Why Your Business is Not Profitable!

Hey, everyone, it's Mike Andes and you're listening to the Business Boot Camp podcast. Today we are going to be talking about how you and your business can get on a financial diet that's going to make you more lean and more nimble when hard times come. Before we get into today's show, though, a big thank you to today's sponsor, which is Gusto. If you haven't Already, go to gusto.combootcamp for a free 90 day trial of their software. And. And you can see exactly how easy it is to have the benefits and the direct deposit for your employees and their payroll. If you're spending minutes, if you're spending seconds literally doing your payroll each week or each pay period, this is a cheaper solution than just about anything I've seen and super, super simple. It's the best software out there I know of for payroll. I promise you, you won't be disappointed. You can try it out for an entire quarter, three months, and after that, it's only like six bucks a month per employee. So check it out. Go to gusto.combootcamp and I appreciate it because they have supported this show a lot. So thank you so much to them. So today we are going to be talking about getting on a financial diet. Now, I own a gym. I know what it's like to be on a diet. I know it's like to be talking to people who are on diets. And for myself, I don't prescribe any specific diet. I'm not into diets at all. I just try to eat as healthy as I can. I'm probably close to a paleo keto diet in terms of, like, my eating habits. I just try to eat as good as I can. And I exercise daily and sleep not enough. So I try to keep it basic for my health physically. But when it comes to the health of your business, a lot of us are carrying around a lot of excess fat or we lack the mobility in our business financially. And therefore, we need to go on a diet. We need to go on an exercise plan to get rid of the excess weight that is holding us down. Now, when. When the economy is good, it hides. When the economy is good, it hides that excess fat and that excess weight that your business has financially. So, like the same thing, when, if someone has a really good taste for clothes and designer clothes and things, they can get away with, like hiding an extra 15 or 20 pounds around the waistline, just get some, like, good tailored clothing and you're going to look fine. They can hide it and the same thing goes for a good economy. When everything is going really good, it's easy for us as business owners to sort of hide the issues financially within our business. In terms of the little bit of slack here and, you know, a little bit of waste here and a little bit inefficiencies here and something that's not really needed here, and, you know, tax write offs that are not being taken advantage here. And all of a sudden there's a little bit of extra weight around the waistline that during economic prosperity, when everything's going good, the jobs are rolling in, lots of clients, the phone's ringing off the hook. During those times, you get away with it because the economy hides those problems. Now when profit margins get cut, when the labor economy changes, when the macroeconomics of the country or the globe begins to change, we have a recession, whatever it is, that's when people get exposed the same way as when it's physically, you know, people most of the time be fine. If they have a little extra weight, they're okay. But all of a sudden, if they have to run two miles because of some emergency, they all of a sudden realize just how out of shape they are. And unfortunately, it's the wrong time to find out and what's gonna happen in the next recession because we've had 10 plus years of really good economic times. People have kind of had some extra financial fat on their business that they haven't trimmed, and it's been fine. You know, the economy has hid that from everyone seeing it. It's not open or public because there's just so much business and times are just so good and there's just so much work to be done. But when times get a little harder, when there's five competitors that show up to bid on your job instead of two, when the customers begin to ask for price discounts, when your employees begin to move to other industries, that's when it starts to show what you've been doing. Have you been in the gym? Have you been cutting out the fats and the sugars out of your diet? And I'm talking financially. And so today we're going to talk about personally and from a business perspective, where you can save money and cut out the fat. Now, before I talk about any of this, I want to say that it's more important to me in the way I think about business to think about the offense. Today, I'm talking about defense. It's something I talk about very, very rarely because I truly believe that with a great, the best Defense is a great offense. That's what, you know, they use in the sports world. I think the same thing goes for the business world. You know, great offense, great growth, great expansion, great profit margins, expanding new markets, increasing revenue share, taking out competitors, whatever it is, whatever you know, growth in your industry and offense in your industry is, I feel like that's sometimes your best defense. That being said, I also feel like when you are growing really fast, when everything is going really well and you are dominating, it's easy to allow the little things just to kind of just to forget about them and allow for excess expenditures to show up on the P and L and you just kind of, you push them aside because the bottom line revenue is so good and everyone's happy and you're making more money than you ever have and quarterly profits are up and everyone's happy. So today we're gonna talk about how you can trim the fat now when times are still good, so that when times are not good, you're not in a state of desperation and you're not trying to go after the next shiny thing, which in the dieting world is like six pack abs in six weeks or shed £50 in the next 50 days. Those are fad diets. And the last thing that you want to be caught in is when the economy hits, everything falls apart for you have to go to a fad diet financially, which is firing a bunch of people, cutting out departments in your business, changing your business model. That's what you don't want to have to do. We're going to talk about how you can trim things, number one, personally. So I'm going to talk about just two areas personally that you can trim off the excess fat and get lean in your business and in your financial diet. Number one is your car. So the two biggest expenditures personally that people have is their car and, and their house. And a lot of people ask me how I'm able to do so many things or when I want to make a business or I have an idea, I just go for it without too much recourse or thought about how am I going to pay for it, I need to take it from somewhere else. The reason for it is because I've been able to live really simply from a personal standpoint and not spend a bunch of money on stuff I don't need. For example, when for Augusta, now we have the franchise. I could have waited a lot longer and saved a whole lot more money. I just knew that, okay, it's gonna take a bunch of money to get started all the attorney stuff, legal stuff, I'm gonna get it all done. And. But the only reason I've been able to do it, the only reason I was able to get it all set up, and now we're selling franchises. The only way I was able to do it is by personally cutting out everything, like, looking at every single thing. But I'm gonna talk about the two biggest ones, which is your car and your house, and what you can do to downsize or reduce the price, the cost of living. And when you do that, this is the thing. I don't think that everyone needs to have a smaller car. I don't think everyone needs to have a smaller house. What I do believe is that if those things are keeping you from the freedom that you desire or keeping you from doing something within your business that you know would allow you to have more time with your family, make more money, make a more sustainable. That's when I start to look at these items, these physical goods that we buy, and really question whether or not they're really needed. Do you really need the Lexus instead of Toyota? Do you really need to have eight bedrooms instead of six? Do you really need to have five bathrooms? Like, my goodness, you only have three people living in the house, for crying out loud. There's just no reason. And so that's when I started beginning to question, like, okay, I'm not against those things, but if having those goods, having the extra three bathrooms is keeping you financially from going out and doing what you want in your business or giving to the charities that you want to support or being able to hire people that you know you need to expand or chasing that idea you're actually passionate about or that new business adventure that you would just love to try and get some experience from. If those. That house, that car is keeping you from those things, that's when I have a problem with it. So, number one, your car. One of the best ways to make sure that your car is not a massive expense is obviously just to have a cheaper car. Like, you do not need a $50,000 vehicle to be driving down the road. Last year, I went from a truck to a car because I started finding out I don't ever actually use the back of the truck, even though it was standard. Because I started a landscaping business. You get used to driving trucks, and so you end up just. What I ended up doing was always just driving a company vehicle, which was always a tr. Well, then it turned out, well, like, now I'm selling, franchise, and doing sales stuff. Like, I do not need a truck. So I got a four cylinder Honda Accord 2010 for $7,000 cash. And I put Augusta decals all over it so I can write it off. And one of the things about a car is you can use section 179 on a vehicle. And so section 179 is basically where you can. It allows you to write off the full cost of equipment or property, depending on if they qualify through depreciation. So in order for it to qualify, one of the big things is you need to use it for more than 50% of the time on the business. So, for example, when usually for a vehicle, they're tracking that by mileage, to take a section 179, which is basically, look, I bought the car for $7,000 at the end of that year, which was last year, I was able to take a section 179 because I used it 95% for business. And so at the end of the year, I took $7,000 off of my income because I took this expense of a car and just took it all the way off. Now, that car does serve me to do other things, but most of the time I'm using it for business anyways. And so I am able to use a section 179 and make a full write off. So now would I be able to morally say that I needed a $60,000 vehicle in my business? I don't think I could do that morally. I would feel like that I'm trying to cheat or something like. But I need a vehicle to move around to these business calls and meetings. All right? And I'm gonna use my vehicle for 80, 90% business. I can use a section 179 to write that entire expense off as depreciation in that calendar year. And so again, another idea how you can kind of reduce your cost of your taxes using your car for business. That's why I have decals all over the vehicle. There's no question that that vehicle is 100% a business vehicle. No one's gonna question me as, like, do you only use that for personal use? No. Like, it's a branded vehicle. There's a dog on the side of it and it says Augusta Lawn Care and has a phone number on there. Like, I want you to think about you having your phone number on your vehicle all the time. Like, no tailing people, no speeding, no harsh braking, nothing. You can't. Like, even if you're in a bad mood, you have to drive really good in my car. And so you can't argue that that's a personal vehicle. That is an absolute business expense. I have no claim about writing that off under a section 179. Again, just something you can do personally to make sure that obviously you can reduce the. The expense of your vehicle by reducing the horsepower. The year make, model, like, go goodness. Like, you don't need to have.

Like a Lincoln that's gonna break down a bunch and it's gonna have a. It's luxurious and stuff, or Cadillac and like, but there's gonna be, like, broken parts. There's like, lots of maintenance stuff. Get a Honda, for crying out loud. It's like, if something breaks on that vehicle, it's gonna cost me like $100 max. Anything over $100 is probably like the engine, which is probably like 200 bucks. Like, it's cheap. And so if you're pride, or if you're not pride, because I'm not looking at it as a negative thing. If your aspirations and your reason for being in business is to have a nice car, you should go get a nice car. But if your aspirations are to build a bigger business or make it more profitable or employ more people or give to more charities, then you might want to question whether or not you need the $60,000 car. When the $6,000 car will do the same thing and free up $54,000 worth of cash for something else with that's the car. Number two is the house. This is the biggest expense that I see business owners getting into personally. That keeps them from then expanding that, you know, puts a little bit of extra pounds, you know, a moment on the lips, a lifetime on the hips, as they say in the health world. Well, same thing goes for business. You know, just a moment of like, you, I'm going to buy this house. It's going to be great. I'm going to have like, this nice feeling, and I'm gonna build a little fence and we're gonna have a great time. And we're gonna live down the street from my favorite golf course. And, you know, a moment there, but a lifetime or like years, perhaps 30 years mortgage on a house. That's a lot of weight that you might be carrying around that you could trim off on this financial diet. What can you do for your house? You can downsize. Like I said, I just don't see the logic in having five bathrooms and. And two people living in the house. You can rent. You know, maybe in the short term it's better for you to rent so you don't have the obligations of maintenance. Like the biggest time suck for a homeowner sometimes is just keeping up on the maintenance. Like if you have two acres, you have a full time job keeping up with the property. I don't even look at home ownership in terms of dollars as much as just time. Like if I'm a renter and something breaks, I call the landlord and they fix it. I don't have to deal with it. I don't have to deal with mowing the lawn, I don't have to deal with any of those things. I pay triple net or I pay, you know, some sort of a maintenance fee and everything gets taken care of. I don't have any maintenance time whatsoever. If there's a leak in the roof, anything like that, you call the landlord. Again, creating time for your business so you can focus on the business instead of your house. You know, maybe you go get a trailer, live in a trailer for a little bit, there's no shame in that. Live in a van, like I think that's cool.

Again, everyone's circumstances are different. If you have a family, you're going to need a bigger house just to house them. But the question is, does it need to be in the middle of town or can it be in the suburbs where it's half the price for rent? Just a question. All right, so those are some of the personal things, way that you can cut out expenses. Now let's talk about the business. I'm going to talk about five or six things that kind of first came to my mind in terms of looking your business. Where can you trim some of the fat and get on a financial diet? Number one thing is advertising cost. A lot of us, as we want to grow, expand, we're spending money on advertising. Nothing wrong with that. But if you're actually wanting to cut costs or cut some of the fat out, you can start to get creative and start replacing paid advertising with creative advertising. And when I say creative, I don't mean just nice text and design. I mean like thinking outside the box. Guerrilla marketing some might call it. But like you gotta start asking yourself the question, what takes time but not money? What can you spend your time doing to advertise your business that's creative and different, that's gonna stand out and actually have a higher roi. That doesn't take a lot of money. So in the past you might have spent $4,000 a month on Facebook ads, or on print marketing, or on Google Ads, or whatever you're doing, or on a radio, local radio show. Whatever you're doing, you're spending like $4,000. The question is, can you move that down to 1,000 and then take that $3,000, cut that fat out, but then do something else that might cost a third of the price, but get you the same return because you're using creativity. So instead of just like renting space on Google and renting space on Facebook, or renting space in a newspaper or renting space in a radio, go try to own some sort of media. That is maybe you write a book, maybe you write a book about your local area, or you start a podcast around your local area, you start a blog about your local area, you create some sort of own media. You might even do a sponsored event in your local area, do a 5K, do some sort of a fundraiser, get a sponsor involved, and literally you can start making money from your advertising. What's his name talks about this in his book.

Man Content Marketing. I'm forgetting the name of this book. It's on the tip of my tongue. But basically he talks about using your. He looks at Red Bull and these other companies that basically turn their marketing into a revenue source by just looking at it differently. Making a magazine, that was really their way of advertising their drink. And then all of a sudden they created like sports events and all these things around them and there really is marketing a drink, right? So how can you make a sponsored event in your local area? Have a local credit union or grocery store or a health club or a hospital, Be the sponsor so you can cover your costs, but then you are the driver, you're the organizer, you can advertise your business, you can use it to really promote yourself. Sponsored events again, what can you do to replace paid advertising with creative advertising? What can you do in terms of handwritten notes and going door to door? What's wrong with that? Go back, do some old school marketing. The reason digital media is taking off so much in terms of advertising and the spend is just going through the roof is because you can just throw money at it. It's easy to rent space, right? It's very, very simple. Going backwards is sometimes a great way to get attention from your customers as well as save money by not having to just continually buy more and more ads to grow your business. Maybe it's handwritten letters and to your clients that moves the needle more and is a whole lot more cost effective and doubles the average ticket value or the lifetime value of your customer and therefore is exponentially more profitable than going after new clients with paid media.

What about door to door? Go just through your neighborhood, depending on what type of market you have. If you're selling bread door to door or at a bakery, like, why not go door to door and give out samples of your bread with a little bit of cream cheese on it? Like, old school marketing is sometimes a great way to move. So that's the number one thing is replace paid advertising with creative advertising. Number two is employee productivity and waste. Again. As you're growing and expanding and everything is good, it's easy to get a little bit of a waistline there, a little bit of 10, 15 pounds, a little bit. Like, we can hide it. It's there. We know it's there. Love handles are there. But we just kind of live with it because we, you know, we're just dealing with it. When and as you're growing, expanding your business in economic prosperity times, it's easy to be like, hiring people and everything, and then not realizing that one out of every five people you hire maybe is just waste. Like, four people could probably do the job of the five.

And I'm not saying that you need to fire people. I'm just wondering, can we expand without having. Can you increase revenue without having to increase the amount of labor or employees that you hire simply due to the fact that they are wasting five minutes walking down a hall, they are wasting 10 minutes in a meeting that's not really necessary. They're wasting 15 minutes walking out to their car and coming back four times a day. They're wasting 10 minutes because the Internet is slow. They're wasting, like, all these minute seconds. And like, this is, you know, from a lawn care, landscaping perspective, I look at it that way for every single crew, every single job. And that's when we start looking at seconds. Because this adds up so quickly. I don't care if you're in an office setting, restaurant setting, library setting, I don't care what your business is. You gotta be looking at the efficiencies of your employees and really asking yourself the question, because this is true. When we fire somebody, at first you're like, I don't know if we can do it. You fire two people, and all of a sudden it's like, well, all of a sudden eight other people took the place of the 10 that we used to have. And we don't really miss the other two. Why? Because they just step up with their efficiency and get the work done. And so you got to start asking yourself the question, like, could our 20 employees do the work of 25, or do we need to hire five more people? And maybe how you sell those Efficiencies and, you know, cutting some of the fat to your employees. Like, look, we need to hire five more people or we can get more efficient and expand the business. And that money is going to go into the pockets of people who are here now, and that's going to help with your retention. So these are just some of the ideas to cut some fat. Third way is negotiate with vendors. It's a great time to negotiate with vendors when they're doing good as well and they want your business and they're in growth expansion mode as well. Before economic times get harder, this is the time to go negotiate with those vendors. Ask for discounts on bulk pricing, things like that. Number four, create systems that reduce experience required for new employees. So can you create a system? Can you use technology? Can you create a methodology to make sure that when you hire someone, they don't have to be super skilled because they're gonna cost more? If you can use this time when economics are good and you're making lots of money and things are profitable and all that, you can take that money and spend some of it to create systems. Invest in technology so that way you don't have to. When you hire someone, they don't have to be a $50 an hour employee. Now you can hire them for $25 per hour because you have certain technologies in place. That doesn't make them have to be super, super skilled. Maybe it's robots, maybe it's a CRM system that makes it where they don't need to know so much accounting information. Whatever it is, you know, do you really need a CPA to be running your numbers if you're a $500,000 business? I don't think so. You could probably get away with a bookkeeper. That's kind of the ideology. Can you make certain parts of what they're doing outsourced? Maybe some of it you do need a CPA for, so you outsource that. But then for the other 90% of it, it's just a bookkeeper. It's just someone that you could probably get for 15, 20 bucks an hour just to click which category the expenses are going in. So don't allow the times like, you know what? I need a CPA and we can afford a cpa. Well, guess what? When times get hard, you might not be able to afford him. So why not cut the fat now? Why not figure out the systems? Why not invest in a system like Gusto to cut out you having to have a payroll certified, you know, someone that's really Good at payroll, and is an accountant running your payroll. You don't need that. You can have a software that costs six bucks a month. Again, CRMs, email softwares, like all of these. Software that's out there is designed to be a system that makes it simpler for your employees to do their job and reduces the level of experience they need to perform the tasks that you require. And therefore, you're able to hire people at a lower rate. Invest in those systems now when you have the money. Because when times get hard, you're like, I can't spend the $10,000 for Infusionsoft to get set up. But yet you know it's gonna save you money in the long term because you won't need to pay people so much money to have technology background.

Whatever industry. And you can apply that. You want to create systems that reduce the experience required for new employees so you can pay them less. Essentially. They're easy to find, too. It's harder to find a $50 an hour worker that is super specialized. It's a whole lot easier to get someone that's 20 bucks an hour that can learn what their tasks are within a couple days, weeks, or months. All right, number five is negotiate with your landlord. If you're leasing space, renting space for your business, if you have a shop, if you have a storefront, if you rent a warehouse, whatever it is, negotiate with your vendor. We talk about negotiating with your vendor, but you can negotiate with your landlord. All right, can you extend the lease and negotiate terms that give you some sort of leverage by extending the lease? So, for example, I bought Anytime Fitness, which is next door to the facility I'm in right now, next door. I signed a lease and extended it by five years. So we have that lease for 10 years. Because when I bought it, it had five more years, and I wanted to get five years. So I say, hey, look, as part of this negotiation, I want the space next door for free. Zero rent, just triple net. I want it free for five more years. For five years. This space was not part of that deal at all as an empty space. And I said, look, I want to make that for offices. We're gonna studio. We're gonna have franchisee training in this space. And I want free for five years when I extend the lease by five years in the gym facility. And they signed for that because they wanted that space, which is really big and it's a really good anchor tenant in this area. And so they wanted that. I said, look, I want five years for free of this other Space next door and they gave it to me. Negotiate with your landlord. Because I promise you, when times get hard, like economic times get hard, it'd be easy for me to start questioning this. If I was paying $10,000 a month, I'd be like, man, I don't know if I can really afford it. Like, I could spend that money on other stuff. I need to make sure Bob is staying busy and my employees, I'd get concerned. Now if I've negotiated it and I know that it's basically free to be here, minus triple net, it's a no brainer. I can keep my foot on the pedal even when times get harder because I don't have to second guess the decisions and the expenses that I've accumulated. Last thing number six is review every single expense. I don't care how small it is, I don't care how insignificant it is. I don't care how busy you are. If you want to start cutting out fat from your business, looking at every single expense is the best way to do that. If you use QuickBooks, great tool. Even if you don't use QuickBooks, use something like Mint. If you're just getting started and you're having a small business, use mint.com or some other form of expense tracking software so that you can connect your credit cards, all of your accounts. Like, I don't care if you have 50 of them. Because that's like I have like 50 some odd accounts. It's nuts. But what I do is all of our businesses have separate QuickBooks. So I think there's. I have four or five different QuickBook accounts and they all individually look at their accounts. I then have a Mint account that looks at every single business, every single transaction, every single account, and literally it could take me an hour just to go through the last few days to like filter them all out and figure out where they're all at. So again, looking at every single one is important. I do it twice, really, because each of the businesses, like, they take care of their QuickBooks and they figure out the expenses and so they do it. But then I'm also seeing it. I'm seeing every single account, every single expense. And randomly they'll get a question from me like, hey, what was that $10 expense? What was that $15 expense? He's like, oh, you're micromanaging. No, no, no, no. I'm watching every little thing. Because every little thing multiplies and compounds and grows. It's just like fat cells just like grows and it's there and it's like hanging out and you're like, oh, it's not too bad. And you get a little bit more. And it's like, oh, a little more fat and a little bit more. And all of a sudden you're obese, morbidly obese. And it's gonna put you at health risk. Same thing for your business, you know, a little bit here, $15 here, a little subscription here. Ah, just a music subscription. Oh, here's a little bit of a, you know, we get food, snacks, you know. Oh, we just added that little addition on there. It's like a $10 a month for that subscription for YouTube or any Netflix thing. We get that for the employees and get the snack coffee machine there. All little things. Little things. Little things add up and they will become a financial risk for your business if you don't trim them now and at least manage them and stay on top of them and be aware of where the money's going. You got to manage every single expense. I don't care if it's $10, $5. Last week I saw a charge for it's $15 that I wasn't sure what it was and I was just waiting for someone to like allocate it in one of the QuickBooks and I'm like. And I remembered what it was. But again, I'm looking all the time and I try to stay out of it until it's been there for a long time. They're not assigning it to a certain category, but I'm always watching expenses, every single dollar. Cause if I can save 100 bucks, that $100 could be the $100 I'm able to spend on marketing that then attracts 20 different landscape business owners and gets them on my content, which helps them. Maybe one of them down the road becomes a franchisee and I get return on investment. But what would have happened if I would have spent that $100 on some other random thing? They would have never heard the content because I couldn't have advertised them. They couldn't have changed their business. It wouldn't have. They wouldn't have been able to make change in their business. Like the dollars and cents that you're spending on the other little things that just the things are just falling through the cracks. That's the money that can be the difference maker for your business when the economy turns. It could be the difference maker for you from you having cash reserves to go expand into the marketplace versus having to go on a crash diet and trying to have to shed all the weight you've been accumulating for the past 10 years. I encourage you today, go on a financial diet, personally and in your business. If you're trying to get money to do something else, make a bigger business, start a different venture. Go do something you're passionate about instead of working the eight to five. I promise you, cutting the fat and going on a financial diet, personally and in your business will lead you to the freedoms you desire faster than you ever imagined. You've been listening to Mike Andes on the Business Boot Camp podcast. Until next time, be great because nothing else pays.

Sam.