Achieve Financial Mastery through Profit Simple

Having up to date information is like creating a scoreboard in your business. In fact, it's like getting in your car and aimlessly or with a gps, going to your destination. If your costs go up and your price that you're charging your clients doesn't go up, your profit margins drop, your gross profit drops. And unless you're cutting a lot of significant costs in your business, your bottom line is being drastically impacted. Hey everybody, Bob Govreau here. Welcome to the Wealthy Entrepreneur Podcast. Very excited to have you here. Ultimately, the Wealthy Entrepreneur Podcast is here to help you move your business forward and help you achieve financial mastery in your business and in your life. And today, what I actually want to talk about is about bookkeeping. In fact, we've created a concept that I'm going to share with you today called Profit simple that I think will help you understand what what you need in your business to help evolve it and achieve great things inside your business. Because you're gonna be empowered by the confidence of good information. So let's jump right into it today. Here's my idea of Profit Simple. So, Profit simple, The concept is three things. One, as a business owner, it is 100% important for you. And if you don't have this in your business, we need to talk. Because if you do not have your information in your bookkeeping up to date, then you are missing out on a huge opportunity. And here's why. So having up to date information is like creating a scoreboard in your business. In fact, it's like getting in your car and aimlessly or with a gps, going to your destination. I always think about this. I always think about going from Toronto to LA and jumping in a car without having any sort of gps. I like to use Waze as my GPS because it also shows you where the police are on the road in case we're going a little fast. Listen, entrepreneurs, I know you like to go a little fast in your life. So if we're going a little fast, it will show me where the police officers are. That is also really relevant, right? So instead of having ways I jump in the car and I start following the sun to the west coast, it's going to take me a long time to get there. And although I might be very intuitive in driving in my car, I know that if I pre program this in Waze, it's going to calculate the best way for me to get there. Because if you don't know where you're headed or you don't know where you're at, how are you going to understand how to get to your destination. So having up to date information in your business for bookkeeping is so very important. In fact, it might be one of the most important elements of running a small to medium sized business. Because if you don't have financial transparency over what's going on, you are completely lost. Okay, so the second piece of profit simple is now that we've got it up to date while we better make sure it's accurate. Because I've seen a lot of business owners that yes, we've got our QuickBooks online that's in and it's available and it's up to date. But the reporting and the person putting that information in is not maybe as technically savvy as they should be. And what happens is the business owner is getting these reports, here's your profit loss for the month, but it's inaccurate. There's items that are being expensed that should be, which might be costing you tax money and there's items that are put on your balance sheet that should be expensed or vice versa. And what happens is us as a business owner, we're getting this information and we're making decisions based on this where we need to make sure that we've got the right information. Because making those decisions with information that has errors in it, that's going to be a big problem. Okay, so up to date, accurate and reliable. Right. Let's throw reliability in with accurate and the last piece is interpreting. Right. It's great. As a business owner, I'm so proud of you. If you've got up to date information, check one. If it's accurate, check two. But number three is, do you actually know what this means? Because it's great to have this information up to date and your filings are likely going to be up to date. Wonderful. But if you're not reviewing this on a regular basis, then you're going to have problems. If you're reviewing this but you don't know what it means, you're going to have problems. Because once you understand what this accurate, reliable, up to date information is telling us, then we are empowered with being able to make informed decisions. And that is one of the key elements of being a successful business. Being empowered by having accurate, up to date information that you understand and you use to make informed decisions. Now I'm going to share a little story here. I have a client, client's a butcher shop. And a couple years ago we had talked about having this regular monthly finance meeting and he didn't want to commit the time to it, it was. Okay, you know, I'll give you some context. The business was about 1.5 million in annual revenue. The net income was about $150,000 to the owner, which is a great small business. $150,000 a year. Fantastic. You know, it's probably 200 if we take into account the deductibility of some of the expenses that come in. But this individual had a fairly successful business going on. And I'm going to throw this back to maybe 2017, 2018. And during that period of time, we saw across the world, we saw the fuel price go up. And for those of you who don't know what happens when fuel prices go up, that means all of our costs go up as well. Because everyone who's delivering a product, especially think of them, right, they're getting deliveries of fresh meat, fish, seafood, every single day. And if they're getting this in, they're getting a fuel surcharge because the businesses are going to transfer that. At least smart businesses are going to transfer that cost to the end user. And you would probably say, okay, Bob, well, yes, why didn't the butcher just translate that to the end user as well and increases prices? Because that's what I would have done and that's what we would have done working together and evaluating this on a monthly basis. But because this business owner was not reviewing his finances on a monthly basis, he missed out that this fuel surcharge was starting to create extra cost in his business. And when that happens, we watch our profitability continue to get squeezed. Now, when I had met with this business owner, he's a typical business owner who likes to meet three to six months after his end of year. We talk about his taxes, he moves on. When we had talked about it the year before, again, $150,000 of income in his business, he's cash flowing, he's living a great life. He didn't want to meet until the next year to review the following year. And during that year when those price increases happen for the fuel surcharge, his profit margin dropped about 10%. Now, here's the reality of understanding our finances. And we're gonna talk more. Not today, but we're gonna talk more about what your business financial model looks like. But what happens is if your costs go up and your price that you're charging your clients doesn't go up, your profit margins drop, your gross profit drops. And unless you're cutting a lot of significant costs in your business, you, your bottom line is being drastically impacted. So back to my client. So we meet the year later. And unfortunately in his situation, because I care about my clients so much, it really bugs me. As soon as we opened up their finances, I saw he had $120,000 loss, $120,000 loss. So I quickly call him up and I say, come on in. I'm not going to share his name, but come on in, let's review this together. And he came in, he goes, bob, I don't understand. My business has been stable for so many years. What possibly could have happened? And I said, well, did you review your finances on a monthly basis? He said, no. I said, okay, well, back in February, I can see that you had a 10% increase in your materials and your raw cost of goods because the market changed, fuel prices went up and your suppliers added a fuel surcharge to your business. So what happened is the money you were making on selling this dropped. It got squeezed and then from the money, even though you might have done more work from the money that you had left, you still had to pay your overhead costs, your staffing costs, your insurance, your rent, your meals and entertainment, your dues and subscriptions, everything else in your business. And by the time you had got to that point, you were losing money. And unfortunately, in this situation, the client did not want to come in and meet monthly, which is okay, you know, that's their choice. But you have to at least implement this in your own business. And we're going to go back to profit simple here. Profit simple, up to date, reliable, accurate and can be interpreted. So in his case, he had bookkeeping that was up to date and it was accurate, but he wasn't reviewing it, he wasn't interpreting it. And he lost $250,000 in a swing in his business and he wasn't even aware of it. This is a problem, this needs to be solved. And this is what we do to help people become the wealthy entrepreneur is introduce a schedule and a methodology. One with Profit Simple. Profit simple is our way of saying bookkeeping, right? We have to have that up to date. Information has to be accurate, reliable. Even better if it's a cloud based solution so that it's live at all times. We need to have a monthly check in with our business check, review the finances, know how to review it so that we can see what's going right and do it again and what's going wrong and how we can eliminate that so that our business continues to be financially successful. And there's going to be moments, guys, in our business, where things happen and we can't prevent them. But we need to identify that now so that we don't miss out on 12 months of our business running very inefficiently because now this particular client is going to have to go raise his prices about 15% in order to recapture his profitability. And for your customers, how upset are they going to be at a 15% increase? Where last year, how do you have done his, you know, 6 or 7% increase that would have broke him even and continued being profitable. They would have been way more receptive to that. Now he's two years behind and now he's got a bit of a problem. Right. Regardless of whether the fair market value of what he offers is his new 15% increase, it's that 15% increase that might be a bit of a challenge. So. And we'll talk about pricing strategy other days because I could talk about that all day. But the important piece is having up to date information financially. Now, one of the things that we've pulled together and, and I want you to be able to download this resource and we're going to attach it to this podcast episode. So we've got a document referred to as the 12 biggest mistake business Owners make with Their Bookkeeping. And this is very important. Right? Take this to your bookkeeper. If you don't have a bookkeeper and your information is not up to date, sos, make sure that you connect with us. There's going to be a link in the podcast as well. Make sure you have up to date information. It's accurate and reliable. And third part is interpretation. You need to be working with someone who can help you interpret that information. Because again, when you have that information available to you, it is power. And the center of being a wealthy entrepreneur or a successful business is understanding where your business is at so that you can build out the pathway to achieving financial mastery. Okay, make sure you download this link. Want to thank you guys for tuning in today. Listening to a little bit about profit. Simple how to make sure that your bookkeeping is up to date, reliable, and can be interpreted to empower you to create greatness in your business, especially achieving your financial goals. Thank you for tuning in. If you liked the episode, make sure you give us a follow. Feel free to leave any comments below. Tell your friends we're happy to have more people. Cause ultimately I'm here to make sure that business owners just like you are empowered with good information so that you can make solid decisions and ultimately change the world. And we can do that together. So thanks for tuning in. Have a great day. Look forward to seeing you next time.