little less than if you're like
(14:14):
just a solo entrepreneur, business owner.
So initially, Marcus panicked. There's no
way I can run this business on just 50%
of real revenue. But here's what
happened. When his operating expense
account became the constraint instead of
his revenue, he started making smarter
decisions. And we all want to be smarter,
right?He audited all subscription
(14:37):
software and canceled tools they barely
used, just like we did in the other
episode. He renegotiated with
vendors. He scrutinized new
hires more carefully, and perhaps most
importantly, he raised prices on services
where his value exceeded what they were
charging. The profit system created
immediate financial clarity, which is
(14:59):
important. We all want clarity in our
businesses. Marcus knew exactly how
much money he was available to
operate the business. He knew what was
happening. His personal compensation
became predictable and consistent,
and the untouchable profit account began
accumulating wealth outside the
day-to-day business operations. So he
(15:21):
kept growing that account. Within one
year of implementing the financial
systems, Marcus's business had grown to
820,000 in revenue, with a
consistent 22% bottom
line profit margin. His personal income
had doubled, and perhaps most
importantly, he accumulated over $90,000
(15:43):
in a separate account.
More wealth building than he'd managed to
in the previous five years combined
because of what he had done and how he
built that system. Now what about Rachel?
Well, after implementing all this, she
noticed her contractors were much happier
working on the projects that they starter
(16:04):
homes and the clients they would interact
with there. She was able to buy
materials in bulk. Because they're
working on the same consistent types of
houses and the material they could use is
more consistent across them. And
remember, she started with a project
profitability and implementing a
financial system called Profit First, but
it gave her a huge marketing idea because
(16:27):
she was actually looking at the numbers.
Of course, you know, home improvements.
Rachel's in a male dominated industry.
Her competitive advantage now is that
she can grab a glass of wine with the
majority of female real estate agents and
build relationships with them that her
male home improvement counterparts can't.
She's having a lot more fun with
marketing than she used to because she's
(16:48):
using that competitive advantage,
building those relationships with real
estate agents that are working with for,
you know, starter home sellers moving to
their forever home, which is a great
market for those real estate agents to be
in. And the more they do, the more she
can do. And she's loving it. Yep. This is
just isn't just Marcus's or Rachel's
story. We've seen these financial
transformations happen over and over with
(17:10):
business owners who make the shift from
chaotic money management systems to
financial operations that work
systematically. After the break, we'll be
chatting through some of the roadblocks
that get in business owners' way and keep
them from a similar transformation.
And again, you might have experienced
some of these roadblocks.
(17:39):
Ready to take the next step towards
securing your financial future?Whether
you're planning for retirement, saving
for your dream home, or you just want to
make your money work harder for you, the
team at Wealth Wisdom Financial are ready
to assist you. And now it's easier than
ever to see how we might give you a boost
on your financial journey. Schedule a 15
minute discovery call with one of us
(18:00):
today and let's discuss your questions
and your financial goals together. Don't
wait any longer. Your financial freedom
awaits. Schedule your discovery call at
www.wealthwisdomfp.com/call.
(18:21):
Now some of you may be thinking. And I
heard it from Rachel, from Marcus, and
countless other entrepreneurs and
business owners. Well, I'm not a numbers
person. That's why I have a bookkeeper.
I've heard that one before. No, I don't
have time to look at financial reports. I
need to focus on serving clients and
growing sales. I've heard that one many,
many times. Oh, let me put on my Southern
(18:41):
accent. My business is too
unpredictable for strict financial
systems. That wasn't that good. Anyway,
you know what I mean. Yeah, I've heard
that one, I think just yesterday.
These concerns sound reasonable,
but they rest on a dangerous
misconception that financial management
is separate from business growth. Yeah, I
(19:02):
remember working with, um, another
Sophia. We love using this, this
acronym, this, uh, pseudonym, Sophia, a
talented designer who avoided her
finances at all cost. I just don't have a
brain for numbers. I'm an artist, she
insisted. That's why I hired an
accountant, right?And pay them the money
I do. For her?Yep. Yeah. But here's the
(19:24):
problem. Her accountant was producing
these beautiful to me financial
statements that were absolutely ugly to
her, right?To Sophia. But also
those financial statements would tell her
what had already happened. Well, Sophia
needed financial insights to make better
decisions about what to do next. So
Sophia implemented this one-page
(19:44):
financial dashboard in partnership with
her bookkeeper. Sophia discovered that
she had a brain for numbers after all,
when those numbers were presented in a
way that connected to her business
reality and her artistic sensibility.
Colors, you know, fun graphs,
charts rather than just numbers. She
didn't need to become an accountant. She
(20:06):
just needed her financial systems that
translated accounting data into
actionable business insights.
As for the time concern, this is often
the most expensive misconception.
I worked with Jeremy who ran
$700,000 service business. He was too
busy with clients and team management
(20:27):
to waste time on financial reports.
I, again, another thing I hear all the
time. I just don't have the time. Six
months later, Jeremy reached out in a
panic. His business had grown to nearly
900,000 in revenue. He did something
right, rightBut he had to take out a
personal loan to make payroll. So what
happened?Without proper financial
(20:48):
systems, he had been making growth
decisions based on revenue projections
without understanding the cash flow
implications. He calculated that
his lack of financial systems had cost
him over 120,000
in preventable expenses,
lost profits and unnecessary
(21:09):
interest. That's an
expensive way to save time. And again,
This is why I think the work we do is
so important. And people are like, just
say, I don't know, I don't have the time.
And I'm like, it's going to cost you.
Yep. You pay them one way or another.
Yep. Yeah. And let's talk about
that unpredictability excuse when your
(21:31):
business is up and down, you know, the
revenue's up and down all over the place.
Well, that's why you need robust
financial systems. Pretty much every
business has highly variable revenue
throughout the year. That was true for
Mia, a short-term rental operator. She
believed her unpredictable cash flow made
financial planning impossible. But once
we implemented proper financial systems,
(21:52):
Mia discovered that her business actually
followed predictable seasonal patterns.
Go figure. And with this visibility, she
could build cash reserves during peak
periods and to sustain operations during
slower months. What had felt chaotic
became manageable through proper
systems. The reality is this. If you want
to break through to higher levels of
(22:13):
business without financial anxiety,
You don't have a choice about whether to
build financial systems. The only choice
is whether to build them deliberately
or deal with the consequences of their
absence, because financial systems are
there. It it is a system if it's
not a system still. And so we shared
earlier about Marcus's transformation and
(22:35):
Rachel's transformation, but we left out
one of the most important parts of
Marcus's change. The most
telling change is Marcus himself. He
now has a clear understanding of his
business finances. He makes decisions
with confidence because he knows the
financial implications. He sleeps better
at night because cash flow surprises have
been virtually eliminated. Here's what he
(22:57):
told us. Quote, For the first time, I
feel like I'm building wealth, not just
running on the revenue treadmill, or
treadmill. Yeah,
this is the power of financial systems.
They transform anxiety into confidence,
chaos into clarity, and revenue into
actual wealth. And here's the good news.
(23:18):
You don't need to overhaul your entire
financial system overnight, right?Start
with just one system. The one that would
create the most immediate relief in your
business. Maybe it's a project
profitability tracking system that helps
you identify which clients and services
actually drive the bottom line. Or it
could be implementing profit first to
(23:40):
ensure you're building wealth, not just
generating revenue, which a lot of
businesses are doing. Whatever you
choose, start small, get the basic system
in place, and use it consistently for 30
days, and then refine and
expand. The path to scaling isn't about
working harder or even selling more.
It's about building financial systems
(24:02):
that transform revenue into lasting
wealth. So Are you ready to start
building financial systems that will
unlock your growth and give you insights
into what's next in your business?Then
join us in the Wealth Wisdom Financial
Community. Today we shared in the
community a practical framework called
the Financial Systems Diagnostic Tool. To
(24:24):
get that framework, you can join the
Wealth Wisdom Financial Community as a
premium member, and it could be the
turning point that your business journey
needs plus. And this has been there for
quite a while. Every Premium member
gets our seven step series to
build your success dashboard, which
we have given you a beta version of a
(24:44):
Google Sheet with some of our best
business growth and tracking tools that
you can mix and mingle and work with your
accountant and make into your own
one-page dashboard or maybe couple page
dashboard with beautiful things
color-coded as Google Sheets only camp.
Also, if you didn't know, we share
practical wealth buildingEvery single
Wednesday in the Wealth Wisdom Financial
(25:05):
Community. Call it Wealthy Wednesdays. If
you want to transform your business
finances from chaotic to streamlined,
join us a premium member at
wealthwisdomfp.com/community
and we love to see you in there. You get
what we publish today, that
business dashboard, success dashboard,
seven step series, and everything we
(25:27):
publish since we started that community a
few years ago. And we use that dashboard
regularly like. So I don't know how long.
Every 10th and 25th and under Rock
Reviews. Yep. So hit that
subscribe button and don't miss next
week's episodes that's geared towards
helping you avoid burnout along the way
of growth to growth and scaling.
(25:49):
Thanks for joining us. Live long and
profit. The stories in today's episode
are based on real life, but just like Law
and Order, they are fictional and do not
depict any actual person or event. The
topics presented in this podcast are also
for general information only and not for
the purposes of providing legal,
accounting, or investment advice. On such
matters, please consult a professional
(26:10):
who knows your specific situation.
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