Episode 76
Do You Own a Business or have a Job?
Profit Over Distress: A Look into the Profit First Philosophy
Is your business thriving, or are you merely surviving in a self-employed job disguise? Let's explore the fundamental differences between owning a business and having a job, as we delve into Mike Michalowic’s book "Profit First". This seminal work is a game-changer for small business owners,showing us how to manage cash flow effectively, while emphasizing the importance of robust financial systems. Sit tight as we deep dive into what makes a business bankable, and why owning a business doesn’t have to mean constant worry about finances.
What if the profitability of your business lay in the narrowness of your focus? We're going to talk about the underestimated power of a niche focus and how it can potentially maximize your profit margins. Instead of being a generalist, we will discuss the merits of tailoring your business to your local area. Additionally, we'll address some practical aspects of business operations, such as timely invoicing and billing, and their impact on cash flow. Let's revolutionize the way we do business, together.
Highlights
2:32 - Being honest with yourself on if your are truly running a business or a glorified employee. And the idea of being bankable.
6:08 - Profit First and the basic concepts of how it can transform your business.
9:13 - Understand where you are spending the most time and is it costing you $$$$
12:17 Brad and Steve reflecting on Past Struggles and Growth in their own business journey.
Mentioned-
Article - How to tell if you have a business or a job
Book - Profit First
Connect with the hosts:
Steve Doyle:
Brad Herda:
This podcast uses the following third-party services for analysis:
Chartable - https://chartable.com/privacy
Transcript
Everyone, welcome back to this exciting episode of Blue Collar BS with your host Brad.
Steve Doyle (:Exciting.
Brad Herda (:And Steve, we got and Steve, don't forget about the and Steve part. You know, the BS stands for Brad and Steve. It also stands for business solutions and it also stands for some other acronyms and things often like bullshit once in a while. And we do like to spew that out every so often. So Mr. Doyle, what is today's topic de jour? That was, I think that was, I think that was French. I'm not sure.
Steve Doyle (:And Steve!
Steve Doyle (:Every so-
Steve Doyle (:So I was snooping around a little bit on the web. France, no, no. Croissant, that's the, you know, I know French toast. That's the only other French word I know. All right. So let's go back on track, cause we're a little loopy from the long days. But I was so.
Brad Herda (:Croissant.
Brad Herda (:French fry, yeah, okay, great.
Brad Herda (:You're a loopy.
Steve Doyle (:taking a little bit of time and snooping around on the websites around here. And I stumbled across somebody's website and they wrote a really interesting, they wrote a really interesting article. So I wanted to bring that up as a topic. So somebody's website wasn't my website. I don't stumble around on mine, but I was stumbling around on somebody else's. And Brad just happened to write an article.
Brad Herda (:somebody's website he says.
Steve Doyle (:about three ways to tell if you own a business or you own a job or you're in a job. So I wanna talk a little bit more about this article, Brad, that you wrote up about a year ago. Why?
Brad Herda (:Yeah, it's so prevalent in the trades. It's so prevalent in construction and trades world. It's ridiculous that most guys have a job. They don't own a business because they don't think.
Steve Doyle (:So let's kind of break that down. When you talk about that with other business owners, how do you help frame that? Do you have a job or do you own a business?
Brad Herda (:Um, a lot of times I will ask them that question just flat out like, is this, is this a business or is this a job for you? And everybody pumps up their chest as well. This is my business. Okay. Cool. Great. So how do you, how do you run that business? Cause if you're doing everything, well, then you don't really have a business. You have a job at some point that you're taking care of everything. Cause you've not let go. Uh, but one of the bigger things is.
If you have a business, what does the bank think about you? Is the business itself bankable? Does it, the bank willing to give your business ABC lawn care, um, Jimmy John's welding services, um, Paul, the plumber, whatever it is, is your bank willing to give you a loan for your business? And I'm going to guess, I'm going to guess right now that
Steve Doyle (:Right?
Steve Doyle (:And
Brad Herda (:30 to 45% of all of those small business owners that are doing the, that are tradesmen, that have their own business, that have their own LLC, likely don't even have business accounts. And they're running everything on their personal credit cards.
Steve Doyle (:So why is it important though for a business to be able to Get a loan and how does that really relate to a business versus a job?
Brad Herda (:Because the business itself is its own separate entity. And if I can create that separation of myself from that business, I have an opportunity to create a valuable asset and I have an opportunity to exit that business at some point and create value along the way. If the bank sees me as something different than just me, Brad, going to ask them for a loan so I can do my own thing to get a truck to go be a plumber or whatever it might be, Paul's plumbing can get that loan versus Brad getting that loan.
Steve Doyle (:Mm-hmm.
Brad Herda (:that tells the rest of the world this is a legit business, not somebody trying to pull a scam or different things. It tells the banking industry that there's something there. And it allows everybody else to understand that there's something more than just me and my charming good looks and fantastic radio voice to go get money from the bank.
Steve Doyle (:Mmm.
Steve Doyle (:That, exactly. So I find that, you did, you did, I'm not even going there tonight. So, not even going there. It's gonna say you got the face for radio, but we're not gonna go there. Yeah.
Brad Herda (:He doesn't touch it. I gave him softballs. He doesn't even touch it.
Brad Herda (:That is true. So yeah, if you're doing everything on PayPal and Venmo and it's all going through your own personal stuff, there is no business record. There's no business credit. There's no business credit score. There's nothing there for anybody to say that your business is legitimate.
Steve Doyle (:So what would somebody like Paul the plumber do? What are a couple steps that they can do? Let's provide a couple solutions.
Brad Herda (:So the first thing I talk to many of my smaller entrepreneurial type clients is I tell them to go get Mike McCalliwitz his book called profit first.
Steve Doyle (:Mmm, great book. Great book.
Brad Herda (:And focus on and focus on that activity of revenue minus profit equals expenses versus the accountant way of doing things, which is revenue minus expenses equals profit, and then you have no money left over because you spend everything you have versus going through a, a very simple cashflow expense management system to run your business and get you out of trouble. I have one client who is in the podcast production industry, who
Um, he started, he's like, Hey, I knew him ahead of time. He's like, I really like your services. I said, great. I'll be here whenever you're ready, but do this first. And following the profit first method had saved him so many mistakes and so many errors and so many bad decisions about going out and doing shit that he couldn't afford to do that he, that he's thriving today, but would have been completely disastrous later on and, um, having the ability to go by $400 for the batteries.
Steve Doyle (:Mm-hmm.
Brad Herda (:because yours took a shit last week in a rainstorm or whatever, and not have to worry about where's the $400 going to come from. Cause it's there. Cause you've planned for it. You've created a financial system to do so. Um, that tells me you have a business versus everything goes in my personal account. My wife gets half of it or does whatever she wants with it. And I just have to go sell more jobs. And the race to the bottom becomes real and you end up in this constant battle of.
Well, I need the job, so I'm going to price it as low as I can, but I won't make any money ever because I need the jobs so I can do the thing, but I won't make any money because I need the job instead of looking at yourself as a business and an entity and deserving, et cetera. And profit first helps drive some of that.
Steve Doyle (:That's awesome suggestion. I love the book, love the concepts because they work and they're simple. So, one.
Brad Herda (:They are very simple. They're so simple. Most people stop following them because they are so simple. And that's, and he says that in his book as well, right? Most people will not follow this through for an extended period of time. Cause it's so simple. They just say, Oh, I can do it without making the transfer that I can do it without actually doing the work. It'll be fine. I can do it in my mind. It doesn't work that way. You gotta follow through on the monthly, on the 10th and 25th and be religious about doing your work.
Steve Doyle (:Ebs- Heheheh, yes.
Brad Herda (:and separating the funds and paying yourself and setting aside taxes. Oh, taxes. Oh, that's right. Taxes.
Steve Doyle (:Right.
Brad Herda (:Here's the other, here's the other thing to tell if you have a job or a business. Um, taxes are okay. If you have a business taxes suck. If you have a job.
Steve Doyle (:Yup.
Brad Herda (:And the success of a business is the right to be able to pay taxes. And people are going to go, Oh, you're full of shit. You're full of shit. I'm not saying to get screwed and not to pay your end to pay just everything willy nilly, but success is the opportunity to pay taxes, to allow everything else in the ecosystem to facilitate and work.
Steve Doyle (:Right.
Steve Doyle (:Mm-hmm.
That's a great point. So one of the other things that you actually list in this article is something that's costing us. Excuses to not take a vacation are costing us. So how does that relate to a business versus a job?
Brad Herda (:Well, yeah, I can't go on vacation because I'm doing everything, right? You may have one or two employees and you don't trust them. So if you have these employees and you say you have the best employees, why don't you trust them while you're gone? Why don't you trust them to do the right things along the way? So how do you facilitate that and make that happen? So one of the ways to help understand that is...
Steve Doyle (:Right?
Brad Herda (:put those costs, keep track of your activity for a week and understand what it is that you're doing and how much time it requires to do it. How much can you delegate to somebody else or just stop doing because the business you went, the business you're in three years ago and you're still doing all the same things, if you're still doing the same thing for three years, you're not growing and you're still, you're wasting your time along the way. You should be able to either delegate, get rid of, or change something along the way to make it easier and simpler and more efficient.
Think about what it costs you to do those tasks. You as the business owner, if you as the business owner, truly as a business owner, and I'm just gonna use $50 an hour as an example. If you're the business owner and you're running your, you know, Paul's plumbing or, you know, Larry's landscape.
$50 an hour for you to make is not anything that's unrealistic. And if you're doing all, so would you pay somebody $50 an hour to do all your invoicing and billing? The answer is likely no. Why would I do somebody, I can do it for that. Well, essentially you doing that, you're paying somebody $50 an hour to do that versus trying to find, you know, a part-time bookkeeper or somebody that might spend eight hours a month at $25 an hour.
Steve Doyle (:Mm-hmm.
Steve Doyle (:Mm-hmm.
Brad Herda (:Well, that's $400 of expenses. Okay, Profit First will tell you whether or not you can afford it.
So understanding what you're doing at the end of each week and what's all happening and then, you know, that time that you're getting rid of or finding others to do it for you, how much time could you be doing increasing your revenue or doing the thing that you are the most important to your business with and most, most small businesses, the owner's the best sales person because they have the passion, drive and energy.
Steve Doyle (:Mm-hmm.
Brad Herda (:So if you could go out and sell three more jobs or four more snow contracts or whatever that is versus sitting at your kitchen table, spending three hours of doing accounting work, where does your business go?
Steve Doyle (:Yeah.
Steve Doyle (:Yeah, let alone all the postings that you got to do for your business. And all the admin work you got to do. I mean, woo! Oh!
Brad Herda (:what postings? What ad what? No, no, we don't do admin or billing, right? So many, many of these contractors, they're so cashflow poor because they don't take the time to do the invoicing and billing. And then when they send the bill, the billing out 45 days after you completed the job, because they didn't take the time to go do it because we didn't automate that we're still handwriting invoices or doing whatever we're putting them in the mail. I have a landscaper here in my community that I've had do my
Steve Doyle (:Why are we going down that road?
Steve Doyle (:Mm-hmm.
Brad Herda (:for my lawn service stuff, it takes them almost 17 days post application to send me the invoice and then they expect me to pay it in five days.
Steve Doyle (:I laugh at those people, but what's even better is those that take 90 plus days to turn their invoice in and still have the same expectations of immediate payment.
Brad Herda (:It's ridiculous.
Brad Herda (:Right. Yeah. No, if you're that slow, you don't deserve to get paid.
Steve Doyle (:Right.
So one of the other things that I was reading in your article that I actually truly appreciate because I struggled on this road for a while is do you know your niche? Yeah, really? Wizard! Weird. Weird that I would even bring it up. Yep. I think you broke this article for me myself, but you know.
Brad Herda (:Really?
Brad Herda (:He struggled just a little bit, did you Steve?
Brad Herda (:Yeah, for those for those who didn't listen to episode one or two or whatever it was Steve and I met in December of 2016 out in San Diego and at our training and Yeah that 2017 2018 2019 we had a lot of pity parties along the way and a lot of lot of motivational pickups from each of us To get us to where we are today. So
Steve Doyle (:Yeah. Yup.
Brad Herda (:Yeah, it was fun. It's in the rear view mirror, which is good. That's the best part.
Steve Doyle (:Yeah, yeah. Let's not go down that road right now. Let's talk about the why niching is important.
Brad Herda (:Yep.
Brad Herda (:Because I have this I use this saying if you are everything to everyone then you are nothing to nobody And so when you go to networking events or go to other places well if you know anyone that Is breathing and has blue eyes i'd love to talk to him Who the hell is going to do anything for that right? I mean, let's be honest Who's thinking of that? from a net Whereas if you know that you are focused on
Steve Doyle (:It was a great post.
Steve Doyle (:Right?
Brad Herda (:privately held businesses that, or in our trades as an example, I have four zip codes, need a third acre or larger. They have a pool, they have this, they have that. Those are the things you're looking for to know that those are the customers you want to take care of. They will come out of the woodwork because you are going to talk to them all the time versus watering down your message of, well, I can help anybody.
Steve Doyle (:Mm-hmm.
Brad Herda (:Well, if you can help anybody, then you're going to get nobody. And knowing, and knowing your niche and knowing what your center lane is, is vitally critical to long-term success because there will people, people will come from the left and right. I mean, I use this example with clients and analogy all the time from Milwaukee to Chicago, there are lots of ways to do it.
Steve Doyle (:Weird.
Brad Herda (:I can go down I-94 and drive straight in and go around 294. I could take highway 32. I could take all sorts of side streets. There's lots of ways to do it.
Steve Doyle (:Right.
Brad Herda (:But which way do you want to go and tell everybody which way you're going to go. And you'll attract those that want to be on the freeway. You'll track those that want to drive along the lake. You'll attract whoever it is along the way. If you tell them that's what you're looking to do and being very clear about it is, is really, really important. And being number one at something in that specific local area is far more important than being number 45,000 for everybody.
Steve Doyle (:Mm-hmm.
Steve Doyle (:Yes, 1000%.
Brad Herda (:If I could be the number one bubbler supplier to hospitals in southeast Wisconsin, great.
Steve Doyle (:Number one bullshit guy.
Brad Herda (:There you go. Thank you.
Steve Doyle (:I'm sorry.
Brad Herda (:People will come from left and right. You just need to know what that niche is. And too often people are afraid. They're afraid to narrow down. And what happens when you narrow down, you're not creating scarcity, you're creating abundance. Which seems ironic, but that's what happens.
Steve Doyle (:Yes.
Steve Doyle (:Well, when you really look at it, when you narrow it down, you become crystal clear on who it is that you're actually serving for your business. Like crystal clear. Like you actually know what the pain points are, what the frustrations are. You can talk to them intelligently about how you're going to help and solve them, all because you're able to niche down and laser focus in that specific area. So it just breathes life.
into your business because of that laser focus. It's great. Absolutely great.
Brad Herda (:Right, the windows, doors, and more guys. Not to pick on the remodeling folks, but the windows, doors, and more folks. Okay, they might be putting in my windows. They might be putting in my doors. Do I really want them putting in hardwood floors in my house, even though they're, right, the and more part. Do I really want them framing out, finishing a basement? Do you really want to do those things along the way? They're capable, but what's their niche? And...
Steve Doyle (:Why not, they do more.
Brad Herda (:When working at Bussaris at the time and doing all the subcontract work, guys would say, oh yeah, we do heavy plate, heavy manufacturing. Like how heavy do you go? Well, we go up to one inch plate. I'm like, OK, great. Call me when you do this. Big deal.
Steve Doyle (:Call me when you do Abbey.
Brad Herda (:Yeah, when you go to 12 inch plate, let me know. But I wanted to know what their core competency was. What do they do every day? Because if I can give them what they do every day, we're gonna create a much more successful relationship than the, well, I think I can do that, or I think that's okay. And you as a business owner, as the plumber, as the remodeling guy, as the...
Steve Doyle (:Great.
Brad Herda (:Landscapers or whatever it is. Landscapers want to do everything. Hardscape, lawn cutting. If you're really good at cutting grass and trimming and blowing grass off the clippings, off the driveways and all those things, do that. Focus on that. Don't focus on building patios and putting up retaining walls if you don't have the manpower, equipment or knowledge. Do it. Don't do it. Just don't.
Steve Doyle (:Mm-hmm. Yeah, absolutely. Mm-hmm. Absolutely.
Brad Herda (:Sub it out, find a partner, get a sales referral, get a kick, whatever, get a, get a referral opportunity. I almost use the word kickback, which is wrong. Can't do that. That's illegal.
Steve Doyle (:Yep. So this is just a great article that you wrote, Brett, focusing on helping a business owner really establish, do I own a business or am I working in a job? Can I get a business loan? Can I go on vacation? And do I actually know my niche? So if you answered yes to all three, congratulations, you own a business. If you answered no to one or more of them.
Congratulations, you're working in a job. Let's figure it out. Hire my friend, Brad. We've got solutions. We're full of bullshit. Here we go. Yup.
Brad Herda (:Wow, wow, here we go. He's on a roll.
And we're going to cut this one short, Steve, before you get on the roll, because it's night, it's late in the evening, it's Eastern coast, it's all East coast time for you. It is well past your bedtime. Uh, we're going to say, uh, farewell this evening before you get way off the deep end and we have to do a lot of editing and our producer would not like to do a lot of editing. So enjoy the rest of your evening, Mr. Doyle. I appreciate us going through this article and sharing this and, uh, have a great rest of your night, sir.
Steve Doyle (:Thank you.
No.
Steve Doyle (:All right, thanks, you too, Brad.
