Turning off the TV

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I am a member of a Facebook group where various people recently committed to taking a 90-day challenge. When I saw what others were contributing, I posted:

I’ve been thinking about giving up TV, but I’m not sure…

Why Would I Consider This?

I realized that TV is very passive in nature. It took up a lot of valuable time in my evenings, and the shows did nothing to feed my soul. Instead of spending what time I did have interacting with my husband, I typically vegged out on the couch and fell asleep with my mouth gaping open.

Living the Challenge

It surprised me when several people commented on my post with encouragement for getting rid of my TV. One lady said,

I turned off my TV and sold it three years ago and I have never looked back.

That was all I needed to hear. My thought was out in the universe, and I was all in. Challenge accepted!

As I’ve mentioned in previous blogs, I’m an all-in kind of girl, and at the time, we were doing some remodeling in our living room. So I immediately unplugged the TV, moved it to a spare bedroom and adopted this no-TV rule in my life (with my husband fully on board).

However, football season rolled around, and I’ve always been a big Cowboys fan. So, I decided that I would allow Cowboys games, and that would be the only TV I would watch. (I even updated the Facebook group about this change to my accepted challenge.)

When the pre-season Cowboys game aired, I hooked up the TV and sat down on the couch, ready to watch. However, I fell asleep during that game and when I roused myself to get off the couch, I decided that was a total waste of my time and I didn’t even enjoy it, so there would be no more Cowboys watching for me.

What I’ve Learned

I’ve noticed some positive new habits forming in my life since turning off the TV. For one, my husband and I used to watch TV before we needed to work on things together as a family, like important decisions or paperwork. But now, we schedule time to do those things and get to it right away in the evening when we are still focused and awake. We are making progress on our goals, and we don’t feel deprived because they no longer interfere with planned TV time. It doesn’t feel like a loss to spend time doing other – more productive – things.

Am I legalistic about this? No way! Am I so staunchly dedicated that when I go to someone’s house and they are watching TV, I go to the other room? Absolutely not! Will I watch it in the nail shop? Certainly.

I’m aware that there are some great TV shows out there, even shows that can help you run a successful business. Some examples are The Profit or Shark Tank. But, I’m realizing that there’s so much other good content and information available that my business will never lack.

During this 90-day challenge, I’ve improved my communication skills by talking more with my family. I’ve seen less procrastination in my life because I have more time to finish projects. Also, I’ve been filling that void of time with reading and better sleep.

When it comes to your life as a business owner, are there areas where you are unwisely spending your time?  

  • Fiddling around on social media during the day
  • Distracting staff at your office rather than working on your goals
  • Attending groups that are not edifying or helpful

Have you noticed that if you go test drive a certain car, you will see that car EVERYWHERE! Now that I’m not watching TV, I’m picking up on lots of people out there who don’t watch television. 

There are so many active things you can do to help advance your dreams. There are people you should hang around that will help you and make you stronger. Ensure that the things you are doing are profitable. 

Going Forward

What will I do with the big, fancy TV currently sitting in my spare bedroom? I’m not sure. Maybe I’ll sell it!

Will I go back to watching TV? I don’t think so. There are so many great books to read, podcasts to listen to, webinars to attend, and time to invest in my family. And speaking of investing time, please comment below on how you are investing your time and any changes you have made to how you spend your time!

Stay In Your Lane

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Earlier this year, the winner of Celebrity Apprentice was Leeza Gibbons, a correspondent and co-host of Entertainment Tonight and later the host of her own talk show. During the competition, there was a great deal of drama between the ladies in the running. When asked how she managed to stay out of the drama, Gibbons answered:

Leeza Gibbons Stay in Your LaneMy mother’s inspiration was enormously important to my win. I promised her when she got Alzheimer’s disease that I would “tell her story and make it count.” How incredible that she got this amazing prime-time platform for awareness! And I played the game with her advice in my ear. She always said, “Stay in your lane. Run your race,” so I kept remembering just to ignore all the drama around me and focus on what I needed to do to help our team win the task. It proved to be a pretty good winning strategy for “Celebrity Apprentice,” and it’s been pretty good at my career, too!

Simply put, Leeza is a class act, and I have thought many times since then about those words of wisdom handed down from her mother. The words “Stay in your lane. Run your race,” resonate with me as I concentrate on staying focused in my business.

Someone recently asked me, “Wendy, who are your competitors?” I was honestly taken aback by that. I don’t spend a lot of time thinking about “the competition”. In business, it’s critical that you stay focused on what you’re doing and ignore the competition. (Yes, it’s important to know the market because you have to stay open to new ideas, but you don’t need to worry about what other people are doing.)

Differentiate

Find your voice and create the magic for your customers. It’s what sets you apart and makes you special. If you are creating the same product as your competition, your only differentiation is price. You have no choice but to compete on price. Stay in your lane.

Negative Thinking

Constantly worrying about your competition, will put a negative spin on everything you do, leading you into victim thinking. That is the kind of thinking that says, “I’m limited because of what I can do.” Instead, turn your thinking around by being positive and staying in your lane. Focus on your customer and listen to their needs. Stay in your lane.

Focus

When you’re driving, you naturally head in the direction of your focus. If you are constantly turning to look at the car in the other lane, you will wind up veering in that direction. Business is the same way. A constant focus on what others are doing will cause you to lose your focus. There’s a lot of noise out there and it’s easy to lose your focus, but focus straight ahead. Stay in your lane.

Abundance Thinking

A mentality of abundance says, “There’s plenty of business to go around.” Embracing this mentality allows you to focus on your clients without worrying about what others are doing. Bring value to your clients. Stay in your lane.

Really Moving the Needle on Profitability

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In my last blog post, I said that in order to really move the needle on profitability, you must focus on two key areas of your business:

  • Products (the items or services you sell)
  • People (the staff you employ and the people you serve)

Today, I want to hone in on People. It’s been said:

It’s not about what you know but who you know.

That old adage rings true in many situations, including your business. The people you employ and the clients you serve can drive your business and its profitability up, up, up or drag it down to bankruptcy.

STAFF

I can’t overstate that who you hire to do each job in your company is critical to its success. So, take your time in the hiring process. Learn all you can about each applicant, test their skills and knowledge. But most importantly, figure out if they will be a great fit with the culture of your business and if they have the character traits that match up with your company’s values.

When it comes to how the work is getting done by your staff, look for inefficiencies and seek to eliminate them. (You don’t want work being done twice, after all!) You should be encouraging your team to challenge how things are done and bring solutions for better efficiency. (You might even consider giving bonuses to staff who find better ways to serve your customers.)

Jim Collins, in Good to Great, said:

“…Leaders of companies that go from good to great start not with “where” but with “who.” They start by getting the right people on the bus, the wrong people off the bus, and the right people in the right seats. And they stick with that discipline—first the people, then the direction—no matter how dire the circumstances.”

CLIENTS

You have clients who aren’t a good fit; you know you do. When it comes to clients, do an analysis of several indicators to determine if they are the right fit for your company. Look at the “cringe factor” of each client. Do you cringe every time you see their name on the caller ID because you know you’re about to hear bad news? Consider value and loyalty, and whether each client finds value in the services you provide and is loyal to you and your company.

It’s important to realize that the time you spend on the clients who are the wrong fit takes you away from serving the right clients. 20% of your clients will yield 80% of your profits, so it’s really important to filter out the 80% in order to identify the 20%.

If you currently have staff or clients in your business that aren’t the right fit, then it may be time to make some changes to get people in the right seats on the bus. I would love to hear from you about what changes you have made in the People of your business.

Moving the Needle Toward a Profitable Business

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Today, I want to look at the first of two critical components that can really help you move the needle toward profitability.

  1. Products (The Items or Services You Sell)
  2. People (The Staff You Employ and the Clients You Serve)

Why are we talking about products and services? Because they represent what brings in your top line revenue, and honing your focus on your offering can really make big changes (for the better) with your profits!

One of the first steps in adopting Profit First and creating a profitable business is going through the Profit Assessment. I had the privilege of digging into the assessment of MY business with the author of the book himself, Mike Michalowicz. One of the first things he asked me as we delved into the top-line revenue of my business was, “What is the one area of your business- the product or service you are offering- that you know is not profitable?”

During my Profit Assessment discussion, Mike challenged me to question everything and make no assumptions about our service offerings. I have since realized that just because we have always done things a particular way, we did not have to continue doing them the same way forever.

You’ve probably heard it before – the definition of insanity:

To continue to do the same thing over and over and expect different results.

Mike helped us and many other businesses identify products or services that weren’t profitable. In our case, that meant transitioning a service that wasn’t in our primary focus to an expert company that works well with our team. Making this change has helped us center our entire focus on our passion: helping business owners find the missing profits in their businesses.

So today, I’m asking you, What is the one area of your business- the product or service you are offering- that you know isn’t profitable? Are you holding on to a product or service simply because you’ve always done so, or because you assume it’s a standard in your industry? I challenge you to take a hard look at your top line revenue and what it represents.

I would love to hear from you about a product or service offering in your business that just isn’t profitable and what you plan to do about it!

Whittle Down Your Operating Expenses

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Last week, we discussed setting up your Profit First bank accounts. This week, I want to discuss that infamous line item- Operating Expenses.

We hate them. They keep us up a night. They can become like a runaway train. Before Profit First, you wouldn’t really know whether your expenses were too high for your size business. But most business owners have a gut feeling about Operating Expenses, and it usually isn’t pleasant. I doubt I need to do much to convince you that your operating expenses are probably too high!

So now that we’ve just put that out there, let’s say it again:

Think back to when you first went into business. You were creative! You found a way to eek out every dime. You made do with what you had, and things worked just fine. Then, as your revenue started to grow, you added on more expenses: Maybe more staff. A larger facility. Nicer furniture. Better software. And more software. Fast forward to now, and you may feel like your operating expenses are either:

A. Too high.

B. Necessary.

C. Both

Want to know my ah-ha moment about expenses?

Branded water bottles. Yes. Those nifty bottles of purified water that had my logo, contact info and value proposition on them. We originally placed an order for a case of them for a function we were sponsoring (where we later discovered water was already provided). Then, we started buying them for clients who came to our office to meet, because store-bought bottles of water are just so… Ew! Then, we kept on buying them since we wanted to keep our “bulk” rate that we had signed up for. As you can see, this bottled water thing turned into an expense that was completely unnecessary. When we took a step back and priced regular water bottles, whoa! They were a third of the cost of the fancy branded water!

So, what’s your “branded water”? Here are a few ideas we’ve seen:

  • Office space you don’t need? (Maybe you don’t need the fancy office and can scale back a bit.)
  • A crazy amount of snacks you buy for the break room? (Have people bring their own and save yourself some cheese.)
  • Software you are charged for each month but never use? (Get creative with software usage and see which apps you can combine to eliminate some costs.)
  • Vendors that charge too much? (Shop around!)

I encourage you to assess ALL your automatic payments and whether or not you truly need those purchases. I’ll bet you find a few that you don’t need! I want to propose to you than you should get creative again and whittle down your operating expenses. Once you have pinpointed those expenses that are unnecessary, cut the cord! (And please comment below to let me know what items you cut.)

Setting Up Your Profit First Accounts

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In last week’s blog post I likened typical Bank Balance Accounting to a financial gumbo, where all the key ingredients of a business are swirling around in one pot. Then, I introduced Profit First and explained why it’s SO needed in our businesses. I said:

Profit First teaches us that we should take those ingredients out and individually assess them, even going to the extent of setting up separate bank accounts for each of the key ingredients. Then, we work a plan to allocate pre-set percentages to each key area. When we follow the Profit First plan, we can continue with our old ways of Bank Balance Accounting, but we are truly only spending what is AVAILABLE to spend.

Now, let’s dive in!

Profit First teaches us that we must separate those five key ingredients to successfully manage them:

  • Income
  • Profits
  • Owners Pay
  • Taxes
  • Operating Expenses

I am a Certified Profit First Professional and want to run a Profit Assessment on your business! When you come in for a Profit Assessment of your business, we will show you how you are currently spending your money in each of these 5 areas. Also, we will show you what your Target Allocation Percentages, or TAPs should be for your own business. (Each business is different, but businesses of the same size (annual gross revenue after cost of goods sold) should have about the same TAPs.) Don’t panic if your business’ allocations are currently WAY OFF. That’s normal, and perfectly ok. For now. What matters is that you start taking baby steps toward your TAPS. How will you do that, you ask?

Setting up your Profit First accounts looks like this:

  • Income Account– This could be your existing bank account. It’s where all the money comes in, and it’s the place from which you make transfers each month. We will be having discussions about your income streams, your product offerings and your customers.
  • Operating Expense Account– This bank account is strictly for operating expenses. You transfer money to this account two days each month- the 10th and the 25th. You can spend every last dime in this account, but know that these funds are only for operating expenses. While your greatest allocation percentages will be directed here, it may be less than what you are currently spending on operating expenses. We will begin having direct conversations about your operating expenses and ways to trim them.
  • Owners Pay Account– This account is only for your paycheck. Haven’t been taking a paycheck? Now, you will! Even if it’s only 1% of your gross receipts this month, it’s a start, and we WILL get you to where you need to be.
  • Profit Account– This account is important and very special. It’s what I like to think of as the Rainy Day or Opportunities Account. Profit First strongly suggests that you put this account at a different bank from your Income and Operating Expense Account so you aren’t tempted to easily transfer money. The amount that we have you allocate to this account may be small at first, but it will add up over time. And each quarter, you must take a profit celebration from this account (half of what’s in there at the time). This celebration can be used in many ways- to benefit your family, to pamper yourself, to treat your employees- but YOU get to decide.
  • Tax Account– This is what I think of as the Peace Account. When you start putting the correct allocations in this account, and it’s time to pay your tax bill, you won’t even notice. No more stress every March when the IRS was previously draining your account. It’s just taken care of, and you don’t have to worry!

Does this sound a bit daunting to you? That’s ok. I understand. I want you to remember these two words:

As your Certified Profit First Professional, I will:

  • Create your Profit Assessment and work with you to determine your TAPS.
  • Help you set up your new bank accounts in QuickBooks and establish an allocation/transfer rhythm.
  • Remind you of the transfers you need to make and even tell you the amounts every 10th and 25th.
  • Coach you on your progress as you move toward your TAPS.
  • Help you really move the needle toward profitability.

Want more information? Contact my office to schedule your complimentary How Healthy Is Your Business consultation!

Next week we will discuss two ways to really impact your profits!

Financial Gumbo by Wendy Knutson CPA and Certified Profit First Professional

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Last week, I told you how my young business lacked a plan and was held together by Band-Aids and Duct Tape. But then, this marvelous book Profit First came into my periphery.

This week, I want to share more about Profit First.

To recap, the standard GAAP (Generally Accepted Accounting Principles) equation for finances is:

Income – Expenses = Profit

Unfortunately, while mathematically sound, the GAAP profit equation doesn’t account for human behavior. Profit becomes merely leftovers after the beasts of expenses and taxes ravage your bank account. It’s something that is just a glimmer of hope that rarely appears as most businesses struggle on their check to check survival.

But Profit First says the way you look at your business should be:

Profit = Income – Expenses

Logically speaking, the math is the same, but the entrepreneur’s behavior is radically different. With Profit First, you take a predetermined percentage of profit from every sale first, and only the remainder is available for expenses. It’s the old adage, “Pay yourself first”, or as that great little book on finances – The Richest Man in Babylon put it, “Start thy purse to fattening.”

Parkinson’s Law:

Why are you bringing up a law, Wendy? Here’s why: Author and historian C. Northcote Parkinson theorized that our demand for a resource increases to meet the supply of it. That is why when we are given two weeks to do a project it takes two weeks, and when we are given eight weeks to do the same project it takes eight weeks. That is why when given $1,000 to complete our work we get it done with $1,000 and when given $10,000 to complete the same work, it takes $10,000. Profit First makes Parkinson’s Law an asset. By taking your profit first, the money available for expenses lessens, and we are forced to be more creative about how we spend our money.

FINANCIAL GUMBO – A.K.A. Bank Balance Accounting

Most likely you have one business bank account, but really it’s a nebulous gumbo of the 5 key ingredients that make up your business’ finances:

  • Income
  • Profit
  • Taxes
  • Operating Expenses
  • Owners Pay

When all these ingredients are floating around in the same bank account, do you really have any idea just how much you can take in profit, or how much you have set aside to pay the IRS? Do you know how much your operating expenses should be for the month? No, you are flying blind. The old “Bank Balance Accounting” method where you log onto your bank account every day and check your balance is a poor way to make financial decisions, but it’s where most of us are stuck. If what we see in the account looks good, we tend to be a little looser with the check book. If the balance looks low, we panic and do whatever we can to make another sale.

Profit First teaches us that we should take those ingredients out and individually assess them, even going to the extent of setting up separate bank accounts for each of the key ingredients. Then, we work a plan to allocate pre-set percentages to each key area. When we follow the Profit First plan, we can continue with our old ways of Bank Balance Accounting, but we are truly only spending what is AVAILABLE to spend.

Next week, we will dive into how Profit First works, what in the world I’m talking about with multiple bank accounts, and a few ways to whittle down those nasty Operating Expenses.

My Business: Held Together By Band-Aids and Duct Tape

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Last week, I told you my BIG WHY that propelled me into business and also what keeps me motivated to push forward. Where I left off was after I started the company. You see, when I started Knutson CPA, I didn’t really have a “business plan”. My plan was to secure an office, hire the right marketing person, get the word out, and start serving customers. And in the beginning, that’s just what we did.

People came our way, and we would take them on as long as they had a checkbook (and heck, even sometimes when they didn’t!) We worked for anybody and everybody that could pay us, and that fostered crazy growth.

We grew so fast my head begin to spin. Challenges and obstacles cropped up all over the place. There was no time to seriously look at an org chart, software solution, or a growth plan, so we used Band-Aids and Duct Tape on the issues that arose.

By our third year in business, I can say with confidence my business was held together by Band-Aids and Duct Tape! Did I realize there was a problem? You bet! But I didn’t know how to craft a cohesive operating plan- a plan that would allow me to become profitable and actually pay myself. (Moment of truth? I went for two years before taking a paycheck.)

Speaking of taking a paycheck, we have discovered that many small business owners go months or years without paying themselves. Sure, they pay their employees, but their paycheck is the last to be considered when it’s time to run payroll. This can lead to resentment on the owner’s part:

  • Resentment toward the wonderful employees they hired to grow the business. And,
  • Resentment towards the business itself. The business of their hopes and dreams. Their baby.

Fast forward to the fall of 2014. I discovered the book Profit First by Mike Michalowicz. When I read this book, I learned a new way to look at accounting and a way out of my Band-Aid and Duct Tape mess.

The standard GAAP (Generally Accepted Accounting Principles) equation for finances is:

Income – Expenses = Profit

But Profit First says the way you look at your business should be:

Profit = Income – Expenses

The math is the same, but the perspective is incredibly different. It says that PROFIT is what you shoot for. PROFIT is what you look at first. YOU, business owner, get paid.

Want to know more about this revolutionary way of running a business? Want to hear how it completely pieced together my Band-Aided and Duct-Taped mess?  Stay tuned for next week’s blog post!

Why I Went Into Business In the First Place

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My Big Why

FREEDOM. Really, that’s what it all comes down to. It’s my BIG WHY. Freedom is why I got into business in the first place. I wanted freedom to run a business the way I saw fit. I wanted freedom from the “old” standard practices of accounting firms. I wanted freedom from being on someone else’s payroll. I wanted freedom to be creative. This is why I started Knutson CPA in 2010. Freedom is why I push forward to grow the business. Freedom is why I take risks and grow and change.

What’s your big why? Why did you start your own business, whether it was years ago or weeks ago? Was it to spend more time with family? Was it to have a legacy to pass on? Was it to have financial freedom? Think back to those days when you first started and the reasons you took the plunge, and remember them. (We will be talking about your WHY in blog posts over the next few weeks.)

What Motivates Me to Serve Businesses

An Out of Business sign. A simple cardboard sign scribbled with a black Sharpie taped to the front window of a Mexican restaurant on my daily commute. Every time I passed that sign, I grieved. I envisioned an older, weathered man writing out that sign with his wife standing by his side and his two children standing behind them. That sign represented their hopes, their dreams, and their shattered finances.

That sign comes to my mind on a regular basis as I grow and build my own business. I don’t want to be that business owner writing out the sign. I don’t want to hear about businesses in my community putting that sign in their window. And I certainly don’t want to serve clients who have to write out their own sign. I yearn to create a company that helps business owners build entities that thrive and grow rather than wither and die.

What keeps you motivated? What helps you get up and push on every day? What helps you when you stumble and fall down?

I would love to hear from you on your big why and what keeps you motivated. Please leave a comment below!