Now What?, Part 1 (Inspiring Women, Episode 27)
Now what? It’s a question many business owners are asking after a year like no other in 2020. Betty Collins, host of Inspiring Women, answers this question with a call to tend to business basics. “Inspiring Women” is presented by Brady Ware & Company.
Betty’s Show Notes
We ended this decade on such a high note. I began 2020 with a lot of optimism. I didn’t think anything could get in our way; the marketplace was just roaring, and at this amazing speed. Not only Wall Street, but also Main Street, they were just hitting records.
But by the 1st of March and as March unfolded, I’m attending a board meeting at Brady Ware, where I’m on the board of directors to discuss corona; not the beer, but the coronavirus, and later renamed, of course, COVID-19. Our CEOs were saying, “How is this going to affect our business and should we be making plans?” I thought, “What for? What would we need to possibly do with this?”
But but we were ahead of the game, and on March 16 we were sending our employees home and restructuring how we did business. We were certainly not out of business, but we were certainly doing it differently.
Life absolutely stopped on a dime.
CPAs were considered essential, and so, I was in our office. There was no traffic. There was no one in the parking lot. I was here for mail and phones and different things while our people were home, safe. It was a lot of craziness; new wardrobes of masks and gloves; and “Wine with DeWine” became a big thing in Ohio.
We had endless days of phone calls. I felt like they would never end, especially in that first 30 days. Overwhelming legislation started taking place, and the word unprecedented – which I can hardly take – I have changed it to ‘for such a time as this’. It sounds better than unprecedented times.
I’m asking the question every day, now what?
As a business owner and leader, I was amazed, as usual, at the resilience of the marketplace, not just in Columbus, but in the country.
The resilience of business owners, and our leadership from the federal to the state, to local levels. We go from this roaring speed to an absolute, screeching halt.
And even so, we jump in, as opposed to jump off.
We learn, we read, we apply for dollars, we use the word “pivot” every day. But not just for business, our personal life too.
By mid-year, the roller coaster ride had slowed down for some businesses and owners. We were getting a little more comfortable, till those things called “spikes” came into play. Then June and July brought assessing the damage. It’s like, “The tornado went through. Now, what do I have?”
The impact was both negative and positive. I think many of my clients are amazed at how they’re doing.
I think others are devastated.
But whether you are devastated or the opportunity was just amazing, we’re tired. We’re all tired, I think.
So, now what?
Fortunately, the basics of business have not gone anywhere, it’s just the approach. In our personal lives, I think it’s been a more of an assessment of what is important.
We start by taking a deep breath and focusing, and we put our energy into actions. I’m going to talk about these actions you need take…
These are all actions, and it means you have to do something.
Download these handouts after you listen to this podcast.
I’d love to talk to you about it, because it’s something that I’m passionate about. Because when the marketplace works in this country, the country works. Right now, it needs businesses to work. It needs employers to have success.
Betty Collins, CPA, Brady Ware & Company and Host of the “Inspiring Women” Podcast
Betty Collins is the Office Lead for Brady Ware’s Columbus office and a Shareholder in the firm. Betty joined Brady Ware & Company in 2012 through a merger with Nipps, Brown, Collins & Associates. She started her career in public accounting in 1988. Betty is co-leader of the Long Term Care service team, which helps providers of services to Individuals with Intellectual and Developmental Disabilities and nursing centers establish effective operational models that also maximize available funding. She consults with other small businesses, helping them prosper with advice on general operations management, cash flow optimization, and tax minimization strategies.
In addition, Betty serves on the Board of Directors for Brady Ware and Company. She leads Brady Ware’s Women’s Initiative, a program designed to empower female employees, allowing them to tap into unique resources and unleash their full potential. Betty helps her colleagues create a work/life balance while inspiring them to set and reach personal and professional goals. The Women’s Initiative promotes women-to-women business relationships for clients and holds an annual conference that supports women business owners, women leaders, and other women who want to succeed. Betty actively participates in women-oriented conferences through speaking engagements and board activity.
Betty is a member of the National Association of Women Business Owners (NAWBO) and she is the President-elect for the Columbus Chapter. Brady Ware also partners with the Women’s Small Business Accelerator (WSBA), an organization designed to help female business owners develop and implement a strong business strategy through education and mentorship, and Betty participates in their mentor match program. She is passionate about WSBA because she believes in their acceleration program and matching women with the right advisors to help them achieve their business ownership goals. Betty supports the WSBA and NAWBO because these organizations deliver resources that help other women-owned and managed businesses thrive.
Betty is a graduate of Mount Vernon Nazarene College, a member of the American Institute of Certified Public Accountants, and a member of the Ohio Society of Certified Public Accountants. Betty is also the Board Chairwoman for the Gahanna Area Chamber of Commerce, and she serves on the Board of the Community Improvement Corporation of Gahanna as Treasurer.
“Inspiring Women” Podcast Series
This is THE podcast that advances women toward economic, social and political achievement. The show is hosted by Betty Collins, CPA; Betty is a Director at Brady Ware & Company. Betty also serves as the Committee Chair for Empowering Women, and Director of the Brady Ware Women Initiative. Each episode is presented by Brady Ware & Company, committed to empowering women to go their distance in the workplace and at home. Other episodes of “Inspiring Women” can be found here.
Betty Collins: I’m Betty Collins and this is my podcast. Like so many podcasts and now, Zoom in virtual events and all the stuff that keeps taking place, it’s the same stuff. Hopefully, today, I’m going to give you some really, really good information. It’s going to be part one of two and it’s called Now What? Now What? is a question I think we’re going to ask a lot of.
We ended this decade on such a high note. I began 2020 with a lot of optimism. I didn’t think anything could get in our way; the marketplace was just roaring, and at this amazing speed. Not only Wall Street, but also Main Street, they’re just hitting records, people’s confidence. It was just a great, great way to end the year 2020 and come into the next. Yet, across the world, there was this fire is starting to take hold and evolve. But that was across the world, it wasn’t here. Here I am, in 2020, and it’s February 29th, which is a leap year. My husband’s birthday is that day. We were at one of our favorite places, Jeff Ruby’s, and it’s just really good steak, food, great experience, opening gifts.
Betty Collins: I surprised him with his sisters being there and we just had a great time on his birthday. We both even said that weekend, “Life could not be better,” but by the 1st of March and as March unfolded, I’m attending a board meeting at Brady, where I’m on the board of directors to discuss Corona; not the beer, but the Corona virus, and later renamed, of course, COVID-19. Our CEOs were saying, “How is this going to affect our business and should we be making plans?” I thought, “What for? What would we need to possibly do with this?” But but we were ahead of the game, and on March 16, the deadline, by the way, for us, we were sending our employees home and restructuring how we did business. We were certainly not out of business, but we were certainly doing it differently. So much for enjoying steak. I’m trying to just find ground beef for tacos at Kroger’s. Not happening. Life absolutely stopped on a dime.
Betty Collins: It didn’t matter if it was work, church, dining out, everything changed. That buzz of the marketplace became empty parking lots. I did come to work still, every day. CPAs were considered essential, and so, I was here and there was no traffic and there was no one in the parking lot. I was here for mail and phones and different things while our people were home, safe. It was a lot and lot of craziness; new wardrobes of masks and gloves and Wine with DeWine became a big thing in Ohio. We had endless days of phone calls. I felt like they would never end, especially in that first 30 days. Overwhelming legislation started taking place, and the word unprecedented- which I can hardly take- times now, as a part of every statement. I have changed it to ‘for such a time as this’. It sounds better than unprecedented times. I’m asking the question every day, now what? As a business owner and leader, I was amazed, as usual, of the resilience of the marketplace, not just in Columbus, but in the country.
Betty Collins: The resilience of business ownerships and our leadership from the federal to the state, to local levels. We go from this roaring speed to an absolute, screeching halt, and even so, we jump in, as opposed to jump off. We learned, we read, we applied for dollars, we use the word pivot every day, but not even just for business, the personal life too, just to a screeching halt. By mid-year, the roller coaster ride had slowed down for some businesses and the owners and we were getting a little more comfortable, till those things called spikes came into place. Really now, at that point, June, July, we’re assessing the damage. It’s like, “The tornado went through. Now, what do I have?” The impact was both negative and positive. I think many of my clients are amazed at how they’re doing.
Betty Collins: I think others are devastated, but whether you are devastated or the opportunity was just amazing, we’re tired. We’re all tired, I think. So, now what? That’s the question you never need to- never I’ll start, whatever. So, now what? That is the question you need to ask with a year like 2020. We probably need to continue to ask that question for maybe always. I really don’t think we stop asking that question, but on top of the COVID-19, the unrest, all the change, the politics … I won’t go there. Instead, I’ll put my energy and my resources in Now What?, from a business and a personal perspective. Fortunately, the basics of business have not gone anywhere, it’s just the approach. In our personal lives, I think it’s been a more of an assessment of what is important. On vacation, I met this young boy. Yes, I took a vacation, yes, I flied Southwest and yes, they have empty seats, and yes, the middle seat is now not filled. It’s beautiful. When you’re on a plane today, everyone’s in a mask and they don’t serve food and they don’t wake you up and nobody talks. There are some good things with COVID-19.
Betty Collins: I’m on vacation, and I met this young boy, probably eight to nine years old. We’re on the beach walking, and he had this huge smile on his face because he had caught this fish. We were walking along and I approached him and asked what was he going to do with the fish? “Are you going to eat it? You’re going to throw it back in, throw it away?” He looks at me and he says, “First, please, social distance.” I just thought, “Wow,” and then he said, without hesitation, “The fish is going to be bait for a bigger fish.” I was so blown away by this kid’s optimism and the way he looked at the opportunity of that fish, not just eat it today or throw it away, but it’s going to be a bigger fish. I think, “Wow.” That’s all about mindset and that’s all about intentiality, and I think we could learn from him, even in this time of “What’s the opportunity you’re taking with what you have, to have more, have less, maybe just figure out what you want?”
Betty Collins: That little kid got it, for sure. It wasn’t even a matter of two that he was going to take the fish and get a bigger fish, he was really aware of his surroundings. He made sure that I social distance. This is a kid who’ll probably go far in life. I look at it and go, now what? Because it’s not if, but when. Lessons that we learn in 2020, that can be applied for the future, for sure, so, where do we start? We start by taking a deep breath and focusing, and we put our energy into actions. I’m going to talk about actions in know, assess, move, reflect and embrace. Sorry, but it’s all actions. That means you have to do something.
Betty Collins: First, know. What do you got to know? You’ve got to know all, not some, but all of the basics of business, your business. I had people who had worked their lifetime on these businesses, going, “What if this is it?” Know your basics. Basics are revenue in customers. I put those in the same line because they effect each other. Then you have expenses, debt, flowing cash. You have those advisors and partners. You have vendors; they are not partners- I’ll explain that later. You have marketing and technology and then your company structure, the pillars, the thing that makes you strong. Things like your current business model, the leadership and management, your employees, my whole, entire HR policy is completely different today than it was on March 15th. This is the stuff you have to know about; these are the basics of business.
Betty Collins: Let’s start with the first one that’s- the one that everyone likes to talk about, revenue- I put customers. Revenue’s got to turn into cash, so it must be the correct revenue and it’s got to be profitable revenue. Which means your financial data needs to be accurate and in real time, so you know, “Am I making money in what I do?” Revenue growth must be planned and controlled. I will tell you, everybody went to curbside immediately and some restaurants did really well with that. Some restaurants had no idea the demand that would be there and they did not have their systems in place. Jeff Ruby, even as an example, I don’t look at fine dining like I can do a curbside with fine dining.
Betty Collins: I don’t want to buy a really good steak and bring it home and heat it. I don’t even want to get their really good hamburger and fries and come on home and eat it. They did it really poorly and he came out and said that. They had to get, “Okay,” because people were calling them and they just didn’t have that expectation, so they had to plan and control that growth. Then later, they did a really great thing. “Here’s your steaks and here’s how to cook them. Here’s your mac and cheese, put it in the oven. Here’s your salad, it’s tossed. Here’s your bread, heated,” so I still had that Jeff Ruby meal, but it was done differently and they had to [INAUDIBLE] back. Revenue growth must be planned and controlled.
Betty Collins: Then you got to look at your revenue streams today in your business. Good thing for all of us to do, anyways, but now, it was even more glaring and should be what you’re doing in the future. You’ve got to overhaul, you’ve got to change, you’ve got to develop new things or you leave it alone, guess if it works. Out with the old and in with the new, is a continual conversation. I’ve done this anyways. Every September, I do this. I look at my clients and I look at the product, “Am I doing the right product? Have I got the right people?” Don’t fix what isn’t broken. Your think tanks around your customers and your new revenue lines you could have, your most valuable advisor in that, probably, is your employee. They probably know. They probably can help you because they’re in there with you.
Betty Collins: I know for us, during this time where we were doing a lot with PPP and EIDL loans and things like that, our employees stood up, stepped up and jumped in with us. We just didn’t say, “Here’s our new product,” they helped us create it. Every industry has to react in some manner. I don’t care who you are. I’ve been so impressed with the restaurants for sure, with curbside and casual dining. Banks really don’t need, probably, branches and professional services can be done about anywhere if you’ve got Zoom and a computer and a home office. You got to create products or services that might require capital and access to that capital. If you need to add revenue streams or remove them, do you have the money to do that? Maybe if you remove one, it’s going to take some time to build it up because it’s the new thing that you have to do. Or maybe your old one was such a lucrative thing, but it’s not applicable right now or it’s not working.
Betty Collins: In all of the basics of business that I listed before, with revenue and customers, you need to ask questions. What are the questions you need to be asking about revenue? I’m going to start with this question, always, first. What is keeping you up at night when it comes to your revenue? What is it that’s on your mind when it comes to revenue? You know those conversations you have in your head. What is my most profitable sale? Is my financial information accurate and does it tell me anything or help me to know that my revenue is going to turn into cash? Do we have enough capital or access to that capital to create the right revenue and to grow? Did my revenue survive COVID-19 and will it survive in the future? I just recently met with someone who does office design.
Betty Collins: Now, think about that. Commercial buildings look like they’re vacating; people are leaving. We’re all going to work at home forever- I don’t think that’s going to happen. When I had lunch with them, they talked about, “What we’re going to do now, is help you design a room for hoteling; for people just- they come and use it when they need it, and conference rooms that now, can have three and then when they used to have eight.” Now, we got to have different conference rooms around, probably. They just looked at other ways to go in there and say, “We’re still going to design offices and now, we have a whole new market to design because an office is going to be used differently.” Is my revenue created by products and services that are in the past, not the future? The last question I’ll ask in each one of these segments, am I missing out on an opportunity because I did not pivot during COVID-19? By the way, COVID-19 is not over.
Betty Collins: Then customers, knowing your customer and your audience, that probably has changed. Mine hasn’t changed necessarily; the client hasn’t changed because I work with small businesses, but how they’re doing business change, which means how I do business with them changes. You’ve got to determine right now, really, really well, who are your A, B, C and D clients. Again, I’ve already done that, every September. You develop some criteria; you know what isn’t a client. Is large an A client? I wouldn’t say that is an A client, necessarily. When I look at those As, then that also fills my pipeline, “I’m going to go to those clients because that’s my A.” Then I got to look at those Ds and go, “You’re fired.” I put Cs on notice, “You might be fired.” It’s time right now to know your audience, know your customer. Customers and prospects need to know their products and services. I recently had somebody during this COVID time, we’re really, really busy, but not earning any money. I think a lot of people did that.
Betty Collins: One of the really cool things she did was, she put a survey out to clients and connectors and vendors and said, “These are my products, these are my services. Which ones do you not know about?” I thought, “What a great idea,” because I didn’t know probably three or four out of the dozen things. I didn’t know she did that. That opens up the door to the client. Those are things with your revenue and your customers that you should be thinking about and doing. By the way, I have a hand out in this and I also have a hand out that you can get on our website that is the questions you should be asking yourselves and your team, when it comes to these basics of business. What are the questions you need to be asking about your customers?
Betty Collins: I already told you the ones on revenue. Always first, what’s keeping you up at night about your customers? What gets your attention that you can’t let it go? What are your best customers? Is your pipeline full of the best customer look, or is it the, ‘hey, they breathe and I think they might have money’? Is that the one in the customer area in your pipeline? Do you have a good database? What I found was this was a great time to go, “Where is all my contacts?” What a mess that was, but I figured it out and I got that really organized. Am I marketing and networking to my A customer, or am I still going to the B and C customer and then wondering why have B and Cs? Do we have enough capital to access and really serve that A customer? Did my customers survive COVID-19 and will they survive in the future? I’m pleasantly surprised that people are doing very well right now, but I’m still got that ‘is the bottom going to drop out’? Do my customers need the products and services that I’m doing now? Hard questions. Last question always, am I missing an opportunity because I did not pivot during COVID-19? Good revenue will generate from good clients, which then turn in to cash. We could talk about cash later.
Betty Collins: Then we go on to the next basic; expenses, debt and cash flow. Expenses, there’s three types and you need to know your differences. Cost to make the product or provide the service. So many people don’t know that. How do you know what’s profitable if you don’t know what it really costs you to make it? Overhead is just the cost of doing business. Some people get really wrapped up in, “I’m going to cut my cable bill,” that’s just a minor thing. Overhead, just be a good steward with it. That’s different expense than what it costs to make your product. Then there’s those expenses, they’re really not expenses, but it’s cash flow that doesn’t hit your profit and loss. Doesn’t fall in expenses and overhead and it doesn’t fall in cost of goods sold. It’s things like paying down your debt, not the interest. It’s like distributions that get passed through an EZCorp, you, the owner, take out your profits. That’s not on your bottom line.
Betty Collins: Drawers for single memberships or partnerships, not in your bottom line. Dividends for Seed Corps, not in your bottom line. Those are expenses, they’re really cash flow and then when you reinvest in the future. You really have three types of expenses to me; something that’s going to take your cash out of your business, the cost to make it, the overhead and expenses that don’t hit the profit and loss. Cost of goods sold, man, look at that number. “Do I have everything in there really cost me to make it?” In other words, if you pay rent, you’re going to pay rent whether you make something or not, so that’s not a cost of doing good business. If you’re a hairdresser, shampoo’s the cost of doing business and knowing what that is, is really important to your profitability, because you’re either going to charge more or buy better products that maybe aren’t as expensive so that you get as much gross margin out of business you can.
Betty Collins: Cutting expense, that’s not revenue growth. Cutting the cable bill, that’s not revenue growth, that’s just, ‘you’ve got the best cable in town, okay’. It’s probably a really small thing. Revenue growth is getting the right revenue and the right customers I’ve talked about. Partnerships, man, those are not the same as vendors. Partnerships are relationship-based that sell you something, but vendors are just transactional, like the Post-it notes that I buy. That’s transactional, but my legal services or my HR consultant or my podcast company, those are things that have partnerships related to them. When you’re paying out any money, whether it’s overhead, partnerships, it’s just your typical vendor, they’re taking your money. So, make sure they think you as ‘you’re the customer’.
Betty Collins: What are the questions you should be asking about your expenses? Always first, what’s keeping you up at night about your expenses? Is it the cable bill? Then that’s just- you need to just get over it, but if it’s the right employee, different thing. Am I really being a good steward of my overhead? Is my gross profit enough to catch all that cash flow that has to go out the door like debt and reinvestment and paying my taxes and taking draws? Again, do we have enough capital access that gives me better buying power? That’s huge. Are my partnerships, who I buy from and spend money with, are they treating me accordingly? Do they even really know me? Do they know my business? Are they engaged with me? Are they on the cutting edge and relevant?
Betty Collins: If your marketing people are telling you that the Yellow Pages is your best bet, you’re the wrong marketing people. If they tell you radio is ready to go, you’re probably the wrong media. Now, those things still happen, but that’s not the main thing. You got to have relevant, cutting-edge partnerships in your life. Again, about those expenses, what’s the question you should be asking? Lastly, am I missing out on opportunity because I did not pivot during COVID-19? We’ll spend a little time on debt. No one likes to talk about it, but you got to know the difference between good and bad debt when you’re looking at the basics of your business. Good debt generates revenue. If you buy better equipment to do a better podcast, you’re probably going to have more revenue from that. Good debt assists with investment.
Betty Collins: It assists with- that generates revenue and wealth accumulation. I did have a person who, she loves filming people. She does videos and she said, “Yeah, but I’d have to go into debt to get a better studio.” I said, “But that studio is going to generate totally different revenue for you.” That’s good debt. Because then that allows you to pay off the debt and now, you have a different product, you have a better client, you can serve more people, you can charge more. That’s okay debt. If it’s a Jaguar, I’m not going to tell you that’s good, necessarily. But upgrade your studio so you can offer a product that will generate this kind of money for you, beautiful. Debt, good debt is with a banker who understands your limits.
Betty Collins: I really can’t emphasize that enough, a good banker may tell you no because you’re just not ready for it. Then you say to him, “Well, then get me ready.” He’s probably going to tell you what I’m just been telling you about your revenue and your expenses. That’s really- he’s not going to turn you down because he doesn’t like you, it’s probably because those things aren’t in order. What questions do I need to ask about my debt? Always first, what’s keeping you up at debt- what’s keeping you up at night about my debt? What are my real expenses to make the product and service it? Am I spending my money wisely there? Should I be debt free? Some businesses, I would tell you yes, most businesses, I’m going to tell you no.
Betty Collins: What is my debt costing me? So many people have no clue. Who’s my banker? So many people don’t have a clue and they really got cut short when it came to PPP and EIDL money; it was terrible. What will the banking look like after PPP is spent, done, paid back, forgiven, your EIDL loans, kicking in, your SBA loan- now, payments are being put to- you got to make in yourself versus the SBA. What is that? What is your banker saying? After all of this stuff related to COVID-19 and debt, what are they going to be able to do for you? Lastly, of course, am I missing out on opportunity because I did not pivot during COVID-19 when it relates to debt?
Betty Collins: I’m amazed today. I had somebody come in- new client- who did not get the PPP loan because they just didn’t figure they qualified; they more than qualified. They gave up a tremendous opportunity by not applying for that PPP loan that now is going to be forgiven. Wow.
Betty Collins: Cash flow, I’m going to discuss a little bit later, so I’m going to past that one. Now, so we talked about revenue in customers, expenses, debt, cash flow. Advisers and partners are next. You are only as good as your adviser. That could be any type of adviser. A long time ago, and it was in probably the 90s. I wore the big hair of the 80s, so my hairdresser, who knew I was out a lot, doing things, speaking, doing my stuff, said, “Why are you still wearing an 80s haircut? You know there’s a thing called a straightener, and there’s these products that do this and your hair looks like it’s the 80s.” I was really taken back by that; I use that example a lot because she was an adviser that was trying to make me as good as I could be. She wasn’t being crude. She said, “Your hair looks great, but it’s the 80s. This is 1990 something.”
Betty Collins: You are the customer and should be treated like one, and that’s what advisers and partners do. Advisers though, man, they got to be in alignment with you. They must know you and they must know your business. Years ago, I hooked up with a guy. I’m not going to say who it is or the company, but I had not done a whole lot with planning. I was a single mom and and I needed to save for colleges and get myself going. I had about $10,000 in an IRA. That was it. I mean, I was 38 years old, so that’s not good. I sat down- and really, I was thrilled because this guy got me really started in the investment world, but then everything became about his company. Pushed and pushed and pushed his company, and pushed and pushed that I can work for his company. I was like, “Hold it. That’s not what’s good for me. That’s not the purpose why I’m here.” They have to be in alignment with you. Advisers are not vendors; they’re not transactional.
Betty Collins: They have to be honest and upfront, no overpromising, no misleading; I don’t need that. They have to have expertise. If you already know it, you don’t need them. Just like you, your advisers are in business to make a living, so if they want to charge you for something, don’t you want to make money for what you do? Don’t look at that as a bad thing or that it’s- because if they are an expense and you don’t see the value, you probably need to move on.
Betty Collins: Then annual meetings of all the people in the room, the only two people that are in charge of you are your attorney and your accountant. Your banker is not going to charge you, your insurance people aren’t going to charge you. The crucial vendors and partners in your life are not going to charge you, but you can get them all on the same page. Here we go, what are the questions you need to be asking about advisors and partners? The first one always is, what is keeping me up at night about these relationships? Are they valuable or an expense? I had a very big wake-up call this summer from a very- client who valued me a lot. He put it on my engagement letter that says, “You’re worth every dime I paid you.” This year, it was, “You’re just getting expensive and the ROI isn’t there. I’m just letting you know.” I was grateful for that because I don’t want to be an expense to him. I want him to think I’m valuable. So, you got to make sure that those advisers are valuable and not an expense. Do I know I can trust them? At least if you’re going to pay someone and bare your soul, know I can trust them.
Betty Collins: How much do you know about their company? A long time ago, I had a ADP rep and loved him, and he was there four, five years, which is a lifetime in a payroll company. ADP is a great company. When he left, I had no one. I didn’t really know who to call there. I didn’t have any other vendors. I did go to a smaller vendor for smaller clients who I know his company. I know his people. I’ve been doing business now with him for 10 years for a smaller company. I still freefer to other payroll companies, but it’s just a different relationship because I know him, and I know what he does and I know a lot about his people.
Betty Collins: You have to ask, are they truly an expert and know what I don’t already know? I mean, at Weight Watchers- I go to Weight Watchers, I already know how to eat. It doesn’t mean I don’t need to go there. You have to have experts that know something you don’t. Are they going to survive during these times? What if your main vendor or your partner or your advisor is not doing well with the times we’re living in? And that surprises you on January 10th when you go to renew something or you need some help or whatever it is? You need to know that. Are they going to survive the times? Lastly, of course, am I missing out on opportunity because I did not pivot during 2019 when it comes to my advisers and partners?
Betty Collins: Now, marketing technology is our next basic. Wow. What have- this life has really changed in this way. Marketing today, for me, is not what it was six months ago. I’m a networker. I’m an event person. I’m a speaker. I’m a one-on-one lunch dealmaker. That’s gone, so now what? As we keep asking. On part two of this, I’m going to have Betty Clark with CP Media and Marketing, and she’s going to come and talk about the challenges now you have. What is your marketing plan? What should it look like? We’re going to a great discussion with her on it, so I’m not going to spend a whole lot of time on marketing today. But I will tell you this, my story for marketing in 2020, much more intentional systems so I can have connection. I got to try a lot new things and I have to deal with Zoom, is called life. I’m sure there’s going to be something come out that’s going to help us all deal with the Brady-Bunch-look on screen, but because there is a lot more virtual connecting, you’re starting to see some of that in events. Until then, now what?
Betty Collins: Betty Clark’s going to come and talk to us about that. I’m not going to go heavily into company structures and policies; they’re boring, but those are things that you really get with your attorneys on, that am I in the right? Is this the right business model for the times I’m living? Is the leadership and management team I have working? Can they deal with the times we’re living in? So, no, it’s a lot. I did a lot of no. Not all of them are going to be … The second thing, though, is the second action, is assess. You got to assess the damage. You got to- the tornado has come through and do we have a house or not? You got to keep moving forward and you got to plan it and map it out and not hope that it all works out. Hope is not a strategy. Part of knowing the assessment, I hate to tell you, is you’re reading your financial statements in your business. What is that financial position today? It’s really nothing more than your balance sheet, which is, “Here’s what I own. Here’s who I owe, and the difference is what I’m worth.” You got to have a positive income statement because that grows the balance sheet. It grows the assets.
Betty Collins: You should be asking questions like, “Where’s the cash from all my profits?” You should be asking, “What’s the difference of a balance sheet in a profit and loss? Your balance sheet tells your worth. Do you even know what that is? I hate to tell you, but ratios help you make great decisions. You just have to know what they are. They’re not that hard to calculate or get someone that can help you with them. You can’t really do ratios unless though, you have really good quality financials that tell you so. Assessing comes from, when it comes to your business and its financial position, it’s knowing those financial statements. We’ll go with, “Where’s all my cash?” It is true, cash is king. You know why? It’s the most important item on your balance sheet, maybe. Because that’s what allows you to make it all happen. It’s what pays you. It pays your employees. It buys inventory. It pays off debt. It lets you reinvest. It makes sure you can pay your taxes. It helps you expand. I mean, cash has to be there. Again, I went back to my statement.
Betty Collins: Good revenue in customers turns into cash. First and foremost, to accumulate cash, you got to be profitable at what you do. You have to understand, I’ve talked a little bit about what gross profit is, which is, “Hey, I sold this for 500 bucks and it cost me a hundred to make it, so I’ve got 400 bucks, but I haven’t paid overhead, I haven’t paid my taxes, I haven’t paid my debt, I haven’t reinvested anything.” So, you really didn’t make 400 bucks. Net profit is, “I sold this for 500, it cost me a hundred. I’ve got a profit of 400 and I paid some overhead. I paid my rent and I paid the phone bill and some things like that, and here’s my net profit, which then is going to take care of paying all these other bills.”
Betty Collins: The balance sheet will help you get a handle on your cash flow. I mean, just does. A balance sheet is nothing more than a date, in a point in time. On this date, so, on October 31st, I have this many assets, I owe this many people, so I’m worth this much. It’s not just for October 31st, it’s since the beginning of time, when you started your business. I put money in my business to start, and I’ve made money. I’ve lost money, I’ve drawn money, I’ve added money, and now, here’s what I’m worth. That’s all a balance sheet is. It’s as important, and everyone focuses on, “How much cash do I have at the bank and what did I make?” Those two are things are fine, but the balance sheet is really important. It never stops; it’s continual. The thing about a profit and loss is, it ends and you start all over. It goes 12 months, then you start again. Another way to say that is, “If I’m going to really assess the damages, I’ve got to have financial statements.”
Betty Collins: A balance sheet is ‘where I’m at right now’ and a profit and loss is, “Here’s the money I’ve made.” Assets are what your company use to operate; cash, receivables, things like that. Where liabilities and your equity, those support the assets. If you have cars, you’ve got loans that’s supporting it. You got to know what- right assets when you- especially if you want to know some ratios as to your stability. I mean, current assets are cash, receivables, things that you can just turn around and again, money ends up in the bank. Then you got fixed assets and other assets of long-term things. You might have paid a deposit on a rent place and just sits there. Then you got liabilities. Current ones are accounts payable. Your line of credit is a current liability. In other words, in 12 months, I got to have all this paid off.
Betty Collins: Then your equity is, again, the money you put in, draws you take out, taxes you paid with your draws and net income. You got to understand those components to really get to assess, “Where did I land in all this?” A lot of people, you would be amazed, don’t know that. The people who do know that, it’s why they grow. It’s why they have success. So, what really is the difference, again, of the balance sheet and the profit and loss? Your balance sheets continue, your profit and losses, 12 months. Your balance sheet shows your net worth, versus your profit and loss show you what you earn. Your balance sheet actually has the net income on it, in the equity section, where the profit and loss, they don’t have anything to do with the balance sheet. You got to know these things. If you’re making profit on your products, to accumulate the cash, to pay your debt, reinvest and just make sure you’re successful. Assessment of those items needs to happen, as a business owner. Sorry, it doesn’t sound at all exciting. You’d rather be dealing with your passion and your ideas, but this is what fuels those passions and those ideas. A lot of people will say, “Well, my balance sheet says I’m worth this much and so, that’s- must be the money be worth.
Betty Collins: Now, there’s a thing called your selling price, too. In today’s world, you wouldn’t believe how much buying and selling is going on, because there are people who are like, “I’m too tired to do this.” There are people going, “I got opportunity to go to a different direction.” To know your net worth, you first of all, have to have a correct balance sheet. If you had $100,000 worth of cash, but your bank statement says you have 50, that’s not a correct balance sheet. It has to be supported and reconciled. Selling price of things is not just, again, your equity section. It’s, if you were to sell today, what clients am I selling? What key employees do I have? What’s my reputation and name like? Do I have cutting-edge products? Do I have old-school products? Then you got to have a solid thing called EBITDA, which everyone hates. Not really, but it really is taking your income statement, that net income statement, and it’s turning it into your earnings that are from operations.
Betty Collins: EBITDA stands for earnings before interest, taxes, depreciation and amortization. Yay. It focuses on operating decisions of your business. It looks at the really- the business profitability from its core operations. This is just what we do, but we did leverage some capital to start the business, so here’s some interest. We’re going to take that out. Depreciation and amortization are a number, they’re not cash, so it reconciles that so a buyer can know that. What are the important relationships on a balance sheet income statement? There’s ratios. I’m not going to go a lot into that. I’s very hard to do on a podcast. I will be doing a Now What? series for- in a couple of weeks, we’ll get that out to you, and we’re going to talk about that a little. You got to have two ratios that are most important. One is, it tells you, “Can you pay your bills?” Those are liquidity ratios. Solvency is, “Can you pay your debt?” That’s what your bank looks at. They don’t look at you and say, “I don’t like you.” They look at your solvency, they look at your liquidity and they convert your profit and loss into that thing called EBITDA. Those are the things you need to know when you are assessing.
Betty Collins: The income statement- I’ve talked more about the balance sheet. Now, on the income statement, when you’re assessing that, you had to focus on that top line revenue and who your customers are. You have to really assess that besides just, “I want to grow 10%,” or, “It’s a million dollars,” or “It’s not enough.” When I first came to Brady Ware, I had a VP marketing, first time ever in my life in 2012, and he asked me questions that I didn’t even ever think about, and that was, “Who’s your 10 best clients?” Of course, at first, I thought, “Well, my large ones, because there’s a lot of money to it.” He said, “No, I want you to get into, ‘why are they your best client?’ Now, that’s hard for a CPA, but it really came down to relationships and partners. Do they value me as the CPA or am I expense? Ethics, ethics are a big part of who I am in my industry. The industry- you business people are accounting that CPAs have ethics, but our clients have to have the same ethic if we’re really going to … If they’re going to be that good client, that’s meeting that top-line revenue on your profit and loss.
Betty Collins: Do they take more than I can give? Are they the client in service that I make money at? When I came to Brady, where I did a lot of just 10/40, personal 10/40s without the business, and I realized, “I don’t make money on those, and they take a lot of time and it’s volume. But if they own a business and I can do their business return, then I’ll just do their personal return.” Do they pay me? That’s a good customer. That’s in your top line revenue. What opportunity am I missing because I’m servicing the wrong client? Huge, huge question. If they don’t see that my product is relevant or good or it’s not needed, then I’m missing an opportunity.
Betty Collins: In assessment, profitability is huge. There is going to be life beyond 2020. I think there’ll be huge celebrations when we can say 1/1/21. When you assess and move forward, you got to project. Yay. You got to do it, you got to know that you’re earning enough to keep yourself moving. Then when you’re assessing, you do need to look at your debt, is the PPP going to be forgiven? Is it going to be a loan? Is it going to be revenue I’m going to be taxed on? You got to be looking at the restructuring of your debt with your banker when you assess. Do I have enough access to debt? Will I have the ability to have access to debt?
Betty Collins: Then, looking at things like your line of credit, what are they saying now? Because they just put a bunch of money in the marketplace, are they going to let us get more in our line? Are they going to renew our line? Everything’s good right now for so many people because they’re expensive. Their expenses really went down. Everybody pivoted, everyone got PPP money, those things, but you should be asking questions about that future. Again, business beyond. What happens, sometimes, when there’s a slowdown like we’ve gone through- I mean, in Brady, where our meals and travel and entertainment have plunged, obviously, that cost has been just pretty much nothing, but that also means we’re not traveling out in the marketplace. Right now, we might feel the really good side of not eating out and and not traveling and not being out there in networking and speaking and events, but the reason we do those things is because it generates relationships and new contacts and new business. We might be feeling a really good effect right now of that travel and entertainments going down, but it might have a side effect in the future.
Betty Collins: You got to be sure that you can rent back up, because the marketplace is getting busier. The buzz is out there a little bit more. Do I have enough inventory? Because right now, I’ve had really short inventory. When I was at Jeff Ruby’s Steakhouse, they weren’t serving prime rib because it’s too expensive to have, because the product they want is fresh prime rib or they want it aged a certain way. If they don’t sell that every day, they can’t throw it away and make money. So, they’re having to reassess that inventory, but at some point in time, they’re probably going to sell prime rib again. People will be there, do I have that ramp up? Those are things all about your assessment. We’ve talked a lot about the know, the basic of business, and assess and keep moving forward. As much as it’s not the greatest thing to go with, it’s something you have to, if you want to go forward, because now what? Now what? is a question you should be asking. Today, if you go into my website at www.BradyWare and look up Betty Collins, my podcast will be right there. There will be handouts that summarize all this.
Betty Collins: I’d love to talk to you about it, because it’s something that I’m passionate about, because when the marketplace works in this country, the country works. Right now, it needs businesses to work. It needs employers to have success. I appreciate your time today. This is part one of Now What? Remember, this fish you have now can be bigger and used for bait for later. Don’t forget those opportunities and that perspective. I’m Betty Collins, have a great day.