247: Using Debt Strategically in Your Business
Michele 00:00
Hello, my name is Michele, and you're listening to Profit is a Choice. Joining me on the podcast today is Danielle Hendon. She is the owner of Four Corners CFO. Danielle loves to take big business ideas and break them down to support small businesses to reach that next goal, to grow and scale, or to just wrap their arms around their business. We're going to have a really great conversation today focusing on debt, such as good debt versus bad debt.
Michele 00:40
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.
Michele 01:15
Hi, Danielle, welcome to the podcast.
Danielle 01:17
Thank you so much for having me, Michele.
Michele 01:19
You and I had some pre-podcast conversations. I feel like we've been friends for years now and I feel like we had a whole podcast before we started the podcast.
Danielle 01:26
We definitely could have turned that into something. Yes, no doubt.
Michele 01:30
Yes, no doubt. Danielle, I would love for you to share a little bit, I always like to start the podcast, letting people hear a little bit of your business journey. I think it kind of sets the tone for quite often, why we think what we think or feel what we feel, and why we do what we do. So, could you share a little bit of your story with us?
Danielle 01:49
Yes. I am a CPA by certification coming out of college, I did what most CPAs do and went into a public accounting firm. I loved what I did and loved the people I worked with, but I started a family and I very quickly realized that 80-hour workweeks and a newborn are not the best mix. Being in the Houston area, when I left public accounting, I landed in oil and gas because that's where a lot of my knowledge was, it's where a lot of the people I knew were, and I was with a company for over a decade, but they went through bankruptcy when the prices tanked a few years ago, I say a few years, I guess now it's almost like five or six years ago. And on the other side of the bankruptcy, the bankers started slicing and dicing and they were just selling everything off. Then the pandemic hit, and it became very clear to all of us that the doors were going to close.
It was also a double-edged sword. For me, it was an opportunity for what I will admit was a workaholic mom because I loved what I did and when you love what you do, you throw yourself into it, to get a completely different perspective of parenting. I wasn't just driving downtown and working all the time. I was “Get them to school Mom, get them to swim Mom”, I got to know the coaches and the friends and the teachers. I realized I didn't want to give that up. As much as I knew I could jump back into corporate and get another job, run another audit department, and do all those things, I didn't want to anymore. I wanted that work-life balance that I think leads so many of us to start our own business. I wanted more time with my family. I started looking around and I was I will say blessed I was blessed to find someone who's in the fractional CFO world that was more than willing to tell me all about what she did and how she did it and give me the encouragement that this is completely doable. So, I took a leap of faith, and I did just that. I started my own business helping other small businesses use those big business concepts that I knew from corporate America and bring them down to a small business realm in a way that's understandable. I never thought I would be grateful to go through bankruptcy. But having gone through that process, I knew how to take billion-dollar business concepts to them, we were 20 people by the time the doors closed so, I knew how to make it small. I knew how to make it fit and that's exactly what I do now in my business.
Michele 04:07
The parallels between what you have gone through and your trajectory and my own are so interesting. I mentioned to you that I built software at a large company, and had my children. We went through a buyout and in that buyout, my job was downsized because we weren't going to be building anymore. Then I came home, it was the same thing. I was taking them to school in their PJs, picking them up, putting them in their PJs, and I realized very quickly I liked being home with my kids. I mean, I still wanted to work. I still had things to do, but I wanted to maybe have a different balance than what I had before. I think that's been my big push since 2007 and that is to take big business concepts and make them accessible even the micro businesses like we talked about.
Danielle 04:53
Yes, I mean, they work they work for everybody but people that are used to big business don't necessarily know how to articulate that in a way that makes sense to small business owners.
Michele 05:04
When I realized that my business was struggling back in 2002, I had a negative net profit where I did my own and it was mostly from investment dollars, not setting my boundaries, not charging for things, giving away too much, and all that can happen in the early stages of the business. It wasn't until then that I had that moment, when I went, what am I doing? My husband even said to me, “What are you doing?” And I had to take that step back and realize, what are the big business principles and what do those look like. Really, I think, to be aware of them and to identify them so that I could bring them back. It's things as simple as some of it's going to sound so silly, but I think part of it is even just running your P&L, trying to look at it and analyze it, asking certain questions about the financials in your company, are we making enough money? Are we going after the right clients? Who's charging us? What is the work that brings in the profit? What is the work that tends to cost us so much, even if we love it? Now how do we adjust the pricing so that it's not the loss leader in the whole darn firm like this? All those types of questions. Where do I want to go? What do I need to do to get there? Do I want to slow down? Do I want to speed up? Do I want to go by myself? Do I want to hire, you know, just asking the questions and then knowing how they translate we just did. In my coaching firm, we just had our strategic planning event.
We do these once a year in September, and I bring all of my clients together in Atlanta, even some of my past clients, and we sit down, and we take our strategic plan for the next year and we ask the hard questions. Is there anything on the plan for next year that is going to increase the budget over this year? Is there anything on the plan for next year that's going to decrease the budget that I had for this year? Are there any decisions that are going to change the revenue model for next year? You know, up or down? Are there any hiring decisions that are going to change it? And then we climbed through our current financial statements and said, is there anything that we did this year that we're not doing next year because it was a one-off? Maybe it was a build-out year? Who knows? Or maybe it was oh, that was a bad decision? I'm not carrying that.
Danielle 07:12
I'll say maybe it's that we don't want to do it that way again because it didn't work.
Michele 07:16
That's right, we're looking at tech. I mean, all of this is some of the Profit Firstcombing that we do, but we do it a little differently in my team, really tying it to the strategic plan. So now we look at every single thing on the strategic plan, and we know what it did to our budget. For us to hit that goal, something had to go up. And if we can increase or decrease the budget for that strategic plan, it's got to come from somewhere. So now what are we giving up? So, it's very much a where are we saying yes and where are we saying no conversation. That has been so crazy helpful. It's something that we would all think that we should be doing, but I would say in practice, we think about it in theory, but we don't sit and do it in practice.
Danielle 07:56
Yes, so many business owners, I tell people all the time, if you're not looking at your financials, that's the first step, you've got to be willing to look. I get it, when you put your head in the sand, it can feel like everything's going to be fine and you don't want to go look. But if you aren't looking, you don't know what's going on. In a lot of ways, you don't know what's going on in your business from how it's doing. But also coming from the audit background that I have, I will say so many people give the keys to the kingdom to one person to do it all for them. That is a huge risk to you as a business owner, small businesses are so subject to fraud.
Michele 08:31
Oh, gosh, aren't they though? So, one of the conversations that you and I are going to have today is primarily around let's say debt. When we're talking about fraud, it makes me think of debt as well, because you end up in debt when you've had fraud for sure. But we wanted to start kind of having a little bit of a conversation around that, but before we go to debt, can you give us two or three things to look at to keep away from fraud? When I work with those in the interior design industry, and honestly I'm not seeing it as much these days as I did when I first started 10 years ago, it was almost two or three per year, but I do see and I wouldn't label it as fraud, I see a lot of messy, nasty bookkeeping. I see a lot of people who air quote call themselves bookkeepers and I don't know what they're keeping, but there's not a consistency. We were talking about earlier, people that are putting things like a child account that have the parent account. It's just sloppy, it's just sloppy, and it's incomplete. You know, and while it's not fraud, it also doesn't put any company in the best position.
Danielle 09:42
It's not reliable,
Michele 09:43
It’s not reliable. When I'm working with somebody who has a really great bookkeeper and a really great accountant, you'll know that you have one because they're proactive. They're trying to get the work done. They want it to be categorized correctly. They are in a partnership with you to work through your financials versus you feeling like you're doing something wrong by asking them for the numbers.
Danielle 10:04
I would say that's one of the number one things is how do you feel about the relationship with your bookkeeper. I'm a number person, I love them. I know most small business owners are not number people, and you probably don't want to talk about them all the time, but if your bookkeeper isn't trying to talk about them all the time with you, they're probably not doing it at the level of detail that you want them to. Because there's so much that goes on in a business, there's always going to be a question and if they're never asking questions, then they're just putting it somewhere.
Michele 10:33
That's right. Even if it were just in the bucket of ask your bookkeeper or ask the business owner, I can handle that. Because at least we're looking for something. So just a good little segue for anybody that is like, Oh, I'm not sure about this relationship. So, let's talk about business debt. I did a podcast a while back, I'll have to go look it up and link it, but it was on business debt, it was personal debt and how they paid it off. It was more of a personal story about it, but let's talk about debt, is that good or bad? That there's a lob off for you.
Danielle 11:03
It's both. I know that sounds polarizing good and bad debt sounds polarizing. I'm sure everybody's familiar with the Dave Ramsey world of things and we want to get away from debt and we want to be cash and we want to make sure that we're making all the right decisions and not beholden to somebody else with our money. I get that, but there are times when debt can be really good for your business, I'm not going to go over the bad debt quite so much, because I think we all tend to enter the word debt with a negative connotation already. But when it comes to good debt, good debt comes from intentionality.
Honestly, the difference between good and bad debt is the intention behind it. If you're going into debt, because you didn't do something, and it's a last resort, it's generally not the best type of debt to have. I will give one of my favorite examples, a team that is growing and hiring, we all know it takes time to get a new team member up to speed, it takes time for them to truly be revenue-generating at the utilization and productivity that you want them to be. That requires money and if they're not generating the money yet, it's got to come from somewhere. Depending on where you are in your business, you might be able to pull it from savings, and I hope you are but if you aren't, you might need to pull it from debt, knowing that the return on that investment is going to far exceed what you're going to pay for that debt. That's the important part. It's all about intention. So, I will say the number one reason I think debt can be good, is to give you a better return on investment than what it costs you.
Michele 12:35
I love it and I would agree with that. I like to think about it as well like good debt would be like when you're getting a house mortgage. You can't pay the whole thing off at one time. So good debt would be making sure that you're buying a home that you really can't afford. That the amount is what you really can't afford. Make sure that it's an interest rate that you can handle and that you can do consistently so that you're going very intentionally, to try to have the debt and perhaps pay that debt off. My bad use of that would be to overspend on the house at a really high interest rate, throwing things into the mortgage, because you can't afford them now and you just want them, and then going sideways on it later. Right?
Danielle 13:15
Definitely, you want to know what your goals and expectations are.
Michele 13:20
Exactly. In the business I mean, you and I talked about the fact that I’m Profit First certified, and while it's certainly not a Dave Ramsey-type program, I have big feelings about the Dave Ramsey program, not all great. Debt is actually leverage. We're using somebody else's money to leverage a position or knowledge or experience or something. Knowing that the payoff on that investment, that leveraged money, is going to pay off. Debt that has no payoff is not good debt. For example, you used a similar example, I'm going to give you a real-world one and I'm sure that there are going to be some people who are going to cringe and want to turn off the podcast hold on to it, but debt that is accumulated due to poor processes in your company. That one gives me feels, it gives me feels. That might look like oh my gosh, I didn't do Profit FirstI didn't understand how money flowed in my company and so what I did was I saw a great big number in net profit and I took too much money home. I paid myself the owner way too much money. And that was money that really should have been paid to cover a sofa or a piece of furniture for my client.
Danielle 14:33
Or the IRS that comes knocking.
Michele 14:37
Absolutely. So now I'm sitting here, and I brought the money into my house, and I've already spent it. I’ve got these really cute clothes. I've got this great car and we went on vacation and my house is decorated. However, my AMEX is at $96,000 and I don't have the ability to pay for that. The IRS is calling because I'm behind and haven't paid for that and I don't know where the money is going. So, I'll go get a line at Credit so that I can pay off the AMEX, I can pay off the IRS, but I don't stop the process of bringing home too much money for myself.
Danielle 15:07
Ah, yes, those are painful, that is painful, and that all of that that you just said goes, but it's unintentional. None of that was an intentional decision, it may feel intentional to go get the line of credit, and it's going to feel like you're making progress, but it isn’t if you don't have the intention to pay it back and fix the processes that created the problem.
Michele 15:27
That’s right. It's the fixing of the process because that's part of that intentionality, I teach an aim with intent methodology. It starts off by having a solid foundation and then creating intention, intentional budgets, intentional KPIs, and intentional spending patterns. One of the things that I taught last week was your budget is decisions you make in advance that tell your money where to go. It's informed decision-making. Debt is the same thing. When it's not trying to cover for processes that maybe are not supportive of the life and the business that you want. When I gave you that description, I wasn't given it to shame anybody. I was giving it to say how easy it is to get caught up in that if we're not watching those numbers. I've seen people who are the best designers with the best of intentions end up sideways and it can happen very quickly when we're working with really large numbers. So, no shame intended, it's more about recognizing, oh, crap, that's a process or that's a way of thinking that I got myself called in and now how do I get out and keep it from happening again?
Danielle 16:34
Yes. The worst part is, in that scenario, the likelihood of someone getting that line of credit when they're already in that position is so much lower. It's awful to be in that place and need an out and not be able to get it because when you need debt, it's going to be the hardest thing for you to reach for.
Michele 16:50
That's right. So that's some bad debt and an easy way for us to get caught in that bad debt trap, if you will, of almost trying to pay our way out of really poor decision-making. How do we use debt in a great way to go forward? I know you gave one way. Another thing that I see a lot of businesses, especially on the blind-shade-shutter side, not as much on the design side, but on that kind of side, they are not always, especially if they're working in commercial projects, Danielle, they're not getting paid 100% upfront, most people in the interior design world now know that as much as they can we get paid 100% upfront before we do special order of anything, but in a commercial environment, that doesn't always happen. So, you can have $100-200,000 rotating in and out. The money will come "is contractually coming", I'm going to put that in air quotes, because we all know how business happens.
Danielle 17:44
It’s supposed to come.
Michele 17:45
Supposed to come. We're building it, but we're having to sometimes create an outlay before all the money comes in. So, I see a lot of those clients running with a line of credit. And they are it's constant, pay it off, load it up, pay it off, load it up, pay it off, we'll load it up.
Danielle 18:00
And that's exactly how a line of credit should be used. That is a good debt version. I was going to flip the script and say there are reasons to not go get a line of credit, like we talked about, there are definitely reasons to have a line of credit. In the scenario you just described, where you have what we call long-term receivables, you have the money you know is going to come in, it's sitting in your accounts receivable line, we hope it's going to come in, it's sitting in that accounts receivable line, you can actually go get a line of credit based on your accounts receivable. They will say, Oh, look, you're generally turning over this much money and if the rest of your finances look decent, they don't have to be perfect, but look decent, they will collateralize your receivables they'll say Yes, we want you to stay in business. So, we'll give you a line of credit, you take that, let's say $100,000 out, now you put it back when you get paid, and when the next one happens, you take it out so you can go get all the things, buy all the things and get to the end of the contract.
Michele 18:59
Yes, I see it used sometimes for inventory as well, just to pre-purchase, like sometimes I'll see it for people that have a store, and they need to buy some furniture or things for the store. They'll use that line of credit knowing because it's really sitting there and they've got they're buying assets for the company, but it's a liability when you buy him, right, because it's sitting as inventory and nobody's paid for it yet so you're responsible for it. I see it used that way. One thing I'll tell you in the Profit Firstworld that we try to do is have people over time, save up enough profit in the company to be their own line of credit so that they're borrowing from themselves because the behavior is still the same and the way the business works. But maybe they can build up enough not that it's bad to have a business line of credit. I'm not assigning morality to that, but I'm saying they would rather have their own because the truth of the matter is the bank can call a loan at any point in time.
Danielle 19:55
They can and it's still going to cost you money. A line of credit isn't free money, there is still interest attached, the end goal is that you identify these trends and can fund them yourself. Every business, we've all got to start somewhere, and I tell people all the time that debt is such a loaded word, and it carries such a burden to us mentally, and money in general. Cash makes or breaks a business. I'm a huge proponent of budgets, that's what we spend all our time talking about, but cash is king, it makes or breaks your business. If you run out of cash, you are going to be in scramble mode, and you're going to be high stress, not thinking straight, not making the best decisions in your business. What I love about a line of credit for business owners who haven't gotten to save yet is it gives you just enough room to breathe, take your breath, make the best decisions, and keep moving forward.
Michele 20:49
I totally agree. I know there were years that we had a line of credit on our house just in case something happened, let's say, my husband, for some reason, maybe lost his job, and we wanted a line of credit so that we could survive in the event that some tragedy happened. I think that's important as well. Talk for a minute, maybe you can share a little bit of information, Danielle, around when would be a good time to get a line of credit. So smart, smart debt building, because it also builds up credit for the business, smart debt building for a business, and what the banks are looking for in their business financially to give them that line of credit. I know you mentioned accounts receivable, but they said they don't have all of that yet, if we could just talk about how they can look at their financials and see if this is the place that I should consider this?
Danielle 21:38
I'm going to point you to a financial statement that a lot of business owners are less familiar with the bank wants to see your balance sheet. We all know revenue, we all know money coming in the door, not as many business owners are looking at the balance sheet and that's where the banks are going to turn first. From an accounting perspective, your balance sheet tells them what your business is worth and what your business has done historically. That's what they want to know. What does the history look like, so that we know what it's going to look like going forward? I will say right now as we're recording this, it's not the easiest to go get debt. It is also not really great interest rates. They’re bordering on credit card level interest rates, but it is still accessible, especially if you've got large accounts receivable, where you've got that turnover, they're collectible, you can use that to help you get a line of credit, it's also going to be the kind of thing I recommend every business owner do as soon as possible. Because like we said earlier when you need that, you're not going to be able to get it, but if you get it when you look good, when the balance sheet looks good when you are profitable, and you're making good money, it's going to be so much easier to get and most line of credits, while they can be called at any time are usually good for one to two years before they reevaluate and decide if they want to continue that line of credit.
Michele 22:51
If they were to get a line of credit, do they have to show that they've used it to keep it active, even if they don't need it,
Danielle 22:57
You don't have to show that you've used it, you probably have a stronger chance of keeping it active. So, I say sometimes treat it like a credit card, we've all got a business credit card. Ideally, you're paying that credit card off every month, but you want to rack up those points. So, we want to keep the line of credit active, you could let's say pull money out, pay payroll, get paid from the clients, and put it back in. As long as you're keeping that cyclical pay-off nature of it, I don't want to see people paying a ton of interest sitting on it for getting they pulled on it and that really goes back to that intentionality of debt. Whatever you pull out of it, you need to know exactly what the plan is to put it back and when.
Michele 23:36
I think that's key right there, it's not just the intentionality to get or to have access to debt, or the opportunity to have money, it is the plan to pay it back. That is the biggest piece that we talk about in Profit First than anything else. Let me back up and see how I want to say this, Danielle. In the past, and I am in my mid-50s, I’m holding on to that for a little bit longer I probably need to let it go, but I'm holding on to it. But I can remember, as a young girl, we didn't have debt like this. My parents did not run on a credit card. The debt that we had was layaway, where you would go layaway, but you didn't get the item until you paid it off in full and the second was, we had a tab at the local store, and on payday, Daddy went up there to pay it off, but we knew the limit of what could go on the tab at the local store. That was just the way that the debt worked. You didn't have it outside of like a house and a car. You just didn't take a lot of loans. It wasn't a lot of shared and borrowed money the same way. I almost feel like as a society, we have gotten almost too comfortable with some debt. When you look at student loans. When you look at, oh, I'm probably going to have this loan forever or it doesn't matter if I die. I don't have to pay that off. I hear people and I see people and I've known people who were still going on expensive vacations with credit card debt coming out their ears going to get another credit card.
Danielle 25:05
Or how many of your listeners took that EIDL loan and haven't thought about where are you really going to be in 30 years?
Michele 25:12
Yes, there's a lot of that. I've seen some who did that during SBA, all those loans, and now some of them have to pay back hundreds of 1000s of dollars and they thought of it in some ways as free money, or low-interest money. It's still low interest, but if you didn't make the plan to pay the $100,000 back, even at one and a half percent interest, that's still $100,000 in change that you've got to pay back. I see it on their balance sheet, they have zero plans, and they're paying the minimum paying the minimum, but not continuing to change the business practices to pay it back. That to me is what makes me feel very unsettled for them. That makes me very uncomfortable, just from a process, because how do you climb out of that, especially when they might have an opportunity to do something big and do something more, but that's a wait. So, your point here is that when we're choosing to have debt, we're choosing to use it strategically, which means knowing what to get when to get, get what we need, but have a plan to pay it back.
Danielle 26:16
And that's where that return on investment, when it's truly a really good investment, the plan to pay it back just comes naturally from whatever you're investing in. There are times that's not going to be that simple. When it's not that simple, and I'm going to use the EIDL loan as a really great example, a lot of people needed that money to stay in business during that timeframe. Now, with that unintentional spending that happened, it was not intentional, it was not a return on investment, and we need a plan to pay it back. Because those I'm going to harp on this just a little bit and get a little techie, they are non-transferable, you cannot sell that loan to somebody else. When you want to be done with your business, you have to be done with that loan. That 30-year loan and the interest you're paying over 30 years feels small, unless that money was used in a way that is generating more money than you're paying it's an extra cost and extra burden. It's going to make any kind of legacy planning or leaving your business and selling and passing down or anything like that. Very complicated.
Michele 27:20
Yes. I think that there was a lot of fine, tiny writing that in a moment of people being in need and feeling a little desperate, rightly so, and it felt like a lifeline. It could be a lifeline, but we just need to know when to cut the lifeline and swim on our own is really kind of what we're saying. So, let's talk for a minute then with debt what are some good ways for people to look at the ROI? Because I feel like sometimes that's the piece they miss. That's the strategy, not I can get the money, go get the money. How much money do I need? But how do they start to look at what is the ROI and over how much time because not all is the same? Some can be quick, that very quick turnover that we were talking about, and some can be a little bit more of a long game. Then there becomes a whole risk part that comes to how long do I wait on this? Or how do I set it with intention, the strategic plan to create the return on the investment so that I can pay it off and pay myself?
Danielle 28:17
I could get really like accounting technical on this, but I'm going to start on the other side, I'm going to start super simple. When I talk return on investment with my clients, we talk about what is this going to give you and time, money, or both, and we need to quantify it. How much time, how much money, or how much of both of those? If it's time, then we want to take that next step and say, what is that time worth? We want to turn everything into dollars and that is the return on whatever that investment is. Now mathematically, we can get into percentages, divide them out, and compare those rates to other things to make sure that it's equaling out. So, when it comes to debt, once you know that you can quantify that money, how much money is this giving you back, divide that out by what you're going to put in to get it, and that gives you that percentage I was just talking about. You want to compare that to what is the cost of your debt, and that cost of your debt is going to be the interest rate and what is that interest rate. Now it can get into how many months annual versus monthly versus compounding and we can get really complicated with it, but you can really simplify it that simple too.
Michele 29:22
That's a good point and I love that everything really can be brought back to a number that was the same thing that I was showing my clients I guess a week or so ago, we were sitting down and looking at what the cost of every hour is. What is the cost to keep the business open per hour? What is the cost for each employee per hour? Now let's add that together. What is the company burden that the employee is carrying? What is the job you have them do? How many people are sitting in that meeting? So really looking at the cost of our activities in the business and debts no different it can be even in time broken down into what is that time worth as compared to what we get with it. To be able to make, we should be able to make more with that money than the money itself or the cost of the money itself.
Danielle 30:06
Yes, I could spend hours talking about what is your time worth, but make sure you know that your time is worth something.
Michele 30:12
That's right. Honestly, I think sometimes what I was seeing was the owners of the company could see what the time was worth for everybody on the team but themselves. They could quantify and I don't know if you've seen that, but they could quantify or qualify to some degree, what their senior designer's time was worth or what. But when it came to theirs, we found they weren't tracking their own as directly as they were the other people in the company.
Danielle 30:36
I've seen that so often, especially with people who have a service provider component of their business, they often don't value their own time, and I work a lot with bookkeepers to make sure we move any part of payroll, whether it's your people, or you that is revenue generating, I want to see that in your cost of goods sold, your time is worth something and we want to know what that cost is.
Michele 30:58
As we continue our conversation, just for a few more minutes, I'd love to talk to you about recession-proofing ideas that you have, especially since we're in a very interesting time right now, where interest rates are high, they're really high compared to what they have been. We have businesses where work may not come in as quickly. As decision-making is shifting compared to what it was over the last two years, for interior design, we were blowing up. I mean from 2000 and even this year, it's been blowing up but we're overall starting to watch it start to maybe level back out. It's not a slowing and stopping kind of thing, but it is leveling with that money's more expensive like you said, it's harder to get, and we're seeing cost go up. So even though we may not be in a full-on recession, we are seeing some recession tendencies. Now we're moving into an election year, and having been around this block a few times, we know that that is a weird year. Good and bad. It's going to be a weird year. It just is. They always are.
Danielle 32:01
They always are. And I'm just waiting to figure out what drops.
Michele 32:05
Yes, everybody's watching and waiting. I don't even know what we're watching it waiting for, but we're watching and waiting. With that what are some things that companies and business owners can do now, Danielle to kind of prepare for that? Because that's what happened, I think even in 2020, because a lot of people were not prepared with extra savings, or that line of credit, or some way to bridge the gap and they get smacked. I know those that I had been working with where we really had Profit First in place and it was rough, but they had a plan because they had already created the plan. What do you see or what do you tell people now when there is maybe just another year and a half of bumpy times ahead?
Danielle 32:43
I'm going to bring us full circle and go back to what we said at the very beginning of this, you have to be looking at your numbers. There are so many things that happen in this world around this world to this world. If you aren't looking at your numbers, you don't know exactly what's happening to your business. Different things are going to impact different businesses in different ways. If you're not monitoring those trends, if you don't know that prices are going up, you can't respond and be proactive, you are going to be in full reactionary mode when all of it hits the fan.
Michele 33:16
I think it's important to look at the industries that impact our industry. I've shared this before I remember years ago, there was a problem with cotton in China. Well, that meant that any cotton that we brought in and imported all of our linings and interlinings or base cloths for fabric were going to go up. If you watch the fuel industry, and you watch petroleum, well, that's going to impact our shipping costs, that's going to impact our foam costs and any manmade items that are made that have petroleum.
Danielle 33:46
Plastics, and petroleum products.
Michele 33:49
All of those things. It's even the industries that we don't think about would like the minute we start having like, you know, these little boll weevils who eat a certain type of wood if that's the word that they use to make a product out of, then we have a problem. So again, it's not just watching our industry, it's watching a lot of other industries that could have a secondary and tertiary impact on our businesses and what we're doing.
Danielle 34:13
Could you imagine how far ahead you get with that if you knew the cloth was about to go up? And instead of buying that curtain, you could buy this other curtain, imagine the difference that that can make for you and for your client and for your timeline.
Michele 34:27
Or knowing that things are seeing it and going, oh my gosh, that's going to come down. I'm going to go ahead and buy more inventory at the lower cost, but what I'm going to do is this is what I taught them buy more at the lower cost and then raise your prices to charge it out at the higher cost because that's the replenishment cost. But if you're not thinking about it, now you've sold it at the lower cost and you've got to replenish at a higher cost and you have to absorb it, especially if it's a cost of good. So, it's really being aware of what's happening. Otherwise, everything is reactionary as opposed to being proactive with our money.
Danielle 35:01
That makes a world of difference, not just physically in the numbers, but mentally being able to be proactive instead of reactive. I just spent a whole bunch of time talking to a friend about that.
Michele 35:11
Yes, for sure. So, Danielle, tell us a little bit about if anybody's listening and they're like, I need her to help me take these big business concepts and bring them down and help me with my accounting and just get me in the right place. How do they find you? Where are you hanging out these days?
Danielle 35:28
LinkedIn is usually my go-to. I know a lot of people are on Instagram, you can find me on Instagram at Four Corners CFO, you will notice there's not as big a following, but we're working on it. LinkedIn is Undermining Danielle Hendon. And of course, the best way to find me is going to be on my website where you can download freebies, you can contact me. I love just talking to other business owners and that's going to be the number four, not the word, but the number fourcornerscfo.com
Michele 35:54
Awesome. And we'll make sure we have all those links in our show notes as well. Danielle, it has been such a pleasure talking to you and chatting with you. Thank you so much for sharing your expertise with everybody.
Danielle 36:04
Thank you so much for having me.
Michele 36:06
You're welcome. Have a good day. Danielle, thank you so much for joining today. I really enjoyed having a conversation about debt and how to work through it and how to think about it, even how to see where there may be processes in our business that don't align with where we're trying to go. If you need some of the services from Danielle, please check our show notes, and you'll have access to everything to get to her.
Then if you're an interior designer, and you also are looking at your business from the aspect of how do I grow and scale? Or how do I get my arms wrapped around all of the nuances of this particular industry, feel free to reach out to me, and let's talk about that as well. We work with you with your accountants, your bookkeepers, and your CFOs if that's what we need to do, to make sure that you fully understand all of your financials and that you're making really smart decisions, not only with the numbers but with the strategy.
You can find us at ScarletThreadConsulting.com If you're looking for software to help you manage that small fractional CFO, check out MetriqueSolutions.com. It has been built to help you wrap your arms around the finances. Remember the more that you look and work with intentionality the more profit you make, and profit doesn't happen by accident.
Michele 37:30
Profit is a Choice is proud to be part of the design network.org where you can discover more design media reaching creative listeners. Thanks for listening and stay creative and business-minded.