S3 EP53 Making $1M as an Electrician… But Where’s the Profit? | Rachel Siegel

SPEAKER_04 0:00

When a business isn't profit first or cash flow mindful, they take profit as what's left over. There's something left over you might get to take it at the end of the day after you pay the tax man. What profit first does is it flips that. You take your sales minus your profit, and that equals your expenses. And in the full system, you're taking your tax money out, your owner's compensation out, you're taking your profit out all from the income, and then you're running your business on what's left over for the expense account. So you take it all out first, and then you run your business with what's left over. So you're always profitable, you always have tax money, you always have your money, and your business is always healthy and running on that.

SPEAKER_01 0:39

Hello, hello, hello, and welcome to the Million Dollar Electrician Podcast, where we help home service pros like you supercharge your business and spark up those sales.

SPEAKER_03 0:51

I'm Joseph Lucani, and together with my co-host Clay New Meyer, we're here to share the secrets that have helped electricians sell over a million dollars from a single service van.

SPEAKER_00 0:59

Now it's time for sales. It's time for scale. It's time to become a million-dollar electrician.

SPEAKER_01 1:12

So, Joe, have you met Rachel before?

SPEAKER_03 1:14

No, I've not. I was gonna say, I've really been looking forward to this because I've been going through the profile.

SPEAKER_01 1:19

We've been working together for like a year. You haven't met Joseph yet?

SPEAKER_03 1:22

Nope.

unknown 1:23

Okay.

SPEAKER_01 1:24

Yep. Rachel, Joseph, Joseph, Rachel. Uh Joe, I know you've heard lots about Rachel. She's with GoFigure Accounting. She's been our profit first representative, helping us every Friday, first Friday of the month in the ops classes. And we've been having a ton of fun with that. Really been helping a lot of the guys get a better handle on their books, their business, anything with numbers in it, as it tends to turn into uh Alphaghettio soup, as you know, uh for being in the field, right?

SPEAKER_03 1:53

So no, I get that. I was gonna say, I honestly I'm really excited because that's a rate. I mean, honestly, Profit First has served us in a huge way, it's something we're become very familiar with, but knowing that that's your specialty, it's just icing on top of everything.

SPEAKER_04 2:06

Yeah, yeah. Profit first works, it's amazing. It's just about how you apply it and how you utilize it.

SPEAKER_03 2:13

Yeah, I'm interested, I'm really interested in learning a lot today. Like to be totally honest. Like, I'm coming in as a student, just being like, I can't wait to glean little nuggets of wisdom off you guys.

SPEAKER_04 2:21

It'll be interesting where it goes. Like our Friday ops classes are always fun because you know, I go in, I never know what we're gonna talk about. And I actually love that because it keeps it interesting for me, but uh, it also means I can help where they're at, which is not always the same place of where we'd like them to be or where they'd like them to be.

SPEAKER_03 2:44

I completely understand. I'll have classes come in where someone we think we're talking about options and it becomes a personal therapy session. So you never know, but all we have to do is just lock in and be able to serve at the highest level. And I'm glad we're all both doing that.

SPEAKER_04 2:55

Absolutely.

SPEAKER_01 2:56

Yeah, I've got some great questions for you today. Some of this for us is gonna feel like old news, Rachel. It's the same thing you've been talking about over and over and over for how many years now?

SPEAKER_04 3:04

Way too long to tell you.

SPEAKER_01 3:06

Too long to tell you. That's rude. Apparently, at some point in your career, that's like asking a lady her age, Joe.

SPEAKER_04 3:12

But you know, when you get, you know, I've owned a firm for you know three decades plus now. Go figures nine years old. It's okay, so you're 39. Yeah, that'd be great. That'd be awesome.

SPEAKER_03 3:23

You're only three years older than me. Perfect.

SPEAKER_04 3:25

Yeah, there you go. My kid I had while I was, you know, pre-pubescent. That that works.

SPEAKER_01 3:33

Rachel, you have been an award winner of Profit First Firm of the Year, I think. Is that right? A couple of times?

SPEAKER_04 3:41

So we won profit first firm of the year in 2024. We are mastery certified in profit first, and as they build and do it, we are at the top level.

SPEAKER_01 3:52

Very cool. Very cool. What's the difference between profit first and mastery level?

SPEAKER_04 3:57

So you can get certified and just do a basic level of profit first, and then there's an advanced level, and then there's a mastery level, and they're actually in the process of kind of divvying that out as well into three more levels. So we are going to be the empire level at the top of the top. That means we use it, we teach it, we do it, we walk the walk, we talk the talk, we're helping clients every day.

SPEAKER_03 4:25

It's cool how you're saying like it almost sounds like the scaling of the titles gets bigger and bigger. We have a problem for mastery, but mastery wasn't good enough. We got to go empire level.

SPEAKER_04 4:35

Well, and that's essentially what they did. So, with that, when you only have three, everybody at some point gets mixed in, and not everybody is at that same level. So, in order to keep learning and keep doing and helping more clients, and we're getting more and more into other things, we needed more. And so they split us out. So the people who are just like me are with me, and then the people who are at a level below me, even though they're mastery certified, will be below me. So it'll be interesting. I love what they're doing, I love what they build, and they're there for us. I mean, if I needed to, I could call Mike on his cell.

SPEAKER_03 5:16

That's pretty cool.

SPEAKER_04 5:18

It's a good organization.

SPEAKER_03 5:19

So I look forward to your eventual promotion to Emperor.

SPEAKER_04 5:21

There you go.

SPEAKER_01 5:24

Yeah. Can we just put that right in the title? Like, we have interviewed the Emperor of Profit First. There you go. It's the most boss message possible. You mentioned Mike for those of the listeners that don't know, uh, Mike McAllowitz, Profit First. There's a whole series of books he's written. You've worked with him for uh a number of occasions, but a number of years now, as you indicated. Uh awesome dude. What do you really feel is like the main point of Profit First that that electricians need to take away from this episode and get some goods with it?

SPEAKER_04 5:56

You need to be intentional and you need to build your business healthy. You can't just fly by the seat of your pants anymore. That's a side hustle. That's not building a business. And Profit First is a framework that's easy to implement within your business without driving you crazy so that you can't build your actual business.

SPEAKER_03 6:19

Who would have thought it's as simple as simply just saying we want to be profitable? Let's put it in a system that establishes that at the beginning and then working towards it. It's almost like play. Remember, you often talk about getting someone to see checkmate and then building backwards from it. So it's like we want this amount of profit. We all can agree on that. Let's just put that in the front and then work backwards and reverse engineer it.

SPEAKER_04 6:40

Yeah, start with the end in mind, do what you fear first. Covey, he said it decades ago.

SPEAKER_01 6:46

I actually really love this book by Mike. Uh, Fix This Next is one of my favorites. And without even opening the book, Rachel's got a bigger collection than me of Mike's books. Nice. There we go. Fix This Next, guys, is an absolutely super easy read. I think Mike's whole series really do spell it out very plainly for contractors and make it really simple. If you're the kind of person that just wants to listen to our podcast and go read a book and just take from it what you will, use this interview, use these books. But let me just say, without even opening this book, right on the back is this pyramid structure. And the first block here at the bottom is going to be sales. Because in business, if you don't have sales, then what are we even talking about, right? Like business starts when you get a customer to exchange for your goods. A lot of times we're addressing the topic of where it gets harder, which is can you get a customer to exchange what you're worth for your goods? That would be the next half step. But what Rachel really, the specialty, if I'm understanding this right, and what you're saying is the next step is profit on this pyramid. And in Mike's philosophy, in your philosophy, profit is really what's the word I'm looking for? It's a double.

SPEAKER_04 7:57

It's intentionality. It's intentionality. You have to intentionally do it. When you get that sale, it needs to be a real sale. It's not a happy accident that your neighbor just needed some help. And you happen to be next door. You're building a business, you're intentionally building the business, you're intentionally getting sales. So you intentionally want to have profit and be healthy in your business.

SPEAKER_01 8:20

Yeah. And so the two are just permanently linked. Like when you're making sales, as crazy as it sounds, profit first really just means that, oh, with that sale, I immediately have a profit intention then by what you're saying. Is that right, Rachel?

SPEAKER_04 8:34

Absolutely. From day one right off the top.

SPEAKER_01 8:38

So how in the H E double hockey sticks, I'll throw a Canadian term out there for you guys, uh, do we do that? How do we have profit in mind from the moment we make a sale? What's the difference between that and what you see on average, do you think, from electricians and and all the contractors that you represent?

SPEAKER_04 8:56

So when a business isn't profit first or cash flow mindful, they take profit as what's left over. Okay.

SPEAKER_03 9:05

100%.

SPEAKER_04 9:06

Think about your profit and loss, accounting terms, sales minus expenses equal profit. If there's something left over, you might get to take it at the end of the day after you pay the tax man. So what profit first does is it flips that. So you take your sales minus your profit, and that equals your expenses. And in the full system, you're taking your tax money out, your owner's compensation out, you're taking your profit out all from the income, and then you're running your business on what's left over for the expense account. So you take it all out first, and then you run your business with what's left over. So you're always profitable, you always have tax money, you always have your money, and your business is always pro, you know, healthy and running on that. It also makes it easier if your operating expense account gets too low, you know you're doing something wrong. If you have a lot of money in there, now what's the next step? What's your next goal? Do you want to expand? Do you want another truck? Do you want an employee? What do you want to do with that?

SPEAKER_03 10:10

You know, there's something else that's cool here in that understanding profit first, there are some people who actually can trick themselves with their own numbers. So, like let me give you an example. Let's say you have uh you sell, go figure, a generator, and you include multiple years of maintenance in that agreement. If you don't set aside the maintenance money and then calculate it separately, you may be like, wow, we did amazing on this job. And then later going like, why am I losing money every time I go to this homeowner? Oh yeah, I factored in money that wasn't right for this.

SPEAKER_04 10:39

And I will tell you, most trades don't factor that in. Most of them are operating on really a cash basis system. And they're just operating by what comes in is going out, and they're not doing those multi-years, especially if it's not a one-year and it's a three-year maintenance. That's when they start really hitting it, and it gets to be a major problem. Year one, there's usually not too bad. Year two, it's a little worse. That third year is usually where they start having issues.

SPEAKER_03 11:08

Yeah, no, all I was gonna simply say is I understand exactly what you're talking about. I had once made the mistake of selling an 11-year maintenance contract. So, like, I understand. Where it's like, you know, the funny thing was I knew it was a bad idea because I was like, Yeah, we're gonna change the price. I'm gonna reach out to this homeowner. Hey, I'm gonna change the price. Are you interested in getting some more years? I offered a five-year. She's like, Well, can I just buy more? I was like, I mean, yeah, you could buy more. She's like, Well, how many can I buy? Like, 11. She's like, Okay, cool. I'm like, uh-oh. It's like immediately I was like, uh-oh, we made a mistake.

SPEAKER_01 11:38

Taking tenure to the next level. Yeah. Where's the drums, Tony? Why don't we have drums for jokes in here? Dad jokes are live. Um, I was gonna say, both of you guys are kind of uh converging here on something that I think many of the listeners might not understand yet. You said OpEx account, and Joe, you're talking about putting this aside. Well, what does that look like? I mean, for the average business owner, we have maybe a checkings and a savings account. Maybe a lot of times, one, everything's in, everything's out, and they're using that balance to determine am I profitable? and trying to answer that question. What do you mean by these other accounts, Rachel?

SPEAKER_04 12:19

So profit first itself, there's five basic accounts. So all the money goes into the income account and then gets split out between the owners, the tax, the profit, and the opex. So those are your five main accounts. I will tell you my clients have more than that, because they'll have goals. So we'll have something set up for the goals account. We will have a pre-funding account. So I like to have them build up an account so they can always pay their payroll for a certain period of time, even if something happened with sales. So it's never a cash flow problem.

SPEAKER_02 12:51

Love that.

SPEAKER_04 12:52

And then we also have a COGS account, your cost of goods sold, especially if they're maintaining a lot of inventory. We want to keep that maintained at all times and never have to have a problem where they can't go do the job because they can't afford the inventory. So that is usually in there for my electricians as well. And that's how we take the 100% from income and we split it out in a certain way and timing, and then do that. Now, that's a lot of accounts, and you'll get a lot of bookkeepers or owners that are doing their own books and going, oh, that's too many accounts. I just can't keep up on it. It's really not that hard. And the bank that we prefer is relay bank, and you can actually see I have my relay bag in the back because that's the bag I carry every day. That's how much I like this bank. We use it ourselves, but mainly because they're profit-first friendly and they automate the profit first allocations. So you can set the schedule in there and the amount of allocations or the percentage, and it'll automatically do it. So it takes all the headache away from that bookkeeper or the owner that doesn't want to do it. Now they have no excuse because the system's doing it for them. And because the system's doing it, you don't need to do it on a schedule of the 10th and the 20th of every month, or every week if you have weekly payroll. Let it go every day. Because the more money you take out of that account that you're not looking at, the better off you are.

SPEAKER_01 14:16

And you said even a goal account. What's an example of a business owner wanting to have another account yet for a goal? Like what goal?

SPEAKER_04 14:25

So it depends on the actual business owner. So we have a lot of our electricians who want to buy another truck and get another employee. So at what point is that? So if it's another employee is the goal, I like them to save up three months of that new person's salary. When they hit that three months, you hire them because by the time they get through their three months, they're up to speed and now they're profitable. So you're not having cash flow problems because you brought on that person. Or if they want to buy a truck and we want to buy that truck with cash and then outfit the truck. You need to have that money set aside in that goal account. And then when you hit that point, that's when you actually do it. So it doesn't affect your normal cash flow.

SPEAKER_03 15:06

You know, the thing that stands out most to me is how invaluable this would be to someone who's just starting a business. Because a lot of times we hear, oh, I can't hire a CSR because I don't have the money yet. Or I want to get someone, but you know, I'm worried. I don't know if I'll have enough work for them. And what that really does is simply say, well, you can prove whether you have enough for them because if you can hit Xa dollars amount in this account, you're good. And this guy would have to produce nothing for three months in order for you to decide this is not a good investment.

SPEAKER_04 15:35

And we do start new businesses out. One of the first things I tell everyone to do, if you're going out on your own, do it this way, do it from day one. Number one, it's all healthy habits. You never, ever, ever have a problem because you don't know any different. You're always healthy in your business. But I love it because no matter how small they are, they've already built in those accounts and they've already built in the process. So they know if they're getting 40% into their opex at the end of the day, and you know, they take that $10,000 and they've got 40% in there. That's all they can operate on. And they know that. So they're looking to make sure they're lean and mean. And then at the end of the quarter, when they get their profit distribution, they're super happy. Whether we decide to buy a piece of equipment, put it towards a truck, or they take it themselves as a bonus. Doesn't matter, it's there for them.

SPEAKER_03 16:33

Almost like our parents' version of the envelopes, just with a way that makes it that much easier for you to not steal from yourself and say, Oh, I can take a lot extra from here. Let's switch the envelopes and we could go.

SPEAKER_04 16:44

Exactly. Yeah, that's what you don't want to do. You don't want to borrow from Peter and Pay Paul.

SPEAKER_01 16:51

No shot.

SPEAKER_04 16:51

If you're just doing the same thing you've always done, and that's where the problems come in.

SPEAKER_01 16:57

Joe, are you saying that your parents had an envelope system?

SPEAKER_03 17:00

You know, I remember that to an extent. My parents were very good at I remember coming up in the morning and seeing my mom have paperwork all in front of her, and she was figuring out how to do it, and there'd be like this box, and we would set aside money and different things. At least I remember that coming up. And I remember asking about it, and it made a lot of sense because it was all right, well, uh with this envelope says we could spend this much on this. When the envelope's empty, we can't spend any more on this unless we take from this envelope, which is going to be our savings. And it's like, yeah, I don't want to touch that. Okay, so we'll just make sure that we're lean with this, and you see it up front.

SPEAKER_04 17:37

Yeah, if there's nothing in the envelope, you can't spend it. Period. Think about no debit cards, no credit cards. That's it.

SPEAKER_03 17:45

It's like a cash change that explains it.

SPEAKER_01 17:48

Joe is so diligent with cash. You've got it down, man. At my house growing up, either it was at my mom's where there was no cash to speak of ever. It was more tears and begging for help than anything else. Man, forget Peter. There was like, you know, Brian, Mark, John, Peter, Johnson, James, everyone on the block was lending. Uh, but at my dad's, it was the other, it was like, oh, credit cards are up again. Oh, we got to refinance. And I would ask as a teenager. I remember asking and them being like, none of your business. They were embarrassed about it. Money was shameful at the dinner table. We weren't allowed to talk about it. I think a lot of people, a lot of electricians, a lot of service providers have a range of experiences between you and I, Joe. And Rachel, I don't know, what was it like for you growing up? Was money something talked about?

SPEAKER_04 18:35

So it really wasn't what money we had. My father chose to spend it in other ways rather than on us. And we weren't really taught. You know, I didn't learn about any of this until well after college, to be perfectly honest. You learn as you go and you, you know, keep seeking that information to make it better and better and better. And it goes from two sides. One is you grew up bad, and you know, we all have, you know, stories. And then from the other side, you can have the shame. I see a lot of business owners that now are so upset that they can't talk about it because they're ashamed they actually make money. And we're trying to, you know, be proud that you're profitable. It is one of the profit first things. Proud to be profitable. It's okay to make money. It's okay to grow your team. It's okay to treat your team really, really well because you can. There's nothing wrong with that. But it's a stigma that we have to get over.

SPEAKER_03 19:35

You know, Clay, something came up today that I think would be really relevant to this. Remember, we were talking about a post about where if someone shows up in a lettered van and a sprinter, that means you're paying double. But the way I the reason I'm bringing that back up is because it almost seems like that is exactly what Rachel's talking about. Where if I show up looking premium and I show up ready to serve, I must be overcharging someone instead of I'm charging the rate that I should in order to deliver a high level of service. Rachel, is that something that like consumingly happens as well?

SPEAKER_04 20:07

I think it's more about the customer and the owner understanding value. So we've had the conversation actually in the ops class where you may have a sub go out and do a particular job for you and he'll do it cheaper, and then he's working under you. And I brought up, hey, does he go in your shirt? Does he have your hat on? Is he showing up in somebody else's van? Because I'm not letting him through the door at that point personally, because I'm valuing you and I'm expecting your guy to come. So unless you've called me and said, Hey, I just want you to know this is my guy and he's gonna show up like this, he's not getting through the door because I trusted you. And with electricians and trades, it's very, very easy for everybody on the block to go, I want to go cheap here, where's the handyman? But the moment you get to a certain point where you go, I need to make sure I have the quality, I need to make sure this is trustworthy, and you find a guy, that's it. That's your guy for life.

SPEAKER_03 21:09

I agree. I don't mean to jump in again. There's something that I thought would be really interesting to kind of bring up because I experienced personally what that looks like in the inverse. Like when you do hire the wrong guy and the damage it can do. I remember we were trying to go cheap with getting landscaping done and having people dig trenches, and we were working with this one individual, and a customer got really pissed. And I'm like, well, why are they upset? And they're like, Well, you gotta see what these guys are wearing. One guy showed up looking like he just left a club, he still smelled like alcohol, he had a popped collar, huge aviators, and like a button-down shirt. And the other guy showed up with a white t shirt with a huge cannabis leaf on it, and that was their uniform that they were running the day, and they paid top dollar for us to be there. And the problem was is he was a subcontract. He's just here to dig a trench, like he's doing nothing, interacting with nothing. But because they represented us, because we sold The job the wrong way, they were mad at us for the lack of experience.

SPEAKER_04 22:04

Correct. And it's perceptions reality. You know, people are much more apt, especially today, to tell about their bad experiences than their good experience. So when you get into an area that you want to make your own, and then you have an experience like that, and the person starts blasting it in the neighborhood, you're out of that neighborhood real fast because everybody goes, Well, I know her and I trust her. If she doesn't like them, I'm not using them.

SPEAKER_01 22:30

Yeah, perception is reality. I love that quote. In fact, my response to uh similarly, Joe, the guy who wrote that post reached out to me after and was like, Well, what do you think? You know, here's three different vans, old Rusty chucking a truck, here's me, kind of white van, minimal lettering, and then there's where I want to be, which is the full wrap, but I'm not there, can't really afford it. You know, what do I do? And my whole perspective was spot on with what you just said, Rachel, is like, well, fix the perspective first. It doesn't really matter about the van. The van's just the cover to your book. Don't judge a book by its cover. So what do you do? Well, A, now not to be deceiving, but you could take what you want your van to be and put it on your website, put it on your Google, because AI lets us do that. You could then go hire and train your CSR to answer the phone really freaking well. And now you know that people see what they want and they like it, they choose you, they call and they get that experience. And if it looks like a duck, it acts like a duck, quacks like a duck, I should say, then it's a duck, right? And so then you just show up with a good process. And even if they ask, oh, you know, your vans look black on the picture. Oh, yeah, no, we're so busy, I'm actually running the old van right now. But that van's gonna be back on the road. We got another one coming soon. So thank you for noticing that. That's amazing. Get to your business and and charge what you're worth with growth intact. And what I mean by that, I think Rachel, you probably have uh a pretty strong opinion on this. I always say you don't need investors and you don't need uh loans to build an electrical or service company, that you can do this in your pricing properly. So we always encourage guys to include some growth in their rate. Is that something that you work with people on too, to really do the math and figure out like who do you want to be and how are you gonna get there? That intention piece we're talking about again.

SPEAKER_04 24:21

Always. Always. We with the electricians that we work with that are part of your program, we run it through your model and then we have some additional things that we've adapted onto your model to give it to them. But you have to have that. Costs are gonna go up every year. Doesn't matter where you are, they're definitely gonna go up. So if you don't have any growth built into that, it's gonna eat right into what you have and into your profit and then into everything else.

SPEAKER_01 24:49

Yeah, so important. Rachel, you've also written your own profit first book or two books, is it?

SPEAKER_04 24:55

Three. Wow, three of them. Yeah.

SPEAKER_01 24:58

That's a big effort. What are your books about? Are they like why grab Mike's and yours?

SPEAKER_04 25:04

So mine are service-based businesses, and they're not just profit first. So I have a lot in there about business issues, you know, what to think about about going into a partnership. And, you know, what should you have in your documents for that partnership before you go into it? Because once you're in there and something goes bad, you know, it could be 20 years down the road, but then you have nothing. What to think about the experiences, and I've been doing this a really long time and helping small businesses, so those types of experiences are within my book. So it's not just profit first itself, and here's how you do, you know, the allocations and my thoughts on all of that, but it's also business-wise and how it ties in and how those experiences make a difference.

SPEAKER_01 25:52

Super cool. If someone's listening and wanted to check out your versions of the book, what's the best place to uh get those, Rachel?

SPEAKER_04 25:59

Amazon, like everything else. Yeah, they're on Amazon. If they put in profit first or put in my name, it'll come up automatically.

SPEAKER_01 26:07

Rachel Siegel, R-A-C-H-E-L-S-I-E-G-E-L. If you guys want to check that out on Amazon, we'll get Tony to pull it up too and link it below in the podcast description to make it easy for you. Uh super helpful. Rachel, why do you find people really come to you? Like, what's the trigger? What's happening to them? You must realize or recognize some some trend of conflict that they finally are like, okay, I need help here. What are those things?

SPEAKER_04 26:34

So they want value and they want to do better. They want to either grow or get their cash flow better. They've had enough of the I'm gonna do this, but I'm not really getting anything out of it. And now they need somebody who's gonna be actively helping them. Our clients, we do everything on a flat rate. So I'm not billing per minute per hour to the six minutes like an attorney. We left that in when I created Go Figure, we left the time and billing aside. Now my whole team, and there's 10 of us, concentrate on helping the clients. That's our goal. So we are very forward-thinking, really, really good at the big picture. So when somebody comes to us, whether it's a problem or a goal, we help them get there faster, better, easier by giving them the framework and having the numbers right. Because it doesn't matter who gives you advice. If your numbers are bad that they're looking at, it's gonna be bad advice.

SPEAKER_01 27:33

And ironically, we were kind of talking about service earlier, and now you're talking about the advice, and you're saying openly, like there's lots of people that can do the math, right? One of the biggest trends we've seen in your monthly operations class uh drop-in that you do, and you teach our guys the first Friday of every month. It's been awesome. Thank you again for that. But it really seems like most guys have an accountant. Very few have an accountant they trust. They seem to work with you in the group and realize why isn't my accountant doing something like this then for me that would serve me? And more accountants should, I think, have a group call where anyone can drop in and use the hour and just get some help. Like, why not? Where do you think this misses in the accounting world that you're kind of solving in your own unique way?

SPEAKER_04 28:21

I don't think most accountants want to do it or realize they have the capability of doing it. And and I say this as a true introvert because that's who I am. When we do it, we're doing it for you on that ops call. Most people who have accountants, they're just taking their numbers and popping out a tax return. That's not really an accountant. You can go to HR block for that. That's not gonna help. You know, a true accountant really is there for the client to help them through everything during the year as well. And like we have that with SLE, but we also do it the first Wednesday of every month for all our recurring clients. So we have an hour, whether or not they're paying for those services or not, it's completely free and can pop in and ask any question they want. And we're literally there just to help. That's the goal.

SPEAKER_01 29:14

I love that. Yeah, it's my favorite thing. I mean, we've built our entire business model off it. When I talk to past clients, the number one question, whether they've moved on to uh I don't need to name names, but bigger, bigger ponds where people have been around a lot longer than us, they always come back and ask this one question. Do you guys still do classes like five days a week? Like, yeah, I know it's crazy. It's a huge effort. Both Joe and I, our wives, are are behind us cracking whips for sure and trying to keep us in line. But it really is, it's all the joy of what we love to do anyway. We really feel we have the answers or know the community does. And so a lot of people reciprocate that. They show up, they ask questions, they get answers from us, they get answers from everyone. At least they're heard and feel like there's always a place to be heard. And I think it's not just the accounting for what I'm hearing, it's not just electricians, it's every trade in between the butcher, baker, candlestick maker, and lawyers included, all of them, that just have trouble with that balance and actually being there with the service experience.

SPEAKER_04 30:19

Again, nobody's perfect. And I'm not perfect, you're not perfect, and we're all human, and that's a good thing, especially with today's world. But if you can walk the walk and talk the talk and help them to understand it, so we're meeting them where they are. I'm not having conversations in accounting speak. They're not accountants, they wouldn't get it. I want to be where they are and talk to them about their world and their shape. So it's super important that that is delivered in that way. And I don't care whether you're an electrician coming to my house telling me my wiring is shot. I don't need to know how you're gonna fix it. I need to know is it gonna cause a fire? Come to me where I'm at and we're good.

SPEAKER_03 31:09

This is just so refreshing because I love hearing from another side of the perspective. Like I have always, and Clay and I have always said that we need to be able to verbally package it to homeowner understandable language because we can show up and say, hey, you know, you've got some annealing in your bus bar in your main electrical control system. It's like, what? You've got um you've got an electrical fault in your main electrical control system. Okay, cool. I can work with that, let me deal with it.

SPEAKER_04 31:33

Exactly. And you know, doctors are really good at you know, using doctor speak. And you know, I think that's where as everybody progresses, you're seeing like the concierge doctors doing much more now. Why? Because they can explain it in a way we understand it. So when we walk away, we know what's going on. We don't have to have the education. I don't want to have to Google everything that my test results show. What does it mean? What does it mean for me? Because it's different for me than it is for you. So what do I do with that? Is it good, bad, or indifferent? Same thing with the electrical, the plumbing, it doesn't matter, the accounting. You know, great. You have profit at the end of the day. What does that mean? What are you gonna be able to do with it? Is it enough? Is it enough to hit your goals of when you want to retire or sell? Will it put your kids through college? Can you take the Disney cruise this year? What does it mean to you? What is that goal, short-term and long term, that you're trying to hit, which is why you want to be profitable?

SPEAKER_02 32:38

I'm curious.

SPEAKER_04 32:39

Nobody just goes, I want to be profitable just to be profitable. They want something, whether that's the kids' college education, the retirement, the Disney cruise, doesn't matter. But they want something.

SPEAKER_03 32:50

Do you I'm actually genuinely curious about this? Do you feel that all these trades and all these individuals who are using their own personal professional language, like doctors, lawyers, electricians, do you think there's a part of them that just want to come across as smart in order to impress the person? And that's why they're using the language they're using?

SPEAKER_04 33:07

I think some of it, but not a lot in the trades. I just think they don't know. And that's how they've been taught, and especially doctors. They've been taught doctors speak. So that's how they speak. The layman terms, you know, people call it the God complex. I don't think they really think they're gods, but that's how they've been taught to do it. They haven't been taught to just be the normal person and have that done. And that's really the issue that comes across with that. Now, I can tell you, my plumber, I have no idea how or why he does what he does. When he shows up, if I have a problem and he fixes it, I'm happy. My electrician, I go, okay, I need this to go here. I know I have a second floor. I don't care how you do it. Is it gonna be done and am I gonna have holes? That's all I need to know. And they fix it, they do it and it's done.

SPEAKER_01 34:03

Peace of mind. Sounds like a big piece.

SPEAKER_04 34:05

It's the same thing, it's that trust and value. It comes back to that. I don't care if you're an electrician, an accountant, or a doctor, or an attorney. It's all the same.

SPEAKER_01 34:16

I'd love to do a little bit of a like a situational thing just to better understand what you do, Rachel. Let's say I'm a mature seven-figure provider, slight growth over the last three years, but really kind of stagnating. I'm just sort of stuck. But we're seeing maybe four percent net. What are some of the first areas that if I came to you and I'm doing a strategy call that you would just start to ask questions around and be curious around for someone in that position?

SPEAKER_04 34:43

There's lots of areas to pick up. The first thing I pick up on is you're only having 4% net. So I'm looking at your expenses and where things are sifting right through your books, just going right out and going, okay, is this a need or a want? Because a lot of those, they're mixing in, they're mingling all the money, and it's really not a 4%, it's higher, but they're allowing everything to sift right through. So we're looking at that. We're looking at how much the owner is taking from the profit first side, not just on salary. And then I'm looking at the sales. You know, is there repeat customers? Are they tracking it? What are they spending with their marketing and advertising? And what's the ROI on that? Because that changes so often. And if you're not watching it, you could spend a ton of money there and not be getting any results.

SPEAKER_01 35:34

So it sounds like if I'm picturing a profit and loss statement, jumping ahead a bit. If you guys don't know what this is, uh please just look it up. Uh, we'll give you that. It's uh one of the basic accounting views for your company. So working from a profit and loss sounds like you're working bottom up.

SPEAKER_04 35:49

Typically, I do. I will work bottom up with problems because I can spot them much faster that way. And again, if I pick out two things and I can help you on those two things quickly, that alleviates some of the pain. And then we can take some time to dive into the other things that then alleviates more pain and more pain until you're fully okay, until the next decision has to be made.

SPEAKER_01 36:14

I live so high in the cloud, so I see everything in models and shapes in my mind. So forgive me if this doesn't appeal to you or people listening to this, but when I see that, I can't help but think and tie this back to the beginning where we said, well, most people are going into business with very little intention for anything beyond the sale. They're just making sales and they're just happy to get agreements and shake hands and have a client. They're not thinking about the bottom at all, or not in a way that would actually benefit them. And the moment they come to you, everything flips, and you start at the bottom and work your way up. It's a complete opposite perspective.

SPEAKER_04 36:50

Completely opposite. And by doing so, we allow them the growth, the room to buy the other things, get the trucks, have the inventory. If they've gone into debt because a lot of the that situation, they'll go into debt because they're just trying to get the sale, but they're not looking if there's anything left over. So then we want to pay down their debt to then alleviate that issue, not just on the company, but most of the time it's on their personal guarantees too. So it's affecting them personally as well.

SPEAKER_01 37:22

Yeah, really cool. You said something important, and I it was so easy for you to say. I think it went over really fast, but I want to call more attention to it. And one of my old school accounting business mentors is a guy named Keith J. Cunningham. Have you ever heard that name before?

SPEAKER_02 37:38

Mm-mm.

SPEAKER_01 37:38

No. Okay. Uh serial entrepreneur. Anyway, he just simplified some things in some ways that were real breakthroughs for me years ago. And one of the things he said is, and it's more for the point of, I don't know how many people actually do this, but you ought to, you ought to keep two sets of books. The one that's actually representing the company's truth, and the one where you're just baking in expenses. You're using it as your personal finance machine for your personal life and your personal uh needs, desires, and problems. And you said it kind of like you'd sift through that and find. I think you're talking about the same thing though, finding those areas where we're kind of burning our own books a bit.

SPEAKER_04 38:18

So when you do the profit first method, you actually do an owner's calculation when you do the assessment. And that assessment takes out everything you would normally do, not just your salary, but your cell phone. It's a company asset, you need it because you're constantly on the go. So the company pays for it, it's legit. But if you didn't have that company, you'd be paying for that yourself. So your cell phone would be in there and all the other things that go along with that. And that tells you what you're truly taking from your company and the percentage of the income that that refers. So it's typically much higher than what people think it is.

SPEAKER_03 38:59

You know, the thing that comes to mind is have you guys ever seen the Broadway show The Producers? Because in there they have a scene where they're having to pretty much two books. It's like, I've got two books. What do they say? Show to the IRS. What does that want to say? Never show to the IRS. And I'm like, all right, I understand the concept of two books. This one, here you go, Mr. Taxman.

SPEAKER_04 39:18

Yeah, there's lots of legitimate ways that you can take expenses and take the advantage, and it's absolutely okay, like the cell phone. My cell phone is on me 24-7. My business pays for my cell phone as it should. But there's also lots of ways that you should not do that. You know, putting clearly personal things through your business and piercing the corporate veil will get you into a lot of trouble. So you don't want to do that. It there is a line that people should not cross.

SPEAKER_01 39:48

Yeah, that makes sense. And kind of triangulating this now then. It sounds like, okay, so there are expenses that do belong there, but maybe maybe we're leveraging or over-leveraging them a little bit. Maybe there's a truth that isn't really showing on our PL today. So you look at that, you kind of extract that and go, okay, here's the real picture. Is that what I'm hearing?

SPEAKER_04 40:09

Yeah, that's the assessment. That's exactly what it is. And then once we do the assessment, we typically would do a six-period rollout plan. So and each period's a quarter, so it's a year and a half long to get you where you need to be. And as long as you follow the plan, you're healthy by the end of six periods, which is not a long amount of time if you're thinking about the life cycle of a business. It's um very, very easy to come through and be methodical if you're committed. It's the people that aren't truly committed, you know, that first month is gonna be painful. It's like any other change you do in your life. Change can be painful, but once you get past that first quarter, all of a sudden it's super easy.

SPEAKER_01 40:54

I was gonna say, I bet you this is a little like hurting cats sometimes. There's probably a lot of people that come into calls with you and they're like, is there a six-week package? Yeah how do I get there now?

SPEAKER_04 41:05

So nobody wants a six-week package, and we've done it. I I actually did it myself when I was learning profit first. I decided to do it. I won't recommend anything I haven't tried myself. So I literally jumped all the way to the end and went, I'm just gonna do it. Let's see if it works, because it sounds like it will, but I need to really understand it and verify it. And it was incredibly painful and it worked. I have had two clients since 2020 try to do the same thing, and it hurt too much where they just literally literally just stopped everything and said, I can't do it. I said, That's why I told you not to do it that way. That's why we do it the way we do it. Um, in the book, Mike even says, you know, he does it over three or four periods. I don't think that's realistic. You need a minimum of six to actually do it, make progress, and stick to it to the point where you're not trying to slit your own throat.

SPEAKER_01 42:02

I've got another situational, and I think this is going to split us into a couple different areas here. I'll try to be careful with it, but about the opposite. Sometimes electricians come to us and maybe they're in their first year, year and a half, and we'll ask, Well, how did you do top line last year? Sales. And they'll say, Well, I don't know for sure, but I did maybe 160,000. And we'll go, Oh, okay, uh, cool, great start, way to go. Uh, how much of that was profit? And they'll say something like 70%. And it always makes us raise our eyebrows and we think, okay, sole proprietor, they're not paying themselves.

SPEAKER_04 42:40

They're not paying themselves, they're not tracking true inventory costs, they're taking in the income ahead of the job, spending it, and seeing what's left over, thinking it's theirs. Terrible bookkeeping. And and it's the guy who just goes, Okay, I have money in the bank, but has no idea that he already pre-did the next job, and out of the money left in the bank, 90% of it's already committed. He is NOAA concept.

SPEAKER_03 43:10

That's a terrifying reality.

SPEAKER_04 43:12

Yeah, we've had a few clients come to us, and when we did the assessment, they're taking 127% of the money out between the expenses and everything. And you know, it's not a great conversation to go, do you realize your company is going under if you continue this? And they're like, but I have all these sales. It's not about sales, it's about what you keep. If you're spending 127% of what you're bringing in, you're going to fail.

SPEAKER_02 43:43

Yeah.

SPEAKER_04 43:43

It is what it is.

SPEAKER_01 43:45

How important do you think this is for let's say, okay, we found a committed one, they're not in great place right now, but you know the way, you lay out the roadmap, they get it. Okay, we're at four percent. Here's a roadmap to get over twenty percent net amazing stuff. And they think and maybe disclose to you, like Rachel, I think I could see myself trying to exit this business in five or six years. Does the advice change for you then, or is it the same either way?

SPEAKER_04 44:12

I think more in the big picture with that. So once they know when they're going to want to exit, and five years is a good amount of time. Sometimes they tell me they want to do it in a year and it just can't be done, not adequately. So you want to make sure certain things are in place that the owner isn't needed in it, is they're going to sell it. It's not about necessarily selling your book of business, it's about selling everything else that goes along with it. And if it's dependent on you, you're getting less money. That's just the way it works. So I've had landscapers, for instance, and in a state where you can't sell landscaping businesses. And I worked with a guy for over 20 years, and he came to me and he's like, I'm ready. And I said, No, you're not. And he goes, Well, I'm just gonna shut it down because you know I can't sell it. I was like, wait, wait, we've spent all these years doing these. You have one thing left to do, you're not shutting it down. So I gave him homework and we sat together for about two hours. I gave him homework, he came back to me a year later, all of his homework was done, diligently done. We went out for a valuation, and he got valued at $3.7 million and had three buyers vying for him. So the sale is over four million, depending on how it shakes out.

SPEAKER_03 45:31

From complete shutdown to four million. It's insane.

SPEAKER_04 45:34

Yep. And it took him to go, hey, this is what I'm gonna do, this is what happens. And the whole time we're working with clients, we're getting them to that eventual exit. Whether that's a family member, a sale, a private equity, doesn't matter. We're helping them grow to the point where they're healthy and have a life. And when they have that life and they're less dependent and then they get themselves out, it's an easy thing to sell.

SPEAKER_03 46:03

Having a life, you mean we can't just work ourselves to the grave and do like, you know, 120-hour weeks?

SPEAKER_04 46:09

You're not supposed to, and I don't highly recommend it. I mean, it's the same thing, you know, there are lots of accountants, you know, if you go back 20, 30 years, they would die at their death. I'm not doing that. I walk the walk, I talk the talk, I'm heading out on vacations that are two to four weeks at a time and multiple times a year. My team gets a lot of time off. You have to be able to balance what you're doing, even if you love it, and I love what I do, you still need a break. So you don't want to overdo it and you don't want to cause health problems because you're overdoing it. Because if you go to the hospital, especially if you're the solo guy, now you're not making any money. Yeah, now your kids don't eat.

SPEAKER_01 46:56

Let's say we're on that journey now, and a couple years in, we've corrected profitability, exits in the uh light at the end of the tunnel, but now I'm man, I just hit a 30% net, and I'm I fear the tax bill. What kind of stuff do you start to look at, suggest uh for that person at that part of the journey?

SPEAKER_04 47:16

So once you're profitable enough, yeah, the question is always what is enough? I know. But we always do tax planning. Those clients that we're working with that actually listen to us and are we're working really closely, they all end up with tax planning. And that's where looking at it during the year, talking about their goals, where they are, but also with the tax in mind. Then towards the end of the year, we're actually annualizing the business, taking it from the business all the way into their personal return and giving them options. It might be two options, it could be 12 options, depending on how profitable they are. And then we put those options within the goals. So is the goal to expand to sell? What do they want to do? Because it's got to work together. But if we can build their wealth within the business and build their wealth personally and save the taxes and get the win-win, that's what we want to do.

SPEAKER_01 48:13

Okay, so personal wealth ties into what you do too, then.

SPEAKER_04 48:17

Yes, I am not a financial planner, but we work with several, or I'll work with any client's financial planner they're using. But when we're building it, it's not just the business because the business flows into the personal. So we're doing it on both levels. And then if we have some ideas that we really like, we then go, okay, who are we gonna work this out with? And if they don't have someone, we'll recommend someone and they'll go do their due diligence and job and work up the illustration so they can see it in action.

SPEAKER_01 48:46

Yeah, very good. I know we only have you for a short time longer. I've got a few quick questions. I want to sneak in here. And then one of our next guests coming on the show is actually Dan Antonelli of Kick Charge Creative. You may have had some clients invest in their branding and wraps and all the stuff they do. So I'd love to ask you a question that reflects uh Dan and that investment too. And maybe we set him up and get a little fun between you guys. But one quick question. I know you could probably do a whole episode on this, and I know you you probably blew in the face in the uh from talking about it so much. S Corp or C Corp, what's the best formation for a home service provider?

SPEAKER_04 49:25

I like the S-Corp. The situation changes on what's the best depending on what level they're at. But I like the S-Corp. I like being able to take the advantages of the S-Corp, lessen the self-employment tax, and then put in other things when they're profitable, that gets that win-win for the tax planning. So they're building their wealth in their retirement much bigger than what they normally could while also saving the tax dollars.

SPEAKER_01 49:52

In class, you've brought up a couple of times. It seems to be maybe one of the biggest kind of alarm bells you've been setting off this year is to do with the S-Corp. Is there something the IRS is looking into or a bit of a warning to those in that formation?

SPEAKER_04 50:06

So in an S-Corp, the owner has to have reasonable compensation for the IRS. You have to be on payroll for reasonable compensation. Traditionally, a lot of people and a lot of accountants have just gone, ah, you just need this amount, it's fine. But they are coming around and they're computerizing. So if you have zero on that line, it's not if you're getting a letter, it's when you're getting the letter. And now they're starting to come around for the actual audits. So there are softwares and things that your accountant and you can do to go out and see what your reasonable compensation should be, and that's your minimum reasonable compensation. So if you're doing a million dollars and you're on salary for 20 grand a year, that is not reasonable compensation. So you will get dinged for every dollar in that audit that you take out. It really depends on how you are doing your job. So that's what it's based on. Are you going out and actually doing the work? Are you doing the back office? Are you just doing sales? Are you the CSR? Are you all of that? That's what it goes into. And then how good are you? Are you proficient? Are you highly proficient? That's how it judges it and comes up with what you should make. I've seen them. What we do with our clients is when you're a client, if you're going to do that, and we do highly recommend that you do it and we hold it for the IRS. So if they ever send a letter, we have it. We actually will do the interview with the client so that we can explain everything the client's doing and what it's doing in the software to make sure it's correct, because it's very wonderful to go out and say, I do everything, I am the best one on the street. This is it, no one's better than me. And it might be great in your trade, but when you're doing your bookkeeping and you're saying you're highly proficient, probably not. You know, it's the doctor that, you know, he's great at his niche and internal medicine, but is he really good at doing his own contracts? No, he's not. That's what the attorney is for. So you may do the things for yourself at certain points, but that doesn't make you highly proficient, and that's what people don't understand. You want to be honest when you're doing these things because that tells you where you need to be for the reasonable compensation.

SPEAKER_01 52:35

Very cool. You've probably taken on some uh pretty chaotic books, and we were talking about shame earlier, and I think there's a lot of shame. Guys don't maybe want to approach a professional sometimes because they just know how much of a mess it is. What's your message to that person?

SPEAKER_04 52:50

Do it, do it every day of the week because if your numbers are bad and you're making decisions off of bad information, you're making bad decisions, and it's as easy as that. And if it's something where you can do the bookkeeping because you're smaller, and then somebody like the accountant comes in and reviews it, if that's what you can do, do it because something is better than nothing. And again, it's all about healthy decisions. And if you're making a decision to hire people, but you can't afford them, that's bad for you. That's bad for your business, and it's bad for those people and their families. It's a trickle-down effect.

SPEAKER_01 53:28

We're in the final quarter of the year. You've got a bunch of home service clients and a bunch of ears and eyes watching and listening right now. Uh, when this goes live, what's that message you have to them for the final quarter?

SPEAKER_04 53:41

So it's all about planning now. So if your books are behind, get them up to date, get them up to date really, really fast because you want to see where you're at and planning for the next step. And that could be tax planning, but also your goal planning because the new year is coming. What happened already during this year? Where is your projection so that you can decide where you're going for the next year? So it's not just about taxes and saving money, which we want you to get that win-win and build your wealth at the same time, but what is that next step? It's always in combination. But if you're behind, first thing you got to do is get caught up because again, it's all about good numbers. If your numbers aren't right, your information is bad.

SPEAKER_01 54:27

Very cool. I told you I wanted to tie Dan Antonelli in. Uh, so often we have guys making this call, like we talked about earlier. Should I upgrade to this fully wrapped van? We've seen the evidence of what it can do to stand apart from all the white vans around your community. It's just the the timing and the investment question. If someone's coming to you, Rachel, and asking about uh an investment into their brand worth maybe tens of thousands of dollars, when do you suggest the best time to do that is?

SPEAKER_04 54:58

So it depends again on their cash flow. If they're already negative in their cash flow, I want to get that to a point where it's positive and start putting some of it aside prior to that. Now, if they're even a little bit positive, then it might be worth it. There's good debt. You know, it's okay sometimes to go into debt to pay off something else. So if they wrap the van and they're able to get a higher value for their same services, and they're gonna spend 10 grand to do it, but they're gonna make 30 more grand that month because now they can get more money because they look more legit every day of the week. I'd take that. Now, if it's a hundred grand, no, now I'm gonna want them to put some money aside and make sure they're healthy and doing all those things and then go do it.

SPEAKER_01 55:53

Rachel, you've been super helpful on this podcast. Uh, I could see we could have you on again and again and again. We keep finding stuff to talk about in our monthly Friday calls. Thank you so much. Is there any other message you want to give uh to our audience before we part ways? And on top of that, what's the best way to reach out to you if you are moved by this podcast and and need uh to talk to Rachel or the team?

SPEAKER_04 56:15

For the message, I just want to make sure everybody's taking their business as a business. This is not a hobby. This is your life. It affects what you're doing during your day-to-day, it affects your families, it affects your kids. Take it seriously and take the numbers seriously because it affects it all. As far as reaching out for me, we're at gofigure accounting.net on the web. You can make appointments there, you can email us, contact us. If you call, you can text, whatever you want. We're just here to help. So that's really our goal.

SPEAKER_01 56:47

I love that. Again, guys, this has been Rachel Siegel with GoFigure Accounting. Uh, she's in the interloop with us every month. If you're a member, you already know that. If you haven't cashed in on one of those calls and you are a member, please you're missing out. Uh, next one will be about two weeks, two or three weeks out here at the time of this recording. Looks like it'll be November 6th. Should be our first one as we're wrapping up the year. Again, thank you so much, Rachel. Uh, we've had some incredible wins, uh, incredible aha moments in those calls. So really appreciate you uh giving so much away. And yeah, wishing everyone an awesome uh rest of your week. And we look forward to seeing you on the next episode.

SPEAKER_03 57:26

Take care, friends. Be well.