070 | This Simple Cash Flow Strategy Can Transform Your Business – Susanne Mariga Breaks It Down

[00:00:00] Patrick: Are you truly paying yourself first in your business, or are you stuck in the endless cycle of revenue coming in only to watch it disappear just as quickly. Welcome to another episode of the vital wealth strategies podcast. I’m your host, Patrick Lonergan. And today we’re diving into one of the most powerful financial frameworks for business owners.
[00:00:23] Patrick: Profit first. My guest, Suzanne Moriga is a profit first certified master author and fractional CFO who helps entrepreneurs turn their businesses into wealth generating assets. In this episode, Suzanne shares the strategies behind intentionally creating profit, structuring your pricing for maximum value, and why the people in your circle can make or break your success.
[00:00:45] Patrick: She breaks down the Profit First System, which is a cash flow strategy that leverages human behavior to ensure you’re not just making money, but actually keeping it. Whether you’re struggling with pricing, battling in a competitive market, or you’re just looking for a smarter way to manage your cash flow, this episode is packed with actionable insights to help you take control of your finances.
[00:01:05] Patrick: Stick around to the end, because Suzanne also shares her step by step framework that helps business owners, even though starting from a financial mess, turn things around and build a sustainable, profitable business. Just a quick heads up before we get started. At Vital Strategies, we help high income entrepreneurs keep more of what they earn.
[00:01:25] Patrick: If you’re tired of handing over six figures to the IRS, Head to vitalstrategies. com forward slash tax and let’s change that. Now let’s get into it with Suzanne. Suzanne, thank you for joining us here today.
[00:01:36] Susanne: Oh, Patrick, it’s an honor to be here today. So thank you for having me on your show.
[00:01:40] Patrick: Yeah, thank you.
[00:01:41] Patrick: So I think the thing we’d like to start off with is. All entrepreneurs really start off desiring the same thing. They want to make a profit, right? They’re bringing this product or service to the marketplace and profit is the goal. It’s okay to have these ideals of making an impact, but if. We really can’t make much of an impact if we’re not driving dollars to the bottom line.
[00:02:03] Patrick: It allows us to scale and grow the business. And I think part of the problem for entrepreneurs is business is hard enough the way it is. I don’t have that time and energy to figure out how to create a system around. My finances and building profit into that, that, that can be, be hard. Oftentimes the system is we just hope and pray at the end of the year, we’ve got some dollars left over.
[00:02:24] Patrick: And a lot of times people are just, they’re solid technicians, right? They’re really good at what they do, but the finance piece seems a little scary, so they stay away from it. And at the end of the day, that just doesn’t seem right. I’m excited to get into this, this conversation about how we generate profit in our businesses and the framework that you can help us plug into, to, to all of that.
[00:02:41] Patrick: So if it’s okay, I’d love to hear a little bit of. About your background, you’ve got experience in big four accounting, but how did you end up being a bestselling author of the profit first system and getting involved with helping entrepreneurs really start to be able to grow and scale their businesses?
[00:03:00] Susanne: No, thank you for asking. It’s interesting. I always tell people it’s one step. at the time. I don’t think any of us wake up one morning and say, I want to write a book and I want to run a business and I want to help seven and eight figure entrepreneurs. It’s literally one step at a time. And wherever that next calling is, is the direction that we go.
[00:03:18] Susanne: And I think that I’m super passionate about helping entrepreneurs because I’ve been there. I am an entrepreneur. When I started my business, like many entrepreneurs, I love what I did. I loved helping my clients. I love seeing their lives change. I liked doing taxes was what I did back then when I started my firm.
[00:03:40] Susanne: And, and I remember when I started my firm, I love what I did so much that I would have done it for free. And that’s exactly how most entrepreneurs are. They start their business because They want to make an impact in the world, right? We want to make the better widget that changes lives, or we want to have staff that we groom to become the next leaders in the world.
[00:04:00] Susanne: And none of us want our, our tombstones to be unvisited and unremarkable, right? And unfortunately, when that happens, we put service to the forefront, but profitability doesn’t necessarily tie with having great service.
[00:04:17] Patrick: Yeah. Yeah.
[00:04:19] Susanne: Do great.
[00:04:20] Patrick: Sorry. Yeah. I’ll stop interrupting you. Sorry. Go ahead. No,
[00:04:24] Susanne: it’s okay, Patrick.
[00:04:25] Susanne: If you do great work and you do it at a low enough price, you just get more great work to do. Right? Volume doesn’t necessarily equate to profit. Having millions in revenue doesn’t necessarily relate to having profit.
[00:04:37] Patrick: Yeah, I’m sorry. I will be quiet when I’m acknowledging. I will nod instead of talk. So thank you.
[00:04:44] Patrick: These are all great points.
[00:04:45] Susanne: And I learned a lesson like many of us. I learned what it was like to watch my children start to grow up and not be around, which was not one of the reasons that I started my business. I learned what it was like to be busy all day and weekends too, but not really have anything to show for it.
[00:05:03] Susanne: In fact, my husband Go, have you thought about going back into corporate and getting a Real job because then you’ll get paid. And I realized that there was something wrong that doing a great job didn’t necessarily correlate with having the outcomes that we want it personally. And it wasn’t really until I discovered the book by Mike McAllist, profit first that I learned that you really had to create profits intentionally.
[00:05:27] Susanne: You had to create the bottom lines that you want, that you had to engineer your results and That’s why I love profit first. That’s why I love helping others implement it because it is a game changer when you make your outcomes truly intentional when you sit down and you write down on paper what it is that I really want to accomplish in life, that you really can start to create the pathways to get there.
[00:05:52] Susanne: And Patrick, I am so happy to report I have made it. My client’s millionaires in many cases, right, because they made profit intentional. If anyone’s familiar with profit versus based upon percentages, there’s a percentage of money that goes to owner’s pay. There’s a percentage that goes to profit. There’s a percentage that goes to your tax account.
[00:06:12] Susanne: And this percentage, when your revenue increases because you’re doing great work, that means your owner’s pay is going to increase. Your profit’s going to increase your Taxes are going to increase. And so naturally you’re rewarded for the performance of your business. And I have seen clients buy their own farms, buy their own buildings.
[00:06:29] Susanne: I ended up selling my accounting practice and it was interesting because I literally had it on the market with a broker for four weeks and we had four offers within four weeks and it was sold within one month. So like literally that’s how Profit First will turn your business around.
[00:06:46] Patrick: I love that. I love that.
[00:06:49] Patrick: And I’d like to just back up and acknowledge just a few things too. We talk regularly about how hard businesses, I think social media at times can paint this picture. Like anybody can be a millionaire. You just start your own business and everything will be great. But I, I also would like to acknowledge not only is business hard, my, my wife’s a female business owner, entrepreneur, being a woman business owner, I think is harder.
[00:07:12] Patrick: I think there’s data out there that supports that. Then you layer on the fact that you’re a minority woman business owner. And it’s, it’s really impressive all of the challenges that you’ve had to fight through. And I love that you coauthored. With Mike Michalowicz, uh, Profit First for Minority Business Enterprises and the success that book has had.
[00:07:30] Patrick: I just would like to just stop there and acknowledge all those pieces. I think that is wonderful. And I appreciate you sharing your story about grinding it out as an entrepreneur going, man, I might have to, my husband’s encouraging me to maybe go back to get the corporate job because this is. More of a hobby than it is an income source.
[00:07:46] Patrick: And then the end of that story being, we created a profitable business that sold quickly with a number of buyers that I think that’s the dream for a lot of entrepreneurs. I want to grow this thing, scale it and sell off the business at the end of the day. Thank you very much for sharing that. I’d like to hear just the transition.
[00:08:03] Patrick: Like, how did you go from. CPA to getting more into the fractional CFO work and really being intentional about taking this profit first system and putting it into people’s lives. How did that transition happen?
[00:08:17] Susanne: Absolutely. And I was a CPA for many years. grew up in accounting. My dad was a CPA. I remember when he was raising me, it was like, it was a game of creating balance sheets and seeing if I get the same answer that he does when we do a tax return.
[00:08:33] Susanne: That was our game as a kid. He had to do what he could to get free setting. And, and I always loved numbers and really In terms of getting more into the fractional CFO, I think it started to happen when I had the accounting firm, I was talking to clients, or new clients that were coming in, and everyone would tell me that the reason why they were switching was because their accountant never talked to them, like literally, their accountant never talked to them, or they would make them feel ashamed at tax time, and go, why didn’t you do this?
[00:09:06] Susanne: And they’re like, why didn’t you call me and tell me to do this? Like, why are we looking back after the year already? Already closed and you’re telling me there’s nothing I can do about my tax situation. And I realized that there was a void in the market of just having accountants that knew how to speak to people and cared enough to do that.
[00:09:23] Susanne: And, and then of course, I would see clients every year as a CPA, and they were so focused on not paying taxes that they weren’t making any money. They had nothing to show for their work. They were so busy buying these 6,000 pound gas guzzlers, getting into debt that. They weren’t focused on things like how do I fund my retirement account or how do I be able to retire one day, right, when I’m ready to walk away.
[00:09:48] Susanne: And so I saw that need in the market as we were growing. And for your audience, that’s a great opportunity. Looking at your business, what are your customers asking more of you from, right? Is there a need there that you can better be able to support them that might, they might be willing to pay a premium for.
[00:10:04] Susanne: And so that was starting to blossom even in the accounting firm. And in terms of selling the firm, I was 46 years old when I sold the firm. So I tell people, technically I retired at the age of 46. Literally, I was a millionaire at that point and walked away from my company. And, and I’ll tell you, there’s guilt when you get to that point of selling your business and walking away.
[00:10:26] Susanne: I remember my kids would go to school and they were like, mom, you’re bugging me. You’re bugging me. You have. nothing to do. Stop bugging me. And people were still reaching out. Okay, so you sold your firm. You’re not taking clients anymore. Would you consider being our fractional CFO? Would you consider doing some consulting work for us?
[00:10:45] Susanne: And so that’s where that blossom from. And so the clients that I work with now, they’re 7 to 9 figure companies and they have very different problems Patrick. I know you work with 7 to 9 figure companies, too Then your startup companies, right? They have team in that particular point. They’re starting to delegate.
[00:11:04] Susanne: They’re starting to delegate financial things and What they’re finding is sometimes the team They joined the company because they want to do good, right? They want to have great health care. They too, that they’re providing to their, their clients, right? Their, their patients, they want to have an impact, but they don’t really understand there’s a balance between profit efficiency and be able to do more of the good that we do in the world.
[00:11:29] Susanne: And so you start to have different problems once you cross into that seven to nine figure, because now you have to get everybody on the bus moving in the same direction. You have financial controls that need to be. You can’t have everybody with a company, corporate card running around and meeting new possible clients, having lunch every day or buying office supplies.
[00:11:48] Susanne: Because I just think these pencils are just better than these pencils. Right. Even though we have plenty of pencils. And so it’s just a different. niche at that particular point, there’s a different need at that particular point, and there’s a different need for organization. And so that’s where the space that I am in now.
[00:12:06] Patrick: I love it. Good for you. And I also look at the rhythm of a CPAs year, and it sounds terrible to me. Like I would hate that schedule of You have these massive amounts of workload in these condensed periods of time that things have to get done and they, there’s a few of them and they’re, they seem to be accumulating more and more often, but you’ve got regular tax filing and then you’ve got entity extension tax filing, and then you’ve got the extension tax filing deadlines and it’s, oh my gosh, all of the work that shows up with that.
[00:12:36] Patrick: And those timeframes, have you, does your new structure allow you a little more? Freedom in that rhythm where you can dictate a little bit more of your schedule versus the beholden to the IRS schedule.
[00:12:50] Susanne: I think the big difference and what I do now versus running a large accounting firm is probably the number of tax returns that you were responsible for when you’re owning your own firm.
[00:13:01] Susanne: I mean, you’re processing hundreds of returns, right? That’s a lot of returns all due on the same day of the year, April 15th. And you would think it would give you a relief to do extension, but I’m like, that just extends. the nightmare, right? It makes it go into the summertime because it’s not like your clients have a sense of urgency to get those documents in.
[00:13:21] Susanne: All summer they’re gonna get it to you September 1st, right? If it’s due September 15th. That’s definitely one thing that’s different. I think I would say the value is different. I think it’s depending on the person. I think one of the challenges that I have had even in my new ventures is I’m one that gets busy fast.
[00:13:40] Susanne: And I see another opportunity where we can help somebody and that fills the schedule. So you’re, you’re constantly rebalancing who you are and what you do in the world.
[00:13:48] Patrick: Yeah, I love it. I love it. Now you also talk about, and I think this is so valuable, the pricing models, like encouraging your clients to bring value to the market.
[00:13:59] Patrick: Place and then price appropriately. Um, can you talk a little bit about that? Like how those conversations go? Cause I think that’s a scary piece for a lot of people. Ooh, if I charge more money, the client might go away and I need all the revenue I have right now to make all the things work that we have going on.
[00:14:15] Patrick: So can you talk about how those conversations go with encouraging your clients to charge accordingly to the value they’re bringing?
[00:14:23] Susanne: Absolutely. And I would say, Patrick, you’re right. Every business owner struggles with that, right? They struggle with, especially starting out, what is the price that my market will bear?
[00:14:34] Susanne: And I have seen clients, I’ve been guilty of it. They call around, what are you charging? I could be a potential client. Are you charging five dollars? Maybe I need to charge 4, right? And it ends up being this pricing war, right? And it’s interesting because when you’re engaged in a pricing war, who wins at the end of the day?
[00:14:53] Susanne: It’s the one that can get to free is, is what wins and who really benefits when it’s free. And so So, competing upon price is never going to get us what we want. Instead we have to compete based upon value. Meaning that, what is the difference that I’m going to make in your life if I provide this service?
[00:15:12] Susanne: If I create this widget for you? What is the difference between Where you are today versus where you’re going to be at and versus going with somebody else and you have to differentiate that in order to really command the price that you’re going to need to support your costs. Because at the day, if you’re not pricing adequately, you’re not going to be able to hire the best and the brightest.
[00:15:35] Susanne: I can’t tell you how many times I meet entrepreneurs and they hire based upon who they can afford versus who’s going to do the work the best. And when you hire based upon who you can afford, You have to hire two of them, they go on.
[00:15:49] Patrick: Yeah, yeah, no, that’s great. I love that. The other thing that I think is really valuable and I, you touched on this earlier, but the circle that you’re in, I think there’s so much data around the five closest people to me are a reflection of me.
[00:16:03] Patrick: So if let’s use our health, for example, if I’ve got all of my friends are overweight smokers with diabetes, I’m probably. An overweight smoker with diabetes is going to be the, the way that works out. And I think it’s really valuable to, to start adjusting your circle, the people that you’re hanging out with and because they’re going to be thinking differently.
[00:16:24] Patrick: They’re going to be doing different things. They’re going to be encouraging me. And I’m going to feel this maybe even subconscious pull. So I need to get to their level. I, I need to get my, my act together from a. A finance perspective, or it could be anywhere, right? Like I need to get my marriage on their level.
[00:16:39] Patrick: I need to get my health on their level. So can you just talk a little bit about the value of circles?
[00:16:44] Susanne: Circles are extremely valuable. And I, first of all, I’m going to say this, if you find yourself in a place right now where you’re alone, where you aren’t surrounded by the people that you prefer to be, it’s not something that happens overnight.
[00:16:59] Susanne: Relationships take time to develop and it’s okay. Don’t beat yourself up about it, right? It takes time to build those relationships, to get to know people at that level. And you may get to know lots of different people, right? Like you mentioned Patrick, there’s the person that helps you with your marriage and may not be the person that helps you with your finances.
[00:17:17] Susanne: You know, that they may not go together very well. Right. And so there may be a different person for each of your needs. Circles are extremely important because one, it can open opportunities to you. I know in our accounting firm, one of my first government contracts that I got, and I write about this in this, in my book, I had work in the government industry.
[00:17:36] Susanne: I had worked for KPMG at the time and I had clients like city of Indianapolis and I had their health department. I had the right government experience, but I had just started my firm after I left
[00:17:48] Speaker 3: there.
[00:17:49] Susanne: And. There was no way that I was going to walk into a contract and like the city of Houston was going to give me a contract Right, they’re like you’re a one woman show.
[00:17:58] Susanne: You just have to drop your daughter off at a teenage babysitter Yeah, we’re not gonna give you this contract But what I did was I went anyway to the RFP meeting request for proposal meeting. I went anyway Knowing full well that I probably would not get a contract to this meeting. I got dressed up in my best suit.
[00:18:17] Susanne: I arranged daycare because I was just starting out and I showed up and what I got to learn from sitting in that circle was one, I got to observe the process. I figured I would observe the process. I would learn for when I was actually ready to go and I shook hands, said hello to a lot of people, but one of the hands that I happened to shake hands with and I never would imagine was someone from another accounting firm.
[00:18:45] Susanne: from a bigger accounting firm, a bigger local accounting firm. And he asked me about my experience. He asked me if I was bidding and I said, I’m not sure if I’m going to bid because I had to be honest. There was no chance in the world. But what happened was he ended up recommending me to another client who needed a.
[00:19:04] Susanne: finance director who needed some interim work on being a finance director for a major city and that turned into a contract that lasted over a Decade where I got to use that experience to be able to one build the city up and have them implement good financial Controls, but I got to build my own resume Because of this experience that turned into other clients and you know, I can say I have I have managed You know, 100 million budget because of this type of work that I was able to do.
[00:19:33] Susanne: And it’s, you never know when opportunity will open up to you. Don’t beat yourself up. If you don’t have the right people in your circle that can help you out or give you the right advice. It’s about putting yourself in new environments and new situations where you never know who’s got God’s going to put in your path.
[00:19:48] Patrick: Absolutely. I love that. And. There’s so much truth in the value of our network. I wish there was a way to quantify it, but I saw some data put out by, I believe was LinkedIn and most job placements happen through acquaintances, not even like a good friend connects you. It’s Oh, Hey, I went to college with this guy.
[00:20:08] Patrick: I know this opportunity is over here. You should call Joe or Jane and just. Have a conversation with them. And it sounds like you’re showing us that, right? Like you met somebody, effectively an acquaintance, but they go, Hey, I think you’d be a great fit for this opportunity over there. And oftentimes it’s easy to decide not to go do the networking thing, to not show up to the event and just be an observer.
[00:20:31] Patrick: But we’ve seen our network has just been incredibly valuable to us over decades. And people that were unlikely in our book to, to help became super valuable to us. And it was, I just appreciate that, that point of view. Cause I think it’s something that entrepreneurs need to do a better job of. This is great.
[00:20:50] Patrick: So I would love for you to give us an overview. You touched on it a little bit percentage wise, like how profit first works, but I’d like to. I’d like to get into that discussion. And I think to set the framework, generally this can apply for business owners at almost any stage, right? It’s amazing how we’ve seen some business owners with tons of revenue have no.
[00:21:12] Patrick: Systems in place. And it’s like, how are you even here? And it is, it’s a very leaky bucket. There’s problems all over the place. So we think about things from like levels, right? No matter where you’re at in your business, you got to get the level one stuff done, and then you move to level two, and then you move to level three.
[00:21:27] Patrick: We don’t start at level three. If it’s okay, I’d like to talk through. Profit first. And then I could see this conversation maybe morphing into, you know, how a fractional CFO starts to fit in your life as your business continues to grow and scale. Yes. Can you start with outlining profit first and how the concept works?
[00:21:44] Susanne: Absolutely. Profit first, as I mentioned earlier, it has been a game changer for. My business as well as for many of my clients and I love profit first because it’s a system that works with our natural human tendencies. It’s a system that works with how we’re naturally made. And I’m going to give you an example, Patrick, there’s something called Parkinson’s law.
[00:22:05] Susanne: And what Parkinson’s law teaches us is that we as humans, we’re efficient. The more you give me of something, the, I promise you the more I’m going to use of it, right? If you give me, if you take me to the smorgasbord, a buffet, I have never left proud at a buffet. So now I don’t even go because all the plates means that I’m going to use more than one.
[00:22:24] Susanne: I’m going to eat dessert when I don’t normally eat dessert and I’m never going to be proud of myself when I go there. Now if we go out to lunch and we’re having a business meeting, I might just order a salad and I’m perfectly happy at that salad. And the reason why I’m making different decisions on eating is because of my choices that are available.
[00:22:42] Susanne: I’m, I don’t have an option to get five different plates. I only have an option to get one and I have a lunch break that I need to get done with. And so I’m making very different decisions and that’s. the same way it works in business. On a day that my entrepreneurs have just been paid, they feel like the world is invincible, right?
[00:23:01] Susanne: They go, Oh my gosh, it’s December 31st. I got a tax problem. My accountant just called me. I need to go out and buy the 6, 000 pound gas guzzler, right? I need to go ahead and redo the whole office. We need office furniture, office equipment, everything to get this tax burning down. Yeah. Now. When things are lean, when money’s not flowing, my answer is asking me different questions are like, Suzanne, how am I going to make payroll this week?
[00:23:29] Susanne: Our collections were low, any factoring companies out there that we can start to build a relationship with? Or how do I lay off these people and still make payroll? And the questions are different simply because of the cash availability. And what’s happening is these entrepreneurs have been Unbeknownst influenced by Parkinson’s law.
[00:23:50] Susanne: And so what happens in profit versus we’re going to work with Parkinson’s law to our advantage. And what we’re going to do in profit versus we’re going to create an illusion of scarcity and we’re going to create that illusion of scarcity through the use of bank accounts.
[00:24:05] Speaker 3: Yeah.
[00:24:06] Susanne: And so what happens in Profit First is all your money goes into one bank account called the income account.
[00:24:12] Susanne: So all your collections, if you’ve got merchant services, that’s being deposited into this income account. If you’ve got people dropping off checks, that’s going to go into this income account. And then once a month or twice a month, what you’re going to do is you’re going to transfer to different bank accounts according to their purposes.
[00:24:29] Susanne: So you’re going to transfer to your account called owner’s pay. And that’s important because a lot of times when I ask owners, how much are you paying yourself? They’re like, I don’t pay myself or I’ve been making the same amount that I’ve been making for the last 10 years. I reached a hundred thousand and that’s all I’ve been paying.
[00:24:47] Susanne: I’ve been reinvesting back into the business. What’s going to happen in profit versus we’re going to allocate a percentage of that collection into this owner’s pay account. So as your collections go up, your owner’s pay is going to be going up. So now you’re being rewarded based upon the performance of your business.
[00:25:05] Susanne: The next account that we’re gonna be funding is going to be your profit account after all we are practicing profit first a lot of times When I meet business owners, I asked them I’m like, so what’s your profit and you’d be surprised Patrick How many people go I don’t really know what my profit is and it’s interesting because in profit first You’re gonna know your profit immediately because you’re gonna allocate to your profit account every single month, twice a month, a percentage of this revenue.
[00:25:32] Susanne: And so literally you can eyeball this bank account and go, this is my profit so far for this month. This is how I’ve been doing. And then the next bank account that you’re going to allocate to is going to be your tax account. And this is so important because as a CPA, I have seen so many business owners wonder, how am I going to pay last year taxes with this year’s money?
[00:25:49] Susanne: Like literally these folks woke up January 2nd. They’re like, I got a problem. I got a tax problem and I don’t got no cash. How am I going to cover that? And so that’s not going to be your problem ever again, because now you’re allocating to a tax bank account a percentage of your collections. And so even if you don’t need to use all of it because you’ve got a great accountant, you still have it reserved just in case you do need it.
[00:26:13] Susanne: And that last bank account that you’re going to fund is going to be your operating expense account. So this is the account that you’re going to use to go. Now, this is all the money I have left over. I’ve already allocated to other bank accounts according to their purpose. This is the account that I’m going to sign.
[00:26:28] Susanne: Can I afford to upgrade my lease? Can I afford to purchase that new equipment or hire that new support staff? Because this is the account that I have to make everything work with. And this is different from the way that you probably have traditionally done it because the way that you traditionally have done it, you have one bank account, all your money goes in that one bank account and you have plenty of money until it’s all gone.
[00:26:50] Susanne: But now you created that illusion of scarcity and you’re only allocating to that operating expense account.
[00:26:56] Patrick: I love this. I love this. So there’s so many. Things I want to talk about, I want to start off with the tax strategy of, I’m going to just go buy more stuff, right? Most of which is depreciating stuff.
[00:27:09] Patrick: So it has nothing to do with wealth building from our point of view. We think that’s terrible tax strategy. If you need a new vehicle, fine. Let’s buy a vehicle and we’ll get a tax deduction for it if it qualifies, but please don’t just go finance a new vehicle because it’s going to accelerate some depreciation this year like that.
[00:27:30] Patrick: We don’t like that at all. I appreciate you acknowledging that. Then the other thing that I really is where you’re at with the pay yourself first, like we’ve had some clients come to us that are proud of the fact they don’t have any profits. Their dollars are like. They’re buying stuff every year and they’re like, yeah, I don’t have a tax problem.
[00:27:49] Patrick: And it’s, you really don’t have a profitable business. What you have is a job that has a ton of stress associated with it. And that’s where the owner’s pay account comes in. That’s your wage for running the business, for doing the work. For owning the business, that’s where the profit comes in. And I think those are absolutely key pieces.
[00:28:05] Patrick: And then I think there’s something to, there was a point in our entrepreneurial career where my wife and I, we were broke. Okay. And I remember taking a dollar of change. And dividing it up into different buckets and going, I’m Lord, I’m showing you, I’m going to start stewarding my resources. So we had different accounts.
[00:28:25] Patrick: I stole this from Steve Hart, Steve T Harv Ecker. So what I’m trying to say, we had 10 percent to the financial freedom account, 10 percent to the giving account. 50 percent goes to expenses, like what it takes to run my life. 10 percent goes to play. 10 percent goes to long term savings for spending. So if I want to buy a car, I’ve got down payment and I can finance as much as will fit in my 50 percent piece.
[00:28:51] Patrick: And then the last 10 percent was education. Like I need to learn more, develop my human capital piece. And we were just like, okay, we’re just going to show the universe that we’re going to start being good stewards. And I think what you’re talking about here is exactly the same thing. It’s like. All right, I’m going to start stewarding these resources as well to demonstrate that I’m worthy of more dollars coming into my life.
[00:29:13] Patrick: And then I think one, one thing that highlights that Parkinson’s law piece that’s really, really good is oftentimes America’s Americans are terrible savers. Right? Because if you just put all the money, they make their wage, it goes into their bank account, they don’t save anything except for the 401k. The 401k is exactly what you’re talking about.
[00:29:35] Patrick: It automates that piece. It gets the dollars out of their account. They don’t even realize it’s happening. And then they get to retirement. It’s Oh, I’ve got a million and a half dollars in here just because. Every single pay period, the dollars came out automatically went into this thing. They didn’t get into my account.
[00:29:51] Patrick: And so we are huge fans of automation. Like the entrepreneur doesn’t have the, they might have a 401k in place, but they have so many extra dollars that are falling outside of that 401k. We have to start automating. Where all these dollars are going, because if you just leave it in there, Parkinson’s law, like you said, it’ll just find a use for it.
[00:30:10] Patrick: And I wanted to highlight all those pieces. Cause I think there’s so much value in all the things you just said.
[00:30:16] Susanne: Thank you. And I love that idea called the freedom account. Man, that just wants me to just throw money in the freedom account too.
[00:30:22] Patrick: Yes, yes, absolutely. Uh, so this is, this is wonderful. So I guess one of the questions I have for you is I’m an entrepreneur.
[00:30:31] Patrick: I’m a little bit of a mess. Okay. I’m looking at my bank accounts cause I don’t have a system set up. I don’t probably not doing a good job running my financial statements, my PNL, all those other things. Where do I start? How I don’t see enough dollars. So there’s not enough percentage wise to start divvying up into these accounts.
[00:30:49] Patrick: How do I, what is the first step I should take to start taking action on getting these things set up from, for my business?
[00:30:57] Susanne: So the best day to have started saving would have been 10 years ago, right? The next best day is today because the reality is when you start saving we all start with nothing, right?
[00:31:11] Susanne: I remember when I first had my daughter I had just left my corporate job and and I was gonna start my own business and we Literally just we were starting from nothing and I remember I like found a bank statement like many years later And then just cleaning out the different cabinets and I was like, oh my gosh, I should have been having panic attacks I should have been like sweating bullets I should have went right back to work like literally this bank We had just had this little girl and we had two thousand dollars to our name I was like that wouldn’t even have covered the mortgage.
[00:31:43] Susanne: Like how did we what were we thinking me starting a business leaving my corporate job? And so the reason why I share that story is you have to start someplace and it starts with the process, right? It starts with even if you can put away 20 a month into that freedom account That 20 a month will get interest if you invest it, it’ll get dividends.
[00:32:03] Susanne: It’ll get appreciation because Stocks grow hopefully over time depending on what you’re investing in and hopefully we’re investing wisely So it starts with just starting and that’s the same way it works with profit first it starts Um, and I actually have the recommended target percentages there that if you want to download that you can absolutely download to see what a healthy company looks like in terms of.
[00:32:39] Susanne: percentage of profit, owner’s pay, tax, operating expenses, but you don’t have to start there. Start with 1 percent profit. Just start with 1 percent profit and then build it from there. Next quarter, go up to 2%, but start with 1 percent and make it a game. Like what needs to happen for me to create 1 percent profit?
[00:32:56] Susanne: Is it letting go one of my subscriptions to one of my magazines? Is it maybe If I’m at my leases ending, maybe I can start working remotely for some of you guys. What can we do to get to that 1 percent profit? And then next quarter, okay, we’re going to go up to 2%. What can we do to make it go to 2%? But then just build it from there.
[00:33:18] Patrick: Yeah. Yeah. I love that. And there’s a number of good books on there out in the world about building habits and. Almost all of them point to, we look at Charles Duhigg’s book. He talks about the power of habit and he talks about fitness and working out. He was like, make the habit going to the gym, not even working out, set the bar really low, just go there and just make it a habit that every day you show up.
[00:33:43] Patrick: And that’s all you have to do to check that box. I’m just going to show up to the gym today. And if I decided to spend 10 minutes on the treadmill, great. If I decided to lift some weights, great. But if I don’t, it’s okay. And before you know it incrementally, you start increasing, like you talked about.
[00:33:58] Patrick: It’s okay. I’ve been able to show up now let’s make it a minimum 10 minute workout. And then before you know it, you’re working out for an hour and you’re really fit. And I think the same thing’s happening here. And we’ve seen the same from some behavioral economics books that say, start off saving a very small percentage and then incrementally increase it.
[00:34:16] Patrick: And your likelihood of success goes up dramatically, right? Like you don’t even notice those increases. And then I think there’s something happening subconsciously to us too, that there’s a little bit of a nagging feeling when the accounts got a little less money than I like, I’m going to go make that extra sales call.
[00:34:32] Patrick: I’m going to look at my profit and loss statement and go. Like you mentioned with the magazine subscription, I heard this once from a book called unreasonable hospitality of all places, but they said in there, they said the raindrops fill up the oceans, right? So we have to start looking at all the little things that are out there that we’re spending money on.
[00:34:51] Patrick: And if we can reduce some expenses, like that number just flows to the bottom line in the form of profit. I love all of those pieces that you’re outlining there. I think that’s brilliant.
[00:35:00] Susanne: Thank you. And Patrick, I was going to add to you with that is it’s hard to see it when you’re going through it, especially when you first set that goal, it feels, Oh my gosh, I’m never going to get to the goal.
[00:35:11] Susanne: And the reality is, even when you change it, even if you just set a 1 percent profit goal, if you’ve been running at a loss so far today, that 1 percent profit goal. Just change the entire course of your business are no longer running at a loss, right? And when businesses sell they sell for either a multiple of revenue, right?
[00:35:32] Susanne: Or they sell for a person or a multiple of profits so somewhere between the multiple of EBITDA or the multiple of revenue is where that goes and so like you’ve got multi million dollars, 50 million in revenue, but you’re running at a million dollar loss. What’s the valuation on that company?
[00:35:48] Patrick: It’s a negative number, right?
[00:35:49] Patrick: You’d have to pay somebody to take it generally. So yeah,
[00:35:52] Susanne: exactly.
[00:35:53] Patrick: Yeah. Yes. Yep. I love it.
[00:35:55] Susanne: Sometimes you are paying someone to take it, right? You have to pay for the bankruptcy attorney to dissolve it.
[00:36:01] Patrick: Yes.
[00:36:02] Susanne: Because that’s how a million dollar loss is being financed probably through debt. And so really it’s about, You’re doing this 1 percent chef isn’t just about changing your life But it’s also creating your business into an asset that you can eventually sell and then one day when you’re 46 years old You can sell that business and retire.
[00:36:23] Patrick: I love it. I love it And there’s also something that we like to acknowledge as well Maybe this is America thing. We want to drive through breakthrough, right? We want the five minute abs. We want instant change. And I’ve got two teenage daughters. I’ve got three daughters total. Two of them are teenagers.
[00:36:41] Patrick: They’re both competitive athletes. And one of the things that we talk about is the work you’re putting in today. You won’t notice the difference from yesterday. You won’t, you’re not going to notice you might, but it’s not going to feel like it’s life changing to put 1 percent of your revenue into an account.
[00:37:01] Patrick: You’re going to be like, here’s a few bucks in there. Okay. But what happens is you start doing that day after day, and then you look back a year from now and you’re like, All right, those imperceptible incremental changes now have compounded to something that is incredible and it’s producing lasting value and it’s worth all of the energy and effort, even though you couldn’t see it from day to day.
[00:37:23] Patrick: So I love all that. Now I’m thinking about businesses as they grow. Okay. The structure they start with is not the structure they should end with, right? They need to continue to grow and develop those structures as time. Passes on, but before we get into that, is there anything else we should talk about for profit first, before we talk about additional structures we can add into our business?
[00:37:50] Susanne: I think we’ve covered profit first pretty well. I think the key to profit first is just to get started. Because
[00:37:58] Patrick: please go, sorry.
[00:37:59] Susanne: The faster you get started, the quicker you’re going to build. And that’s really where you’re going to end up getting to your goal is by just, like you said, starting.
[00:38:09] Patrick: Yeah, I love it.
[00:38:10] Patrick: And you have so many free resources on your website. People should go check those out, download those. You’ve got videos, you’ve got tools. It’s fantastic. We’ll have links to all of that in the show notes, but you do a fantastic job of helping people just lay the foundation for getting started with profit first, so I appreciate that.
[00:38:25] Patrick: Okay. So now I’ve got my, I’ve got my profit first structure in place. My business is growing. Now I think we can probably start to look at. Where I’m at with my financial reporting, you touched on this earlier too. And who’s my financial controls and some of those other pieces, like who has a credit card, who doesn’t.
[00:38:46] Patrick: There’s things like cost of goods sold. Sometimes people hear that. And I don’t even know what that means. And an operating expenses and all these other things as our business grows, it’s really good to start getting those expenses and income and all those other pieces categorized correctly. So now I can make appropriate decisions in my business.
[00:39:03] Patrick: Can you talk a little bit about. Your fractional CFO work and maybe some of the common issues for somebody that’s had a growing enterprise. Like it’s profitable. It’s starting to work, but now they’re starting to bump into some additional finance problems and they need to bring in additional help instead of trying to figure out how to maybe run those financial statements.
[00:39:24] Patrick: Well,
[00:39:25] Susanne: exactly. And I think that one of the challenges that a lot of businesses grow as they grow, that they run into is that. They find that the person that may have brought them to one point is not the person that’s going to bring them to the next point. And what I mean is, you may have had an accountant that you outsource the accounting to, and they may have been great for giving you those quick monthly financial statements with no detail, everything is running through the P& L, it’s not tracking inventory, it’s not tracking accounts receivable turnover.
[00:39:58] Susanne: That may have been great for a certain point. But as your company grows, as those minor details start to make incremental impact, then you really need to have more finite detail. You have to have more, the more detail you can get, the more data you can get, the more minuscule the data can be. And we’re talking like profit, gross margins on product, gross margins on service, not just as a whole, like how long does it take person A to do the job versus person B?
[00:40:28] Susanne: What’s the profitability on person A versus person B? To the, to that detail that you can get, the better you’re going to be able to make those adjustments. Cause maybe person B shouldn’t be there. Right? If they’re. Not as good as person A and person C and person D, but you’re not going to know that unless the data is screaming at you.
[00:40:46] Patrick: And can I make a point on that real quick? Cause I, I think this is a, is so good. I heard this phrase and I’ve been plastering it all over the place, but data eliminates denial, which prevents disaster. And. It’s when the data staring me in the face, I can’t deny the facts, right? Where if I don’t have the data, I can pretend that person’s performing well.
[00:41:08] Patrick: And that product’s actually not losing us money and everything’s going swimmingly. But when the data staring me in the face, I’m like, Ooh, I need to solve these problems because if I don’t, there’s going to be a disaster coming down the line. So. I couldn’t agree with you more on having access to really good data.
[00:41:24] Patrick: So I’m sorry for interrupting, but yes, please continue on.
[00:41:26] Susanne: Small accounting firm is going to be able to do for that. And so what a lot of times that we’ll do is we’ll help our clients bring that accounting in house. So we’ll help them hire, right? And that might not be someone that you already have on staff.
[00:41:39] Susanne: You have an office manager that might be doing it. That office manager might be great at buying office supplies and doing scheduling, but they may not have the financial acumen. to understand what a stock ticker is or understand how to really create financials. And so a lot of that is us potentially going in helping you build that accounting department from scratch so that you can get that data into the minute.
[00:42:03] Susanne: Line entry so that you can get day to day. Like, what was my profitability for yesterday? Right? Um, or and so that or what am I expecting my revenue to be for today? And so really being able to create the systems, the people, um, in order to get that data. Readily available, really real time.
[00:42:23] Patrick: Yeah, I love all that.
[00:42:24] Patrick: And we could probably talk all day about all the different financial structures you could put in place to manage. But like we, we have some clients that have large accounts receivable and they’ve got accounts payable too. And they’re trying to manage all of these things and they’re creating like a 13 week cashflow to just go, okay, these are the dollars we’re Expecting to go in.
[00:42:44] Patrick: Now we can manage the dollars going out and to make sure that we’re not running ourselves out of cash. Cause the, one of the things that we spend a lot of time talking to our clients about is just managing cash and liquidity, right? The number one reason businesses go out of business is they run out of cash.
[00:42:57] Patrick: We think about our four cornerstones of planning. It starts with cashflow. Then we move to tax strategy. Then we move to investing dollars. And then finally, once we’ve built some wealth, let’s protect it with insurance and legal structures and that type of thing. Yeah, I, the importance of managing the cash really well is just, it’s the first step of running a successful business.
[00:43:18] Patrick: I appreciate all the work you’re doing there, helping entrepreneurs take their enterprises to the next level. I think that’s wonderful. Anything else we should talk about? On the fractional CFO side of things, before we move to the next topic,
[00:43:32] Susanne: I think every company is different. Your company is going to be very different than company B culturally.
[00:43:38] Susanne: It’s going to be different process wise industry. It might be different and it’s important to really. Be open to the fact of customizing what you do, which is really important with that. I think it’s good to, as a fractional CFO, I have a lot of experience with a lot of different industries. So there’s cross pollination of what worked in one industry may not be in another.
[00:44:00] Susanne: So let’s bring it to another and see what happens. So those things kind of things also help too, is getting that wide of experience, wide array of experience to incorporate different ideas that you may not be doing.
[00:44:13] Patrick: I love it. That’s fantastic. So when you’re thinking about your fractional CFO work, we’ve talked about seven to nine figure businesses are businesses that you work with, but.
[00:44:22] Patrick: Who is an ideal client for you? If somebody is listening to this and what would you identify as, Hey, if you’re fitting into these categories, this is the type of person that we feel like we can really add value to. I know it’s a wide range, but if you could narrow that down to if somebody’s in this category, that that would be great.
[00:44:38] Susanne: So I would say definitely above the million dollar mark where you’re starting to. realize that what you have isn’t working. It’s not enough detail. It’s not timely enough. You definitely want to be more profitable, I think is really important. And you’re wanting to maybe control your data more internally and house.
[00:44:59] Susanne: You want to have a better understanding of your financials and what they mean is very important. And you’re also ready to make some hard decisions. Yeah, it’s our ideal client, because I’ll tell you, there’s not one implementation where the person will walk out and say that they are not a changed person.
[00:45:16] Susanne: I think everyone changes when they implement. I love
[00:45:19] Patrick: that. I love that. And going back to the data piece, one thing that the data does is it brings the truth right in front of you. And I think as entrepreneurs, oftentimes it’s easy to. Deny the truth that’s standing right in front of us. And so oftentimes we have to accept that truth.
[00:45:36] Patrick: And then we have to, once we accept it, we have to make decisions based on that information. And those can be hard. It’s easier to just stick my head in the sand and go pretend like it’s, it’s not there. So I appreciate you, you acknowledging that. Cause oftentimes we’re in the same boat. Like when you come to us, we’re going to introduce new ideas to you.
[00:45:52] Patrick: We’re going to introduce new ways of doing things. And if you want to keep doing things the same way and expect different results. It’s going to be really challenging. So I do love that. So somebody wants to engage with you on the fractional CFO side. What is the best way for them to get in touch with you?
[00:46:09] Susanne: So the best way to get in touch with me would be to go to our website. Our company site is www dot Marika group. com and our contact information is listed there and set up a consultation.
[00:46:25] Patrick: Yeah, very good. And Suzanne, we’ll make sure we have all of that in the show notes and in the emails we send out for listeners so they can be able to click on those links and get right in touch with you.
[00:46:34] Patrick: So let’s say somebody isn’t quite to that status yet. We’ve talked a little bit about all the free resources that you’ve got, but obviously they should start with. Your book, Profit First for Minority Business Enterprises. That would be a great place. But what else do you have out there for somebody to tune into to start working on some of these, these profit first principles?
[00:46:55] Susanne: Um, it’s obviously the, the listeners are Advent Podcast listeners, um, and they love listening to financial information. I, we also have a podcast called the Profit Talk, and we do talk about different profit firsts. Topics within the profit talk. So that would be another great place to learn more and listen more.
[00:47:13] Patrick: I love it. And again, we’ll have links to all of the resources that Suzanne’s got available from the podcast to the profit map and all those other things. I know she’s got some great videos. We’ll make sure all of that is in the show notes as well. So. Suzanne, when I think about the progress that people make here, it, it moves them to creating peace of mind in their business.
[00:47:33] Patrick: Being a business owner is hard. It comes with a lot of stress. I think we’ll all take more, more peace. It also allows us to grow the enterprise. When I’ve got a profitable business, I can have more impact is as my business grows and really the only way for it to grow is it to be profitable. It also then moves me towards financial freedom.
[00:47:51] Patrick: Right. Like I can have this, this profit that’s generating wealth for me outside of the business may be really valuable, but it’s really nice to have a profit outside of the business. And then ultimately I’m building enterprise value. I’m taking the value of my business. Like you were talking about earlier and how businesses are valued.
[00:48:08] Patrick: And we think about net income, EBITDA, all of those different factors that we can look at and go, okay, I’m going to get a multiple of that and more. of that bottom line I have, the more valuable my business is. And the cool thing is if we’re trading at a five X number, right? Every dollar I put to the bottom line increases the value of my business by five.
[00:48:26] Patrick: And so that’s, that’s always really exciting. And then we think about what happens if we don’t do that, right? Like we continue to struggle, potentially go out of business. We talked about the enterprise value being expensive in the form of bankruptcy, right? If we’re have a negative number there. And I also just in all of this discussion, appreciate your.
[00:48:44] Patrick: Top line number is not, it can be a very sexy metric, but at the end of the day, I would rather have a 3 million business that nets a million and a half dollars. 50 percent profit margin to me is the owner versus a 50 million business with a fraction of that or, or negative, like you talked about. Please give me three over 50 all day long when we’re talking about profit.
[00:49:05] Patrick: That’s good stuff. And it just eliminates a lot of frustration. This conversation has been very valuable. I appreciate all of your wisdom and insight. Any final thoughts before we wrap up?
[00:49:14] Susanne: Yeah. I just wanted to share too, if folks are interested in buying the book and like you mentioned, Patrick, it’s called Profit First for Minority Business Enterprises.
[00:49:23] Susanne: And you talked about. As an entrepreneur, when we’re profitable, we’re able to do more good work in the world. And one of the things that I did when I wrote the book was I said, how can we create a foundation where we create a book that continues to keep giving? And so one of the things that we did was we set up a permanent endowment with the book, meaning that when a book is sold.
[00:49:47] Susanne: A dollar for every book is contributed to a 501c3 by the name of Hope Worldwide. And Hope Worldwide then sends the contributions to Zimbabwe and we send girls to school. And I’m proud to say that since our book. Probably we have filled up a classroom every single year of young girls that we have sent to school in Zimbabwe that would not be getting an education any other way.
[00:50:14] Susanne: So, you know, it’s when you create a Initiative there’s you never know the impact that you’re gonna have in the world and definitely if you do buy a book Thank you for sending a girl to school.
[00:50:28] Patrick: That’s that’s beautiful. I Love the impact oftentimes Businesses can get a bad rap in the media and that type of thing.
[00:50:36] Patrick: Oh, the big, bad business owner. But at the end of the day, like we’re making a positive impact in so many different ways. We’re providing jobs for people. They’re able to create abundance in their own lives. And I love what you’ve got going on. They’re impacting people around the world that may have no idea who you are.
[00:50:55] Patrick: The. The wealth of knowledge you’ve brought to the marketplace and it’s, it’s changing lives. So, uh, like that’s not just a small change in somebody’s life. I think about education and how important that is for us to just grow and succeed in today’s world. And that’s amazing. So thank you so much for all the good work you’re doing both here and around the world.
[00:51:14] Patrick: It’s wonderful.
[00:51:16] Susanne: Thank you, Patrick.
[00:51:18] Patrick: It’s been a pleasure having you, Suzanne. Have a great day.
[00:51:21] Susanne: Thank you.
[00:51:22] Patrick: Thank you for joining us on another episode of the Vital Wealth Strategies podcast. I’m sure you found this conversation with Suzanne Mariga valuable. You now have actionable insights to take your business finances to the next level.
[00:51:34] Patrick: If this episode resonated with you, do me a favor, share it with someone who could benefit from these strategies. The more we help each other, the stronger our businesses in our communities become. If today’s episode got you thinking about how much you’re really keeping from what you earn. Let’s take it further.
[00:51:49] Patrick: Visit us at vital strategies. com forward slash tax to start building a tax strategy that works for you. And remember your vital entrepreneur, you’re vital because you’re the backbone of our economy, creating opportunities, driving growth and making an impact. You’re vital to your family, building abundance in every aspect of life.
[00:52:06] Patrick: And you’re vital to me because you’re committed to growing your wealth, leading with purpose and creating something truly great. Thank you for being a part of this incredible community of vital entrepreneurs. I appreciate you. And I look forward to having you back here next time on the vital wealth strategies podcast, where we help entrepreneurs minimize their taxes. Master wealth and optimize their lives.