In this episode, we will be interviewing Cyndi Thomason, the author of the best-selling book, Profit First for Ecommerce Sellers, a Certified Master Profit First Professional. She is also the founder and president of Bookskeep, a U.S.-based accounting, bookkeeping, and advisory firm for eCommerce sellers worldwide. She has a passion for data analysis and process development. She uses that passion for educating her clients and helping them structure their businesses to maximize profits.
Let’s dive right in and learn more about Profit First and how to implement it in our business.
[00:01 – 04:59] Opening Segment
- Cyndi shares the story about her motivation in writing her best-selling book
[07:35 – 15:14] Profit First for Ecommerce Sellers
- Cyndi talks about Profit First and how to implement it into the existing Ecommerce business
- Parkinson’s law, its history, and how it may apply in our business
[15:15 – 22:40] Finding The Right Strategy in E-commerce for Your Business
- Cyndi shares her opinions on eCommerce’s common strategy, which is to grow and build your business by reinvesting all of your profits back into the business.
- Recommendation to inch forward and go full time in Ecommerce Business
[22:41 – 31:49] The Biggest eCommerce Opportunity in Profit First During COVID-19 Pandemic
- Cyndi talks about how to make financial statement useful
- Check your gross margin and monthly comparison
- The current biggest eCommerce opportunity in terms of Profit first and open space (due to COVID-19 Pandemic)
[31:50 – 47:15] Prevent Procrastination in implementing Profit First
- Cyndi shares the biggest failures and shortfall that she has seen in the E-commerce business
- How to prevent procrastinating in implementing profit first in your business
- Cyndi talks about coaching and Profit First consulting program in Bookskeep
[43:20 – 46:00] Top Questions for Vetting a 3PL
- Lightning Round segment with Michael
- Favorite book: The Art of Possibility by Benjamin Zander
- Hobbies: Gardening
- Successful e-commerce entrepreneurs vs. people who give up: Resilient to figure it out mindset
- How to Connect with Cyndi – links below
Email us –> support@Firing The Man.
Cindy, can you explain what is profit first,
profit first is a strategy for taking the money that you bring into your business and giving it a purpose.
Can you explain Parkinson’s Law for our audience?
Parkinson’s Law is, if there’s a lot of something, you use more of it. If there’s less of something, then you tend to conserve. If you’re looking at that bank account, and that money is just all mixed up there, we start figuring out ways to use that money.
What are some of the biggest failures and shortfalls that you’ve seen in your clients, e commerce businesses,
not recognizing when it’s over?
Welcome, everyone to the firing the men podcast, a show for anyone who wants to be their own boss. If you sit in a cubicle every day and know you were capable of more than join us, this show will help you build a business and grow your passive income streams in just a few short hours per day. And now your host, serial entrepreneurs, David Schomer, and Ken Wilson.
So Ken we just got finished with one of the best interviews we’ve ever done. And the story behind this episode goes back about a year when I read profit first for e commerce sellers. I remember I read it, I called you I was like, dude, you got to read this book. This is going to solve all of our cash flow problems. So we read this book. And when we started this podcast, and we’re coming up with dream guests, Cindy Thomason was one of our dream guests. And today, we recorded an awesome interview with her. What did you think?
It was fantastic. And I remember when you reached out and said, Hey, Ken, you got to check out this book. You know, I read it got everything set up, and then nothing. And it’s like, what one of the ways to fix cash flow. But it was the hardest thing to get going. And one of the things Cindy covered in the show was the number one reason people do not implement profit first and how to fix that. So yeah, the show was amazing. She covered a lot of great stuff. And I think you’ve mentioned it a couple of times. You know, being an accountant. Cash Flow is one of the number one issues for e commerce businesses. And if you can get profit first set up and running, you know, you’re off to the races.
Cash is king baby. This is an episode you’re not going to want to miss.
Welcome, everyone to the firing demand podcast. On today’s show, we have the pleasure of interviewing Cindy Thomason, the author of the best selling book profit first for e commerce sellers. Ken and I read this book last year and have been implementing the strategies discussed by Cindy in our own businesses. Welcome to the show, Cindy.
Thanks, David. hi Ken it’s great to be with you guys.
All right, well, first question, tell us a little bit about yourself.
Well, I have a accounting business called bookskeep that I founded about six years ago. Um, I was looking for a lifestyle business somewhat like a lot of Amazon sellers. I had a daughter at home that I was needing to homeschool because she had dyslexia and had accounting training and worked in corporate world. And cloud accounting was coming along about that time. And I realized that I could create this remote business started out because a friend asked me for help. But I saw that there was an opportunity to, to build this business to help ecommerce folks kind of live the same kind of life I was looking for, you know, having having the opportunity to work but be flexible in my schedule and that kind of thing.
Now, as I mentioned in the introduction, you have authored a book, titled profit first for e commerce sellers. What led you to writing that book?
Well, when I started this business, cloud accounting was just getting going. And I had the opportunity to go to San Jose to the first QuickBooks conference. And I was in one of the sessions and it was after lunch, and it was really hard to stay awake. But over in the room next door, people were laughing, and you just hear this whole uproar of laughing. And so after about 20 minutes, I’m sitting here, and I’m nodding off and I think I should go over there. So I got up and I went to the other room, Mike mccalla Wits was giving his very first talk on profit first. And I heard the end of it didn’t quite understand everything because I didn’t get the context. But he gave us the book and I read the book on the plane ride home. And I realized that all of my clients, for me to keep them as clients, they needed to do something like this, because if they didn’t, I saw that cash flow issues they were having and I was just concerned that you know, as a long jetty, concern for my business, they needed to be healthy. So I called Mike in Ron that runs the profit first professionals and I joined and in that whole relationship, Mike became my business coach Mike mccalla Wits became my business coach. And he was very adamant about you need to create a niche specialization, because you can’t be all things to everyone. And if you would specialize, it would help you serve those people better. My husband comes from a manufacturing background and process is, you know, just baked into our conversations that we would be able to get our processes better, we’d be able to market better if we focused on one area. So in that coaching with Mike, he said, Okay, so what niche would you pick, and at that point, I had a handful of e commerce clients that had come to me word of mouth. And I decided that, you know, they were after a lot of the same things, I was the flexibility in their lifestyle, they were comfortable with technology, and, you know, we work remotely, so I need people that are going to be okay with helping me log into, you know, their Amazon account and that kind of thing. So there was just a lot of similarity in the way we like to work. So I started working and focusing on e commerce clients. And then Mike’s book, profit first got picked up by Penguin house, he had self published the first edition. So he was sending out emails saying, Okay, you’ve been implementing profit first for a while, what should I add in the revised edition? And I kept saying, Well, my clients need inventory. And my clients, you know, need information about, you know, these all these different things that I have in my book. And any you never picked up on it. And he’d send out another call for and I’d send the information. And finally he said, Okay, I hear you, why don’t you write your own book? Because that’s too specific for what I have to publish for a mass market. And I said, Okay, well, do I have permission? And so of course, it was a negotiation around the permissions part of it and the license. But, but that’s what led to it because I, I could just see there were pieces of how the original profit first work that I had trouble implementing with my clients, and so I had workarounds for them. And that’s why I wanted to get that information out to help people see that it does work for e commerce, because I had several clients come to me and say, Yeah, I read the book, but it doesn’t work for e commerce. Oh, my Oh, yeah, it does. And so that’s how it came about.
Now, Cindy, can you explain what is profit first? And how can you implement that into an existing e commerce business?
Sure, profit first is like the envelope system that you maybe remember that your grandmother had, you remember, a lot of our grandparents would have envelopes for things like they put money in for rent, or maybe they had an envelope for their groceries or for Christmas presents, money had a purpose. So when that money came in, it went into an envelope for that specific purpose. So profit first is a strategy for taking the money that you bring into your business and giving it a purpose. So for ecommerce sellers, one of the big things that we have to keep in mind is we want to keep the inventory flowing. So we would have an envelope for inventory, we would have an envelope for profit, because we we are taking the risk as a business owner, we need to be sure that we are also getting the reward for the effort that we put in as owners of our business, their buckets for taxes, because the government is going to be sure and get up a portion of it. So having those tax dollars set aside is another bucket where we, we know that based on the income that we get in, we have to put money in these buckets. Well, what that does is it makes things a little shorter in the operating expense bucket. And by doing that, it really creates the efficiency and the innovation, and just the frugality that you need to have to put the right pressure on your operating expenses in your business. So profit first just really allows us to give our money purpose, and to ensure that we take care of the important things in our business, and stay lean on the things that can get bloated over time. So when you’re in existing e commerce seller, and you’ve got this business going on already, and you’re probably getting your money in and putting it in a operating checking account, what we do is we work with our clients to create a few accounts just to start and we start moving that money off into additional accounts. So for example, I like to think about it as a beach entry and not a cliff dive because what you’re wanting to do is You don’t want to put shockwaves into, into your cash system. Because if you do things too quickly and too fast, what happens is you just moving money around and you think over a few weeks or a few months, I’m just moving money around, this is never gonna work. If you do it slowly. And with the proper steps, you can move money in a way that you get yourself positioned to be able to handle those expenses, like inventory separately from your operating expenses, you position yourself to handle and build up that tax account and your profit account as you’re cutting back on your expenses. So what we do with most of our clients, their already existing businesses, and we just design that beach entry so that we’re taking some baby steps towards making this happen, as we’re getting expenses under control. And we’re looking to play out a strategy that’s going to take sometimes 18 months before it’s actually working exactly like we want. But absolutely, it can be done for businesses that are up and running.
Now, one thing that really stood out to me when I was reading this book was Parkinson’s Law. And just to give you a little bit of background here, I’ve been in business for a little over four years, and I would say my biggest struggle has been cashflow. And as a CPA that has been incredibly humbling in when I read about Parkinson’s Law, it just seemed to explain all the issues that I’ve been having. And so can you explain that for our audience, and how it may apply to some of the businesses that you have in your practice?
I sure can I love Parkinson’s Law.
Parkinson’s Law was created by Cyril Northcote Parkinson, he was a British naval historian, and an economist. And what he did was study bureaucracies, specifically, the British Navy, itself. And what was interesting to him was, you know, people would be busy, and they would bring in new resources to help, you know, alleviate the buisiness in the office, and those people would just immediately be busy. And Parkinson’s Law, what he learned from studying this is that we use what we got, I mean, that’s the shorthand of it. So if there’s a lot of something, you use more of it, if there’s less of something, then you tend to conserve. The example I like to use when I speak, is a tube of toothpaste, when I’m out traveling, I take this little tuba toothpaste with me, and I try to make that toothpaste last as long as I’m going to be on the road. And so many times, it’s just a little.of toothpaste on my toothbrush. But when I’m at home, and I’ve got this big tube of toothpaste, you know, I’m, I’m very liberal with it, and I fill up my toothbrush. And if I’m at home, and my toothpaste is going to run out, and I’m not going to get to the store for a few days, I go back to conserving because I only have a little bit of it. So when you when you think about Parkinson’s Law and apply it to money, you can see that if you’re looking at that bank account, and that money is just all mixed up there with, you know, maybe some of its going to have to pay for your inventory, maybe some of its going to pay for your, for your payroll or for your warehouse rent. When you think about all of those things, all jumbled up into one account, you don’t really go through the mental math to figure that out. You just look at it and you say, there’s a lot of money in here. And then you start acting like how am I going to use this money. And the way Parkinson’s Law pays out just because of human behavior is we start figuring out ways to use that money. So if we separated into the bank accounts, like I described earlier, then you’re giving that money a purpose, and that you can look at your inventory account and go, okay, I’ve built up this much money, when am I gonna have to order again? Am I going to have enough? Am I setting enough money aside for making my next purchase? You can look at your operating expense account and say, Okay, this is how much I have to cover every month. Am I going to have enough in here? And just by having separate accounts with a purpose, you start to you start to short circuit that Parkinson’s Law a little bit because you’re able to realize that that money has a purpose and that it can’t just be used because there’s a whole lot of it there.
Yeah, excellent description. I think Parkinson’s Law for me also chews up the the money but also the time as well if I don’t allocate it properly.
Exactly. You know, I think it should be taught in school because how many of us had term papers that were due You know, the last two weeks of school or something, and we started on week three, before the end of school, you know, we had a semester to work on them. But you know, we wait, we waited because we had a whole abundance of time. So it applies to any resource that you have.
So a common strategy in e commerce is to grow and build your business by reinvesting all of your profits back into the business, you know, via inventory, adding new products product launches, what is your opinion of this strategy?
I think it’s done oftentimes with the goal of growing the top line. And I think that’s dangerous. And what I see played out over and over again, is people, I’ve even heard people say my mastermind is working on growing at a certain level, and we all have to, to grow our top line, by a certain level, by the end of the year for us to meet our goals. And I’m like, oh, my goodness, you know, a whole bunch of people with different businesses, all working towards a common goal of growing top line revenue. And that may just not be the right strategy, it is only a good strategy. If you have got your business dialed in, and you understand your profit margins, from a gross margin level. First, are you making money in the business model that you have? If you scale a business, that’s not making money, you’re just going to grow that faster. And that doesn’t in, you know, you, you’re just going to get to a deeper level of debt, and a worse cash situation, using that model. Sales is not the answer to every problem. And I prefer that, when we work with our clients, what we want to do is be sure that we’ve got the business model dialed in, that that business is going to be generating gross margin enough to support a reasonable operating expense to leave you with some net profit, you know, just making sure the business is sound, before you pour the gas on it. Because whatever you’ve got, when you start putting gas on it, you know, either you’re gonna burn out of control, or you can go far, but you’ve got to have things dialed in. And I think people skip the getting things dialed in part.
So just to expand on that question, the title of this podcast is firing the man. And that often means people that want to quit their full time job, and run an e commerce business. Say somebody wants to quit their job in one year, and they want to pay themselves $50,000 a year. But at this point in time, they cannot take $50,000 out of the business, or else it would crumble, what would be your recommendation to that person to inch forward towards that goal?
Well, that’s the recommendation you inch forward. And we’ve worked with many clients trying to get in the position to go full time into their business and leave their their day job or, or whatever their employment is, and profit first, because Mike, in his book, he did the research to understand what the benchmarks are of a healthy business. Depending on the size of a business, we know what percentage should be taken out of that business to pay for the owners involvement in the business. So when we know that we can kind of reverse engineer and get back to Alright, how much do I have to sell? At what profit margin gross profit margin to get me to the point of making this kind of money? And what we what we do with clients is we you know, if they’ve got an existing business already, we look at how that business is performing and how much we can actually carve off into an owner pay bucket. And then we start to build on that and we look for ways can can we increase price? can we reduce the cost of the product? can we reduce operating costs, all the levers we start to we try to figure out what can we do to pull those levers so that we can move the business in the direction of being able to support the owner that’s wanting to go full time. And we don’t just do it as an experiment. We do it in a way that we start putting that cash aside in a bank account. So that as we’re inching forward, there’s a bank balance building up so when we finally say all right, today’s the day you can turn in your notice, we’ve got some cash already set aside so that if there’s a problem in the first you know, few months, you’ve got your salary sitting aside that can cover you while things recover. And so it’s not just an exercise of building a model, we’re actually building some cash, at the same time to be able to have a little bit more comfort in making that transition.
Now, I’ve heard you mentioned gross profit margin quite a few times. And can you explain to our listeners what that is, and how that differs from net profit margin, and why you play such an emphasis on that gross profit margin.
The gross profit margin is you take your revenue, and then you take your direct cost out for producing that product. So it may be what you pay for the manufacturer to develop the product, it may be some prep center work to to get it packaged up and labeled or and you know, in the way that you want to present it, there’s probably some shipping that you incur the expenses that you have in getting your product ready to go to, you know, Amazon, Amazon fees are also put in the direct cost bucket. So you take your your revenue, you subtract out those direct cost of getting your product to your customer, and that gives you your gross profit. And if you take that gross profit and divide it by your revenue, multiply it by 100. That’s your formula for gross profit margin. And you want that to be 30% or above. Because if you don’t achieve at least that level, you’re not going to have enough money to throw into the operating expenses to run the organization. So that’s gross profit margin, the net profit margin is when you take the calculations that I mentioned before revenue, minus your cost of goods sold type expenses, the direct product cost, then you subtract out your cost for advertising your cost for your salary for for you and your team. You may have subscriptions, all of those expenses, insurance, all of those expenses will come out as operating expenses. And what’s left after that is your net profit. And that net profit, we want to be somewhere around 10%. Because if it’s less than that, you’re not going to have enough money to pay your taxes. And your business is not generating cash to be able to grow.
All right, very nice. That makes a lot of sense. I’m glad you clarified that. So at the end of the month, once you get your financial statements back from the accountant, you’ve got an income statement, and you’ve got a balance sheet. And one thing that I know I do is I always go down to net income. That’s the first thing I look at. But in terms of making these financial statements decision useful, what are some things that we can do? When we get those financial statements? What what are some things that we should be looking at?
Well, first of all, you want your financial statements organized in a way that is going to give you good information. So for example, I see a lot of folks putting Amazon fees down in operating expenses. And you know, and I’ve seen accountants debate the point. The reality is, if you didn’t have Amazon fees, you wouldn’t be selling your product. And so I want to be able to look at what I know, I’ve got to pay and understand what my gross margin is. So the first place I look in mine is gross margin, I want to know, is my gross margin at a level. And is it consistent over time? Or is there something going on with trends here I need to pay attention to I think when you talk about financial statements, different people generate them different ways. I would encourage you to get your financial statements printed out in a way that you’re looking at month by month. So right now, at talking at the end of September, you would have financial statements from January, February, March, all of that lined up across the page, so that you can compare month by month what’s going on, that allows you to look for are there holes? Did I forget to pay my rent? You probably heard about it already. But is there something where you typically are paying and that you didn’t pay? Is there something that spiked high that you need to understand? Did you accidentally pay your rent twice, you know what’s going on month by month, do that kind of comparison, then look at gross margin what’s going on with your gross margin, and you want to be sure that you’re keeping that in line because gross margin is going to tell you if something is amiss with your inventory. People wait till the end of the year to know What their profitability is, because they don’t book any kind of cost of goods sold throughout the month to understand how their business is performing. And that’s just fundamental, you’ve got to know, if you got this much in in revenue. So you got $10,000 in revenue, how much went out the door? To make you that $10,000? That’s the first question that every business owner needs to understand. Am I profitable there? And is that varying very much over time, because if it is, it means you don’t have your inventory system dialed in like you need it to be. And then after that, looking at what that net margin is, and are there things that you’re paying for, in the operating expenses that could be cut. And I I like to do the same thing with the balance sheet, I like to look at that balance sheet, month by month is my cash growing, it’s my debt growing, as my inventory growing or going down, understanding the trends that are going on in your business is much more valuable than just having a data point, because our brain doesn’t really keep all of that in our heads month by month. But seeing it in terms of a trend really starts to help you put into perspective, the true nature of what’s trending up, and what’s trending down, and what you might need to do to change those trends.
Okay, Cyndi, where do you see the biggest opportunities in the e commerce space in terms of you know, profit first, and just open space, you know, considering the pandemic and everything that’s going on?
I think there’s a lot of opportunity for people to really dial in their numbers, and get their hands around, how to manage their inventory, and the impact that that has on their cash flow. The biggest struggle that I see folks having is either resisting paying themselves, and really fighting with trying to keep money going into the business and not taking money out for themselves. And trying to put it all into inventory. And what happens with that is, in times of stress, we start to feel like, why am I doing this? Why am I working so hard when I don’t get any reward. And we’ve certainly been in for six months now quite a time of stress. You know, it was really interesting. In March, when things started to really become uncertain. I got two different kinds of emails, and the the first kind of email was, everything’s falling off the tracks, I need help, can you help me put together some kind of cash plan, I’m not sure what we’re going to do. And we went into kind of triage mode for some clients doing 13 week cash flow planning to get them through. The other kind of email I got was, thank you so much, because of profit, first, I’ve got a cash reserve, and I’m going to be okay. And then pretty quick, because things it really happened in a couple of weeks things sorted themselves out for, for most of our clients. And then I was getting emails, like, I’m so glad we had the money set aside to be able to fund our inventory, because we’re growing three times our last month was three times what we thought it was going to be. And because we’ve got this inventory, cash flow going on, we’re able to sustain and grow and and, and have cash reserves to grow our inventory. So I think you know, this people’s acceptance of, you’ve got to have a business model that is going to throw off enough cash to generate the desired results that you want. And doing it through debt is not the answer, because the margins are just not strong enough fair to support the kind of debt that most business owners have to to employ right now. Because, you know, cat, getting credit is not easy. And the the things like the cabbage loans and the Amazon loans, those loans are expensive. And so just making sure that that your business is sound and throwing off the cash, I think it’s time well spent.
So this year is what the pandemic, you know, it’s it’s a lot different than, you know, just say, a normal year, like you mentioned earlier, looking at trends, and, you know, you can really get a pulse of your business by looking at the books, you know, month over month over month. And then, you know, we have a global pandemic, right, and everything is kind of out the window. You know, we’re looking at q4, they’re predicting anywhere between, you know, between 30 and 50% increase in sales from this year versus last year. So So how do you look at that and say, Okay, I have an opportunity cost in front of me, and then I also have a risk So how would you manage that in terms of, you know, do I buy way more inventory than than what I usually do and use the cash flow for that, or even debt? Or do I do I not and take the risk of leaving that money on the table.
A lot of that depends on your tolerance. I think using debt unless it is very affordable, very affordable debt instrument is setting you up for problems. People that had debt, going in to mid March, were the people who were stressed out about how they were going to handle the situation when Amazon quit accepting their products in and they had to figure out how to, you know, do merchant fulfilled etc, you can pivot. It’s an uncertain time I, I know from seeing my clients numbers that, that they’re doing as much as three times what they did last year, q4 already. That’s, that’s how much it’s already changed. And then forecasting, you know, going into the next several months, it could be, you know, three to five times what they’re doing now, I just encourage people to look at what they can afford, do you have your numbers dialed in, because, yeah, you could spend a whole lot of money to sell a whole lot of stuff on Amazon. But if your gross margins 2%, you’re not helping your case, you’re throwing gas on the fire, you’re not, you’re not getting down the road further. So it really depends on a number of things. But if you don’t have confidence in your numbers, then to me that risk is way outside of what I would be comfortable with.
So moving along, what are some of the biggest failures and shortfalls that you’ve seen and you know, your clients, e commerce businesses, or just in general in the space,
The shortfalls are not recognizing when it’s over. Debt is used to prop up the business a lot of times, and when you’re at on your 43rd credit card. And you know, you’re having to continue to open up credit cards and take out loans, you’re beyond having a business is going to be able to support itself, because it’s going to crush under the weight of the debt. So I see people just not want to face that reality. And I understand that because it’s not a fun place to be. But you can close a business and walk away from it and open another business. But when you’ve gone to the point of jeopardizing your personal credit, history, and your and your personal credit, you know, reputation, your score, then you’re setting yourself up to have a lot of challenges going forward in your life. And I think people, you know, they, they’re optimistic, and I’m an optimistic person too. But there’s a dose of reality that has to come in there to say, I am not going to put my family in jeopardy by continuing on a path of borrowing money, that I have no clear way of paying back. And I’m not talking about hopes and dreams of paying back. But where you’ve really studied and understand that, that there’s a way to pay it back. I think people are sometimes just not realistic with with the situation that they’re in.
Cindy, I’m so glad that you responded that way. Because this industry is full of it, at least on the surface, it appears that everyone has a success story. Everyone has a seven figure business, everyone is able to fire the man. And I think what you just described is all too common. And so I’m glad that you mentioned that. Now, one last question that I wanted to ask before we head into the lightning round. And this is a little bit embarrassing, but I’m going to share with you a story. So I read your book about a year ago. And as soon as I read it, I said, Ken, you got to read this, this is this is going to help both of us this is going to help us with cash flow. Ken read it. Within that month, both of us had went to our respective banks and set up the checking accounts. We put $100 in each account. And we were going to implement profit first. And then for the next six months, we continued doing the same thing that we weren’t doing those we weren’t moving money around. And there was some hesitation and it’s hard for me to describe this but it was funny I I mentioned that to Ken and he said it Yeah, I’ve done the same thing. I haven’t done anything with these bank accounts. And so one My first question is, is this common from some of the clients that you see? And to what are some ways that you can avoid this this six month? procrastination really, really is what it is.
Do you know why you procrastinate?
Yes, so I can speak for myself. My goal is to fire the man, I have doubled the I’ve went from about 200 to 300 skus in the last year. And I have been reinvesting every dollar I have back into inventory, which is a problem that you point out in the book, I have a sense of urgency to fire the man. And so my thought was, the more I can reinvest, the more I can grow. And I don’t need these funds for my day to day expenses. That’s my story. I can’t speak for Ken.
So I think for for me is, uh, you know, kind of that principle of let the bucket is full, and I just use the bucket for everything and, and not having that, you know, mentality of a paying myself first. So, you know, for the first six months after that I didn’t set anything up, I didn’t do anything. And then over the last, I was really glad to hear you said earlier that it could take up to 18 months to implement this in a business. Because I’ve got one of my companies, I’m about 80% there. And the other company, I’m about 20 to 30%. There, it’s taking longer, and it’s in not to get into the weeds, but it’s really identified some some areas that I need to improve on to actually make this work. So I think just really, you know, backing myself into a corner and saying, Hey, I have to do this to have a functional business release, you know, is what made me spring into action. But yeah, I sat there for six months. And I don’t know whether it was because I didn’t understand the process. Or if I yeah, I don’t know. I mean, maybe it’s common, I’m not sure.
Well, to be clear, the 18 months starts when you start No. Six months is not counted in there. So if you asked me, David, if it was common, and it is common, I can’t tell you I’ve had the chance to be at conferences with Mike and people come up, oh, I loved your book. It was so wonderful. And he goes, Oh, good. Did you implement? Well, I haven’t gotten around to it yet. And so I saw that happen a bit a good bit. And so I do think it happens a lot. It takes a lot to change, you know, it takes a lot to change anything. I mean, we don’t just pick up and change our habits. overnight. And, and when it comes to our money, we’re afraid, you know, we’re afraid we’re gonna mess something up, we’re afraid that, you know, we’re going to put our dream of firing the man in jeopardy. And so that really comes down to not 100% buying into it. So because if you hundred percent buy into it, you’ll take the steps. And I know this because I see it over and over with clients. The reward is tremendous once you do, and the reward for getting where you want to go. It seems counter intuitive, that by putting profit first in place in diverting some of the money into things like profit and taxes and operating expenses, etc, that diverting that money away from, you know, buying more inventory. It seems counterintuitive that you’re going to get there faster by doing profit first, but I will tell you, I have seen clients get there faster by doing profit first. And not only that, the reward is so great once they get there that is beyond what they could conceive of. And I need to do more documentation of case studies of that, I think because it it is scary and it’s hard to move forward and in the conventional wisdom is if you reinvest everything, then you’re going to reap the reward faster. And what I’ve actually seen is reinvesting really doesn’t get you there any faster. And many times because you’ve not built up things like starting to pay for yourself starting to have tax money set aside. you’re setting yourself up in a way where you’re not financially sound to operate. And you spending money on things that are are not necessary. And all of that kind of thing diverts attention and it diverts money, and it just doesn’t. You’re not operating at the most optimal way. I wish I had a way to help people see that more that, that you could, you know, it’s kind of that fable of the tortoise and the hare. It’s just like, I don’t, you know, how can that be. But we’ve heard that our whole lives and and I see it over and over with profit first, people think that this is going to make them go slow. And it probably does initially. But then when they go fast, they go really fast. And it really does pay off.
Obviously, Ken and I have run into some roadblocks here. Is this something that we could hire you at bookskeep to help with with this implementation? Is that something that you guys do?
Yeah, we have a couple of things going on. We, you know, obviously, do accounting do the bookkeeping for e commerce, folks. But on the profit. First side, we have a profit first consulting program, where we have a three month coaching program, where we go through and we look at your financials, we put them through the profit first lens and do the analysis to get a profit assessment. That’s kind of a big picture, look at things. And with seasonality in the business, sometimes, that’s not the place where we want to start because those percentages can be really high. And if you happen to be doing this in q4, maybe your percentages are high. But if you’re doing this in March, and your seasons in q4, the cash may not be there. So we look at it from the overall perspective, kind of big picture, but then we get down to a typical month. And that’s where we start to understand, alright, these are what you’re paying money for, maybe you need to be working on cutting some of those expenses, because they’re, you know, out of line from where a successful business would operate. And we use that that analysis of a typical month to determine and set the allocation percentages. And we just we do it incrementally we we walk through where we think you can start. And you know, we don’t start everybody with all the bank accounts, because it’s too much we do this beach entry, like I’ve mentioned. And then then we hold your hand for the next two months. So all of that analysis takes place in the first month. And then the next two months, we hold your hand and get you through your first profit distribution where you get to take money out of the business and reward yourself as the owner. And by then you’ve seen the whole process. And we leave you with a plan for what you need to continue to work on and how you can scale up your percentages in things like owner pay, profit, and start to scale down your operating expenses and just dial all that in. Sometimes it involves doing some analysis around your products and determining the profitability of products. But whatever is necessary, we kind of figure out where the attention needs to be placed to move you in the direction so that by the end of that three months, we’ve started down the path and you know what to do for the next. You know, just rinse and repeat going forward.
Sounds good. Well, you are going to be getting a call from me tomorrow. Rolling in bet.
We’d love to work with you.
We’d like to wrap up each episode with a lightning round where we ask you three questions that we ask every guest at the end of the podcast. I’ll kick it over again.
Yeah. Are you ready? Cindy?
All right. What is your favorite book?
The Art of possibility.
Oh, nice. Okay, I have to check that one out. Yeah. What are your hobbies? I’m sorry, go ahead.
Oh, the author is Benjamin Zander. Okay. My hobbies I love gardening. That’s where I spend my time.
Nice. What do you think sets apart successful ecommerce entrepreneurs from those who give up fail or never get started?
I think it’s it’s mindset. And you know, just having the resilience and the grit to figure it out. No matter what the day brings, you’re gonna figure it out.
Yeah, like that.
Okay, last thing I you know, how can people get a hold of you if someone’s struggling and they want to or they want to learn more about profit first.
Um, you can go to www.bookskeep.com. And we talk talk on there about, you know, all our accounting services and, and profit first and there’s a forum there. If you’d like to visit with me just fill out the form and let them know that that you heard this firing man podcast and you’d like to set up a time to talk and I’d be welcome the chance to visit with people.
Thank you everyone for tuning in to today’s Firing The Man Podcast. If you like this episode, head on over to www.firingtheman.com And check out our resource library for exclusive firing demand discounts on popular e commerce subscription services that is www.firingtheman.com/resource. You can also find a comprehensive library of over 50 books books that Ken and I have read in the last few years that have made a meaningful impact on our business, or that head on over to www.firingtheman.com/library. Lastly, check us out on social media at Firing The Man on YouTube at Firing The Man for exclusive content. This is David Schomer and Ken Wilson. We’re out
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