Episode 45 - Finance Should Not Be The Most Complicated Part Of Your Business

Finance Should Not Be The Most Complicated Part Of Your Business

Does all the financial information for your business make your head spin? It doesn’t have to be this way. That's why we are pleased to talk with Terrell Turner from Business Talk Library by TLTurner Group about how to simplify your business finances.

Watch This Episode

Insert Video

Listen To The Podcast

Subscribe To The Podcast

Apple Podcasts
Spotify
Google Podcast
Stitcher
iHeart Radio

Read The Transcript Here


Podcast Transcription

Finance Should Not Be The Most Complicated Part Of Your Business



Tim Fitzpatrick
Does all the financial information for your business make your head spin? It really doesn't have to be this way. I've got a special guest with me today and we are going to dig into how you can simplify your business finances.

Tim Fitzpatrick
Hi, I am Tim Fitzpatrick with Rialto Marketing, where we believe marketing shouldn't be difficult. All you need is the right plan. Thank you so much for taking the time to tune in. I am super excited to have with me Terrell Turner from Business Talk Library. Thanks for joining me, man. I really appreciate it.

Terrell Turner
Absolutely. My pleasure. Thanks for having me.

Tim Fitzpatrick
Hey, you bet, man. I had the good fortune of being on your podcast a little while back, so I appreciate you popping on. And I'm excited to kind of dig into some of this financial stuff, because, for most business owners, the numbers can get pretty overwhelming.

Terrell Turner
It can be.

Tim Fitzpatrick
Yes. Yes. So before we jump into it, I always I've started to ask these fun fact questions just to help people get to know you and frankly, me a little bit better. So what's your biggest pet peeve?

Terrell Turner
You know, funny enough, I think it's like seeing dirty dishes in the sink.

Tim Fitzpatrick
I remember being in college and we used to call it kind of Mount Dishmore where like it went over the top of the sink. You knew that it was time to have to clean. Yeah, I could see that. That actually is a big pet peeve of mine. I'm a super neat freak type person, so it kind of drives me nuts when dishes are in the sink. But I will tell you my biggest pet peeve, and this is really more it's I mean, it's life in general, but it happens in business a lot where it drives me nuts when people don't take responsibility.

Tim Fitzpatrick
You know, it's like if you messed up, just own it. Let's learn from it and let's move on. I cannot stand it when people don't you know, they just looking for the blame game. Right. That bugs me. So tell me a little bit more about what you're doing with Business Talk Library. You've also got your company, TL Turner Group. Give us a little bit more background on you and what you're doing to help business owners.

Terrell Turner
Yeah, so my background in accounting and finance. As you can probably see from the shirt, I got a master's degree from Notre Dame in accounting. And I know as soon as people see that, they're just like, oh, he's one of those. And that I completely understand all the stereotypes about accounting. But one of the things that I decided to do after working with some of the largest companies in the world, like General Electric and other Fortune 500 companies in different roles, is, you know, I spent a lot of time working with people who didn't have an accounting and finance background. And really, I became the translator of how do I take what the financials are telling us and then translate it into something that they can go do, whether it was an engineer, a salesperson, or whether it was a marketing team.

Terrell Turner
And so, you know, I took one job after General Electric and work with a tech startup as a finance director. And we went through the process. We bought two different companies for twenty plus million and then we raise about sixty-five million in private equity. And then I kind of felt like, OK, I have all the pieces that I need to go build my own firm to really focus on helping small businesses and helping them translate financials or helping them get the insight that they need to actually be effective in their business and to not do it in such a stereotypical way to have personality, to have fun and make it more interesting.

Tim Fitzpatrick
Yeah, awesome.

Terrell Turner
And one of the big things that we've done with the Business Talk Library was just that is we started creating content which like that we had you on the show to talk about your business, your background, what you're doing with your marketing firm, and how you made marketing simple. And then the same way we're just like, hey, how do we make finance more simple for business owners?

Tim Fitzpatrick
I love it. I think that's why we click. It's so easy to make things overcomplicated and we really need to boil things down to their simplest form, especially when you get into things like all the financial numbers. Those of us that don't have a background in that, I mean, seriously can be like reading a foreign language. You're looking at the stuff going, I don't know what this means. So I love that analogy of kind of where you're helping people interpret that data so that they can then make good business decisions from there.

Tim Fitzpatrick
So I love that. So, when we think about business, when you first I don't know, when I first start any business, you know, there's all this excitement, you know, you're like, I can't wait to get into this. But there are so many different elements that we have to consider as we form that business. You know, you've got your operations, your finance, your sales, your marketing. It can really be overwhelming to figure out what we need to do first. What kind of advice would you have from the finance side for somebody that's just starting out? What do they need to look at and consider?

Terrell Turner
Yeah, I mean, I always work with a lot of business owners that are kind of at that early stage. And one of the first things that I tell them is you need to get at least a relative idea of what is it going to actually cost you to run this business because that way you kind of get a starting point. It will actually inform help inform your pricing. It will actually help you help, you know, like, hey, how aggressive do you need to be with your marketing and your sales program?

Terrell Turner
Because if you're going to start a business that has it's going to cost you 10 grand a month to run this business, then, you know, you need to get sales and to be able to cover that. But if you run a business and it's only going to cost you, let's say, three hundred dollars a month to operate your business, it kind of helps you understand how you need to dial-up or dial back your other strategy. So the first thing I say is let's just get an idea of how much will it cost you to do what you're trying to do on a monthly basis?

Tim Fitzpatrick
Got it. What are some of the biggest mistakes that you see new business owners making when they get into it?

Terrell Turner
And I think a lot of business owners, I mean, they're very excited about their idea and they just run out there and they jump into the idea and they don't really get a grasp of, hey, you know, what could the possible financial future look like? And when they start just jumping into the idea, they start making sales or people are buying. It's like, hey, people are buying the product and we're selling a ton of stuff. But they didn't really factor in.

Terrell Turner
Well, what about all the expenses that you have to pay? And then tell me, what do you have leftover after that? And what I find with a lot of business owners that were just so excited about jumping in is after they paid all their expenses. They're at a negative number, which tells me you have too much expenses or your price isn't right, like people maybe buying it off the shelves because you're like the lowest price out there, which is the best scenario for you always.

Tim Fitzpatrick
Yeah, yeah. If we're not profitable, we're in trouble, right? We could be making a ton of sales and then you find out you're not profitable. It's not a good thing. So as they start to grow. Right. They've done this initial work. They kind of know what it's going to take to run that business as they start to grow. What kind of financial information do they need to be monitoring on a regular basis?

Terrell Turner
Yeah, so I always tell people, I mean, definitely, you want to monitor your sales and you want to see how are your sales trending. And an important factor on sales is you also want to break it down to a customer level. So if you know that you're making ten thousand dollars a month and in sales and revenue is translated, OK, if you look at what the average customer spends, how many customers is that? And that way it kind of gives you more of an operational if you're running a business, you know, hey, for me to hit ten thousand in revenue, I need to have 13 customers. I need to have 15 customers. It gives you it breaks down a big number into something that you can actually manage to where you can say, hey, what do I need to do to go get 13 customers if I want to hit X in revenue?

Terrell Turner
And then I will tell them you want to look at your gross margin. I mean, that's really taking what your revenue is. If you subtract out the cost that the cost involved for you to deliver the product or to deliver the service, whether you have to, like, outsource something, you want to see what that is, because that gross margin tells you, hey, are your prices health enough or are you managing your product cost well enough for you to be able to have enough profit to then fund all the back office stuff like, you know, whether it's rent or whether it's your marketing strategy or whether it's paying other management-level employees because if you don't have enough in your gross margin, you're not going to be able to fund those other things that are going to help your business to continue to grow.

Terrell Turner
So you want to kind of break it down. I always tell people I kind of break it down to like three sections, like your revenue and your gross margin. Those are kind of like the main character is if you think about it like a movie, those are the main characters in a movie. And then when you start thinking about kind of your sales and marketing, your R&D and like all of your general administrative, those are like your supporting cast.

Terrell Turner
They are part of the movie, but they're not the main thing, but they help the movie move along. And then you have kind of like your critics and your supporters. So those are like your investors and the bank and the IRS, like they're involved in the story now. They're not helping on the day to day, but they are involved and you can't forget about them. So it's like you start to then conceptualize, hey, this is what I need to pay attention to the main characters. I need to utilize the supporting cast, but not make them the main thing, because if I'm not generating enough gross profit, I'm really not going to be able to keep my business alive.

Tim Fitzpatrick
Yeah, got it. So I think this is often overlooked by a lot of business owners. But give you an example, I talk to a prospect. This was probably a year and a half to two years ago. It was a manufacturing company and they had actually just been bought by a small private equity firm. Eighty percent of their business was done with one customer. And when they told me that I almost fell over, I was like, oh, my God, that is I mean, I didn't tell them this outright.

Tim Fitzpatrick
And I was like, that is not good. What it's not uncommon, I think, for a lot of small business owners to be to have one customer that they're doing a lot of business with. Is there a number as a percentage of overall sales that you look for with that where you go, man, you've got one or two customers that are doing X percent of your business. We need to see what we can do to start building up other customers so that you're not so heavily dependent on these one or two customers.

Terrell Turner
Yeah, I always tell people I mean, I kind of look at I use like a fifty percent rule. And I would say if one customer makes up more than 50 percent of your business, there's a couple of questions we need to ask. One is, is that person on a long term contract or is that company on a long term contract? If they are, that's going to give you some security for a little while. But we still need to figure out how do you how do you start either going out, getting other customers, how do you upswell, other customers, or how do you build up your customer portfolio in other areas?

Terrell Turner
Because, you know, if something happens to that customer's business or they decide to reduce their orders is going to have a drastic ripple effect into your business. And as a business owner, I mean, it's like it's exciting to get big contracts. But you also want to think about the sustainability, the longevity, because, you know, business is a I mean, I guess you say it's a concert of so many different relationships. And if something happens in this relationship, if that relationship is that big of a part of your business is going to actually, ripple and caused you some unexpected issues in your business, so you want to really, in my opinion, you really want to try to not allow one customer to be more than 50 percent of your revenue base and, ah, start developing strategies to figure out how do you start changing it?

Tim Fitzpatrick
Yeah, because when you were talking about looking at overall sales trends and then you said, you know, we also really need to look at the customer level, I think that's such an important thing because it's not only is it the revenue that each individual customer is generating, but you also touched on gross margin and profitability. Sometimes these large customers, they're actually not great customers. They're not very profitable. And so looking at your total numbers, but then your numbers at the customer level and how profitable each of those are is really, really important.

Tim Fitzpatrick
Because, I mean, we've I think we've all seen this with, you know, with e-commerce. I mean, we don't work with a lot of e-commerce companies. But, you know, there's a lot of people that are doing a ton of business on Amazon. And you talk to them and it's like, yeah, Amazon is 80 percent or 90 percent of my e-commerce business. I don't know about you, but that's not where I want my business because who knows?

Tim Fitzpatrick
Amazon may look at my sales and go, man, I love that. I'm going to make the same products through Amazon basics and undercut your price. You know, it's like they have all they are so much more data than any of these affiliates that are selling through Amazon. So I think it's so important to keep that top of mind because those large customers if something happens with them, your business could literally be gone overnight if you're too dependent on them.

Terrell Turner
Yeah. And I think it also locks you into you know, you have to run your business according to their rules, because if they're that big and they make a change and let's say if they want to change how products are advertised or they want to change, like, hey, you now have to do two days shipping, you don't know, maybe that will destroy whatever little profit margin you had. But if they're 90 percent of your business, you don't have a choice but the chain.

Terrell Turner
So it's just like you no longer are in control of your business. When you have a customer that is more than 50 percent of your base is like really their decisions are what's really controlling your business, not you. And no business owner really wants to be in that situation.

Tim Fitzpatrick
No, it's kind of like the tail that wags the dog. Right. That's not a good situation to be in. So when we look at the cast of finance people that are involved in any business, I think from a small business perspective, a lot of those characters, there's three main people there. Right. There's you've got your bookkeeper. You've got your tax professional, your CPA. And then you potentially as you grow, you may start to have a CFO, a chief financial officer that's running and overseeing the finances day to day. What's the difference of these three different characters that are coming into the story here?

Terrell Turner
I think that's a great question because a lot of business owners struggle with this because I think they look for one person to be all of them. And it's very rare that you will find one person to be all of them. So to just take a step back. I mean, you're a bookkeeper. They're going to be there to help make sure the books are like that. You have the financial data tracked in the right place. If you think about it, all the transactions, all the things that you're buying, the things that you're selling, all those expenses are going into some kind of system, whether you're using an online system or whether you're using a lot of the spreadsheet type of approach or in very rare cases, some people are still writing it down.

Terrell Turner
It's like, however, that works. The bookkeeper's job is just the keep that stuff organized so that you can look at it and say, OK, how much did I spend this month? That way the bookkeeper organized it. So you can call a reporter, you can look at it to see and then kind of your tax professional or your CPA and how to even put tax attorneys in that category. They're really going to focus on the tax code and how the tax code impacts your business, which is a very specific thing.

Terrell Turner
I mean, yes, they understand accounting and yes, they understand other aspects. And they may have a general idea about finance, but most of your tax professionals, that's what they specialize in. They specialize in taxation. And what I find with a lot of people is they say, well, I talked to my CPA about what I should do and running my business. And I would say, no offense to your CPA because I'm a CPA as well.

Terrell Turner
Now, I don't practice I don't specialize in tax, but I have my certification. But I was like, you know, your CPA probably has never run a business before. They probably know very well what you need to do from a tax standpoint. But they don't know how to really help you drive profitability because they've never had to do it before. Yeah, and that's that's where the CFO comes in to where the CFO is the one who can take what the bookkeeper has done and then also understand the strategy of your business and then kind of help you develop.

Terrell Turner
Hey, based on the numbers, this is how we should kind of tweak our strategy to really hit the financial goals that we're after. And they also do advanced things like if you want to raise capital, you know, the CFO is the person that you want involved in that discussion to help you figure out how to raise money or whether you want to go get a loan from the bank. And if you don't understand the role that all three of these play, what you tend to do is you tend to ask the other hand, to ask the wrong.

Terrell Turner
I guess you say it's in the ask them the wrong type of questions. And I always tell people, if you want to understand how your day, how your expenses and revenue are being organized, you know, talk to your bookkeeper if you want to understand what the tax implications are, your tax professional, your CPA, which you may see once or twice a year. But if you want to understand how your business is doing financially and what changes you need to make, the CFO type of person is the one you should be asking those questions to.

Tim Fitzpatrick
How do I know as a business owner when to bring these different people into my business? Because I think a lot of people are probably thinking, oh my gosh, CFO. I mean, I can barely hire, you know, the next salesperson. How am I going to bring in a CFO and how does that work? So how do they know when to bring these people in at each phase of their business?

Terrell Turner
Yeah, I mean, I think in the beginning, I mean, your bookkeeper is going to be your very first person that you probably bring on board. And that's in a lot of times you can get whether it's like Quickbooks or Xero and you can kind of do it yourself. But I always tell people is if you start thinking about how you need to spend your time to grow your business, if you need to spend more time on the operational side and you just realize, like, hey, every month goes by and I never really open my Quickbooks, I never go back in organized.

Terrell Turner
And then it's just like, hey, you need to hire a bookkeeper and a bookkeeper is probably going to be you're not probably it will be your least expensive out of all three roles, because like I said, they're there to just help you organize the information. Now after they've organized information and so you get to the end of the year and you're like, OK, I'm doing things that are more than just when I was just working a day job or whatever.

Terrell Turner
You may need a tax professional to help you file the tax returns or whatever, or if you're trying to do something that's a little bit more complex, like you're moving into a different business. It's worth it just to have a conversation with a tax professional just to ask some questions like, hey, what implications or what thing should I consider if I'm doing this type of business and they should be able to lay things out for you. Now, when you get into the point where you're trying to grow your business, where, hey, your bookkeeper provides you with the reports, but you have no idea what those reports mean or you're trying to figure out, should I do this or should I do this?

Terrell Turner
Well, what's the financial implications? Those are signs that, hey, you know what? You need someone in the CFO realm that can break that down to help you navigate those. And the good thing is you don't have to bring all of these people on as employees of your business. You can contract this stuff out for a fraction of the cost. And a lot of times like it. It saves you a lot of money because for the most part, until your business really starts growing at a I'd say it starts exceeding, let's say, two hundred and fifty thousand a year.

Terrell Turner
You really probably don't need a CFO on a regular basis. You probably need someone that can help, maybe create some reports for you and help explain a couple things for you. And then you can kind of self-service that way where you can kind of move forward like, hey, they gave me the framework that I need to keep making decisions. But as you need to spend more time on growing your business, you need to spend more time whether it's interacting with customers. You don't have the time to really dig into the numbers. Then you need to say, OK, we probably need a regular ongoing relationship with a CFO to help us navigate this.

Tim Fitzpatrick
Yeah. Do you have any suggestions for how to best, you know, the questions that we should ask when we're looking at hiring these people or how to best go about finding these people to make sure that you've got somebody that you can rely on that that, you know, they're doing a good job?

Terrell Turner
Yeah, I think for the bookkeeper, the main question that you're going to ask is, hey, what is your regular schedule of being able to get me the information? I mean, if they can do it on a monthly basis, then you're and also tell you, like, hey, we can get it to you by the fifth of every month or by the fourth of every month or whatever date you guys choose on. If they can deliver the information on that date, more than likely you're going to get what you need from a bookkeeper because you just need to see all the ins and outs organized in some legible way.

Terrell Turner
And then when it comes down to a tax professional, I always say is I'm like, hey, have you worked with my type of business before? Or actually, it really comes down to really what questions are they asking you? And it's like if the tax professional is asking you questions that get you comfortable, that, hey, they're really taking time to understand my business, my situation, because tax law can get very specific. So you really want to pay attention less to the questions you ask them and more to the questions that they ask you.

Terrell Turner
Because if they're not asking you questions or really understand where you are, what you're doing, then that tax professional may not necessarily be looking out for your best interests. And then when it comes down to the CFO, I think the questions you want to ask in that space, it really comes down to, hey, here's the scenario. I have this option, this option, which option is better for my business and why and that why question becomes very, very important, because the CFO job is not only to just give you an answer or give you a recommendation, but to help you understand why that is the right recommendation.

Terrell Turner
So as you're taking steps as the business owner, you can be confident about the decisions you're making and you can actually start to see why this was a right or wrong decision. And if your CFO is not able to answer, hey, this is why I'm giving you this recommendation, then that's usually a sign that, hey, this person probably isn't the right fit for my business. They aren't the right fit for what I need to do.

Tim Fitzpatrick
Awesome, I love that. Thank you for sharing that. And this has been awesome information. I know it's going to help a lot of people. Do you have any other parting thoughts before we wrap this up about finances that we should keep top of mind?

Terrell Turner
Yeah, I always tell people, I mean, understanding the finance side of your business, I mean, as a business owner, I mean, you got in business because you are passionate about whatever it is that the service or the product that you have. And a very important part of you being able to continue doing that is making sure that your finances support you being able to continue operating a business. So it's very vital for you to understand the finances now, just like a learning a foreign language, you aren't going to become an expert overnight.

Terrell Turner
And the goal is really for you to kind of like what I did when I lived in Brazil. It's like I learned enough to be able to have a functional conversation. But when it got to more complex things, I would ask my friends who are Brazilian to help translate or help me understand stuff. And as a business owner, that's what you're looking for, is you're looking for who's going to help me get enough of a framework so that I can understand the basics and kind of navigate some things on my own.

Terrell Turner
But as I get some more complicated things, that's when these people step in. They help me kind of navigate the more complex things. But don't feel like you have to become a accountant yourself. Your goal is really to get a solid framework to help you navigate the financial side of the decisions that you need, that making your business.

Tim Fitzpatrick
And with what you're doing, you're doing some stuff at that bookkeeping level. And then you're also getting involved more at that CFO type level from a consulting basis, right?

Terrell Turner
Yeah. So one of the things that we're actually released, we call it the Bookkeeper Plus program because we understand it. A lot of businesses are probably somewhere in between a bookkeeper and the need of a CFO. So what we've done is we specialize in CFO services. So what we've done is we created some strategic partnerships where clients can come to us to get bookkeeping, plus kind of a la carte, customize selection of the specific types of CFO services that are right for where their business is now.

Terrell Turner
And kind of we can scale that as they continue to grow and they're like, say we can make by doing that, we make it cost effective to give them both the bookkeeping plus the CFO, the elements of a CFO that they need to continue growing and keeping their business healthy.

Tim Fitzpatrick
Yeah, I love that you and I were talking briefly before we jumped on live here. I think that having that ability where it's like, you know, your books are being taken care of and then having somebody like you just being able to say whether it's weekly or even if it's just once a month saying, hey, we reviewed the financials, here's where you're at. And just giving them those high level details that they need to make good decisions is it's invaluable.

Tim Fitzpatrick
So I don't talk to a lot of people that are offering a service like that. So I love the fact that you're doing that. And I would highly recommend that you guys reach out to Terrell if you're in that place. So where can people learn more about you?

Terrell Turner
Yeah. So the Business Talk Library is probably a great place for people to start because at the business library, my wife, who's also the CPA and CFO as well, you know, one of the things that we've done is we create a ton of free resources there. In fact, the interview that we did having you on the show to talk about your business and your journey, and we have that show. We also just launched a Small Business CFO Show where my wife and I, we dive into some of the real world topics that people are asking about and that businesses are facing.

Terrell Turner
And we just talk through those topics to give people the context and the insight of what they need, because, you know, part of being successful in that area is just having the right level of information or knowing the right questions to ask or the right factors to consider. So we have a ton of free content there. And then also, like I said on the website, you can find the link to where you can work with us to where you can work with us one on one with our company as we do the bookkeeping plus program or CFO services. So I would say Business Talk Library is the best place to go. Ton of free content as well as ways to get in touch with us to do business with us.

Tim Fitzpatrick
Awesome. So that's businesstalklibrary.com. Terrell, thank you so much for taking the time and I really appreciate it. I've learned something. I know a lot of other people will as well. And for those that are watching, listening, thank you so much for tuning in. I'm Tim Fitzpatrick with Rialto Marketing. If you want to gain clarity on where to focus your marketing efforts right now to get the best return. Hop on over to our website at rialtomarketing.com.

Tim Fitzpatrick
That's R-I-A-L-T-O marketing.com. Click on the get a free consultation button. I guarantee you'll get a ton of value from that call and walk away with a lot more clarity on where you should be focusing your marketing efforts. Thank you so much. Till next time, take care.


Connect With Terrell Turner



About the Author Tim Fitzpatrick

Tim Fitzpatrick is the President of Rialto Marketing. At Rialto Marketing, we help service businesses simplify marketing so they can grow with less stress. We do this by creating and implementing a plan to communicate the right message to the right people. Marketing shouldn't be difficult. All you need is the RIGHT plan.

follow me on:

Leave a Comment: