Episode 206: Fireside Chat - MBA Level Financials with Louisa Else

Welcome to another episode of the Club Capital Leadership Podcast. My name is Bradley Hamner, your host. On today's episode, we have the new manager at Club Capital, Louisa Elzie. She has got a wealth of experience in tax and bookkeeping. I think you're just going to see her love for all things bookkeeping and tax accounting, etc. But hopefully, and I know you will, you'll pick up some things that will help you along your journey. Without further ado, here's my conversation with Louisa Elsey.

So the big question is this: how do small business owners like us grow our leadership, develop our teams, and scale our business in a way that allows us to get our products and services out to the world yet still remain profitable? That is the question, and this podcast will give you the answers. I'm Bradley Hamner, and this is the Club Capital Leadership Podcast. Hey, before we get into today's episode, did you know that Club Capital is the largest accounting advisory firm for insurance agency owners in the country, providing monthly accounting, CFO services, and tax preparation? Check them out at club.capital. This podcast is brought to you by Autopilot Recruiting. Join over 1,200 State Farm agents in putting your recruiting on autopilot. Any successful insurance agent will tell you how important team is. Finding those rockstar team members doesn't happen when left to chance. It happens through consistent recruiting. You never know when you're going to lose a team member, and the key to an incredible team is constantly searching for the best talent. Autopilot Recruiting is a continuous recruiting service where you'll be assigned a recruiter that has been trained to recruit on your behalf every business day. This recruiter will take over and revamp your career plug, send out assessments, do prescreen phone interviews, and schedule your in-office interviews. All you need to do is to show up and give a thumbs up or a thumbs down. This ongoing service is extremely affordable and a no-brainer for taking your insurance agency to the next level. Listeners of the Club Capital Leadership Podcast, go to autopilotrecruiting.com and use the code Club Capital to get started. Again, autopilotrecruiting.com and use the code Club Capital to get started.

Louisa Elsey, welcome to the Club Capital Leadership Podcast.

Great, thank you so much. It's great to be here.

Excited to have you. So, uh, you are the new manager at Club Capital, and so, uh, the Monday episodes— I think I shared this— we always do kind of background and origin story. Once you, uh, introduce yourself to our listening audience and, uh, share a little bit about kind of what you're, what you're doing today, but first talk about your journey.

Absolutely. So I joined Club Capital about a month ago, a little bit more now, and my background has always been in tax and accounting. I got to start off kind of in the traditional stereotypical sense doing public tax at one of the bigger regional firms and had a— and really had a great background there as far as like getting into the nuts and bolts of taxes as well as learning on the job about everything and business related as well. And I actually got to be an Anchorage, Alaska to do that because of where I got the job offer. So I spent the first 4 years of my college graduate career after that kind of exploring up there and then decided it was time to move home back to the Midwest where I'm from. And so I ended up working in industry at a publicly traded company and learning tax on that side of things, which is a very different experience. And then after that, I actually got the chance to kind of go back to my heart, which is working with clients directly. And I just spent 3 and a half years working at a boutique consulting firm that did outsourced tax and controlling controller work there and working as their tax practice leader as well as serving on their management team. So that's kind of where I came from and then come bringing all of that into Club Capital now.

Yeah. Tell us a little bit about what are you, what's your role day to day as, of course, as with any role, it's always evolving, but what's your role day to day?

So my day-to-day role is really coming in and providing that wealth of experience that I've built up to our existing teams and our existing clients and continuing to support them both with my knowledge as well as setting up processes. So I've been working really closely with our account managers. I came in and started end of year, so there's no shortage of projects we're working on and things I can help out with. I'm also coming doing the same thing on the tax side. So overall, working on setting up processes, continuing to support the growth that is already there, as well as by virtue of my experience jumping in and helping in a lot of client-specific questions because I can and trying to help us kind of move forward that way as well. Yeah.

Well, I'm kind of curious. I don't know if I was going to ask you this before, but I think for our listening audience to be able to kind of support them. You were, as you said, kind of working for almost a, a Big Four, right, company. Um, and so you've seen big businesses. You know, I, I remember one of the very first times that I had a conversation with Micah years ago. You know, he had made a— I don't know if he recalls this comment actually, but he made mention of bringing, you know, big business financial type structure to small businesses and making financials and tax, et cetera, kind of approachable. What are some of the things that you've seen that you feel like there are kind of best practices from the bigger companies you've worked with that small businesses can apply to what they do every day?

I think the most important coming from my angle, because of course I'm, I'm looking at the numbers, but is being on top of your numbers. And being organized. One of the most common things I saw when I was doing small business tax returns in a couple different jobs was it became a February, March frantic pace problem. And really it was everything was focused on the taxes. Hey, I need my taxes to be done, so here's my shoebox. Literally, we had clients who brought us things in a shoebox. Thankfully not too many. Or, you know, here's my QuickBooks file. I haven't really looked at it, you know, please let it, please do my taxes. And so it became not just doing people's taxes, it became basically doing their whole year's financials before we could do their taxes. And if we found things that, you know, were recommendations we could make or anything like that, it was too late for last year. I couldn't say, you know, here's a great recommendation on spending because it was done, last year was done. So the more that I see small businesses who are on top of things, who are looking at their numbers and understanding, the more benefits they're going to get for their business growth and for their tax side, because they can spot problems in real time. They can spot opportunities in real time rather than always looking backwards and going, oh shoot, I wish I had fixed that then, or I wish I had thought about that then.

Yeah, yeah, yeah. What are, what are some of the things whenever you like? Because I think conceptually people get that, but like, what is specifically is like on top of it look like?

Uh, I think the biggest thing, or one of the biggest things, is knowing where your money has gone. Um, to be able to say, I know that I usually bring in $50,000 a month. Um, and the people are pretty on top of usually how much they brought in. Um, but people are usually— are sometimes less on top of really tracking. It's the same as a personal budget as far as spending. Well, okay, I'm playing— I just hired 3 employees, that's not a big deal, right? Well, it is if that employee now you have to offer benefits to or taxes. And just because you're paying them, say, $1,500 a month, that's not what they're costing you. And so it's really easy to feel like you've got a lot going on, know that you need to support it, and that's great, but not actually crunching the full numbers as to what that's going to cost you. And then you get to the end of the year and you— or if you get to the end of your bank account and you realize that you hadn't planned out how you were going to spend. The flip side of that, and this is probably the most common thing that I see, this is the most common, I think, pain point for a lot of profitable small business owners, is they get to the end of the year and they never thought about taxes. So thinking quarterly about what taxes are, especially if you're a new business owner, because we aren't— if you have historically been, I don't want to say stereotypical, but, or traditional, but a W-2 employee, you get paid, but you go to work every day, you get paid by your employer. You don't have to think about taxes because the federal government requires that that's done for you. You have a part of your paycheck kept out. So what I have seen very commonly is people get— go out, they start their own small business, whether it's an insurance agency or a store downtown or anything in between, and they're really excited about it and they've gone through everything and they come to their first year of a tax return and they never thought about taxes. They never thought about having to pay in taxes. The IRS requires you to pay them in quarterly. And that is a really common pain point, especially if you were successful. but you didn't think to set money aside. I've seen so many clients come through in every industry possible who are really excited. They had everything going well and they made, they profited $50,000 last year and they don't have $5,000 to pay their taxes when April comes because they didn't think about it. And that's huge because the IRS doesn't give you an extension on that, whether it's having to set up payment plans or really starting yourself off in the hole. Just by virtue of not thinking about that one piece.

Yeah, yeah. It's, you know, it's just basically that people are really good at typically setting production sales targets, production goals. But it's really about setting— in addition is taking it all the way down and setting goals for the financials too, and setting financial targets, almost like tying your production numbers to your financials and being able to see the correlation between the two, right?

Exactly. Yeah, exactly.

If someone— talk about the, the value that you've seen, um, even the last couple years. I've tried to use words very intentionally, whether it's on the podcast or in, in the businesses, in that, you know, people forecast, budget, etc. And, you know, really forecast the value of forecasting looking forward. Okay, so I've got my financials, I'm, I'm looking at, I'm looking at what I need to pay in quarterly tax estimates. You know, I'm on top of my numbers, I get those. It's like, okay, those are the baseline things. I mean, if you're 6 months behind on your financial statements, that's one thing. So what are your thoughts around just financials and forecasting financials?

I think it's really important to go to the next level. I think there are a lot of small businesses out there who don't do that, and they, they have kind of the same goals, they have the same results every year. They've kind of established their niche, and that's fine, and that's great. It all depends on, you know, what you're looking for. I'm not here to pass any judgment on whatever your goals are, but using a budget at a base, a forecast, really helps set goals and helps you achieve them. It's the same thing. I think most of us are Personally, I need to set myself a lot of lists and a lot of, you know, I need to be here in even this weekend or next week or whatever. But if I want to get to that, I have to do these steps. If I don't make that list, if I don't make my goal, my Christmas tree stays up, which it is in the background here. So it's the same thing for business. It's if we set those budgets, it's a goal to get to, it's motivation. And also it makes us figure out the how and make the plan. And I think the plan is really important. If your goal is you want to increase your bottom line by $100,000 next year and you don't budget out what it takes to get there, then you're not going to get there. You're gonna say, oh, well, I want to increase by $100,000, so I'm gonna make sure that I have $100,000 more in revenue. And at the end of the year, you didn't meet your goal because to get that $100,000 in revenue, you spent $20,000 more on a new employee, you spent $5,000 more on marketing, marketing, and so you didn't plan out all of the steps, and so you didn't meet your goal. So forecasting, I think, is the really important way to set goals and make them attainable and give yourself a roadmap to get there and then be able to check in along the way. If I made a goal for this coming December and I have my steps to get there, I can check next month to see where things are at and what needs to be adjusted.

All right, I'm gonna put you on the spot here because I just wrote this down, but I was thinking when you said next level, I was thinking, well, what are the actual levels? So let's, let's lay them out. Okay, so we're going to use 101, 201, 301, and MBA. Now if there's— if 4 levels is too much, then we can drop it down. Okay, so there's no reason at some level for somebody to be thinking about you know, at an MBA level, their financials, unless they have covered all the basics. If you don't get your financials on a monthly basis by the 15th, then you're okay. We get that, right? But what are those levels? Okay, so let's begin to kind of say, okay, here's the foundation, here's the next, here's the next.

So the foundation— so we want the foundation to be that getting the financials done, keeping them up to date, right? Um, I think the second— and having your books done, you know, whether it's you doing them or having Club Capital, just keeping things up to date. I think that's the base level. Things are cleaned up, things are going well. If you needed to look at something, they were there. I think the second level to that is a deeper personal understanding of what's happening and understanding what those financials mean. Some people don't care. They're going to their tax accountant at the end of the year. So It's important that they're right. But the next level is understanding what's happening. That really a lot of times in real life comes down to understanding cash flow. I think a very common question people see is, well, you're telling me here that I profited $20,000 last month. I don't have $20,000 in my bank account. Where did I spend the money? And then we can look and say, oh, well, you paid this personal, or here's this loan you took out. And you have to pay back 10 of that $20,000 to your loan every month. So understanding how, how the, what those mean, what things are moving, that's the second level. And that's a personal, that's a personal thing for you to be able to speak to how your business is doing and what choices you're making. I think that's really important because for small business owners, cash is king. So you need to be understanding where your cash is going.

I think it's awesome. I just want to call out and kind of agree with you on the delineation between the two, because I was just thinking in my mind— I won't, I won't say his name, but, you know, one of my friends, he was like, oh yeah, I get my financials every month.

Great.

Do you actually look at them? He's like, no, I don't look at them. Like, okay, what good is it going to do? You need to review them. That would be 201 and actually having an understanding of them. Okay. I love that.

All right.

What's 301?

So that's a good question. I would say 301 is taking that and budgeting. So maybe not a full forecast, but having a plan for how your year is going to go. So the next step is budgeting. Budgets can be anything from, I know what last year looked like, let's plan for it to be the same, and let's track against last year, to I want to grow a little bit, so let's, let's increase and see. So Understanding your financials, having that budget set in place, and then being able to benchmark against it. This is where I want to get to. Let's see, this— I last month I missed by $5,000 on income, or hey, I'm ahead of the game, that's awesome. So setting that budget and benchmarking against it, I think, is the next step for 301.

All right, we've We— what are we going to? Are we going to 401(k)? We're going to MBA level. What's next?

I think let's go 401(k). I've got two here. So 401(k) is taking that budget and doing a specific cash forecast. Cash forecasts are a little bit different because we're again specifically focusing on cash and it's understanding like when— what you can afford cash-wise. Cash forecast.

Big difference. We're not just talking about the P&L and the balance sheet. Most people just get focused on, I just, I get a P&L and that's enough. It's like, no, no, no, no, no, no, no. I've told my story on this plenty of times. Uh, uh, you, you can go back if you, you had— I know you just came on with Club Capital, so you haven't heard my story, but when you were telling about like not knowing the difference, I was like, I've vulnerably shared my story of me not knowing what in the heck was going on. I actually asked, uh, Summary version was made $30,000 in profit. Um, the first time I made a profit in the business, I was like, awesome, where's that money? He was like, I don't know, you spent it. I was like, what? That makes no sense to me. I literally thought there was a pile of $30,000 sitting somewhere. I was like, oh great, good, I need that money somewhere. Yeah, that was gone. I had no idea. Anyway, go ahead.

There's a lot more discipline that's required to be a small business owner than to be a traditional employee.

Yeah, for sure.

I think it's just, it's a very different mindset. So I— you're not alone, I'll put it that way. Uh, yeah, so I think that cash forecast is important, and you're really focusing on, okay, at what I'm doing right now, this is, this is what I'm going to have left, this is what I need to plan for. Um, and then taking that one step further to the MBA level is the full— is the full-scale, scale forecast. And that forecast lets you take a cash forecast and go bigger. That's, I want to grow, I want to set this, I want to make this scorecard bonus, I want to make this variable comp percentage. How do I get there? And so that is not only looking at cash, that thing, hey, I need to have cash to pay my mortgage, so we've got to make sure that that cash flows in there, or whatever else those other expenses are. But then also looking at what it's going to take to meet those goals. And that, and that's a bigger investment. That's a bigger focus. But that's how you really grow. There are plenty of, there are certainly small businesses out there who have seen growth without doing those steps.

Yeah, sure. But it just kind of happened. It just kind of happened, right?

But it just happened. But for most people, for most companies, for most businesses, it's because you're intentionally figuring out where you want to get and how to get there. The flip side of that is for people where it just happens, they didn't plan for it and they can't support it, whether it's because they don't have enough staff because they grew. And suddenly they're scrambling to their personal life behind it. Oh, we weren't expecting people to want our product so much and we can't make it. So the flip side of that is also really important for forecasting. You might be able to get to the numbers without it. But if you haven't planned out how you support that, your company is in just as much danger.

I think this is actually really profound. Is that some people listen to this and they say, okay, I passed, I'm past 101, I'm past 201, I'm past 301, you know, and I've set a forecast, I'm done. Well, even taking— let's just say I'll use some numbers. Okay. Tell me if I'm, if I'm kind of thinking this. I make $15,000 a month from my business personally. To me, my business pays me a W-2 salary and I take distributions of X amount. X amount pretty much every month, although most people would probably take variable distributions. But let's just say, let's say, say you're pointing at me like, yeah, but let's say that they've structured that, okay? And they say, I'm making $15,000 a month. I want to know what is it going to take for me to make $20,000 a month continuously? Because we're wanting to buy a lake house, we're buying, wanting to buy another property, we're even buying some investment property. So it's almost like taking and reverse engineering, going backwards all the way back up the other way and saying, from you personally to make $20,000, an extra $5,000 a month, here's what the financials need to say. Here's— and then you can go all the way back up to the, to the production numbers and then tie all that way down to the activities, which business owners typically are pretty good at that part. They're pretty good at that part, but it's the going the other way. Thoughts on that?

I think that's really, really a great point, is we, we have our goals, but we have to back into what, what we have to do to support those goals. Uh, if I want some— if I want to increase my margin or to increase my, my monthly profit by $1,000, okay, well, how many more units do I need to do for that? A thousand? Okay, I'm— that cost me 20 units to make an extra $1,000. Oh wait, but what does each one cost? Okay, well, I, I spend $50 on each one of those. And you have to absolutely go back up because if all you do is say, okay, I need to make $5,000 more cash next month, like we talked about before, that's not factoring in the additional spend you have to do to make that. So there's always, always an investment you have to make to increase. It's not a dollar for dollar.

Okay. I'm so glad this came up. This is actually a really good place. I want, I want people to hear this because I think that you've seen it from a big company perspective, and I just don't think we think about this enough. I certainly did not understand the balance of investing in— for growth versus profitability and the constant— like this part of it, the company is like, you may actually be producing and growing, but that doesn't mean it's always going to immediately trickle down to the bottom line. Eventually may get there. So my fallacy early on was we'll just produce, sales will happen, everything else will take care of itself. No, no, I was completely wrong in that. And if I had known what I know now, I can't even imagine. So just speak to that aspect of the, of the balance between growth and profitability that you've seen, not just in the time you've been with Club Capital, but, but other companies and how they balance that.

I think the biggest thing there is sustainability. And the fallacy that you had, you know, the focus on sales and growth, that can give short-term success, but it's not sustainable if you don't invest back into your company to, to build it more. I can say, hey, I want $30,000, I want more sales, I want 30 more sales next month, and you can send your sales team out and they'll get it. If you don't hire the additional team member it takes to support those 30 sales, First of all, either you're not gonna serve those clients well and they're gonna disappear and that growth will have been very temporary, or you're going to pick up the slack or your team's gonna pick up the slack and you're gonna be so wiped out, you're gonna lose team members 'cause they're overworked. So I think investing in, especially in this day and age, especially in the remote work culture we live in, investing in people is so important. Because that's what builds your team, especially if you're in a service industry. This can— obviously there are a few different pieces if you're in manufacturing, things like that, but in a lot of these service consulting focus, different items like that, your team is so important because one, they will replace you if they, if they need to, and you can't do it all. I think that one of the biggest things I see— I did this myself at my former company along with my coworkers and on the leadership end— is we took on a lot. We were growing. We didn't have the hiring because it was constant. We saw so much growth that we were also overworked, that we were trying to, trying to pick up too much. And it's not sustainable. It's not sustainable for your team. And no matter how good you think you are, you're not going to provide the same level of service to your, to your, those new sales. And maybe those new sales are going to be great, but you've taken away from existing clients that you've had for, for 5 years. And they're noticing, they're going to be the ones that notice, they're going to be the ones that say, hey, you used to talk to me twice a week. And now I get a half hour.

Yeah. And, you know, you can be hitting the sales numbers, but the cash that it took to actually fuel that growth from the new people that bring on, plus the marketing spend to provide them with the lead generation that they need, etc., you can be hitting sales targets and be like, wait a minute, why is the money not going up? Well, maybe the money is actually going up. But the actual bottom line is like, what's not growing? So top line's growing, but bottom line is not growing. And just understanding how that's going to ultimately play out in terms of, like you said, with cash is really, really important. So this has been great for our first, first session, first podcast, I should say, first session. Great to have you on. People want to reach out to you and chat with you and the team. Where's the best way for them to get in touch with you?

So they can reach out to me at support@club.capital, club.capital, or they can reach out to me at my personal email is louisa@club.capital. So both of those are open. I'd love to hear from everybody. I like answering nerdy questions. It's kind of my forte. You can ask, you can ask all of my new coworkers from the last month. Kind of what I do. I like numbers. So awesome.

It's great having you on.

Awesome, thank you.

Just a real quick takeaway, I think when we went through the 101, 201, 301, 401, and then the MBA level, hopefully some of you were able to hear that and say, oh yeah, here's where I am, okay, here's how I need to get to the next level, here's how I can improve. I hope that that was really helpful for you. It was a really good reminder for me and helped me to kind of see, oh, you know what, I actually need to go into a couple companies and look at putting together a cash forecast because there's some things that I have not focused on, even though regularly getting the financial statements is something that I've been doing. I can see in a couple companies where I need to improve to get to that MBA level, and I want to be able to develop the skills to be able to do that. So hopefully that served all of you. I want to give a shout out to our podcast sponsors, Autopilot Recruiting. Club Capital, certainly Coach P Consulting and DirectClicks. Obviously you just heard a great example from Louisa about Club Capital, but if you're wanting to make decisions about bringing on a team, or can you afford to outsource, you know, the team of recruiting, how's that going to affect your cash flow? And you want to work with a company that's going to be able to help you to do that. Go to Autopilot Recruiting, autopilotrecruiting.com, and let them know that you heard about them on the Club Capital Leadership Podcast. They're going to be able to take what you know should be done on a daily basis, weekly basis for sure, and do that for you and put in front of you high quality candidates. Then when you get them on board, you can train them with Coach Pete. Go to coachpeteconsulting.com. He'll give you an entire first month off. And then finally, you know, you want to make investments and give some of your sales producers great leads that they can convert on a consistent basis. Visit DirectClicks, go to directclicksinc.com. All right, everyone, enjoy this episode with Louisa. You'll be hearing from her more often. We'll be getting down into the nitty-gritty of tax and accounting with her, I know, in the future. All right, everyone, till next episode, leave well.

So the big question is this: how do small business owners like us grow our leadership, develop our teams, and scale our business in a way that allows us to get our products and services out to the world, yet still remain profitable? That is the question, and this podcast will give you the answers. I'm Bradley Hamner, and this is the Club Capital Leadership Podcast. Hey, before we get into today's episode, did you know that Club Capital is the largest accounting advisory firm for insurance agency owners in the country, providing monthly accounting, CFO services, and tax preparation? Check them out at club.capital.