076 | Financial Clarity = More Profit: How to Fix Your Books and Scale with Matt Tait of Decimal

Patrick: [00:00:00] Have you ever felt like you’re flying blind when it comes to your business? Finances? You’ve got a great product. Your marketing is working, but when it comes to cash flow, bookkeeping and taxes, things feel messy. That sounds familiar. You’re not alone. And the truth is the lack of financial clarity could be costing you more than you realize.
Welcome to another episode of the Vital Wealth Strategies Podcast. I’m your host, Patrick Laden. Today I’m excited to sit down with Matt Tate, CEO of Decimal, a company dedicated to making it easier for entrepreneurs to manage their bookkeeping, taxes, and financial operations. Matt’s got a unique background.
He started in scaled businesses, failed and learned along the way. Now he helps entrepreneur clean up their financials so they can focus on growing and keeping more of their money. We also talk about why so many business owners avoid looking at their numbers, how to eliminate friction in invoicing and payments, and the simple steps to finally take [00:01:00] control of your financials.
And if you’re looking for more tools and strategies to clean up your finances and lower your tax bill, head over to vital strategies.com/tax. That’s where I share advanced tax strategies specifically for entrepreneurs who wanna keep more of what they earn. No fluff, just real ways to save. Wow. If you’re serious about scaling your business, reducing stress, and keeping more of your hard earned money, you won’t wanna miss this one.
So let’s dive in. Here’s my conversation with Matt Tate of Decimal. I appreciate you joining us here today. I’m really excited about this conversation. Uh, we’re gonna be talking about one of the most important things, uh, a business can have, and that’s good clean financials. And, uh, it’s surprising how often we see entrepreneurs that.
Have a great product. They’re really good at marketing it, but they’re, they’re missing the third piece of that equation to, um, really make effective decisions in their business. Yeah. And that’s, uh, that’s good financials. So, uh, thank you for joining us here today.
Matt: Well, I really appreciate you having me on and, [00:02:00] uh, certainly this is a passion for me, but I also totally understand that every business hates this area of their business, and that’s totally fine too.
Patrick: I think we like good data. As entrepreneurs, we like to see good data. Like getting the good data into the systems though is, is generally the hard part. So, uh, yeah. Can you tell us a little bit about the work you do as CE o@decimal.com?
Matt: Yeah, so I mean, it’s, it’s pretty easy decimal. We do bookkeeping, tax, and what I call accounting operations for small businesses.
The basic gist of it is you need to pay your bills, get paid in track at all. And we help people do that and put in the right systems, the right technology, the right tools you use are what makes it either easier or harder. And quite frankly, if the three worst things about running any company are hr, IT, and accounting.
Patrick: Mm-hmm.
Matt: And your goal should be to not think about any of them
Patrick: ever. Right. And
Matt: if you set up the right systems and the right processes. Then you can put [00:03:00] yourself in a really good position. It’s kinda the foundation for everything, and we see it when people wanna sell a business. We see it when they want to go get a bank note or get investors, or if they just wanna start figuring out how to make more money and pull more cash out of the business.
You need to understand your financials and how to do that well. And too often we run into companies and. I don’t mind because it creates great clients for us. But then saying like, gosh, we haven’t thought of this. We haven’t done anything, or, I’m still writing paper checks and all of those things, you can make easier and better, and the more you do it, the more cash you make and the easier your business is to run.
Patrick: Yeah. No, I, I love that and I, I’m just gonna walk through what I see as the problems. Yeah, yeah. The entrepreneur faces, right? Like we’re, we’re struggling with. Accounting and financial clarity and you, you just talked about that, right? When we don’t have that, it’s, it’s a problem. It’s really hard to make strategic decisions when I’m.
You know, we’ll say flying the airplane without any data, right? I don’t know my altitude, I [00:04:00] don’t know my speed, I don’t know what direction I’m heading. It’s, uh, it’s, it’s challenging. Now, I might be able to look out the window and go, okay, there’s a Mississippi River, right? I got a rough idea of the direction I’m headed, but it’s hard when we, we don’t have that, that good data then, then there’s also the just feeling of overwhelm.
I’ve got so much stuff going on in my business, right? You know, my, my financials don’t make it into the top a hundred things I wanna spend my time and energy on. So it just keeps getting pushed down the road and. That’s a problem. And then, right. You know, business shouldn’t come at, you know, the, the expense of, you know, the transparency and the company values and all those things that we’re trying to build.
If we don’t have a profitable business, um, you know, it’s hard to build something meaningful that’s going to last. And so, um, I just appreciate the work you’re doing and I’m, I’m looking forward to getting into, um, how we can do this without it being, again, one of those things that I have to spend a lot of time and energy.
Thinking about, so before we dig into those problems, uh. A thing that I love [00:05:00] about you and your background is you’ve started things, you’ve failed at, things you’ve scaled things. All of which, uh, I think are critical as an entrepreneur, uh, to understand what it takes. Uh, there’s a, there’s a quote by, I believe it was Conrad Hilton who said, I don’t do business with anybody that hasn’t been bankrupt twice.
You know? Yeah. He was like, you haven’t learned anything if you haven’t, like started something and failed a few times, so. I just appreciate, uh, your background and then also, you know, the fact that you’re, you’re running an accounting business, but you’ve got a background in law and business and tech, and so the foundation you’ve laid is, is, is really good.
Can you just tell us a little bit more of your, your business story, what, uh, how you got started and things that have worked and haven’t worked?
Matt: Well, you, you stay much nicer than I have. I, I always tell people I’ve had a very windy, crazy path to get to where I am today, but, you know, ultimately it starts with, I, I come from a family of entrepreneurs.
My dad, uh, was a builder here in Indianapolis where I live, and my grandpa had some car shops and trucking companies [00:06:00] and. I grew up with that kind of entrepreneurial mindset. In fact, last summer I went to a family reunion and there were 60 of us under one house, which normally I wouldn’t recommend that many people under one roof.
And we looked around and at one point 12 people in that room had run a business where a large company. Mm-hmm. And so that was the mentality I grew up with. And yet I still made the crazy decision to go to law school and become a lawyer and. Look, my wife will tell you that was a great thing for me to do because ultimately I met her in law school and, um, she’s a real lawyer.
So yeah, I practiced for a little bit of time, but then ultimately I wanted to get into business and I, Indianapolis is a growing tech and startup scene and I wanted to swing the pendulum all the way and, and that led me to first running a company for somebody else, then starting a business that, as you mentioned, totally failed.
To then joining a mid-size accounting firm as kind of like [00:07:00] a entrepreneur in residence and
Patrick: mm-hmm.
Matt: Helping them start new things and buying what is now decimal from them and
Patrick: Cool.
Matt: Growing that to, gosh, we’re decimal is five years old now, and at this point we’ve got about a thousand clients and little over a hundred employees.
Um, and so like. I’ve been through all of it and, and I’ve seen all of these problems myself. You know, I’ve seen mm-hmm. What it’s like to not care about this area of your business, to have really bad struggles with hiring people, to thinking, oh, I’m gonna hire the best accounting firm in the world to do it, and that’s worse than hiring somebody.
And Yeah. Yeah. I’ve gone through that full thing. And so like any good crazy entrepreneur, I. I saw my own problems. I then asked a bunch of people and validated it was other people’s problems as well. And mm-hmm started a business that, uh, we’ve got a great team that’s grown pretty fun, uh, since then.
Patrick: Yeah.
This is great. So can you give us an overview of, of decimal, because I, I think it’s more than just, uh, [00:08:00] bookkeeping. You’re really leveraging technology to, to help simplify that process. So can you talk a little bit about, um. Really what, what decimal does, how it gets involved in the entrepreneur’s life and, uh, makes, makes things.
Yeah. I mean,
Matt: ultimately this pulls back to our mission as a business is just to make it easier to be in business. And we take that kind of operations first approach where our goal is to look at our clients and say, we wanna make it easier for you to operate your company. Most accountants, most bookkeepers look and they’re like, Hey, I’m gonna help you with your books.
I’m gonna get your financials ready and all of this stuff. Great. That’s awesome. We do that. That’s really important. But it’s more important to the business owner that their day-to-day life is made better and easier. Um, ’cause one of the things you kind of hit on in, in talking about the problem sets that you see is most businesses are bank account businesses.
The owner measures success and failure by what is in their [00:09:00] bank account and what they mentally have in their head as going in and coming out and, and that’s just a reality. We could tell people they need to change. We could yell at them to change. We could shame them into changing. That’s the reality of what they’re going to do, and it’s okay.
Mm-hmm. We did a little survey of our client base passively because we just looked at open rates on emails. A couple of years ago to see how many of our clients actually opened their month end reports, their balance sheet, their p and l, their cash. Like who, who opens just the basics. Yeah. 40%. 40% actually opened them.
Patrick: Yeah. That’s that’s amazing because. Just the way we look at the business, uh, we look at wealth building. One of the things, the first thing we start with is cash flow and understanding your free cash flow, and then managing what I’ll call liquidity, uh, month in and month out. ’cause the, the number [00:10:00] one reason businesses go outta business is they run outta cash.
So it’s like, okay, we’re gonna help somebody build wealth. First thing we gotta do is make sure we’re protecting this thing and understanding right where we’re at from a cashflow perspective. And so it’s, it’s really hard to know where you’re at if you. Just refuse to look at the information. So that’s, uh, on one hand it’s surprising.
On the other hand, it’s not because it’s, again, it’s not something that’s screaming really loud. You know, oftentimes we have these other things that are, they’re screaming loud, and even if it is screaming loud, it might even be easier to just stick our head in the sand and pretend, right. Like it’s not a problem.
So, um, well, and look, the,
Matt: the reality of all of this is when you start a business. You really have kind of two mental goals in mind. One, you’re willing to say out loud, and one, you’re just thinking, one, I wanna make money and usually I wanna make as much money as I can to reach the goals that I have. Two, I want to pay Uncle Sam as little as humanly [00:11:00] possible.
Those two things kind of go hand in hand and you want to do it ethically and you wanna do it the right way, but like you want to be able to take home what you have earned and that is a natural feeling. That’s totally okay.
Patrick: Yeah.
Matt: Most people think that I’m gonna do that by working harder, and that’s not wrong.
Right? You certainly have to work hard to do it, but then you’re also gonna lean on the things that you’re good at, and very few people that start companies have a natural skillset of accounting. Mm-hmm. Or technology. And to be totally fair in small businesses, accounting nowadays is as much a technology issue as it is a math problem.
And it’s all about picking the right tools and doing the right things. That then make the math, the accounting side easier, harder. And so setting all of that up and doing it well, and look, there are certain areas of a business that you look at and you say, Hey, these are what I do really well. I sell, I work with clients.
I do that. There’s certain things that you [00:12:00] really don’t do well. Maybe you aren’t a lawyer and you need to put together legal documents. Mm-hmm. You hire a lawyer. Mm-hmm. Same with accounting is like actually finding somebody that can take this over for you and be able to do it, because if you do, it’s worth the cost every single time.
Patrick: Yeah, I, I totally agree with that. And, and we’re, we’re big believers in finding somebody that, uh, is a who versus learning how to do it right? Yeah, absolutely. Like the best use of my time is not, especially if I’m making healthy income, the best use of my time is not. It’s not opening the mail, it’s not doing my bookkeeping, it’s not doing any of those things.
I should be handing that off to somebody else where I can have clear data where we can review it regularly and have insight into the business. Absolutely. But I should be, I should be, you know, outsourcing that and, and maybe at some point, you know, depending on the complexity of my business, if I’ve got, you know, uh, if I’m a manufacturing company, I might, and [00:13:00] huge inventories, I might need some staff accountants, you know.
That type of thing on, on staff. But, uh, for the most part, I, we feel like, you know, outsourcing these things are, are much better than trying to, to bring it in-house. Either having one of your, you know, operations people try to do your bookkeeping, never a great idea or you doing it, never a great idea. So, uh, we, we think those are, uh, all problematic.
You mentioned the tax piece. Um. We love driving down the tax bill. We look at our engagements and we, we sort of point to that number and we save our average client $280,000 of income tax. And so, uh, when we, we look at that, it’s like the only way we can do that is when we see clearly what’s going on in your, your business.
Right? And, um, you know, we. Simply we need to see, you know, what is, what is net income? You know, let’s, and, and what do we, what is the owner getting paid? We need to know some of those key pieces. But then, then as a business grows up, it’s so nice to be able to [00:14:00] see, you know, cost of goods sold and some of those other factors that, uh, you know, businesses may not have spent the time or energy setting up the systems to like get into that data because there might be some nice efficiencies in there that we can go help, uh, the client recognize to drive more money to the bottom line.
So. Can you talk a little bit about how technology helps, um, somebody go from, we’ll say a financial mess and, and just the work that decimal does to go? ’cause I, I think there’s oftentimes maybe some shame associated with like, oh yeah, I should have, I should have this cleaned up. It’s embarrassing to get somebody in front of my data, uh, every year.
I’m last minute getting it cleaned up, getting it to my accountant. So can you talk a little bit about. You know, the process that you can take somebody through to go from financial mess to financial insight.
Matt: Yeah. And look, here’s, here’s the reality. Everybody is a mess. Even the most cleaned up set of books has issues.
Mm-hmm. Um, I was talking to a bank the other day and they were like, look, even the best run [00:15:00] businesses, every time they get a new CFO or VP of Finance, we know they’re gonna restate something like everybody new is going to find something. And so. Take the shame out. Like I, I, I understand it, but the reality is no one’s alone in that boat.
So when you’re, when you’re looking at a mess, there are a couple of things that I think you need to really start with. One, you kind of mentioned it earlier, good data in equals good data out, and nobody cares about the ledger or the accounting or QuickBooks. What you care about are all of the other operational things that lead there.
So how am I paying my bills? Am I still writing checks? You should absolutely stop doing that. Find a good piece of software to do that in a very automated way that then integrates with the ledger that takes all the data entry out like you wanna remove people from the process because people are going to make mistakes, and so you want to take the data entry and the people side and [00:16:00] limited as much as you can.
Also, nobody on your team likes doing that. We were talking to somebody the other day and they were like, I’ve got 30 employees there sending expense reports. It takes me 10 hours a month, and they’re all pissed about it. I’m angry about it, and I’m like, great. Put ramp on. Yeah. SA credit card. They’re gonna use it.
They’re gonna take a picture of their receipt, it’s gonna be done. It’s all automated. That 10 hours a month now and one like that’s nine hours of savings. Value your own time as much as you value everything else. And, and so looking at each kind of point and saying, how can I find the right tool that makes this easy?
The other thing is, is how do I look? So number one, you wanna make sure that how you’re paying your bills is simple, projectable, and easy, because cash flow is important. And one of the ways you measure cash flow is what goes out the door. Two is figuring out a compensation and income. Creating [00:17:00] process that’s easy and measurable as well.
I see too many businesses get stuck on like a billable hour for a, you know, cost and material type basis that they could really set up recurring payments for. And those recurring payments are really important because you mentioned like the shame in an area that want that businesses can really improve on vastly.
One of the craziest things to me is how much outstanding AR exists in perfectly healthy businesses, and it’s usually because people get busy and they also don’t have the processes and data in place to say like. Weekly, we send our clients a, uh, updated AR statement, which is like, Hey guys, you’ve got a million dollars outstanding in ar.
Here’s what’s been outstanding the longest, and by the way, you wanna make a million dollars stop selling, do this, like, you actually have the bird in the hand and you’re letting it go. Chasing one in the two in the bush. Yeah. And so like putting it’s part of it’s technology and putting the right tools in.[00:18:00]
The other part is putting the right processes and habits around those. That are just simply like good stuff. And what’s interesting is people will do it in their personal lives. Like, Hey, your buddy owes you money. You’re gonna go collect on that, right? But for some reason, like those three clients owe you money and you get busy doing other things, you shouldn’t do that.
It’s not fair to you and it’s really not fair to them. Their accounts are actually telling them to go pay it so that they can actually have good data themselves, right? Yep. So putting those processes as well as the technology in place. That’s really important.
Patrick: A hundred percent. And, and I, I love what you’re talking about on the AR side, like we’ve, we’ve had some clients that are charging monthly, like it’s a monthly retainer to do their work.
I’m like, put it on automation. Absolutely. QuickBooks, automatic draw or credit card, hit it every single month on the first, it will eliminate your. And guess what? If the payment doesn’t go through, you don’t do the work. You don’t end up in a situation where you’ve been working for wait, pay
Matt: on the front end, pay for [00:19:00] access to the work you know you’re gonna do, don’t pay for the results, make the overage, the result based end of the month payment.
Um, and here’s the thing, we’re all used to that structure too. Like that’s not a new structure. So simply working with your clients to do it and having those conversations. That’s the other thing, like business owners. Have to be willing to have tough conversations. You don’t have to be mean about it. It’s just like, Hey guys, I need this.
Like, let’s work together. Let’s align our incentives. Your incentive is you get great work or great products. My incentive is get paid. I
Patrick: wanna get paid. Yeah,
Matt: it’s
Patrick: great. Well, Matt, I think you’re talking about one of the reasons they might not be getting paid is just because their bookkeeping is the hundredth thing on the list that they’re doing.
You’re absolutely right, and they just haven’t got around to it. Not that they don’t want to pay you, they’re just like. I haven’t got to that thing yet. Right? Oh, yeah. And, and, and so it’s like, yep, the squeaky wheel will get the grease eventually, especially if you’re like, keep hitting the [00:20:00] person. They’re like, oh, geez.
Yeah. You know, I like Matt. I wanna pay Matt. I need to get the bill, you know, set up and those dollars out. And so, um, yeah, I, and I, I’m always looking for like. I don’t like the invoice showing up in my mail or my inbox. Like, please give me an option to just have it automatically paid. Agree. I’ll review my financials and make sure you’re not overcharging me.
But it’s like I don’t, I don’t wanna have to screw with it. I want it as simple as possible. And I think if you can take the friction out of those transactions, you know, and friction is the customer has to do something with the invoice. Like no matter how simple that is, you know, like I love my plumber.
My plumber doesn’t have me on a monthly recurring charge, ’cause I don’t, I don’t need plumbing all the time. But when he comes and does something at the office building, he sends me an invoice via QuickBooks. I hit the pay now button on my email. My credit card information’s all in there, and he gets paid like instantly.
I pay it instantly. It’s like, I love this versus. Him printing something off [00:21:00] three months later, I get it because he finally got around to it. I pay it a couple months after that because, you know, it sat on my desk or what have you. So yeah, I think that friction piece is, uh, uh, is awfully important and I love how, you know, building processes and habits into the, the equation is, is good stuff.
So.
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Strategies that actually help you keep more of your money. If you’ve ever felt like you’re guessing when it comes to taxes or deductions, this will give you clarity and direction. All right, back to the episode.
Can we talk a little bit about, you know, the, the shifts in mindset to, to scale the business, right? Oh, like I start to get my [00:22:00] financials kind of cleaned up. What do I need to do to, you know, really, uh, what are you seeing as best practices from a financial perspective? To go from, okay, I got a million dollars revenue, you know, I wanna get to 2 10, 5 50, you know, where do I need to go to?
Um. Really level up my business from a financial perspective.
Matt: So let me say two things. Number one, I think every business owner period should always work and think with the end in sight. Mm-hmm. If you start a business today, think about what is my goal? Is my goal to sell? This is my goal to make a million dollars a year off of it.
What is my goal? Because once you make that decision, and if you haven’t done it yet, sit down over the weekend, do it. That will start to inform your decision making before you reach kind of problem sets. And you’re talking about our natural flex points that every company has. And I’ve been there a million times and I’ve seen, seen it happen a million times with companies.
Mm-hmm. And you know, [00:23:00] the biggest thing is preparing for that before you get there. So number one, from a, from a finances and kind of business structure mentality, you’ve gotta think about do I have the foundation set correctly to grow? A big part of that is building into smaller and smaller boxes. You and I have actually been talking about some pretty big boxes of like revenue and bills and all of that stuff.
Usually as a business when you’re getting beyond that first million and you’re really thinking about scaling and I call that the messy middle where you’re
Patrick: mm-hmm.
Matt: You’re doing everything that worked when you were kind of startup mode and getting to a million, all of a sudden stops working pretty quickly and you have to do processes and like stuff that quite frankly I hate, but we really need as a business, once you start to think through those things, you need to get to smaller buckets.
Like one of the things we did at Decimal is as we started to scale well beyond that point, and dealing with a hundred employees is different than dealing with five. Mm-hmm. You start to look at, [00:24:00] okay, what are all these services that we’re providing and run a p and l on those? How profitable is each thing?
You talk about wanting your business owners to make as much as much money as possible. For them to do that, they have to make sure their company is making as much money as possible. To make sure their company is making as much money as possible. They have to understand the difference between revenue and profit, and so many businesses get trapped in that misunderstanding.
Mm-hmm. They think I’m gonna grow and growing is good if done correctly, but the profit, what you’re making is the most important thing. And I can’t tell you how many times we’ve gotten into businesses and seen that their highest revenue generating business line or service line or product line is actually losing them money.
And you look at the next two largest and you’re like, guys, these are actually what’s making you money? You’re getting paid off of these [00:25:00] two. And they’re like, well, we’re selling so much of this. And I’m like, great. Figure out how to remove 20, 30% of the costs, and all of a sudden you have a very profitable business.
If you can’t do it, then guys like actually think about shutting it down.
Patrick: Totally. And, and I think it’s so hard to kill our, our babies, right? Like, you know, it, uh, it’s, it’s such a challenge. And I, and I wanna just highlight what you’re talking about, duke. So if I had a choice, I could have a hundred million dollar business and let’s just keep the mass simple.
And let’s say I have a. A 2% profit margin. Okay. Very small. Like that’s, that’s dangerous though. But I’m making $2 million a year on, on and, but I can tell all my friends, yeah, we’ve got a hundred million dollar business. I hear somebody talk about their top line. I’m like, one of two things. A, I don’t care.
Or B, you don’t even understand what, what is the important metric, right? Yeah. Uh, the top line doesn’t make any difference. So I got a 2% margin on a hundred million dollars. That means that I’m making $2 million. Sounds like a lot of money. Or I could have a [00:26:00] $5 million business with a 50% margin and be making two and a half million dollars.
Right? Two and a half is better than two. And my simplicity is it’s so much easier to, to manage $5 million worth of revenue than it is a hundred million. Right? And everything that comes along with that. And so, uh, I think people get awfully hung up on that, that top line number. Like, oh, we’re doing a couple million bucks this year.
I’m like. Is you’re not making any money. You know, who cares? Um, you know, your salary is all your, you’d be better off just going and getting a job somewhere. From my point of view, it’s like the bottom line is, is where all of the, the, the focus should be. And we should be doing everything in our power to make sure that we, I love the idea of p and l on each service.
Like, let’s carve this out and just make sure that that thing is. It’s profitable, and if it’s not, we should kill it or change it. Right? Like, let’s go. Right? Let’s go find the efficiencies that we can, we can shove in there. And I, I love this saying, um, I, I am stealing this from a book on hospitality. It’s called Unreasonable Hospitality.
But the point he makes in [00:27:00] there, when business was tough, he goes, the raindrops fill up the ocean, right? Like, right. All of the little things make a difference on the bottom line. So we started like just going through the pencil. Oh yeah. Crossing off the things that weren’t necessary to deliver the product.
And I think that’s a, a key piece too. Like let’s just really get micro on what is making these products profitable or not, and find new opportunities in there. So,
Matt: well, one thing that I think, I’ve got a friend, and he takes it to the extreme, but I think it’s very cool. He’s running a hundred year old fourth generation family business, and.
One of the things that his dad started doing that I think is, is really interesting is every five years they bring somebody in and say, what could we sell the business for? That’s a very fascinating look because if, if you are running a fast growing SaaS business and you’ve got 2% profit on a hundred million, guess what?
You’ve got a multi-billion dollar company, right? Great, that’s great. If you’re [00:28:00] running a small manufacturer or a manufacturing business with that, you’re probably selling it for that 2 million times, maybe four x ebitda, five x ebitda, and so you’ve got a hundred million dollars business that you’re selling for $10 million.
That’s not gonna feel very good. But if you’ve got that $5 million business and it’s pumping off two and a half and you’re selling it for four or five X ebitda, all of a sudden you are making a lot more money. And so getting an understanding of, even if you don’t want to do it, just fundamentally understanding what I could sell this for, it lets the world tell you what it’s worth because business owners.
Because it’s our baby, because we’re so passionate, we care. We’ve put blood, sweat, tears, sleepless nights, missed kid stuff. All into these companies. We look and we say, we think it’s gotta be worth a hundred million dollars. There’s no way it’s worth 10. Then you talk to somebody and it’s like, gosh, actually it’s worth 10.
Mm-hmm. And these are all really [00:29:00] important things for us to think about and consider. I wouldn’t recommend doing it every five years. I think it’s kind of a waste, unless you’re actually thinking about selling. Mm-hmm. But they use it as a great opportunity to cut costs out and to just fundamentally get better.
Patrick: Yeah. I love this. I also really appreciate the, I. Start with the end in mind, right? Uh, that’s a Stephen Coby, Stephen Covey, seven Habits of Highly Effective People Concept. Like, Hey, let’s start with the end in mind. And, uh, one of the things that, uh, I think really matters is I’m gonna make different decisions on this business if I am developing it for an income and maybe generational.
You know, uh, family enterprise versus I’m going to build this and scale it as fast as I can to have an exit. Right. Um, and so I, I think those two pieces are, are, are really important and I can’t overstate the value of good financials if you’re going to sell the business. Absolutely. The, the number of [00:30:00] clients that we run across that are like, I’m interested in selling, and we take one look at the financials and we’re like.
Is this is a disaster. Like we’ve got a lot of work to do to get these cleaned up before you ever take this to market because, uh, any buyer that looks at this is instantly going to be concerned about. I can’t tell what’s going on. I can’t see where the opportunity is. I can’t see where the owners, like, you know, we’ve got a zillion add backs that are like, need to come back into this thing.
Uh, we need to get all of that cleaned up before we ever try to take it to market. So, um, that’s probably the number one issue, you know, for Yeah. Uh, getting a good value is you gotta have clean books if you don’t like. Because you think about it from a buyer’s perspective, I’m, I’m now taking a business that either has, I’m, I’m gonna be applying a lot of debt to it, you know, now I have to, I have to have the debt serviced and I’ve gotta find upside in this business, right?
That I can, you know, take and grow it from [00:31:00] here. And if, if I can’t see that in the financials, if I can’t have confidence that I’m, I’m going to do that, I’m gonna do one of two things. You’re gonna get. A lower offer, or we’re gonna have a totally different structure for this offer, right? Like, we’re gonna have earnouts and all this other stuff that nobody wants in their, their, their opportunity.
So, uh, yes, I think the, the end in mind, you know, what are we, what are we trying to accomplish when we start is, uh, is so important and I appreciate that distinction.
Matt: Well, and you know, pull the reason for that back a little bit too. When we run a business, the things that. A lot of it’s awesome and we love it, particularly people like me who have done it a million times.
Like I, I love running businesses. I’m a terrible employee. Like fundamentally understand all of that. Yep. But the thing that we hate the most is uncertainty and fires that pop up and they’re gonna come. The self-inflicted ones are the ones that we can prevent to make life easy [00:32:00] If you set all of this stuff up really, really well.
You give yourself a level of certainty and the level of certainty of knowing that I can pay my bills, pay my people, and pay myself, that’s a really big weight to lift off your shoulders, particularly because you already have a million of ’em. And I always recommend to business owners like, take yourself inflicted wounds off.
Remove those. Those are the ones you can control. And when you do, you’ll feel better about all of the other ones. So that’s another aspect here of when you run your business, well set it up to sell, set it up to profit, set it up to pay yourself. Doing all of that stuff fundamentally correctly just also makes day-to-day life easier.
In a business like everybody romanticizes running your own company, it’s not a romantic thing. It really sucks a lot of the time, and that’s totally fine. [00:33:00] But take the self-inflicted wounds out and you make it that much easier, and why not do them?
Patrick: Yeah, I, I totally agree. There’s this misconception out there that the entrepreneur has all the time and all the money.
Yeah. And, and the reality is they are the last one. If something needs to get done, they’re doing it right. And that, that could be anything from getting in the bathroom to, uh, the client meeting that, uh, you know, I had to hop on a plane and go, you know, fly across the country, uh, and then. I get paid sure.
But only after everybody else has been paid. All the invoices are paid, the lease is paid, the utilities are paid, the software’s paid. If there’s any money left over, now I get some, some extra cash. Uh, and a lot of times, especially during the startup phase, we see entrepreneurs that are spending tons of time and energy and not getting compensated at all for that.
I think it’s one of the reasons we, we see a distinction between. We’ll call it high income earners like doctors and even maybe some, some CEOs that, uh, [00:34:00] are used to this. I put in a an hour’s worth of work and I get, I get compensated at a high level. Yeah. Their spending can get way outta whack. Right? Like we’ve seen some doctors spending making a couple million dollars a year, spending a couple million dollars a year.
Uh, or 2.1 actually. Uh, and then we, we see the entrepreneur though, they, they know what it’s like to put an hours worth of work in and not get compensated. Time after time for that. And so they tend to like bring their spending down. ’cause then they, they understand that I need some financial margin to be able to right, uh, uh, survive through some of these, uh, these, these periods.
So yes, the entrepreneur, uh, statistically speaking, nobody should do it. Just go get a job. Oh yeah. Uh, the, the failure rates just, but, but stress, I’m very, levels be
Matt: lower.
Patrick: Yes, I’m, I’m like you, I’m unemployable because I’d get there and I’d wanna like, change everything and then I’d, you know, not follow the system and they’d be like, you gotta leave and that’s okay.
Fine, I’ll go start a competitor. But there’s some of us that are just wired even with all of the, you know, the warning signs. Like, Hey, [00:35:00] this might not be a good idea. It’s like, Nope, we’re gonna go, uh, fire this, we’re gonna give it a
Matt: shot. You’ll appreciate this. So last summer, I, I had an intern. We’re a remote only company.
And so fundamentally, most of our employees are a little more experienced and you kind of want batteries included most of the time. Yeah. But we, we did an intern and, and I looked at, looked at him and I said, Hey, I’m sitting in some meetings and like, you think you could do my job, don’t you? And he, he just kind of awkwardly laughed.
And I was like, it’s okay. Like you can tell me honestly. ’cause I remember being your age and thinking that, and he goes, well, and I’m like, I’ll make you a deal. I’m gonna have you sign an NDA. It’s locked solid. Why don’t you spend a whole day sitting through Zoom meetings with me. Just one day I’ll pick and then let’s have a discussion afterwards about how well you think you can do my job.
And, and it was a fun exercise because he sat with me and we were in HR meetings, investor meetings, client meetings and partner meetings. Um, all different stuff about the business. Yeah. And I looked at him at the end and I was like, so. [00:36:00] What are you thinking now? And he goes, I got lost after the second meeting.
And I was like, he goes, how do you change context all day long and you’re there for every meeting and you’re present and you know you’re able to do this? And I was like, look, you gotta build to it. Like it’s hard. Yeah. And this is something you kind of learn. And I’ve been good. I sucked and now I’m doing better.
And, um, it’s an interesting kind of way to look at life.
Patrick: Yeah, absolutely. Absolutely. All right. This is, this is great. Matt, if it’s okay, can you talk us through, like, let’s say I call up decimal and I’m like, Hey, I, I need, I need help. Um, what is, what is onboarding? What does it look like if, if my, and we’re, let’s just assume everybody’s a mess to some, some level, like it’s varying degrees of mess, but how do you assess the situation and figure out, uh, how to get people moving in the right direction
Matt: so nobody calls and changes their bookkeeper if they’re happy.
So everybody that comes to us is fundamentally a mess. The biggest thing for us is our [00:37:00] client journey starts in sales and creating one continuous experience is really important. So sales works to do deep discovery to learn about the entrepreneur or the CFO that we’re working with. Learn about the business, learn about how they’re doing things today, learn about their desired outcomes.
And a lot of people don’t necessarily know what their desired outcome is, and so working with them to find it. Then when you start onboarding, number one is making sure that from day one you can operate. So our team is doing the books immediately from day one, and then we’re also working to revamp the operational processes to put new technology in place.
We want to create a seamless experience that starts to eliminate time, the time needs from the entrepreneur, and starts to immediately provide the right type of information and data. We’re working on multiple levels, just to make sure. Number one, first, most important thing, the business continues to operate and they’re still paying their bills, [00:38:00] getting paid and tracking it all.
That’s number one. Number two is improving and making that process easier. And we like to talk a lot about aligning incentives. It incentivizes us to improve your processes because it makes our lives better and easier. It incentivizes you because it makes your life better and easier, and it keeps your costs down.
So we’re my, my grandpa always used to tell the story and I very much fundamentally agree with it. The Henry Ford quote about like, I believe everybody should be able to get the Model T in any color so long as it’s
Patrick: black. It’s black. Yep.
Matt: And you need to look at the client, understand the nuances of their business and their industry.
But you also need to say like. You called us, we’re an expert.
Patrick: Mm-hmm.
Matt: We’re gonna give you what’s best. You’re going to do that, that’s why you’re priced this way. And we start selling that the whole way through. And that’s what ultimately I think, creates really great long-term relationships, really great expertise on our side.
Mm-hmm. And really great experiences.
Patrick: Yeah. I, I [00:39:00] love that. And I think a couple things. It ties back to one of the things you just, you, you mentioned like get your, get your billing set up. So it’s, it’s recurring. You’re not tracking down ar I’m not having to time track and build the client. You know, it’s like, here we go.
We’ve got a, a set cost and we’re gonna deliver on that. Now we, we do the same thing and the reason we like doing that is it encourages the client to leverage us for every possible question. Right? Yep. If I’m buying a car now, we can give you an intelligent answer. Uh, but I like the fact that our clients are leaning into us going, Hey, I’m thinking about doing this.
What is the best path forward? Great. Let’s, let’s talk about it. Uh, versus if I’m billing them hourly, they’re trying to get off the phone with me as fast as possible. They’re not leveraging us, and it’s really hard to give a client good outcomes when we’re, we’re not. Fully engaged in everything they’re doing.
I love the idea around like, we’re creating efficiencies, we’re driving a ton of value to the [00:40:00] client. Our incentives are aligned. I think it’s a beautiful model and I’m saying that as somebody that’s, you know, executed on that model, uh, well for a fair period of time. So, um, I think that that is wonderful.
Now, I’m also looking at like, I think there’s some complexity that starts getting into the equation, right? Like there’s the cleanup piece first, and I’m gonna. I’m just gonna think about a restaurant, for example. Yeah, okay. I don’t have any idea what products are actually making me any money that I’m selling.
Right? And figuring out that that cost of goods is going to take a minutes to like get my, yeah. My food cost and the time and energy and resources it takes to sort of produce that, you know, sandwich. So how do we go from. We got set up, and this could apply to a manufacturing setup, you know, almost anything.
But how, how do we go from like, okay, I got cleaned up, I’ve got some like basic good data. How do we start to like stack on that and, and really get clear on, uh, additional data moving forward?
Matt: You know, the, [00:41:00] it’s all about that process and the technology that you use. You need to track things somehow.
Number one, start with the big buckets. The big buckets that you get, right, the big buckets that you do. Well start with that. Then get smaller and smaller, but do it in a way that creates better processes and better technology and better data collection. If you’re doing it on pen and paper, find something better.
If you’re doing it in a spreadsheet, find something better. Like keep leveling that up. Just the habit of creating and doing it is the first thing. So if you’re not tracking that stuff, if you’re not tracking where you’re buying your produce from in the restaurant or what you’re paying your labor or you know, any of those things, number one, start tracking it.
Tracking it as the number one thing, then take the next step in improving it. And the next step in automating as much as you can. And you really wanna start to look at, Hey, [00:42:00] how can I automate? Like one of the things with produce. If you create a bill pay system that can maybe use artificial intelligence to line out each individual type of produce, you can start getting the data in a very digestible way.
And then you can start to understand like, maybe I should buy my lettuce from one place and my meat from another place. And you know, any of those things you can start to understand and cost out. But first you have to create the habits that you can then improve on. What I don’t like is when people immediately jump to the potential future and they go buy this really expensive system.
We just had a client that talked to me yesterday and she’s like, yeah, we got a new CFO and she put us on SAP, and I’m like, you are a $2 million e-commerce business. You do not need SAP. I’m like, and by the way, you skipped like nine levels in getting to the most expensive software. And she’s like, well, we just spent 180 grand doing it.
I was like, great. Number one, we don’t work in SAP, so we’re happy to help your next [00:43:00] provider. Number two, you just wasted a lot of money and that’s a problem. Yeah,
Patrick: and you’re a $2 million company. You probably don’t need a CFO, you know? A hundred
Matt: percent. There were, we were unpacking a lot of issues with the entire statement there.
And, and, yeah. Yeah. We’ve had it happen a couple of times and ultimately we had a client come back to us in December and they were like, you were right. We shouldn’t have gone to NetSuite. We let go of our CFO. We’re, we wanna convert back to QuickBooks, we want you to work with us. And we’re like, great.
Absolutely no problem.
Patrick: Yeah, yeah, yeah. I love that. And, and I think there’s also, this is worth acknowledging too. Um, I think there’s a. The, the term fractional, CFO gets tossed around a lot. Uh, and CFO gets tossed around a lot and I, I think there’s, there’s probably a good, uh, order of operations for how we, we do this.
I think before the first dollar of revenue flows into the business, you should probably have a bookkeeper in place and it’s not you. I would agree. As the business owner have [00:44:00] somebody that is just there getting your book set up correctly from the get go just solves like a million. Issues down the road.
Yep. So we can, we can start with bookkeeper and then we can move to, um, maybe more staff, accountants, you know, might be the next level. Like somebody like controller understands the business, right? Yeah. Staff, accountant, controller, you know, can pull some of the levers, make things happen in the business, but they’re not doing anything strategically.
Um, and then like we. We pay a fractional CFO to consult with us to help our clients. Yeah. So we’re, we’re paying them to just get insight into, uh, their financials on a level that we don’t, we don’t see, uh, we don’t have the, the ability to see into those, um, financials the same way they do. And it’s like, okay, this is, this is pretty neat to see how they see things.
And then there’s, they’re often making suggestions on. This is what your team needs to look like. You know, this is what your software stack needs to look like to be able [00:45:00] to, to do that. And that might move to fractional CFO. And, and I don’t know, it seems like, like we’ve seen businesses from a revenue perspective cross the $30 million threshold and, you know, running it 2025, 30% margins not have a CFO.
They’ve now brought those in and they’re, you know, looking at valuations north of a hundred million and they’re like, okay, this is, this is working. But, um. I think people are, are in a hurry to maybe, you know, add some of those, those pieces when what they should be doing is calling you and you are building the team around the business.
Uh, because it’s, um, when you start early, you don’t, you don’t need somebody to come in and clean it all up and you might be like, oh, I need a fractional CFO to or A CFO to fix this problem. And it’s like, no, you don’t. You just need a firm that understands what the entrepreneur does, right. With the. The base tools in place and just continue to build on that.
Matt: Well, and
Patrick: I dunno if there’s anything to add to that, but
Matt: No, I think, uh, [00:46:00] I agree with you entirely. The problem is, is that ultimately most business owners just want to not think about this, and they want somebody to do it for them. The problem is, is that they, they usually aren’t willing to take the time to shop, to find the, the right one, and industry expertise and actual experience is so important.
Because what we see in fractional CFOs are so many people that give themselves the title without the experience. Mm-hmm. And that’s a problem. The, the other problem, and you kind of hit on it a little bit, is my dad would tell you in building a house, you wanna build a foundation first and the second story later when you go with A CFO first and expect them to then build down, you start to make mistakes.
CFOs aren’t necessarily known for putting in the right technology infrastructure and the right day-to-day processes and all that stuff. They’re much better at looking forward. And so you need to build from [00:47:00] the ground up and you need to get yourself ready for A CFO, not hope that A CFO will get you ready for them.
Also, if you’re asking a CFO to do all of that work, that’s a very expensive way to use a CFO that isn’t actually helping improve anything going forward. Yeah,
Patrick: yeah, absolutely. That’s, uh, fantastic. I appreciate, uh, all of those, those distinctions. And it, I, I love to hear the fact that you’ve been there, done that with businesses.
Right. And, uh, I think one of the things that you, you touched on, and I think what is happening through this podcast is. It allows people to, to build trust, right? Like when I just go Google fractional CFO or, yeah. I don’t even know what to look for when my, my finances are a mess, right? Oh, uh, I think hearing conversations like this, you know where people are.
Um, and I know you guys have a podcast, but you’re doing a great job, like getting information out there into the world so people can go, all right. What does [00:48:00] Matt do at Decimal? What does decimal do for us as entrepreneurs? Let me go learn about this, build the trust, and then we can, uh, uh, it makes it easy to engage when I understand everything about, uh, the work you guys are doing.
So thank you for that. I appreciate it. Yeah. So, okay, we’ve talked about, uh, uh, a number of different opportunities, uh, for cleaning up the books, good ways to do that. What is the best way for people to connect with Des? To, to sort of go, all right, I’ve got this issue. I need to get this cleaned up. What I’ve been doing is not working.
Where do we go from there?
Matt: I mean, number one, the easiest way is just to go to decimal.com. It’s very easy to find, and we have an amazing sales team. I. Did you find when your company grows? They don’t let me do anything anymore. I’m not allowed to sell and I definitely can’t count, so I can’t do bookkeeping.
Uh, but we have an awesome team of really great experts and they’d love to chat if, if anybody just wants to follow my content or hear about my life [00:49:00] running a business, or the experiences that we have with our clients are on the podcast, just follow me on LinkedIn, Matt Tate and, um, after the Million, after the first Million podcast.
Um, but it should be easy. Look, whether it’s me or Decimal, our mission is just to make it easier to be in business. And that leads to a lot of good things.
Patrick: I love it. I love how you simplified your, your message, right? Uh, we wanna simplify what it means to be in business. That’s, uh, that’s wonderful. And we’ll have links to all of the, uh, information you just stated in the show notes decimal.com, your LinkedIn profile to podcasts.
Um. Matt, this has been, this has been great. I, I think if, you know, one, one thing to sort of highlight for our entrepreneurs is if I’m running a successful business, I need clear data. I, I, I need that you do that information to be able to sort of fly the plane. And if I don’t have it, it’s problematic and I’m, I’m not gonna be making as [00:50:00] much money, I’m not gonna be having the peace of mind that I need to.
Um. You know, be able to run this effectively. You know, all of the, the hassle you, you, you mentioned this, all the hassle that comes with being an entrepreneur. Let’s take some of those pain points outta the equation. And that just comes with having the right tech stack, the right people in place to, to make all those things work.
And so, uh, not doing that just leads to frustration and, uh, potentially going out of business. So we, we, we don’t think that’s. Right. We think the entrepreneur is the backbone of the US economy. Uh, they, they drive this country forward. They employ all the people, uh, not all the people, but most of the people.
And, uh, uh, it’s really, I think where the American dream comes from. Even though, uh, people get into that American dream, they figure out how hard it is, but it’s, uh, it’s still good. So. I appreciate all of the work you’re doing to just let the entrepreneur, uh, go out there and, and do their thing. We see entrepreneurs that have a great product, they have a great marketing system, but oftentimes don’t have the, the great financing to Right.
[00:51:00] Uh, really sort of bring it all together. And so this is, uh, this is great. Anything else before we wrap up that we, we should have discussed that we didn’t?
Matt: No, I think we covered it all and I really appreciate you having me on. And, um, look, accounting, bookkeeping, taxes. Super boring topic, but
Patrick: yeah,
Matt: fundamentally important.
Patrick: You know, what’s not boring? Having a lot of money in the bank that I can go live a great life. Right. You know, uh, what is, uh, also not boring is not having any cash in the bank and being stressed out. And so you guys help with, with all of that. Uh, so I, again, I appreciate this and, uh, think this is, uh, fantastic.
Again, we’ll have all the notes to, or all the links in the show notes to. Des Mo and, and all the good content Matt and his team put out.
Matt: Awesome. Thanks again.
Patrick: That’s a wrap on today’s episode. I hope you found this conversation valuable, and then it gave you some actionable insights to take control of your financials and build a more profitable business.
If you [00:52:00] enjoyed this episode, do me a favor, share it with someone who could use this information, whether it’s a fellow entrepreneur, a business partner, or someone struggling to get a handle on their numbers. This could be exactly what they need to hear. And remember, you’re a 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, creating abundance in every aspect of life, and you’re vital to me because you’re committed to growing your wealth, leading with purpose. You’re creating something truly great. Thank you for being a part of this incredible community of vital entrepreneurs. I appreciate you now.
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. Until next time, keep building, keep growing, and keep making an impact. And hey, if you’re ready to go deeper, reducing your tax bill and keeping more of what you earn, make sure to check out vital strategies.com/tax.
Before you go, let’s talk about some of the best advanced strategies there are out there, simple legal ways to save [00:53:00] thousands and run a more efficient, profitable business. Thanks again for tuning in. We’ll see you next time on the Vital Wealth Strategies Podcast.