137: 5 Mistakes to Avoid when Scaling Your Interior Design Firm
Michele 00:00
Hello, my name is Michelle and you're listening to Profit is a Choice. With me on the podcast today is Courtney DeRonde. Courtney is the CPA and managing partner of TDT CPAs and Advisors in Iowa. Courtney and her team provide boutique advisory services for small businesses that are in a growth mode. Today she shares with us the five blind spots of growing and scaling a company. If we ignore these blind spots, issues can certainly arise. And Courtney offers actionable ways we can recognize those blind spots and then do something about them in advance. Enjoy the podcast.
Michele 00:42
Every day empowered entrepreneurs are taking ownership of their company financial health, and enjoying the rewards of reduced stress and more creativity with my background as a financial software developer, owner of multiple businesses in the interior design, industry, educator, and speaker, I coach women in the interior design industry to increase their profits, regain ownership of their bottom line, and to have fun again in their business. Welcome to Profit is a Choice. Hey, Courtney, welcome to the podcast.
Courtney Durante 01:14
Hey, Michelle, thank you for having me.
Michele 01:16
Oh, it's my pleasure. I'm excited to talk to you today. I love talking to people about the numbers and financials. And you know, of course, everybody listening to the podcast knows that. But I'm super excited to chat with you today. Before we jump in, why don't you tell us a little bit about yourself and about your company?
Courtney Durante 01:35
Sure. So I am a CPA, and the managing partner of TDT CPAs and Advisors. We are a boutique accounting and advisory firm in central Iowa, we serve clients all across the country. We've really focused on helping small business owners who are generally overwhelmed, and overwhelmed leaders of their companies learn how to utilize financial information to grow and scale their businesses to support, decision making and really get their business on to the next level.
Michele 02:11
That's awesome. And you and I had talked about before we even came on that one of the pieces and parts that you enjoy doing, as well as your team is really having that consultative nature to the relationship not just being transactional. Tell us a little bit about how you do that and why that's important for your firm.
Courtney Durante 02:32
Yeah, so much of accounting, is about capturing what has happened, and reporting on it. And that's important. As long as you know, banks and investors want financial statements and the IRS wants tax returns, we have to do that. But I think a lot of times accountants will stop there. And we feel that there's so much value that can be given to business owners when we take that next step of using that information proactively. So figuring out how we can utilize financial information to support decision making. So running what if scenarios and providing financial information and non-financial information to give you leading and lagging indicators, not just lagging, but also leading indicators to tell you not just where you've been, but where you are going. So we take a very proactive approach. One of the things that we found when we when we started to really focus more on being proactive, is that a foundation of being proactive, is having accurate, timely financial information. And sometimes that's a struggle for small business owners, either they don't have the skills or the time to do it, or they don't have a bookkeeper to do it. And we have to start there. So we do outsource accounting for clients. We do transaction processing, payroll, Bill Pay reconciliations, we can do that, if that isn't already handled adequately, internally, some clients have that piece under control. And we provide outsourced controller and or CFO services. We're providing oversight and review. And then more forward-looking guidance and advice. So and then we also bundle that in with tax preparation and tax planning services. So we're looking at the whole picture, not just from a tax perspective, but also from a business growth perspective and making sure that someone's covering that foundational level of accurate, timely financial information, because that's the basis for everything else we can do with that information.
Michele 04:36
Yes, I'm doing like a big high five, everybody can't see it. And you know, I think one of my big frustrations on behalf of my clients when I work with them is, we're halfway into the next month and they don't even know what their numbers look like from the month before and that's not a good scenario. Some of them are one and two months behind in getting that information and they're looking to say, can I hire the next person? Can I make this next move? And our data is two months old at best. And I get so frustrated because I can't help them without that good clean. No, nobody can really help. I mean, we're guesstimating when we don't have good clean data, and like you said, and have it quickly and have it when we need it. And I do get that that's a challenge. But there are things that can be done with your bookkeeper and accountant, especially that if they're watching for those things. To move things on a similar cycle. I know, I went ahead and made sure that my credit card cycle kind of lined up with the other cycles so that I could get the data all within the same week and wrap things up. And so there are things to do there. But I love to hear that your firm thinks that is important. Yeah, I think that is so very important. I mean, I know you've seen it, I know I'm not the only one. But it astounds me that sometimes we try to make decision, look, I've done it, I did it. I did it all wrong when I first started and letting the bookkeeping and the accounting get away from you is so easy to do, if it's not your love, and it's not what you're great at. And so handing that off to somebody who knows and looks at it. Here's what I also really appreciate about the model that you just described, Courtney. And that's that it's holistic in nature, you're looking again, not just at transactional, and you're not looking just at the tax doing but the tax planning, right, not just prepping for today, but planning for tomorrow. And the companies that I work with are companies that are growing and scaling in some direction, that's the same thing that your company does. And we very much aligned with that is understanding that all of the things that they've been doing that got them where they are, may not be all the exact same things the exact same way they're going to get them where they're going. You know, a lot of my clients when they first started, they can't even think about funding, a 401k or an IRA are offering that to their employees. And then as the business grows, we're now talking about how do we create that? And how do we plan for that? And how do we budget for bonuses? And how do we budget for these things? And what might it look like if we do like the scenario planning that you talked about? And so it always excites me to hear of other professionals offering that for their clients? Because that's how we all get better together.
Courtney Durante 07:35
Exactly. And I think, you know, so many times business owners feel like they don't know, what they don't know, that's probably one of the most frequent comments I hear from prospective clients is, you know, just I don't know what I don't know, I need you to guide me and lead me and tell me and teach me. And so some, you know, some CPAs out there just aren't structured under that business model to, to provide that kind of guidance and expertise. And, for us in our firm, we're not structured to only prepare tax returns, you know, so there's different business models within CPA firms, I think that's important to recognize for for your listeners is that, you know, finding the right fit, matching up that expectation for what you're looking for, and what the firm you're looking at actually provides there, you know, just like in design, you know, not everyone's created equally, there's different business models and different purposes and kind of getting a feel for what you're looking for. And finding a firm who will match up with that we spend quite a lot of time in our process, when we have prospective clients, just making sure we are the right fit. So that so that there is value delivered, like you said, in those relationships.
Michele 08:56
You're right, then the design world is the same way we have some designers that go in and they are, you know, buying products and putting it in the home, and we have others that are going in and building the home from beginning to end. Or, you know, offering different levels of services and coaching, we have the same thing. There are some that here's a course you can take it there are some that do one to one, it all varies. And so I'd love that you do an exploration to to work through that. And my guess is that this past year of 2020, you had to do a lot of scenario planning with your clients because the scenarios kept shifting and changing on all of us. And my guess is moving into 2021 you're going to be doing even more of that.
Courtney Durante 09:44
I know, yes. Definitely. That is one of the things we've been very focused on with clients. Because a lot of times, business owners do a pretty good job with creating their vision and their strategic plan, but they don't often take that next step to crunch the numbers to see if their strategy is even going to get the results that they're looking for.
Michele 10:11
Yes, yes. It's like a disconnect, just like the financial plan is over here on the left, and the goals and the strategy over here on the right. And never the twain shall meet. And you're like, No, no, we had they have to go together.
Courtney Durante 10:30
I think are how one of the the blind spots that we see come up with businesses who are in that mode of trying to grow and scale their company. And we'll probably talk a little bit more about this as we go on. But I wrote an ebook that goes through these five common blind spots. And this one is so common, just as you grow as you get to this next stage of your business. And this is something that can kind of come out of nowhere, when you're, when you're starting out, or when things are very steady and predictable, you don't really need a lot of scenario planning, because, you know, what you're doing is working and you're continuing to do it. But when you're trying to grow and do something different than you did before, and you have a vision, that's new, and strategies to get you there. This is a new need. So it's not like you missed the boat, though, you know, the first five years, and and you know, didn't do this, it's you probably were doing it in the form of business plans and budgets. And then once things, you're profitable, sometimes you can start to feel like, well, I don't need that anymore. But actually, having a plan for how you're going to spend every dollar you earn is still very relevant, even when you make a lot of money and penciling out your strategy to make sure it actually gets you where you're going is a really important step of the growth stage. And I think sometimes this, like a blind spot is something that's out there that you're missing. And you don't really know that it's right there out of your view, you know, something, you know, something you might feel like something's off, but you can't identify it yet. This is a very common one that business owners don't realize, right off the bat when they're in that growth stage.
Michele 12:20
You know, it's interesting, back in March of 2020, when we all got sent home, I immediately started thinking, Okay, I think this is going to be longer than two weeks. Just it I just in my gut, I knew this, I think this is going to be more than two weeks. So I went out to my clients and said, Okay, I want you to start creating, I just called it very quickly on the fly, plan a plan B and Plan C, Plan A said we're going to be able to get back to business in four weeks, one month, Plan B said eight weeks and Plan C said 12 weeks. And I had pushback. I mean, I know nobody was mean, nobody was rude. But they were kind of like Michelle gosh, that sounds so Doomsday. Why would you tell us to go create a 12 week plan? Well, what do you think we went to? We went to the 12 week plan. And I just said to them, You know, I need you to start looking at your resources, I immediately put out a cash position analysis document, we need to know how much cash you have, we need to know this, we need to know what happens if you can't pay, we need to watch what's happening. And just started going through some of the immediate scenarios that were hitting us so quickly. And some people immediately, Courtney, were drawn to that they wanted to know, and there was absolutely some resistance to it. And if the resistance wasn't to doing the work, but to what it meant was happening if they had to do the work. Right. And so I think sometimes our mindset stops us because it one of the things I teach as well was how to do a risk analysis like what is because we always go to the worst case. All right, right. We a lot of times our brain goes to a worst-case scenario on a project or whatever. But then taking that information and trying to put some data with it. What would it look like? What could we do? How can we work around that? Do you find that when you are working with your clients that are growing and scaling? And as we're talking about the five blind spots? You're talking to them about different scenarios? Do you find some I mean, some of the scenarios are positive, right. So they're not all negative. But do you find that when there are some that maybe aren't the best scenario?
Courtney Durante 14:37
Some of it is personality based as well. And just how we're wired, a lot of entrepreneurs are visionaries. And so creating financial models to see whether an idea or strategy will or won't work isn't usually like in their desire zone. It's like, I want to create the vision, right? And I think, and I don't want to pencil it out. But that doesn't mean that you shouldn't have somebody who will pencil it out for you. And so I think for some business owners, especially if you're in a more creative profession, this might be something to just recognize that in your wheelhouse, and you've got to have somebody within your team internally or in your, you know, outsource relationships that can do this kind of thing with you. And you can tell them your vision and your strategy, they can pencil it out, and then they can run you through some of the, the stress testing, you know, what if this, what if that because a lot of visionaries don't want to think about what if this or that. But I think, you know, it's important to recognize that most plans don't turn out, you know, the way you had hoped. And so the purpose of creating the plan is to give you a framework to adapt and modify as things start to happen. And you have more information now to revise your plan. So, I mean, this could even be as simple as you know, thinking about an overall goal in your business to increase your revenue, maybe you added another designer, and you've now got more capacity. And so if you're going to be able to pay this person, you have to find more customers. So the goal might be, well, I've got this capacity of this new team member, and I saw now my revenue goal just went up, you know, whatever, let's say, $200,000? Well, having a goal of $200,000 is really hard to actually achieve if you don't say, Well, how many customers? Could she served? At? What average amount per customer or client? You know, is it eight customers is it 10? Is it 50? Like, based on our, based on this team members skills and our, you know, ability to gain clients in the marketplace? What, what is a realistic average revenue per client that we think we could get? Or if we're going to try to target it to be higher than what it was? What do we have to do to get that, but if you just say, my revenue goal is, you know, 200,000, and you don't ever dig down any deeper into creating more detailed numbers that support that. It's just a, it's really just a big dream, to do the math, and then you have to think through Okay, what is it? Right there? Are there additional costs that are going to be required, then for me to actually achieve that? What's the impact and other aspects of my business. And so doing this scenario, planning, whether it's something, you know, I'd say, on one end of the spectrum, that's pretty basic. And that's cash flow forecasting, you know, to the other end of the spectrum, where you're doing detailed revenue projections with different assumptions. And a lots of things in between the whole point is to have someone who's helping you pencil out your strategy to make sure you actually have a shot at achieving the vision that you've laid out.
Michele 18:16
I love that that is a framework, you know, it's funny, I'm one of those, I do that kind of planning. And I teach my clients how to do pieces and parts of it all the time we, you know, talk about hiring somebody and how many billable hours we can expect per week? And at what rate and who they can serve? And do we want this type of project or that type of project? And what is the average that would come in? And how many do we need to talk to before we say yes, or, you know, the whole thing. And, and what was so interesting is that there was a time in my business that I was in a partnership with some other people, we owned an investment company together and my partner, my main partner, she is 100%, the visionary that you talk about her dreams have dreams. I mean, she is just visioning all the time. And she's great at it like that is seriously a skill set for her. But she didn't step back and walk through it all to see what it would look like penciled out, well, that's my skill set. And so we just happened to pair up. And it was so funny, because, you know, the first time she came to me with this dream, I said, I see, here's what it looks like. And she's unemployed. So I would want to know, this, this, this, this and this. And she almost looked deflated. And I was like, don't be deflated. I'm just saying if we want to take it and actually make it work. I need to know these things, to make the assumptions to finish straw manning it out for you to see it. Well as we work together. We ended up working together for about four years, you know, probably about six years. into it. She said to me, she said, Okay, so now I know what types of questions you asked me. So a lot of my visioning never comes to you. Because I know that I've learned here the next three or four things, Michelle is going to ask me. And if I can't answer those, I don't even come to you. I just keep thinking. So then I knew by the time she came to me, we might still have more work to do. But she had thought through some of those high-level things, as opposed to just going off on an idea. And not that she was ever erratic. She wasn't she was very thoughtful in what she did. She just had that super gift. Yeah, visioning. But together, you know, it's almost like in, like the implementer. You know, there's somebody who can sit and think about how will we implement this? In Courtney, I also just want to point out, I love that I love teaching frameworks, right? I don't want to just teach somebody how to how to solve a problem in the moment is kind of that teach a man to fish versus giving him a fish. And so I really love the idea of teaching and creating frameworks, because we can pick it up and move it around to solve other problems. So when you said that about creating a framework, it's almost like your client start to understand here are the questions I need to ask, it may not be that they're the ones that are modeling it, and your you and your team are modeling it for them. But they now at least, can start to train themselves on how to think about even a couple of milestones or KPIs or something that would say, keep going, or raise the flag to say I need help or back off, or whatever. So I love that stress testing. It's so true. We have to, you know, I've got a couple clients, we're working on building up bonus plans, if you want to talk about something you need to stress test, you better stress test, a bonus plan, because once you roll it out, people are depending on that's the way it's going to work. So what are some other blasts?
Courtney Durante 21:58
One of them is, you kind of hit on this a little bit earlier in our discussion where we're talking about the financial information and not having accurate or relevant financial information. So one blind spot that goes with that is, you know, your gut feeling for what's happening in your business is no longer accurate. So when you start out, and you're doing everything yourself, and you don't necessarily need timely financials, because you know, in your head, like you did all the work that contributed to it, you spent all the money, you earned all the money, you don't necessarily are you're not really relying on financials, but as you grow and scale, and there's way more activity going on in your business that you're not necessarily involved with, you can start to feel like you've lost touch with what's happening. In some cases, the financials aren't accurate, you know, there are adjustments needed, like your gut is right, that this is not accurate. Sometimes, the financials are accurate. It's the calculations in your head, that don't account for everything that actually occurred. So as your business grows and scales, you just can't keep all these details in your head anymore. So you have to have those accurate, relevant financial reports to have a clear picture of how your company really makes money and how you how you're doing. Otherwise, you can end up with lots of activity, maybe even high gross revenue, but little profitability, and I'm sure, I think that's a topic you're passionate about. I'm sure so. But that's one of the blind spots. Yeah, yeah, gut feeling for what's happening is no longer accurate. That is normal. Sometimes the gut reaction to this feeling is to say, I'm going to bring it all back in, like, I'm going to take this back over, I can't trust these people. They don't know what they're doing. And that's I don't know if you've ever read the book, it's in the E-myth by Michael Gerber. That's something he talks about that happens a lot in the entrepreneurial journey is do you delegate and then you feel like you've lost control or they're not doing it like you thought, then you just suck it all back in. And then all of a sudden, what you've done is kept your ability to grow and scale with what capacity and skills you have. And so this is normal, it's something you should expect to feel. But when you start to get this feeling, don't pull it all back in. recognize what's happening here, recognize there was something in your blind spot, that's totally normal. And instead of pulling all the financial information back in and capping your capacity to grow, recognize the importance of having someone either internally or outsource that can keep those accurate financials for you and keep them timely and you're going to have to shift to using that information to tell where you're at where you're going. You can't just rely on it all being in your head anymore.
Michele 25:02
You know, it's interesting. When I started my business back in 2000, I was doing custom window treatments and small projects for people. And I kept thinking at that point, I will always remember what fabric I put in everybody's house. Like, I'll look at the fabric and how remember the project, I remember the job. And I'll know exactly where I did it and who I did it for. And then I can remember the point where my business was so busy, that I would see a fabric and my work. Like, when did I use that? Who asked for that? Where did that come from? Right, same kind of thing. We think we can hold all of this in our head. As a Profit First Coach, what I see with regard to that blind spot, Courtney, is I see people that are making money. And at first they can parse out one account with all the money for all the company and they can't parse it out. But then over time, they start looking at it, they want to hire and they're moving out, and they need to buy new equipment and, and they're looking at this one big bucket of money. And they're like, Yeah, got money. Yeah, there's money there. And they're not realizing that they have already kind of pre spent that money on something else. And we no longer have the ability to hold all of that in our head. And it is part of growing a larger company and a larger firm and being able to put some things in place processes, procedures, outsourced assistance. Um, but I also want to talk about this, I think there are two things I think we don't I don't think we trust our gut 100%. I don't think we should, I think we should look at data to back it up. But I do think we should listen to our gut, there's a difference there to me. And so if your guts going, I'm feeling out of control, I think that the real decision making needs to be Am I really out of control? Or do I just think I am right? Is it a timing issue? To your point, it may be that all the data is there, but it's not there when they need it? Well, all the data being there two months after I need it. It's not that it's inaccurate. It's just that it's not up to date. And sometimes it's that maybe the firm is giving you the information, but you don't know how to interpret the way they're giving it to you. Right, which then gives you that same gut feeling of I'm out of control when there's really not an out of control, isn't it?
Courtney Durante 27:35
Even if even if it is timely. You know, that's one issue, like you said, that could be the problem. The other issue might be it's not relevant. It's not, it's not providing enough detail where you need it. And it's got too much detail where you don't so for example, if you have different lines of business within your company, different main sources of revenue, consulting versus, you know, markup on products, or if you have maybe some kind of a subscription, where you're providing some kind of ongoing service, if you have any kind of, you know, different revenue streams, maybe you need your financials to be broken down into those divisions or business units or profit centers, seeing the whole picture all lumped together, even if it is timely might not be relevant to you, because you don't know, should I be doing more of this or more of that which one of these is more profitable to me. So having the information reported in a way that gives you relevant information. So profit loss by profit center, being able to tell your margins on certain key products, or customer bases or geographies, and then having your expense categories be relevant. Sometimes people will have a p&l that's, you know, two miles long and nothing stands out. And others will have, you know, way to summarize. So I think almost without a doubt, businesses need to take a look at their Chart of Accounts and evaluate, you know, what do we need to change here? And it starts for us with what do we need out of this, like when we when we provide financial reports to you what's most relevant and helpful and what's going to be the key that helps you actually use this, then we might have to back into changes in our process for accounting for transactions so that we get them entered at the appropriate level of detail, so that transactions are tagged or have a certain dimensional reporting level. So that we get what we need out of the financial statements. But if we don't take the time to figure out what do we need? And what do we need to change in our process to make sure that the data gets entered that way, you're just going to perpetuate having financial statements that even if you get them timely, still aren't relevant to you.
Michele 29:54
You don't know what to do with them. Yeah, I always ask people, okay, have you reviewed your financials and they say, yeah, and I'm like, you did you review them, and you knew what you were looking at. And you can make your decision making. Where did you go? Yep, she sent them check, like, what are we doing with it? I've used this example before, but it's like having an advertising and having 20, 30,000, 50,000. And not even knowing where you spend it. Right? And the interesting thing that you bring up about Chart of Accounts, if when people are new, and they're asking me, Michelle, how do I set up my chart of accounts I, in theory, right, because I'm not an accountant and not setting up your chart of accounts for you. But I do have an idea about that. And, and what I always tell them as I don't want it to be any more complicated than it needs to be. But I don't need it to be so complicated that we don't get what we need. So what are your main revenue sources? What are the cost of goods associated with them? And what do you want to be able to analyze? Like, what decision making Do you want to make similar to the questions you asked? And then how do we categorize our expenses in such a way that we can look at them quickly? and decide what to do? Right? How do we how do we get it where we can drill down? And then you can move more into Do you want to do Job Costing? Do you want to do what how much further, but I see people with these, like you said, p&l for miles long, where it's got everyday green sofa with brown legs, some food with, you know, tan legs, and I'm like, people, please, we don't need every bit of that broken out as an individual goods, you know, put furniture, like, do we really need to look at that we can draw another report. But so I love that because it clears up the blind spot of not giving us too much data. But giving us I mean, the truth of matters, we need the right data at the right time to make the right decision.
Courtney Durante 31:46
It is not just accurate and timely, that's foundational, but it also needs to be relevant. And then,
Michele 31:54
Yes, like a SMART goal. Yep. It's got to be exactly my mark data. I love it. Okay, great.
Courtney Durante 32:01
So the third blind spot is, you're spending a lot of time putting out fires, instead of preventing them. So as your business grows, you can end up spending a lot of time fighting fires, instead of figuring out how to prevent them. And as you add more people and more activities, it becomes harder and harder to to identify the underlying issue. And you can't tell anymore, are you fixing symptoms? Or are you fixing the underlying cause. And so what we help clients understand is that you have to start identifying your upstream issues, the financials report, all the activity in your business, the results of it, it's what has already happened. If you want to impact future results, what shows up in your financials next month, you have to start identifying the key activities that are happening in your business right now that drive those results and start measuring and monitoring those. So this is going above and beyond your financial statements. This is another layer of reporting, you might call it a dashboard, a scorecard or key performance indicator reporting. So it's figuring out the upstream issues, the underlying activities that drive your business, capturing, measuring and monitoring those and, and doing something about it while you still can. That'll give you a prediction or a leading indicator, what's going to show up in your financials later.
Michele 33:52
And I've mentioned this before, but as a coach that focuses on financials, what I do is I use those financials, to determine what decision making has been happening. And I share with my listeners and all the same kind of thing you just said, the numbers on the report are really just showing us every decision we've made there. It's just the outcome. It's a compilation of our decision making. If we like the numbers, keep making the same decisions. If those are not the numbers that we want, or that we need or that are going to carry us forward, we have to go back and determine to your point which activities with decision making. Did we do did we did we check to see I mean, it's even as simple as little stuff like this, you know, we found that we had a gym membership that kept being charged because we had not stopped and gone and done the activity of canceling the gym membership that we weren't going to, you know, it's it can sometimes be little things like that or to your point, bigger decision making processes, the way that we're working with clients, the way that we're engaged In business, all of those things need to be looked at. So I wholeheartedly agree with you, it's like a, it's like, almost taking your temperature is the temperature check for the company says, Are you healthy? Or are you not? Okay? Now, where do I go look, because this goes back to hiring, it goes back to marketing, it goes back to Who's your ideal client, and I tell my people all the time, the way you make money is this, you sell the right product or service to the right person at the right price, and then you manage the heck out of it. And if you're not managing the heck out of it, then we got it, you know, we got a problem, what if you are managing it? Well, then we might have a pricing an ideal client, or a product issue. And so again, you get to be able to go back. And look, I love it. I just had another person, jack Tompkins on the on the podcast, where we were talking about dashboards, and visual representations of data to help you make those kinds of decisions, it's so important to be able to look at our data in more than one way, right. And I'm certain that you and your firm, you help your team members and your clients to look at that data multiple ways. And to think about it and talk about, you know, what's so cool, Courtney, I think about it as almost getting the data off the page, and looking at it as something.
Courtney Durante 36:26
Well, I think in our brain, if you will process visual data so much easier and more quickly, then sheets of numbers. So some of us, you know, who are wired to really enjoy, you know, spreadsheets and cheese of numbers have to recognize that we're not necessarily the norm for that. And so we utilize data visualization to be able to show information, whether it's financial lagging financial indicators, or leading key performance indicators, so that it can be, like you said, brought off the page and made so much more visible. And I think, you know, for your listeners, if you're trying to think about like, What are you? What are you guys talking about, like what could be an example of this. I like to give an example about cash flow, because fighting the fire of cash flow is very, very common. But cash flow problems are just a symptom, they're not the underlying problem. So you could have high sales, you could have strong margins, and still have a cash flow problem, because it's taking too long to collect payment from your customers. So a lot of times, people will measure their receivable days, like, how many days does it take my company to collect payment, and they'll use that as part of their cash flow forecasting. measuring and monitoring your receivable days is not going to change your results, it just tells you what's already happened. And if your receivable days is higher than what you want, or need, you have to figure out what is happening upstream, like what's the underlying activities that impact my receivable days, maybe it's taking your team too long to get the customer invoices sent out. Or maybe the invoices have mistakes. And maybe you have somebody new doing invoices, they have mistakes, and then customers don't pay because they're incorrect, or they're they've got mistakes. And so they're fighting back and forth for weeks trying to get that resolved. And all of that drags out your receivable day. So that those are just a couple examples, like there are a number of underlying issues that could be contributing to the high number of days in AR, you have to first recognize that there's an issue, and then go upstream to see what it is what are the underlying activities, and then start measuring and monitoring those. So if this was your problem, then instead of just measuring and monitoring days and AR start measuring and monitoring the percentage of accurate invoices sent out, and the number of days from when service is completed to when the invoice is sent out, measure, monitor those and manage those. And if you can get those numbers changed, your AR days will go down. But just watching AR days of itself is not going to change anything. So figuring out those upstream problems, the underlying activities in the main areas of your business. So like you said, it could be anywhere it could be in it could be financial, could be operational might be something with your customers, it could be your people, like anywhere that you have kind of a raging fire right now, think about what are the underlying activities, what are the leading indicators? And then how could you measure and monitor the underlying activities so that you can see problems before they start or at least while there's still a chance to fix them before they show up as bad metrics in your app. Actual financial results.
Michele 40:04
You know that that's a good one, some of my clients when we first start working together, and I've seen a shift in the interior design industry now that haven't been in it for 20 years, people didn't always take payment upfront. And so they're putting out a lot of their cash and not taking it, we walked all the way back and started noticing those things, and change the process processes. Now 100% upfront, it's now a retainer that we draw off of, we started moving the cash to the front instead of to the back, that we weren't paying out an employee for work data is going to take us 60 days to collect upon. And but again, if you can't just check one thing, you got to walk it all the way back and ask yourself, Is it still the right process? Is it broken? Where do I need to change standard operating procedures? What can I do, and it's almost like with anything, you go back to the route, go back as far as you can, and then look there. Okay, this is so good, I'm loving that.
Courtney Durante 41:02
Or if you have more cash than you're used to, and you don't want to waste it. So, you know, normally we like we just talked normally, cash is a problem, you don't have enough cash flow. But as your business grows, becomes more profitable, you should find yourself with excess cash at some point. And you might ask, well is more money really a problem. And it can be because when, when things are going well, it can be it's easy for cost to creep in. It's easy for inefficient processes to become status quo. And sometimes the just the comfort of having excess cash can cause you to undermine your own success. So having a budget, where you're planning, how you're going to utilize every dollar you make is a is a way to get around this blind spot. So oftentimes thinks that budgets are a tool to help us stretch our dollars when things are tight. And that's certainly an effective use of a budget. But really, the purpose of a budget is to create a plan for spending your money, whether you have a little or a lot, it's being intentional, so that you can make intentional strategic choices about how to utilize those resources.
Michele 42:27
So I love budgets. I talk about budgets all the time, and I teach how to write a budget, create a budget and my understanding your financial scores, I think one of the things that I have found most helpful in creating my own budget is too. And it kind of goes back to the strategy and some of the pieces that you talked about in that first blind spot, Courtney, but it's about even writing down the assumptions that I'm making. When I create that budget. My husband and I have shared before I have taught the Dave Ramsey Financial Peace University and I do profit first. And so we're really about telling our money, what to do instead of it telling us what it's going to do. or doing it not telling us and then we're wonder where it came from. And but you know, it's interesting when you make the comment about, it's not always about not having enough money, it's about almost having too much money. Here are a couple of things that I see, when businesses are scaling and they're more profitable. And they didn't plan for it. They don't know what the new tax implications are going to be. Right? Because when you make more money, you have more profit there. And I remember the year that I got more from my accountant, my accountant has said, Michelle, you need to make this amount of estimated tax payments. This was years ago. Okay. Well, thankfully, I asked her, What did you base that on? Like, where did you get that number? And so she said to me, this number is based on this amount of total revenue and this amount of net profit. I was an LLC at that point. Okay. Well, I realized, thankfully, I had asked the question, because in June of that year, I had already surpassed those two numbers. And it hit me at that point, if I continue paying on the scale that we have established, and I'm going, I'm on par Now to bring in twice that amount. I'm going to be deficient, and having made my tax payments. And so I called her and certainly she was like, Oh my gosh, yeah, here's what we need to do. But I had not been in constant communication with her to tell her that and for her to see it. So that's a big thing that I see when we are more profitable than we planned on. A second thing is we sometimes look at that and think about growing and then we grow too quickly. Oh, I can go hire this next person. Like you said, the costs start creeping in or we have now we've got more money than time. So we just start paying for things that we don't necessarily need or wouldn't have paid for in the past. Or we don't even know that we can actually pay ourselves more. And, and so I'll see, designers come to me with almost all their money sitting in the bank account because they are afraid to bring it into their home, you know, and some of it, the taxes have already been paid on it, but it's sitting there because they don't know what to do with it and how to handle it appropriately for their situation, or how to hold it because they want to do some big thing, they want to move out of their building, or move into another building and, you know, plan build out cost and just planning for the future, that strategy of telling the dollars where to go instead of either letting them sit there or letting them wander off. You know, and not knowing so I think that that is huge. It's almost, um, I had somebody with the day share that they were having a fear of success, like, what happens if it all goes right, Mm hmm. And that, and that's a real thing. And it's very close to the fear of failure. Because to your point earlier, again, we start to self sabotage, if we don't have a plan. I've seen people where the profits came in faster than they were expecting, and they pulled back on all of their marketing. And then what happened is it took a dive, because they had not done the marketing to sustain it. And it can be, it's definitely a scenario we need to think about. And you're right, that's a huge blind spot. So how do you and your firm How do you all step in? What have you seen? I'm certain that you've probably seen some of the same things I have.
Courtney Durante 46:28
Yeah, I think one of the top ones that you mentioned that we also talked about is are you are you paying yourself enough? And are you thinking through the impact of what this means? So I think, I think what it kind of what happens is, psychologically, you know, we all react to change differently. And sometimes no matter how exciting or positive and change can be, you know, there's still this inevitable cycle of change where it's different. And so even if we've experienced all this success, it's a change. And even if it's positive and great, we can start to feel like oh, no, maybe I shouldn't have done this and get into that kind of self-sabotage mode. So that's why it's so important to, to plan out to budget out because then you have more visibility about what to expect. And it's not like it just happens. And then you've you find yourself trying to deal with the change that you didn't expect. planning it out gives you a little bit more of a preview of what to happen, what's going to happen, or what could happen if this all works out. And then you can get more comfortable with that along the way. So using budgeting and, and scenario planning, both of those two tools are ways to help people kind of try on for size, like what they're hoping to achieve. And so that way, it's not such a shock or a surprise.
Michele 47:52
I think too, one of the other, I'll say maybe mindsets that I see is when people have, like, everything starts to work, right? I mean, that's really what's happening here. Everything we've been planning and everything we've been doing, it's all starting to click at the same time, and we're reaping the rewards. And I also see fear, oh my gosh, can I duplicate this? Can I replicate it is it going to continue. And so that fear of it not continuing or not replicating or not moving forward, can also put us in that feeling of a better hold back now, or a better pullback now. You know, it's kind of like, here's the way it's coming to me in my brain. I'll just put it out there. If people think I'm crazy, it's okay. It's kind of like when you first learn to ride a bike, and then all of a sudden, you're starting to go downhill. And you're starting to kind of really, you know, get some wind and hatchet and you're going pretty fast. And at first, you're nervous, because you're thinking, Oh, my gosh, I've never gotten this fast before. And then when you realize that you have control of where you're going or what you're doing, you actually start to enjoy the ride. Hey, but if not, and we're not prepared, we don't have you and your team or someone like you supporting us, it's easy to slam on the brakes and say I shouldn't go that fast down the hill that's not safe. When maybe what we're doing is safe. It's just a faster pace or, or more coming in. I see a lot of fear around the success. And especially when the money comes in. There's the oh my gosh moment.
Courtney Durante 49:34
And I think the other thing that can happen which is the last blind spot, is you kind of reach your limit. So you know, a lot of times as you grow and scale your business, you have to figure out how to do everything. And as things becomes successful and they start working like you said because things are all clicking, you're going faster and faster. You can reach the end of your capacity. And this can cause you to want to put the brakes on. And so as the demands on your time and even your energy grow, you can find yourself either feeling like you're going to burn yourself out, or you're going to have to tamp her back on things. What we help clients understand is that you have to figure out where you and your team's skills, provide the highest value to your business, it doesn't mean you should keep doing everything the same way you have been. And I think that's where some of the fear of failure can come in is, well, if I start delegating some of these things, what if they don't do it as well as I do? Or what if I lose some of the control but carrying out roles and responsibilities within your business that don't match your skills and desires can be really risky, and it can stall your growth, like you talked about, you can be like slamming on your brakes on your way down the hill on your bike. That's kind of you know, worst case scenario is it stalls your growth, I think, you know, at best, you just end up getting into a situation where this, this business that you've been so excited to build becomes boring and unfulfilling. Because you're not doing the things that you're most passionate about. You're doing everything to keep it all rolling.
Michele 51:25
I'd love that in the example that Michael Gerber uses at the beginning of E-Myth, Revisited where he talks about the baker, she bakes these great pies, all of a sudden, she starts a business baking pies, and then she's got to manage the store. And then she's got to do all the other things. And at some point, she can't be the one baking the pies and running, you know, the cash register and running the business and it's just too much. And, and we all kind of start our businesses, even when they're really small. Yeah. I'm going to say almost like a DIY experience, how much can I do until it reaches capacity, and you have to hand it off, you know, you listen, I'm a coach, and I have a coach, I have an accountant, I have an attorney, I have, you know, four or five people that are on my team, I cannot do everything at the level that I need to do it by myself. And I think sometimes we interfere. And I've been there and Courtney, you may maybe you've been there too. Sometimes I think that we believe that delegation means handing it off without preparation. And delegate, nobody's asking anybody to delegate without preparation, right? We're really, when you delegate, it needs to be clear there needs to be it needs to be very clear on what your own, what you're handing off what the expectations are, how it should be done, there should be a standard operating procedure to go with it, the metrics that are going to be measured. If we do all of that all of that prep work, and we give a chance for the person that we're handing off the work to do it. And we know that they are equipped and able to do it, it actually gives us a relief to hand it off. And what I've also found is when I hire people that are smarter than me, in those areas, they take me further faster than I could have ever gotten by myself. So, you know, we're not like hiring stupid people to hand off our work to I mean, let's be serious. I know that sounds horrible to say it that way. But sometimes we act like we're, like hiring less than able to do what we're trying to hand them. And that's not the case. Eileen Hahn was on the, the podcast and you know, one of the things she talks about, and that podcast corny is higher at the highest level that you can for what you can afford, like look at what your business can afford monetarily and hire the best that you can for that money. And the more that we do that, you know, the, the more calm, we're going to fill it handing off the work so that we can do what we're passionate about. I can go do coaching, because I don't have to worry about how to create that Canva document, I don't want to go create a Canva document, I want to talk to somebody and help move them forward. And its true no matter what our business type, the word designer, CPA firm or a coaching firm, it's how do we do what we do best.
Courtney Durante 54:20
That's the way you can contribute most to your business is by doing what you are the best at and the most passionate about. And then the rest, have it handled by you know, an appropriate mix of contractors and employees carrying out clearly defined processes and procedures. And I think that's where, you know, for some we talked about, yeah, you know, entrepreneurs are often very visionary and innovative. And so processes and procedures is not usually within their desire zone of what they want to spend their time on doesn't mean you have to do it. Or it doesn't mean that you have to spend time mapping out the whole thing you can hire someone To help you optimize processes, or you can hire someone to take on that role and work through the transition process and have them, document the procedures that you've described to them and have them carry it out. So this is, you know, in this blind spot, I think we know what you can do about it, is to recognize the value of having clear roles and responsibilities, and processes and procedures. So that like you said, You're not just delegating and walking away.
Michele 55:31
You're not dumping, you're setting someone up and delegating. Dumping and delegating are two different things.
Courtney Durante 55:35
You probably just kind of in your scrappy, get it done type away, figure it out. And it's going to take a little bit of effort and energy to document that and lay it out. So somebody else can take it over. But once they do, you're back to contributing to your business, and really feeling fulfilled in what you're doing, because you're in the right role, to carry out the responsibilities for you, and you've got somebody else adequately handling the other aspects of your business, whether it's accounting, payroll, technology, HR, operational items, you know, it could be any of those areas. So you just have to really look for ways that you can increase efficiency or gain new x gain access to new expertise, like you said, hire the best at this that you can afford, that's going to optimize your business and best utilize your strengths and your gifts, and the strengths and gifts of the other people, your employees or your outsource relationships. So they can, you know, do what's most meaningful and helpful for you as well.
Michele 56:42
And that's what brings us joy when we work is when we're doing what we were made to do, right, and what we love to do and working in our strengths that makes all of us more joyful, as we're doing what's in front of us. I also think to Courtney, my gosh, if I had to go back and take on everything that everybody I've hired was doing for me, I couldn't do it. Right. And so at first your you made the comment about and working to your capacity. Well, now that I've handed off, it's allowed me to do so much more. If I had to take all that work back, I would have to shrink back down into what I could put out and what I could do and how I could serve? No. And I don't want to do that. So I think that's just a great reminder, that for us to grow and to blossom, we have to let go and hand some things off and do it with forethought, I'm very much with intention, and then monitor it and measure it and trust. I mean, we're building trust relationships here, you know, we're not trying again, to build a dumping relationship, that we just dump it on the next person that walks by, we're trying to work with hire and outsource to people who love what they do, and whose success is built upon our success. And when we build those very trusted relationships we all succeed.
Courtney Durante 58:06
Absolutely. 100% agree, Michelle,
Michele 58:12
Courtney, as we wrap up before you tell us where you're hanging out and all that, could you just go over and read those five blind spots that companies could run into as they grow and scale like 1, 2, 3, 4, 5? I just want everybody to have a reminder of them as we wrap up the show.
Courtney Durante 58:28
So you have a vision for your future. But you're not sure if it pencils out. your gut feeling for what's happening in your business is no longer accurate. You're spending a lot of time putting out fires instead of preventing them. You have more cash than you're used to and you don't want to waste it. And you've reached your limit. And you know, there's got to be a better way.
Michele 58:59
That's excellent. That's exactly the clients I love working with and exactly the clients you'd love working with. And I'd love that you have created this e-book. So Courtney, tell people where you're hanging out.
Michele 59:12
On our website at tdtpc.com. And I'd love for your listeners to have access to this e-book for free. And so if they go to tdtpc.com/profit, then they will find a free download of this e-book that goes into more detail on each of these five blind spots that we talked about today. I think most business owners feel like something is off as they're growing like they don't quite know what it is. And this ebook will help you diagnose and kind of just give some language around what your problem might be. How do you know you're struggling with it and most importantly, what you can do. So the E book is broken down into those five blind spots to help you diagnose like, is this what I'm experiencing? Is this what's kind of been out there? And my blind spot right now? I haven't even seen it yet. And then what can you do about it some very specific practical steps, I think it's a great way for your listeners to kind of take a next step forward and, and download that e-book. And if you want more help after that, as you read through the e-book, we're absolutely available. We work with clients all across the country one on one, there's contact links throughout the E book, or you can certainly contact us through our website before that as well. So again, it is tdtpc.com/profit. And that's where you can get that free download, or you can text "blindspot" to 233777, and get the free e-book through that through that text as well.
Michele 1:00:54
Perfect, and I will make sure that I have all of that in the shownotes. And people will be able to have access to get to that. Courtney, I thank you so much. for your time today. This was a fun conversation. I love that you have your firm is also built on helping businesses grow and scale, which is the same thing that I do. You know, from a coaching perspective, certainly not I'm not doing anybody's bookkeeping and accounting. I partner with bookkeepers and accountants for that. And it's interesting my program is called Aim With Intent. And it stands for align your team, ignite your process, and manage your money with intention. And yeah, that's the process. That's my methodology for helping them scale. And so it 100% aligns with what you're doing on the financial side to give them the data and the information that they need to make a decision. So thank you for sharing with us today for alerting us to these blind spots so we can be watching out for them. And then even for the practical steps of how to do something about it, not just go, we're getting ready to get hit.
Courtney Durante 1:02:05
And you know, it's my pleasure. Thank you so much for having me, Michelle.
Michele 1:02:10
You're welcome.
Michele 1:02:17
I'm so thankful to Courtney for sharing these blind spots with us on the podcast today. Make sure to check out her offerings and the free e-book that she has made available to us. planning, organizing and reviewing our data is important. But equally important is getting the help and assistance we need to move our businesses forward. None of us can grow these businesses all by ourselves. My aim with intent methodology was created to provide a framework to grow and scale your interior design firm with ease. Let me help you as you move forward in your business and remove some of the overwhelm and stressors of managing it all on your own. If you want to set up a call with me, head over to ScarletThreadConsulting.com and fill out the form for a discovery call. Let's plan and manage your profit because we know success and profit don't happen by accident.