235: How to be Eternally Optimistic about Your Finances

Michele 00:00

Hello, my name is Michele and you're listening to Profit is a Choice. Joining me today is Matt Drinkhahn of the Eternal Optimist Podcast and Pro Coach Advisors. Matt is full of information, enthusiasm, and excitement about understanding our numbers, especially surrounding financial literacy. Matt is going to share about his journey including some of his embarrassment at not knowing his numbers and then harnessing the power behind those numbers to scale and grow businesses. This is a fun enjoyable conversation, and I invite you to listen in and take notes. 

Michele 00:47

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, and 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.

Michele 01:21

Hey, Matt, welcome to the podcast.

Matt 01:24

Thank you, Michele. Love being here today and ready to talk about financial literacy. What a fun, scary topic for many, I’m excited to talk about it.

Michele 01:34

I know, it's so fun. Matt, before we jump to that, I would love to hear a little bit about your business journey. You've had a very varied journey. You've done a lot of different things. Share with our listeners a little bit about what brought you to do what you're doing today.

Matt 01:55

Thank you. When I first got started in business, I did not know if I could sell anything. I did not know if I could lead people. I kind of felt that I probably could, but I didn’t know. I got my first real job out of college selling Cutco knives.

Michele 2:12

I have Cutco knives. I have them, they are the best knives ever. My husband and I have had them for 27 years and we keep buying additional knives to go with it. They are the best knives ever, just saying.

Matt 2:30

I completely agree and they also have a great training program for college students. When I joined, I was in college and ended up running an office, then a few offices, and had a couple of 1000 salespeople. I was able to learn a whole lot about interviewing and hiring and training and sales and development so that was millions of dollars of Cutco sales. Then I decided let's go and play pro golf because that's what my dad wanted. I read his diary after he untimely passed. This week in 2023, the day after Memorial Day here in the US, is the 18th anniversary of his passing.

Michele 3:06

Wow, I’m sorry.

Matt 3:07

I’m sorry for that too, but it led to some amazing things. One of those was his diary that said that his only regret in life is that he wished he could have caddied for me on the pro-Golf Tour. So, I hung up the business and decided to go try and play pro golf for 30 months, and I did not earn a single penny and did not do anything, what you would call, successfully there. Then I went back to corporate America and in that corporate space with two companies for over six years I learned an incredible amount working for other people. In those two enterprises, like Fortune 50, one of them was one of the biggest companies in the world, I was able to learn how to do b2b on a high level, manage, and motivate corporate employees, not my employees mind you, corporate employees, and teammates. All of that then led me to the age of about 36 in 2014, when I made the jump into coaching, and now bullet point, Business Coach. What I really do is help the people that are perfectionists who are recovering from that, who are control freaks like me, and I say that lovingly and respectfully, who want to have everything under their thumb. They want to know all of the things and they want to make all the decisions. They're the bottleneck and the challenge in their business. So, I help people that are the bottleneck in their business make it so they can scale it and do it in a simple way. That's what I've been doing for the past nine years. We're in year 10 of business and in our company Pro Advisor Coach, there are maybe 150-ish coaches around the world with Pro Advisor Coach and I'm the person who's been here the second longest. Excited to be a part of that company and to serve people through coaching now.

Michele 04:54

You also have a podcast, tell us a little bit about that.

Matt 04:59

It's the passion project, Michele. It's the thing that when I reached a certain level of scale in the business and things were going well there, I’m like, what can I do to give back to the world and the Eternal Optimist Podcast is that. It's for people who are looking for hope and a “you can do it too” attitude. I interview what some would call famous or successful people and ask, What's the hardest thing you've been through? How did you overcome it? And then now, what are you putting into the world? So, I have interesting conversations with people. If you check that out, on any of the podcast platforms we’re now in the top 1% of podcasts. It's been an amazing journey to be with that podcast for the one year and two weeks we've been doing it, so, it's an exciting place.

Michele 05:42

Yes, It's so interesting. I am celebrating that I'm in year 11 of coaching because I started in January of ’13 and started the podcast in ’18 and my entire trajectory for the podcast and for my coaching changed because I had to sell a business, close a business, major health issues, and my whole life got stopped. I had to go, how do I use what I have if I can't use my physicality because I was lifting and doing things if I don't have my physical body? What do I do? How do I use what I have to rebuild something else? So it's interesting, I can't wait to dig even deeper into your podcast, but if I had not had the challenges that I had in 2012, where I almost died, I would not have sold a business at the same time, I wouldn't have closed a business and I certainly wouldn't have turned around and created all that I've been able to do in the last 10 years.

I'm a firm believer that God uses everything from the beginning to the end, and now I own a second company that was started from what I did when I worked my first 10 years out of college. In the same way that yours has moved, mine has done a lot of that moving and pivoting, but also coalescing to come together, which is so interesting. It’s not a bunch of disparate paths, it's paths that I journey that sounds like you have as well, where you learned something that you then used for the next thing that you did. I think that's what's so beautiful about the journey of being a business owner, not just working, not that you couldn't do that in corporate working for someone, but when you own the journey yourself, as the owner of the company, I keep thinking of that road less traveled, or what is it, the two roads diverged in a wooded path?

It's all about which choice you take. It's just interesting, especially since I've been an entrepreneur since 2000, that's a long time, a lot of winding roads. But I have to tell you, you’re in year 46, and I'm almost 56, so I'm about 10 years ahead of you in age, but I'm telling you, I am living the dream of what I want to do. I'm coaching people, I'm loving on people, I'm supporting them, I'm empowering them. My kids laugh when my husband talks about retiring and my sons say all the time Dad's going to retire, Mom's never going to retire. Mom's never going to retire. It's not that he wants to retire, I think he's just looking for something else to do and I love what I do. But what's so cool is the people listening to my podcast love what they do because most of us wouldn’t build a business we hate, and that makes no sense.

Matt 8:38

Yes, and how many people are stuck in a place that they feel like they can't get out of because they made choices to get them there and now, they're like, well, I can't get out of it. Well, there is a way out and by listening to this conversation, you might uncover a couple of clues because you've dropped some nuggets here. You started this part of our dialogue with how might I or how would I do this with this health challenge? You took what many would be the biggest obstacle of their life, and it would just completely shut them down and they'd be the victim of it, and you took it, you played off it how might I shift things around? How would I do it this way? And look what's happened, your greatest challenge has become the thing that lifted you to where you are now. And that is my way in Eternal Optimist is being able to take the hard challenge and learn from it and use it to uplift and to teach and to inspire others and to inspire yourself, which you've just done with me, I love that you did that. And that you're living proof that yeah, hard stuff happens, and you can use it to your advantage and help the world with it. So, thank you, that was awesome.

Michele 9:42

You're welcome. There's a great book you've probably read, Failing Forward by John Maxwell. I love that book. And he has three questions that he asks all the time and I challenge my clients with it as well because I've seen it to be very helpful for myself. It is what went really well, what didn't go so well, and I would change, add or delete, and what did I learn? Just the framing of those three questions such as what worked well? Awesome, celebrate it and move forward with it. What wasn't so cool or what needed to be tweaked? Okay, and what did I learn?

Michele 10:18

I think sometimes we're so used to learning by only getting it right and not a lot of learning comes from failure. The older I get, the more I'm embracing failure as a learning tool. There are people based on our conversation today, who may feel like failures because they don't know their numbers, or they don't understand their financials, they don't understand how to scale, they're afraid to take themselves out of the day-to-day activities, they're afraid to give up control, and some things aren't going to work right 100% of the time, actually, most things aren't. It’s building tolerance. That window of tolerance, that allows you to say, I'm okay with some amount of failure, because perfectionist, that didn't get you anywhere, we just want to keep moving forward. So, tell us how you use all of that in your coaching and in what you do to help people.

Matt 11:11

Well, I want to say I love some of the framework you've laid out here and you're coaching people in you're loving on people, I view it the same way, I love what I do, and I don't think retirement is in the equation, because I love it, it's so different than the corporate grind that I used to have. If anyone out there is listening, and they're in between or they're building the side hustle, I'll say that, yes, you can do it. And there are a couple of basic, simple, not necessarily easy, as I'll share with my story of how I missed the simple, but there are some basic simple principles around financial literacy and building the business that I don't think are common knowledge or common practice that I want to share. And I'd like to share this openly and transparently because there are probably people out there like me for many years, who felt ashamed, and I didn't want to talk about financial literacy. In fact, I used to think that I could outsell or out-earn everything. My problem with finance is not understanding what's a P&L statement. My revenue goes up every year by 20 or 40% so I'm going to be fine, that used to be the mindset.

And what did that get me? Very transparently, here's what it got me friends, it got me into a place where I didn't know much about taxes, how to save for taxes, how to pay taxes, at the end of my first multiple millions that I made, I had not saved for taxes, I did not pay taxes, and I had to go write a huge check to the government that set me back a lot. It was a source of much stress, and this was a private thing, only a couple of people knew about it, and I felt really ashamed and guilty about this. So fast forward to coaching high-performance people. I've come to find that a significant portion of high performers run companies, they don't have this down either. If you're out there, and you're feeling exposed or feeling guilt or shame that there's this challenge of understanding finance or understanding financial literacy, a lot of people have that and I'm one of them. I'd say that there's a couple of things that I've done since then, it helped to relieve that shame or that guilt and now we're in a place where all of that is sound, and we're profiting. And it is a choice now where before it was to outsell everything, now we can look at the P&L with a little bit of confidence. Because we've been taught, we've learned. Here's how it started. For me, it started in 2018, when one of my coaching clients shared with me a question that guides him, and here's a place that if you're not driving, maybe jot it down.

The question is what am I going to do today that my future self will thank me for? What am I going to do today that my future self will thank me for? For me, it was Halloween 2018, and it was solve my tax issue and solve my financial literacy issue. It's not that long ago. I'm running a seven-figure business and I don't understand these things. And I'm coaching people to a high level, not on financial literacy a number of years ago. I can talk about it now and coach to it now, I understand it now, but then I didn't. Then this is long after I had solved the tax thing and paid it off, but I still didn't have a system for understanding and reading my profit-loss statements and understanding that. I committed to 30 minutes a day where I sat down and I got all my taxes, all the stuff that I've been paying, the late fees, and all of the “let’s just go ahead and submit something that's going to cause me to have to pay six months later at multiple penalties and interest”. I started to get all that ahead of schedule and when tax time came, I wasn't scrambling on the 10th of April to take eight hours over the weekend to get it all in just to file an extension. No, we were ahead of it. I got that meeting out in February 2019 right before COVID happened and since then we've always paid on time, and we have no more extensions.

In addition to that, I was able to get some help in a place where again I had shame and I was a little embarrassed to share this back then, but I didn't use QuickBooks. I used a spreadsheet for everything. I didn't know how to track these things. I just kept a bunch of receipts in a box. And now, I don't do QuickBooks myself, I have a professional do it for me. They sit down with me, and they show me how to reconcile things. And these simple, not easy, necessarily, but these simple practices of learning how to face the challenge, get ahead on taxes and face the challenge and hire a professional, a fractional CFO, or your CPA to monitor and help you through QuickBooks. Those are things now that are second nature. But they weren't second nature as little as six years ago, five years ago.

Michele 15:48

You probably wouldn't even think to go back, would you, to not have those things?

Matt 15:22 

Whoa, no way.

Michele 15:55

Right, no way. It is interesting, our journeys are similar in some ways. In my first 10 years, Matt, I worked for Dun and Bradstreet software and built financial application software, built projects, accounting, and accounts payable, and did all that. When I came home to raise my children who were one and three at the time, I decided to start my own company, but I didn't take those big business principles and bring them down into let's say, a micro business. I just started doing like you are doing, I started doing the work of the company, not the building of the framework of the company. It's one of those things if I'm pricing something incorrectly, I can't outpace myself with sales, it doesn't happen. I can't sell more. If I'm already losing money on everything I'm selling, selling more is not going to help me, it's just going to take the hole deeper. And I got hit with, “Oh, my gosh, I'm trying to start this business, I took six figures out of our home 30 years ago so that I could come home, I'm going to start this business, and it's already costing me money”.

As I've been teaching the same way, I was taking money that my husband earned in corporate, because he was helping put money into the company so that I could work for rich people doing interiors, so that I could lose money after not having time with my kids. Sounds like a beautiful business that anybody/nobody would ever want to build. I started realizing at that point that either I'm going to make this work, or we're going to I'm going to go back to corporate and we're going to find another way. I had to sit back and say, what is everything that I know? And am I doing it? Am I a hobby? Is it a job-ee? What am I doing? I made those changes, and then we got hit the same as you with the tax bill because I didn't think all the way through the taxes of a self-employed person. I'd always had my taxes covered by corporate where they just took it out for you. And so, all of a sudden, we get hit with this big tax bill. We've had a great successful year, but we get a big tax bill. Well, I sat back and thought all right, how we're going to fix that one? The same thing, pay the tax bill and worked my way through.

I am a numbers person, I am not a salesperson, I'm a numbers person. I then started learning it, started talking, and sharing it. So back in 2007, I started teaching in the interior design industry, how to read a P&L, how to read a balance sheet, how to price independent work, what pricing is the strategy and the structure of a pricing model, not a commodity, but very boutique idea driven type pricing that we would use in interiors. A different way of pricing, than say I'm going to price a cup, it’s a different thing. We're not just it's just not as straightforward, it's idea based. Then I started teaching. I have three signature programs that I teach, and it's about pricing, and understanding your financials, and then I became Profit First certified. How do we make sure that these things don't happen? But like you, a lot of that training and a lot of that education and a lot of that coaching came from doing it wrong, personally. Then getting it wrong and being willing to go Hello? I don't know if you've seen this, Matt, but you're a guy telling us that you had these challenges.

I would tell you that there's even more shame sometimes for women around some of these things, perceived, I don't know that it's truly more. But there's this perception that by and large, I would say over the last 50 years, women have not been taught at the same rate as men how to manage money. As you know, women weren't even able to get a bank account until like mid-1970s without their husbands signing for them. So financial literacy, numbers, it was not something that a lot of women of my generation ever knew much about. And we've had to really dig in to learn and understand we were always taught that that's kind of what the guy did.

Now you have a lot of women who are in companies that are making multiple millions of dollars, and they don't even have the background, because they've just never been taught that. There's a disconnect. It's getting better, it's a lot better now than it was. And the conversation that you're bringing to the table today is that would say, a conversation that I've seen more and more business owners be willing to have, like, I didn't get that, or I mess that up, and here's how I stopped it. It is so interesting to hear you, because we're used to hearing women have this conversation and share this blind spot, if you will, when they built their business, so I really appreciate you sharing the same blind spot.

Matt 20:32

You're certainly welcome. Michele, I'd say that generally, across the board, men, and women, and maybe at a higher percentage for women, this is definitely a blind spot, it's definitely a source of pain. When you get into an individual one-on-one coaching relationship, or when someone comes to you and trusts you enough to actually open up and talk about this, yes, it is a great source of discomfort and hidden guilt, or hidden shame. If someone listening today has this, and they've been listening to your show for some time, and they know that this is a subject they can come to you with or that if they're building up their courage to finally let it out, how might they start? Here's how I might start or how I might invite them to start first. I might invite them to reach out to you and have a conversation with you and hire you as the coach because this is your specialty. If they are still undecided on that, and they want a little bit more at home or on the bench work or just give me something else I might be able to take in feeling, the first resource that I learned was from a client of mine who gave this resource to me. That was a simple book, it was by Greg Crabtree. It's called Simple Numbers, Straight Talk, Big Profit and these are some simple concepts that if you take these in here, and you look at where you might be spending your money in your business, the percentage that you're spending your overhead for employee costs, what you're spending to attract and retain talent, what your marketing is, what your profit actually is, at the end, your net profit, your gross profit, everything that are these terms that might be confusing, or intimidating. I found this to be a simple place to dive in.

Michele 22:12

It's a great book, I have it on my bookshelf over there.

Matt 22:15

I think this is the book where I find a client who has this challenge and many of them when they do have it open and share it, this is the place I take them first is over to here. Then I take them to my QuickBooks and show them here's how it's worked for me. To see the light bulbs go on and to see people that this has been a deep, dark, hidden secret, start to open up and talk about it, that's the point, that's the purpose.

That's why we're talking right now is that I want to let people know that this is not a scarlet letter on the chest, and it may feel like that. This is a place where there are people like Michele, there are people like this book, Greg Crabtree, and there are places you can go to learn about this.

I just want my story to be a testimony for others that it may feel like a dark place and maybe a stressor, you can get over that you can make it through one step at a time. I invite the audience to ask this question, what is the simplest, soonest action that you might take on your path to financial literacy? Because it can feel like a giant pyramid that you're trying to build in one day. It doesn't have to be. Just one simple, soon action you can take, and you're in the presence of friends right now, dear listener, so please reach out to Michele or message me and we’re happy to listen and help you on that journey.

Michele 23:33

You know, it's so interesting, Matt, that financial literacy, it's its own language. That's what I really try to encourage people with, and I think that you've done so well, there. That is you're not going to get it all at one time. There are these concepts that build upon each other. I was speaking at the International Window Covering Expo a couple of weeks ago and made the comment that I can remember when my husband asked me a question about how much profit are you making on that. And at the time, this was early on, probably 2003 or 2002 and I said I don't know. I felt shame, but I also felt like why don't I know? I should know that. His whole thing was, are you making enough money? Is it worth it? Are you making money? Long story short, after I dug in and figured out if I was going to do this and take time away from my family, I was going to make money at it. Like that's just going to be the bottom line of it.

Then I can remember when the conversation changed and I told him I was doing some job and he was asked, what is your profit? And I said I don't know how to answer you. He was like, what do you mean, you don't know how to answer do you not know what I mean by profit? I said, “Well, that's a very vague term. I don't know if you're asking me about gross profit or net profit before taxes and after taxes before I've invested in my 401k. Which profit, at which point do you want to know? And he said I think you got it. Because I knew not all profit is the same. Gross profit is very different than net profit. Net Profit is different than before taxes and after taxes before investments before debt repayment, before inventory after inventory, there are so many ways to look at it. So, if you're going to ask me the question, ask it specifically, and then I'll answer it. And he was like, all right, I got you, I got you, I'm out.

I don't have to worry anymore, but it's a muscle that we have to keep using. It's a language and it's a muscle and it strengthens the more that we talk about it, the more we dive into it, and the more that we want to learn. There's the basic understanding of a profit and loss or balance sheet and then there's the more detailed deep dive into how do I analyze it and make it work. You mentioned a fractional CFO. I'm not sure if you even know this Matt, but I launched another company last fall and it's an online Financial Dashboard called Metrique Solutions. It's built for small business owners to have a visual look at their financials. We load QuickBooks data, and we show it to you. We show it with your Profit First percentages, we allow you to do financial modeling to look at billable capacity, and when you pull up your dashboard, it shows it to you in a visual way that a business owner can use, not your accountants and not your financial planners. But it's it was another tool out of my journey of building spreadsheets for all of my clients to understand what they were doing, to say there is a tool here and you have the ability to understand it, maybe you don't need to see it in black and white on a P&L. Maybe you need to see it in a pie chart or in a thermometer chart and maybe you need to have it pulled out so that you know where to focus because time is money. And you don't have hours to sit and do a calculation with your calculator or your phone. What if we just did the calculations for you? What if you just set a KPI and we show you where you are? And all you have to do is load your data and you're done. You're out, tap it out, look at it, make a decision, move. It's time and effort to build the strength of that financial literacy.

Matt 27:25

I agree and Metrique Solutions, I believe that what you just said is the name and I love that. I've not seen it yet. I've been talking about my angle so far and it has been from the front end and overcoming this gap. Now that I'm about five and a half years into understanding and reading these statements, I’d like to fast forward to the other end once you do have an understanding. I know you have some listeners that have a sophistication around this, and I have been talking to those that are overcoming the fear that I overcame. If we move forward, whether you are brand new or trying to overcome this challenge for the first time, I am certain that Metrique Solutions is a great place to start and now, once you've gotten your GED or high school diploma in this stuff, now what happens as you're getting your master's and your Ph.D.? What I might share with that, is that right now I have an equation I looked at, and I don't really have a name for it. But let's just say it's desirable profit, good or bad, let's just say desirable profit. Now that our business has scaled, the place right now is looking not just at the money and time, I like to look at a couple of different factors in what I would call my version of financial literacy with clients. I run a coaching practice where I do a lot of one-on-one coaching, public speaking, and some group facilitation. I look at the different types of engagements and I'm asking myself (a) the money, how much are they paying and (b) the time, how much time is it with them. How much time is in planning? How much time is it developing my associate coaches to work with them? I asked myself (c) how much emotional energy by expending on these particular client engagements because there are clients that pay a lot that suck a lot of life out of you. There are things in your business you don't want to do. And then there are those that may not pay as much and you love it and it's just free-flying and free-flowing, so emotional energy expended is a category for me. And then the last one comes back to the referrals. Is this someone that is a raving client fan that's offering us testimonials and referrals by the bundle? Now when I look at all those things together, that's how I started to figure out my own equation of profit when it comes to clients.

Because one thing that really rings true in what you're saying is that I don't want to trade time for money, because time with the kids is important time. Right now, my kids are eight, six, and four so I don't want to just trade time for money and I’m not judging anyone that is it, I wish everyone the best without any judgment. And for me, I don't want to do that anymore, because I've done that for a long time. So now truly looking at every client and asking, where is the tradeoff here? Can I do this for someone and take 90 minutes a month, as opposed to 90 minutes a week? Can I help them solve their challenge in less time so that I might have more time with the family? Might I delegate this to someone else?

These are some of the questions that come up to me when I'm thinking about what's the desirable kind of profit, not every dollar is the same to me. The ones that give me the most emotional energy, and that give me life, the ones that empower me to go back and spend time with the family, that was the dollars and the profits I am looking for. Does that connect? Does that resonate?

Michele 30:49

Yes, absolutely. I think that's even the same conversation that a lot of our listeners are having, because, especially in the interior design world, there are some that are working on multiple projects, and it takes time to design an entire home. Some of these are two-year projects, but then they may have a small project where they go in for two hours and just share information or answer some burning questions that somebody might have. There's a spectrum of time that they're spending on these projects. And honestly, there's the emotional part that is so important, because there are clients out there that I mean, they literally drain you, they drain you. I know that even in my podcast interview process, one of the things we talked about on the podcast too, Matt, is that profit is about more than money, you just like hit the nail on the head. My whole theory behind the podcast is profitability is about more than money. It's profitability of communication, the profitability of time, of energy, and of the whole thing. I use the Bible verse a lot of times that says what is it profit a man to gain the world and lose his soul? So, it does me no good to have all these millions of dollars, or hundreds of thousands, or whatever the number may be if I am miserable on the other side of it. Figuring out at any season of life or season of a business, where do you want to expend that energy, where do you want to put that time, or what is the best use of your resources at this moment? That's the way that I like to look at profitability, which is exactly, I think, what you just described.

I know a lot of our listeners are asking all the time, how do I communicate clearly and effectively? Because that's profitable? How do I make sure my contracts are written beautifully, but also tight? That's profitable? How do I make sure that I'm hiring the right people because that's profitable? The cost of a bad employee, the cost of a bad contract, the cost of bad communication, the cost of spinning our energy in the wrong place, and being exhausted. And then what happens for that? The cost of being the bottleneck, as you started with. The cost of not having a raving fan, the cost of how they're going to speak about us on social media, all those things affect profitability, whether it's for the brand, for the human, the person, or the business and you absolutely connected and hit the nail on the head. I think it's important for all of us to think about who is our best client. I've had some of my clients and they thought that their best client was the wealthiest of the clients.

Matt 33:31

Oh, yeah, all the time that happens.

Michele 33:34

Just because they would have the money. Because we think that they are the ones that are going to have money to spend on all the things and sometimes they are the most difficult people, not all of them, no blanket statements here. But I have seen that sometimes the expectations are high, they expect to be given a lot of things, and they expect for things to be cut, it's not the ideal that the business owner thought they were stepping into. Sometimes taking it down a step or two, kind of paralleling what you describe somebody who maybe they're not paying as much, but they are a joy to work with, and it is fun, and it's life-giving, I would work with that all day long over the higher level where it felt like I was being drained. That's what I see people recognizing.

Matt 34:30

Yes, that really connects with me because I remember my first big, big client, a famous client, a professional athlete client, houses in the Hamptons, I'm thinking I'm in. I've got this rich client that's got all this money and now I'm going to be in these circles getting connected up here. That was the hardest person I've ever had to work with, who was constantly angry and yelling and skipping calls and blaming and all kinds of stuff was happening and that was incredibly challenging. I did it because in the beginning of coaching, I needed to have clients and it sounded pretty sexy to have a client that's paying what they're paying and all this opportunity. Great lessons learned from that. It's not the size of the bank account necessarily that matters most now when you've achieved a certain level of scale or success, or you have the ability to choose a little bit more of who you work with, who is that ideal client that you might work with? Who is the ideal prospect or client that brings in the type of profit that serves where you're going next in your career? You mentioned interior design which brings up in my mind and it takes a couple of years to design the interior. I coach some high-level organizations in the construction industry, and I know that some of them take a fee for the work, they take a beating at HOA meetings, at Civic planning meetings, they just take so much, and it's not very profitable, some of these deals. And I continue to ask the clients, why do you do this? Well, the gist of it is that we learn how to go and start a business, we learn what makes us money, and if we get into a comfortable place, it can be very challenging to break that habit. It can be challenging to break the habit of figuring out a way to get clients, they may not be as profitable financially, but at least I have the work, so I continue to do that. That's a hard habit or mindset to break for many people.

I want to honor the people out there who might be listening and thinking that it's not just about understanding where the profit is and what the terms are. If you've advanced past that, now it's not just about making money, it might be about turning some of those hard habits and the things that have led us to here, it might be breaking some of those mental habits and starting to see what you're describing right now of there is the right kind or the enjoyable, life-giving, light-bringing type of client that you might be able to work with. I think at different stages and in different levels, this literacy of profit certainly has many different avenues to explore and I'm glad you're here to share this because this is helpful stuff what you're talking about.

Michele 37:09

Question for you, so here's something I do and I'm curious to see if you do a similar exercise. Every year, I sit down and not only review my clients who I'd like to work with again or continue working with not just them by name but what is it that I'm solving for them. How is it that I'm engaging with them? But I also stop every year and ask myself how do I want to show up this year. How do I want to take my brilliance or what I know, how do I want to distribute that into the world? Where do I want to focus my energies? And there are times that I have offerings that I take off my plate that I'm not going to do that anymore. That no longer feels like it's good for me. Could I do it, yes. Is it the best use of my energy and time, no. Then I choose not to do that anymore. It's just something that comes off my menu of services. I know my clients and those that are listening, they do the same thing like we no longer offer that or we don't we don't work that way anymore. Have you found that you do the same thing, Matt, when you're talking about this overarching kind of conversation around profitability, what’s profitable for you as a person?

Matt 38:20

Let's say two things come to mind, Michele. One is I remember there was a time in my first year in coaching in 2014 when I was offered the chance to coach someone who was a financial advisor in their first year, and their father owned the practice, it’s done really well, and he could afford it. He paid me to coach his son. That felt like the world to me to have a $500-a-month client that I could coach and help them grow and develop their sales ability. Loved that in year one, 2014. In 2023, there's no way I would take on a brand-new first-year sales professional., The people that I coach now are people that are selling enterprise level, people that are selling deals that are not in the hundreds of dollars or the thousands, but in the fifties and hundreds of thousands, in the millions and tens of millions. There's a different level of player that I coach now and before it was throw everything at the wall and take any clients that we can and now the profitable choice is for me to coach people who are at this skill level, they want to take it to the next place. Not everyone will accept my offer. So yes is the answer is that some of the offerings from 2014, we don't have those anymore. The annual thing that I would do every year and I do it the week of my wife's birthday, which is the week before Thanksgiving, I sit down I like to look at every client and I look at how many calls and how much time did we actually invest this year.

I ask myself on a 1 through 10 scale, no sevens because seven is a BS answer my friends, so on a 1 through 10 scale, I'll ask to what level of energy does this person give. Eights, nines, and tens, I love it. I want to replicate those people, keep working with them, and at that energy. After working with them for the first year, or my longest standing client right now we're in year number eight, and if I look at the client and we're in year eight and the energy level is starting to go down, then it's time to promote that client to excellence elsewhere or to change our agreement or to have that conversation around it. So yes, there is a tiering that I'd redo every year to look at the time, the money, the energy expended, and again, is this the person that's offering me referrals to more ideal clients. I do look at that and I'm glad you brought it up, because sometimes, if you have the person that's paying the most, and you get a lot of energy from them, and they're taking FAR more time than you would think, it might creep up on you. If 15% of your annual revenue is coming from one client and you're spending 50% of your time and they fill your bucket, you may be getting hypnotized, and they may be pulling the wool over your eyes unintentionally and you're spending a lot of time with them. That is not a profitable client, even though it feels like it. I like to keep some of those facts and feels in there and they balance each other as to what the ideal client mix is, and what the ideal services are moving forward.

Michele 41:25

I love that. We talk a lot about comparing empirical data with the gut feeling, you can't get rid of either one. The logic and the feeling, you've got to look at both and I would say that you're a business coach and I'm a business coach, we both do that. But other business types can do it the same, like my clients, and your clients. We probably encourage them both to do the same thing in the industries that they represent. What do you love to do? Where is your team perfectly poised and skilled at this moment to serve your ideal client? Because if not, that's draining. Where do we need to fill in the gap with education? Where do we need to fill in the gaps in other places? Sometimes I know there's energy I want to expend, but I don't have it so I'm looking for where I can pull it from in other places so that I can put the energy towards what is most important for me in that particular season of life and business.

Matt 42:19

Yes, I think this is an important distinction to make, because you just triggered a thought, in my mind, Michele, around the client. They're an annual seven-figure earning client who happens to be the bottleneck, and they're so good at selling and so good at leading people, and they're not great at letting go of things. If any of your listeners are out there in that boat where they want to keep their eyes on everything, control everything, and they are the bottleneck, they'll know who I'm talking to you, if they're feeling that right now, if you ever feel that way, one of the things that I've seen to be hard to break, and it is breakable and changeable is being able to let go, to be able to automate and delegate things. If that is a challenge that any one of your listeners is having, then I invite you to please reach out to Michele, or please reach out to me because that is 43:07 one of the biggest challenges that I see in recovering perfectionists and highly functioning workaholics is they don't know how to let go and they don't know how to delegate effectively. Now, and if you truly want to scale it, and literally double your business, there's a way to do that. Just figure out the right question to ask and how you might get out of the way and let your people do it. I think that might be the thought I would close with there on that subject.

Michele 43:29

Yes, I love that and for those that are listening, there's a podcast, we'll link it in the show notes, that I put out on Delegate Don't Dump and we'll talk about the difference between delegation and dumping so that you're delegating with success, exactly what Matt has just mentioned. So Matt, tell us where everybody can find you. This has been such a fun conversation and I know everybody, including myself, we're going to want to follow up and listen to more and get to know more about what you have to offer and what you're putting out to the world. So where can we find that?

Matt 43:57

Thank you, Michele, the first place would be EternalOptimistpodcast.com, that's my podcast website. I'd love to invite anyone here to come and listen to our show. If you want to connect with me live or in person, then you can find my name Matt Drinkhahn. There are only twelve Drinkhahns in the world, and I'm related to all of them and the only Matt, so find me on LinkedIn or Facebook and connect with me there. But I would invite your listeners to come to Facebook or Instagram @EternalOptimistPodcast, I've got a page and an account there and every morning Monday through Friday at 7 am Eastern time, I do a live stream for 10 to 20 minutes every morning, and I coach and work on how to change whatever inside might be holding us back and turn it into that inner peace and happiness. In addition to that, we work on some business coaching and some skill development as well. But I'd love to have people come and follow me there and connect. Coming up later this summer. I've got a masterclass on sales that we're launching, a new mastermind, so we'll tease people with more of that as time comes on. But thank you for the opportunity to connect with your audience today, Michele, it's been a real pleasure. I appreciate you.

Michele 45:07

You're welcome. I enjoyed it. It's always fun to talk to somebody who cares about a lot of the same things that I care about and that you care about. So it's been a pleasure. Thank you so much.

Thank you, Matt, so much for the podcast today. Thank you for sharing. I'm glad that there's no more shame in our game of not understanding our financials because now we've got that under control. I want to encourage all of you that are listening to check out the Eternal Optimist Podcast and then certainly on Facebook, LinkedIn, and Instagram, join up with Matt and hear what he has to say, listen to his coaching moments. If you are looking for information on scaling your design business, please reach out and let us know here at Scarlet Thread Consulting, we would love to have a discovery call with you. You can go to the work with me page at scarletthreadconsulting.com and remember from everything that we have shared with you today, profitability is not an accident. Profit happens intentionally so make it your intention to be profitable.

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