 Hey, good afternoon everybody Tom Stewart here our guest today is Jason cup. This is smart business moves. Hey Jason How in the world are you? I'm great I am in cold and soon to be snowy Reno, Nevada today and we've got a winter storm watch So I'm literally looking out the window right now watching it rain And that's gonna convert over to snow at some point as the temperatures drop this evening, but I'm doing great I'm doing awesome it get out. So is this the first snow you've experienced this year It is gonna be the first snow I've I've been as we were talking about before we went live I've been in the end of the year dance as well traveling a ton Did get a little bit of snow when I was outside of New York City a couple of weeks ago But nothing to speak of but the forecast right now is we're gonna have three to four maybe five inches of snow on the ground By morning, so it's gonna be a pretty big Snowstorm it's gonna hit, you know West Coast Pacific Coast time So yeah, it's a little bit bizarre leaving Kansas City where my home is and it being in the 60s or 70s The this past week and find somewhere where you know, you're landing the plane last night at a footer storm warning, right? Yeah, that is I don't know that makes it interesting this time of year when you're traveling around you never know What you're gonna get do you? Yeah, that's true. Absolutely, but y'all got to be prepared for it and I pre-covid I did a lot of traveling and so I'm almost conditioned in the way that I packed my bag And I I travel to make sure that I'm prepared for it being really warm or really cold or snowy or everything in between So it's kind of part of the deal, right? Yeah, I remember back when I had a real job and I traveled a fair amount I used to do these trips where I would leave home and I'd go to several different way points before making my way home And right this time of year a lot of times They would send me to Milwaukee and then they would send me to Southern California, so I had to like Twice That absolutely. I mean you have to kind of think through that and I was in Southern California actually last week And it was that rare time in Southern California where it was colder in Southern California that it was back at my house in the Midwest Go figure, right? You never know. Well, you never know I Got a message from from Liz a little while ago and she's efforting to join us But at the men at the moment Travel is not her friend and she was supposed to be in front of a computer by now But she's telling me that hang tight. She's on her way So we're gonna go ahead and get started and you know, hopefully she'll be able to join us somewhere along the way and as Everybody knows this is budgeting and planning month and Jason's here to share some thoughts with us on Some of his approaches and techniques and thoughts and philosophies on on the matter Yeah, absolutely. I always find December to be an excellent month Actually, I would say December and also January and I'll approach that here in a second to be excellent months to begin that planning It's part of the reason I'm doing a lot of traveling this time of year is going and meeting with clients see in their teams Looking at their numbers trying to figure out the budget items for 2022 and and also creating a strategic plan of how we're gonna go And accomplish the budgets not it's one thing to say we want to do this But it's also coming up with a plan to be able to do what that plan is, you know And I think a lot of people, you know kind of close their eyes and they get up the dart They throw and it hits the dartboards out That's what the goal is gonna be but then they don't Tom have an plan for for a client acquisition and revenue What is necessary to be able to accomplish that but then also which is very important? I know you all have talked about it a lot, you know on this show and we talked about it last time I was on a handful of months ago the people plan making sure that we have the people to be able to do the job And what that capacity is and how we can go and scale our business in that regard So I think right now December and January are really key months at every business owner No matter what industry is really kind of taking a look at at the past the past year what's worked What hasn't worked? What was the success and what is an opportunity? And then also how are we going to leverage that for for the following year and make something really great out of it? So absolutely. This is a great time to be having that reflection Yeah, you make a number of really good points there, you know a lot of people think the whole budgeting process is kind of a game of Trying to predict the future being clairvoyant and It's really a tool to to grow and build your business and a tool to help you accomplish business objectives So, you know, you mentioned the the plan part of it And I guess execution is is another dimension of it that takes place in 2022 But do you do the budget and then come up with a plan to make the budget happen? Or do you come up with like objectives and a plan and then figure out what that budget looks like? You know, you bring up a really good question and for years Those that know me well or have heard me speak on this topic know that I I sit in two different distinct places Do you create revenue and then chase it with expense? Which means you create the budget and then you go chase it with the plan Or do you create the expense and then chase it with revenue? You do the opposite of that And I actually like especially in light of of of what we've already, you know briefly mentioned on today's call That you know people are are hard to find especially good people are really hard to find So for me, I almost suggest that you look at what your current capacity is the folks that you have in your business That you can rely on and and who are they and what What capacity do we have with our current staff? Because one of the biggest things has been inserted into this budgeting discussion has been a people plan And and making sure that we have all of the people to be able to execute because you could go Anybody can go and build a budget, which you know as we all Know or should know right that you know budget is what's top line revenue going to be What's going to be our costs to deliver that revenue and then what of course is going to be the The overhead that that contributes to that revenue and I can go through that a little bit later if you'd like And the reality is is that is that most people Especially entrepreneurs who tend to have You know very wide thinking in terms of what their production can be And and they tend to be a little bit more open to you know to some goals that possibly couldn't be Hit I know that I'm certainly guilty of that in my past entrepreneurial efforts where I said Oh, I'm going to do a million dollars this year, but I only did 300 000 dollars in the previous year So how am I going to make up that 700 000 dollars of additional revenue, right? And and so we can we can be a little bit excited about something But we don't have a plan to execute it and I'm here to tell you that you got to have the plan to execute it And the most important thing and almost any business today unless you're in tech Um, it is the people plan to execute that and I know that a lot of the people Who would be you know joining you that are you know, your friends and clients and followers online They need people to be able to execute their business And so you got to have that people plan be very much part of the budget, which is the financial plan Yeah, and I mean especially like this point in time I know most of the folks who we work with who are watching us now Have businesses that they're short staffed and they've been dealing with that for some time and You know the natural reaction to that is we need to be hiring more So you spend more on your recruiting and you're doing all of these things just trying to hire and hire and hire And yeah, I mean that's an approach But you know, there's a lot of other things you could be doing in the face of well, this is the hand I'm dealt. This is the labor force you have could we be making a whole lot more money By doing other things other than just beating our head against the wall trying to hire people who aren't there at the moment Totally agree, you know, it's funny. I was this was probably like weeks before covid, right? I I was I was hosting along with some other colleagues a group of people down in New Orleans and One of my clients and and friends that was there He had a great point about the people plan and I thought it was brilliant You know, so many business owners entrepreneurs management teams. They spend a lot of effort and energy budgeting the acquiring of clients, right? They're constantly marketing an seo and ppc at google ads and facebook videos and all of these great marketing ideas But they're not willing to make the same investment of time money Effort strategy into acquiring the people to serve those clients, right? And and almost they balk at the fact that hiring Especially in today's day and age is almost a full-time job You've constantly be a you know, you're constantly focused on or you should be constantly focused on developing that bench Hiring the next team member and making sure that you have Adequate staffing to be able to accomplish the task at hand, which is run your business And you can take that thought a step further and go beyond just the hiring process We spend a whole lot of time talking about customer service And you know, it's hard the word employee service doesn't even It's not even really part of most of our lexicons But maybe it should be you know team member service be thinking about not only how do we hire them But how do we treat them with the same level of customer service as we? Treat what we call our customers because our employees are customers too, right? absolutely and and I think it's You know those of us that are familiar with the financial statements know the word a balance sheet is It's it's what lists all of the the different assets and liabilities and equity in a business And the number one thing that is not on a balance sheet that is one of your biggest assets is your people There's no way that we can put x number of dollars is on the but boy You can put a vehicle on there You can put a computer system or you can put a building that you buy or you know, whatever it might be You can't put people on there and people are probably the number one Undervalued element that's in a business that you need to be able to run it And you're so right that that there is this incredible focus on customer service And we talked about this some in our in our last uh in our last call Was you know just building up that culture and really developing ideas To to be able to build up that team and I don't want to take a budgeting and planning and you know And kind of retread what we talked about last time, but um, I would encourage anybody who's kind of stretching How are you going? Oh, that sounds like a good idea to maybe go back and listen to that because I think we Kicked around some really good ideas on how to build up culture Build up teams some steps and some everything that you can go to do that But it's really a lost art and part of the reason that I amplify it I put an exclamation point bold it and underline it and this discussion is I don't want people to go out and build a budget or a strategic plan without a people plan attached to it Has to be incredibly critical And I think it's important and the other thing I want to say on this Is that I I think that there are a lot of folks that are out there That are running really successful businesses that they are developing their people plan Long in advance of them needing those people They've got a strategy and a plan for what their growth is They're hiring people now that maybe they don't completely need But they might need them in two months because the worst thing that you can do is to try to develop Your people plan when you're desperate for it when there is that need when you have to chase that revenue Because the worst thing that you can do is to frustrate a client who's new to your team Because you don't have the staff member that's also new to your team to be able to execute that work And then it just becomes a lot of you know shell game in terms of trying to figure out how to get the work done You know the department of labor, you know coins this term We use this term called human capital and return on human capital and we've talked about that in the past and Um Now more so than ever like for you know prior to covid, you know wages were fairly flat costs fairly flat and You know, it's never been just super easy to hire people But it's a whole nother world now So getting the most return off of your human capital and especially if you have an opportunity to hire people Knowing that you've got pent up demand It's no different than than buying supplies And in bulk knowing that you might not use it until three months from now, but you know, you have it on hand when you need it Absolutely, I agree with you 110 percent and as you were As you were talking about that one of the things when you're talking about the human capital and the return on human capital That I was thinking about is is just the the constant investment not only in hiring but then also retaining and Building up the the the team and making sure that they they stick around and that they're They're a tenured part of the team and so many you're talking about the revolving door right of Team members and I think it's critical But even the the the one thing that I would insert in on the the budgeting conversation now is that And we talked about it just briefly right before we went live is that a lot of companies are having the discussion about You know price increases and I'm here to say that not only do we need to have a discussion about increasing prices to clients But we also need to have a discussion about right sizing pay to our team members You know pay is going up. I do not think it's going to go back down. Yes Consumer price index cpi is over six percent now through the end of november I don't know if you've seen that statistic yet, but it's a the 12 month trend is over six percent I've been watching cpi for a long time tom and I don't know if I've ever seen it at six percent So that means that that everything that we pay for every single day fuel we did but it was like 19 It was 1981 was this the last time that it was that high Right, you're probably right And and the reality is is that is is that if we really want to continue to retain and attract the team members to help us execute Our financial plan we we need to be prepared From a budgeting standpoint to right size of their pay as well I was I was telling somebody early this morning that you know back when I was running my landscape company You know 13 plus years ago. We could hire you know starting labor for a lot less maybe Half or a little bit more than half of what it cost today now granted that was a while ago 13 to 15 years ago But the truth is is that that's just because everything gets more expensive And and we've got to make sure that we're treating our people right from a pay standpoint to culturalization standpoint and all that Prior to covet you could pretty much take last year's playbook and do it again, you know the next year and you're you're okay You know your costs are relatively flat But you know, I know most companies are paying 50 percent more for their line labor now is what they did pre-covid So everything's up in the air in terms of what you're charging and what do you need to be paying? You know six months from now could be higher than what it is today It's just very dynamic. So I guess this is really at the heart of you know the budgeting and planning process What worked pre-covid could get you into trouble today You've you've got to be following the numbers more closely and be more Fluid and more dynamic with the whole Planning process and even what you come up with today, and I'm sure you're going to speak to this There's a process throughout the year where you use that So it's not a static document. You're gonna gonna be taking this plan and Arguably, you know changing it on a on a month-to-month basis if necessary Yeah, you're right. I mean I'm probably of the opinion that I don't want the budget to be recast on a regular basis But I certainly want a budget to actuals to be able to be analyzed And I do recommend taking a peek at it and possibly doing a recast Obviously, I can tell you this that in covet, you know people that wrote budgets In the in the December and January prior to covet when we didn't even know that covet was going to happen Those budgets for a lot of companies got recast really quick because of an extenuating circumstance, right? In the face of an unprecedented event in a global pandemic. It's okay to recast your your budget Right, but in a normal if there is such thing as a normal typical year That that recast might happen on the quarterly but probably more appropriately on the on the six month We we knew when I was running my service industry business that we could almost predict what the second half was going to look like Based on the first half performance. We knew what those percentage in metrics looked like And and so we could look at our end of june numbers and really, you know Right after the 4th of july once we had our june numbers We could really begin to peek into what we thought that the the remainder of the year would look like And and you know, where did that come from tom? I'll give you a guess I'm going to I'm going to put you on the spot. Where did where did our assumption of what the second half was going to look Like compared to the first half come from I would assume that you were just doing a trend line of what the variance was budget to actual for the first half And applied the same logic to the second um Yes, but with one Distinct variable which I really want everybody that's listening to pay attention to this Is really really looking at what past hystericals were we went back 7 8 9 10 years and we always knew that the percentage of revenue in the first half Was very very similar to a commensurate percentage of revenue and profit and overhead in the second half And so we were able to really do some predictions because there was a line item It kind of did this rather than up and down and up and down And I think that most people in our world that are running businesses that that we that we know about I think that most people In our world that the thing is is that they they have they have pretty predictable revenue based on The month or the quarter there's uh, there's there's predictions that you can kind of go through relative to uh to those numbers and I think that That that's something that I really want everybody to understand that one of the things that I've developed in my years of budgeting working with people and their financials Is that historicals play a very very very important role to what potentially is going to be happening in the future And so many people take pie to the sky when they're planning to budget And then they're just thinking about the future, but I would really encourage people who have good data in terms of numbers Um to to look at the past because the past is going to be a really good predictor of what the future is going to be With an investment in growing the business. Did that make sense? Or did I? Absolutely Okay, no, I mean there's there's seasonality in a lot of industries. I mean I'm I'm absolutely sure that in the landscaping business There's things happening in the summertime that's not happening in the winter and vice versa House cleaning is kind of the same thing, you know the term spring cleaning actually means something to a lot of people And sure then you know school kind of does its thing and then During the summer when school is out a lot of times there's uh, there's a drop in demand But it depends where you are if you're in a market that is heavily weighted towards vacation type business You can see an upswing And then you get business, you know towards the holidays everything gets busy And then january people get their credit card and figure out they spent more for the holidays And they meant to and then there's a drop in the business and you can kind of count on those up and downs year after year Sure, and I have to imagine there's probably maybe a little bit more with you know Family being over holiday parties occurring that maybe there's a little bit more investment around the holidays and kind of getting in and getting Kind of a deep down deep down clean, you know, it's interesting I thought about you guys if you recall Just very shortly after our our last session. We were both going to be on the east coast at about the same time I think I was going to be in north carolina and you guys were doing something north carolina as well And one of the interesting things the place I was staying it really relates to the cleaning industry The place that I was staying was it was normally on on a weekly cycle of being rented on vacation I happened to be staying at a home that was owned by the owners with the owners But the amazing thing that they told me I really thought about this from a financial perspective It does play into this conversation is that they have a move in and a move out day and this heavily Heavy vacation part of of the country in north carolina along the beach and it was always on saturdays And I thought about all of your friends and colleagues that they had to do a whole bunch of projects Get in and clean all of these beach homes on a saturday No, you can't do it on sunday. No, you can't do it on monday and what the impact of that was to budget And and and how they had the resources I thought about that from the people plan and the strategic plan As I learned that almost all of the vacations moved out on a saturday And then the new people moved in on a saturday and there was a very short time period Maybe six or eight hours depending on the property to be able to get everything Cleaned and linens done and I was I was blown away by that I'm sure you guys have addressed that before on your show Yeah, we we've we've talked about that. I actually I in a weird locate. I'm located in charleston, south carolina So okay, I am intimately familiar with the whole exercise of doing vacation rentals. Um, Personally, our business doesn't do as much of it as we used to but sure was the time maybe when um I was hungrier I guess quite frankly that we would turn a hundred plus units You know on a saturday and it was a heck of a logistical effort and Wow a lot of ins and outs and details and tricks to uh to making that work, but uh, yeah, that's uh, that's a Material part of a lot of people's business and some of it's in the south doing you know, like vacation rentals for beach properties And I know a lot of people are north that you know, we're doing it as well for you know ski I mean all over the country. There's uh, you know vacation rental terms that turn on a weekly basis Yeah, one reason I bring it up is that I I really thought as we talk about capacity That that has to build in some capacity where there there's only a certain number of properties that you can turn Obviously, I know that not everybody does vacation It made me think about what the capacity is for those businesses who have a large focus Or a large book of business in vacation cleaning Um, and it just made me think they have that one window and they have to get a lot of work done And once that window is over with their revenue needed to pivot to some other type of revenue that would not be vacation because that was that one window so Yeah, or sometimes you just hire a bunch of uh temporary labor for season if you will and You know leverage your organization And you're you're you're seeing you people to kind of direct them and still kind of do your core business through the summer but uh, yeah Definitely from a budgeting standpoint You you you need to to plan and there's you know different costs and you know additional revenue to go along with that but And and and a plan you certainly Can't wait until uh june to start putting your plan together for doing vacation runnels and you know if you're doing it for You know and in a place where it were summers the season Yeah, absolutely absolutely Well, you want to talk a little bit about more a little bit in detail about budgeting and and the kind of the strategic plan that I really recommend I'm walking lots of people Through uh, this is so the first the first step that I always tell people to do is Is that they they need to look at their business? From Jason before before you go to too deep in and just so our audience knows you Are in high demand and you travel all over the country basically sharing same information You're sharing with us today, right? Yes, that is true or via zoom. I mean in in the world of covet. It seems like that. Uh, we're in zoom. Hey, look who's joining us Finally Hey, y'all, I'm sorry. I'm late Traveling has not been your friend hasn't my gosh. You just you know it. Um, it's the truth Well, so so the reality is is since travel took you away you have to cover the next 25 minutes because tom and I have been covering for you So, um, so I'm I'm exhausted. I'm exhausted. We're it's been very awkward All right. Well, the only reason tom does these is because he thinks they're so fun So I know I'm not in any any danger here. I know he's He's been having a good time over there I miss you guys Uh, we've just been talking about kind of strategic planning and into the year and beginning of the year And I was actually just getting ready to jump into it and tom was kind of creating a little bit of a basis um That uh, you know, some of your viewers might not know who I am and what I do and how I do it And so we were kind of starting to unpack that a little bit before Before I started sharing some of the detail so Anyway, so good to see you Liz. All right So tom to answer that question. Yes, um, so 15 plus years ago I developed a financial system that's based completely on metrics that I've got hundreds of companies Across the united states in a few up north in canada that they use to run their businesses their service industry businesses And so this time of year it's it's doing that strategic plan understanding What worked what didn't work and then also beginning to build the following year plan And so this is not just something that uh resides just kind of in the back of my head It's actually in the front of my head every single day. In fact, um, Liz I I told tom and all the viewers earlier that i'm actually in a client's office today Doing exactly that And and and so the the but I told them in advance that I had this scheduled So we just arranged our agenda so that I could get a little private time to spend an hour with you all and so So anyway, yeah, this is what I do Lots of face to face, you know really looking into numbers and understanding what they are and helping Great business owners and entrepreneurs make decisions about what their business is going to look like financially Very cool. I love it. That is awesome See I want props because I'm the one that got Jason for our guest You did You did you did. Thank you. Thank you kudos to you. Thank you So that doesn't mean you could take the rest of the day off though All right, all right message heard So so for me the the the the first focus in all of this is always Just to you know, really look at what has worked in the business in in the past, you know to Sit down this timing year as we're approaching the holidays And I know that business keeps going on but we might be able to take a couple of moments To really analyze, uh, you know, what worked in the past year What were the challenges? What were the bottlenecks? What uh, what what were the stresses? What were the pain points and um, and I recommend Almost getting out of your regular element. I usually tell my clients, you know, go You know, if you live in a nice part of the United States, go sit on a park bench You know, leave your phone at home. Take a take a pad of paper write things down If you have a quiet space in your home or your office or whatever it is But try to get outside of your normal environment and really kind of review the year I'm pretty well known amongst my friends and even clients and I do that on new year's eve every single year Weirdly enough, I'll I'll I'll I'll usually go get dinner sometimes by myself or with some close friends And I'm really reflective about you know life and and what worked in business what didn't work in business What challenges we had and really try to back myself into The things that worked because I want to duplicate them the things that didn't work because I want to fix them And the things that were pain points because I want to understand them more so that I can create opportunities to fix them and and people or processes or situations that were that were bottlenecked so that I could understand them Neither delete them You know back way back when I started this consulting company. We did marketing consulting. It was a total pain point And and it didn't work and so we don't do that anymore and people ask us to help them with that Even though my formal education is in marketing and branding It just wasn't something that made sense for us as a company because it was an extreme pain point bottleneck And so You know, so I think that the first step is is to have a real conversation with yourself About what worked what didn't work what opportunities there are Um, and that's where you have to start the budgeting process because you might realize that the pain point was on quality control or on training Or pricing or too much debt or whatever it is and your budget needs to reflect a solution for that, right? And so it it does play into because I believe that budgeting really overlaps with strategic planning If you and Liz that was one thing that tom and I were talking about is is that if you plan a budget You don't have a plan to execute that budget might as well not spend the time doing a budget because you're just not gonna Probably not going to be the level of success. So I believe that first first step is a strategic plan Understanding what worked in the past understanding what didn't work so that that can play into a conversation about budget So the whole chicken and the egg question what comes first? I guess is the plan because A lot of people sit down in front of a spreadsheet and start cranking out a bunch of numbers But without a clear plan as to what it is that You're going to be making happen within your business. You don't really have a basis to put numbers, too Actually, that's not what I heard what I heard that's step number two That step number one is reflection Correct fair fair enough. Yeah. I think it would be easy to forget that I think it would be easy to just kind of blow that off. I love this strategy Let's reflect first Let's find out what did work what didn't work and let's create our plan from there. I think that's great I love that little piece I I agree with you. Liz. I think tom. It's a very close second I think they go hand in hand that that when we identify I mean the number one question that we always have to ask ourselves in business is why why was something great Why was something not great? Why do we have a good year? Why do we not have a good year? Why do we make money? Why do we not make money? Why does this one employee work out? Why did that other employee not work out? Whatever it is we got to ask the question Why and when we know the answer to the question why then we can put solutions in to solve it Let's let's let's drill on that for a second because the reflection part makes sense and for for a lot of reasons Are you sitting there with just a notepad staring out, you know into the sky or Do you have like data and numbers and what material do you use to do the assessment as to well? What worked and what didn't work? I oftentimes recommend that the first step of reflection is is almost like a trip down memory lane Not not with data, but with but with what you observed what you saw what you experienced as a leader And then you back that up with data and oftentimes in my world that comes from financial data historicals and so I I do I do really firmly believe that you have to kind of think And you got to kind of rewind the tape is what I always say rewind the tape and pay attention to what What happened because you know business at least for most people Myself included maybe not so much for you all is it's very very very fast moving I I often say that we're in a dinghy a boat a dinghy a small little boat And we're and there's an ocean and it's roaring between two very, you know very high You know like hills or mountains and the dinghy is just banging up against the side of you know of the of the water And and very few business owners have this just really opportunity to have You know thought throughout the course of the year I I know some do most people that I know They're they're moving pretty fast. They're moving pretty fast And they're maybe not paying attention everything that they need to and so to take that time to get into an environment To think through that and then back it up with data Which is what I do. I I love I usually do not get involved in that esoteric conversation I'll listen to it and I'll look at it and I'll look at what they put on on the points But my job is to go back and then find the data that supports either the solution the opportunity or the next move I bet you sometimes you find that the problems they think they're having really aren't the problems that they're having It's just the symptom that they see I would agree with that I mean I I have I have some people that come to me that say that they are incredibly inefficient And you know that they're you know that maybe they're concerned about their team or the team's ability to get things done And then I run their efficiency numbers and I run the data They're loaded labor rate their overhead recovery all of those numbers and they they Point directly towards a high level of success. So so then I have to peer in to say well Why did you think it wasn't was it deficient? And if you can give me if you can give me good examples of why it isn't efficient Guess what these numbers are great and they can just get better if we can solve that problem And that usually is a light bulb moment for people Because when I can go at it and I can give them the the percentages and say This is what the industry should be right and they are within what I would call a range of success That's actually really energetic for most business owners It's also the opposite of that when we realize that the range of success is not In a place that it needs to be and that's when we got a roller sleeves up and figure out that why that I mentioned earlier And go and solve it. Is it a pricing problem? Is it an efficiency problem? Is it an overtime problem? Is it a the way you buy materials? Is it the way that you schedule? Is it your density? It's is it you know, is it the type of clients you're attracting? You got to figure out the why because you got to go and solve it You got to go and solve it Yeah, I never the number of times that we've uh been working with someone who swears that they have a marketing problem And after looking at a little bit you've got tons of leads you aren't even answering the phone Yeah, right, right, right you have a you have a you have a follow-up and a conversion problem at that point, right? Yeah All right, so I'm really excited hearing this because it's prompting this really cool Thing in my brand not sure how to make this work, but in our groups and our strategic success groups every month Everybody in the group does their highs and lows for business personal and family But now I'm thinking I already have all of the soft data About what worked and what didn't work in these areas over the course of the last year like I'm just We can just compile all of that stuff quickly and do a quick review without having to sit there and try to remember You're not going to be able to remember all that stuff But right written down over the course of 12 months This is this is what really happened. This was what where the highs really were This is what your lows really were and look Seven months out of 12 your lows were You didn't have enough employees Right kind of easy thing to look at now I love this. I think it's gonna be awful Liz I love it too because you're already what you just described as you're you already have a format and a box in which people Are collecting that data and so really it's a review And to find the trends. I mean I believe interestingly enough, you know And of course we never know the way these conversations are going to go Um, but I believe that business is all about finding the trends finding Finding the things like I said earlier that have worked and that haven't worked and when we find things we work We go and we duplicate them when we find that things that don't work We find the solution to them and then we we repackage them We repurpose them and then hopefully they're going to work and then we go and duplicate them. It's finding the trends, right? Yeah, I really like to find trends in thinking and trends in behavior They're they're hard. Both of those things are hard to fix like why do you keep thinking the same bad thing over and over again? Why do you keep so this is a great one that popped up today actually in our managers group? so One of the managers was saying she didn't get one of her tasks done that she was supposed to get done for For the week And then they have to say why they didn't get it done Her reason was because all of these things popped up over the course of the week and what came out very quickly is That is a bottleneck for every single person in the managers group We just thumbs up if this happened to you in the last week thumbs up and every single person agreed that that happens to them and Nobody knows how to fix it. I mean they do know how to fix it, but nobody thinks They don't drill down on that problem like you're talking about and actually fix it So that it doesn't repeat itself. They're like, I'm just gonna try not to take on so much stuff I'm gonna you know, right and so that's super useful For for moving forward for planning especially going into the new year. I think I I totally agree with you and and I will tell you that the bottleneck that I see the most Is actually the person who's identifying the bottleneck. It's the business owner. It's the manager and And no, no, it literally it it often. I don't I don't know. I don't know if you're joking in agreement Dead serious. Okay. If you're the ceo, you're more than likely the problem. Yeah, right. Yeah, I mean possibly And and and here's the crazy part about that Is that oftentimes the way that the business owner no longer becomes the bottleneck, which we're going back to do a strategic and budgeting element Is is to to hire People to work alongside them last time we met we talked a lot about the people quotient and culture and hiring people and all Those different types of things and you know, and one of the things I probably said I don't remember anything that I said is is that, you know, I've got team members in my organization that are the polar opposite of me And that's very much by design. That's very much to address a a A bottleneck and that bottleneck guess what is me is is me because I need to have a team who Who just like you and your team or the people who are watching their team We need people around us for the opposite of us because oftentimes we're the bottleneck and to hold us accountable And and I have no problem with that idea being held accountable But guess what that costs money, but that usually opens up opportunity So when you get rid of the bottleneck, there's opportunity that opens up and then all of a sudden That hire that strategic person on the team Then all of a sudden that really becomes something that that that is a budget item costs money But it delivers a bigger business or more profits or or a smoother operation or Better yet even a work-life balance Well, and what we like to say here on this show. We say it all the time is Yes, it's going to cost money. You're going to have to have a bigger line item in your budget But at the end of the month six months a year, you're going to have more money in your pockets Absolutely. That's the bottom line is you know, is it going to net profit or is it just going to Ease you you know in some ways like it's what you can do. So it's what you're going to do You don't want to do it just because you can You're investing in your organization Yeah, you really are and I call it short-term pain for long-term gain You invest short term whether that's time or money For the ability to have a long-term gain of growing the organization and and a lot of business owners They're afraid of that, you know, they're they have a fear of investment that they're going to lose your investment and I'd rather bet on myself than Than the stock market or other things that are you know less in my control. I mean Well, it's it Number one, I think so the thing that I always like to do this. So I'm a I'm a metrics guy. So my entire budgeting process is is largely based on metrics not dollars But on metrics and so when you have metrics, so let's let's say Let's make the math easy and say we have a hundred thousand dollar a year business and it costs us 40 percent to get the work done. Okay, so it's 40 percent in labor and materials and subcontractors And that's usually the definition that I operate from material labor and subcontractors And that's labor to get the work done. That's not sales labor administrative labor owners labor So if if you're running a cost of goods sold percentage of 40 percent, which means a gross profit of 60 percent You can use that metric at two hundred thousand dollars at three hundred thousand dollars And yeah, it might have just up and down a little bit But you know, it's like the the clients that i'm with now I've been with them for a while and I I know their growth and their Cost of goods sold has stayed right around the same even as we've hired more people and given people raises and so on and so For and so you can use that metric and I will utilize that to say all right You're doing a hundred thousand dollars at a 40 cogs, which means a 60 percent gross profit Um, and let's say the to make the math easy your overhead is 40 percent as well So you got 40 in cogs and 40 and overhead, which means 20 in that profit. Okay I will use that metric of 40 percent in cogs To prove to them that if they have a half a million dollar business and they can keep their cogs at 40 percent That their overhead is no longer 40 percent because overhead doesn't go up at the same amount It will actually go go down some because there's variable expenses and fixed expenses fixed expenses would be things like the owner's salary or rent or Maybe technology or utilities or whatever it might be and then variable overhead would be things like advertising recruiting insurance Fuel if you've got a bunch of vehicles out on the road. Those are all variable based on top line dollars merchant account if you charge credit cards so on and so forth Your variable expenses are going to be tied to revenue But your fixed expenses are not nearly as tied to revenue So that 40 percent of a half a million might actually be 35 percent, right? And business owners need to understand the relationships of all of those metrics So how do I get them over that? I show it to them in black and white with actual spreadsheets that say Your business is 100 now it can be a half a million and the metrics are going to play through your overheads Going to be less and you're going to make more money. Why aren't you investing in the variable? overhead of hiring an account manager per se or an operations person or some technology in your business go and invest in it Because you're going to make more money But how do you convince them that they're not going to lose the money? Didn't you say that that's what they're afraid of that they're going to lose the money that it won't pay off Showing them so there's there's two ways to do that number one is showing them formats that that Proforma would be a financial module that would show them what the future performance of the company could be if they go and do an act The other one is give them Case studies case studies are the number one thing that you know guys guys and gals like like you and I That we utilize we tell you know, I don't need to you know I don't Want to say stories but we share experiences of people that we know in business that say I know of a company who went from one to five. They invested in Software they invested in operations person They invested in a different type of vehicle and this is what it did to them You can be the same and when they hear Over and over and over again case studies and proformas that prove that And there's a track record with somebody like me or like the two of you that have been able to successfully do this in companies They're going to be a lot more apt to go and make that investment with less risk And you're using the term making the investment and Liz before you got here We were kind of talking about all the unprecedented events that have you know We've been dealing with over the last couple of years And it is the time to do planning for 2022 And for a lot of businesses out there They're setting on cash that they've never had before and they're trying to figure out what to do with it and you know there's This isn't a one size fits all type solution here But for some businesses hiring, you know that key person that Can you know strengthen where the current organization or weaknesses are could have a material impact on growth And that would be part of the planning process. Wasn't it? absolutely 110 I Most people that I know that didn't go do something silly with the cash balances that they have There's a lot of people out there in the business world that did silly stuff and Not real fond of those stories, but there there are people that we probably all know that did silly stuff Others have invested heavily in their business and most notably in people as we talked about Liz you you know tom and I were talking about Just the investment in people that the best businesses are investing in people almost before they need them They're hiring that next key person They're hiring that key account manager or salesperson or operations person or quality control or whatever my trainer And maybe that's not somebody that they would have hired two or three years ago before They had the cash balances that they do or the strength of a balance sheet And and that is key and paramount to be able to have confidence And I'm having lots of discussions and you're right tom you nailed it A lot of people would not ever have the ability to do that because they were just fighting maybe to stay alive Or whatever it is and the the truth is is that people need to be very strategic about where they're going to go and invest there there's a I would call them a mainstream Person that's out there that has been been pretty Religious about saying that sales solves everything if you can sell If you can sell sell sell sell sell sell you're going to make a profit I vehemently disagree with that statement And I really really really think that people need to understand that they need to learn how to make a profit And then go and invest in that machine to go and continue to make a profit Well, you know, there there was a time there was a time in this industry Jason where People didn't really have the tools to do the things that they can do now from a managing profit standpoint Right, you know, they really didn't even know, you know, how many homes they were cleaning each month all they knew was you know Book a job since somebody to clean it and hope there's enough money in the checking account at the end of the month to You know pay all of the bills But now, I mean, this is like almost 2022 businesses have all this wealth of data that the technology they're investing in That you can really manage A profit driven model in ways that you really really didn't have much of a chance to do in the past At least in the house cleaning industry I I think in most industries, Tom I think that that completely kind of almost Barrels into a lot of other industries and I work in a lot of different industries not just service industry companies And I see that in a lot of companies right now that That they they They now have these tools whether it be like you said software or just data or education I mean education is changing as well people people can get knowledge in a completely different way I mean even just this medium to be able to jump on to social media and you know Watch an hour of content and and to have that hopefully, you know Be something that they can they can pull one nugget out that they could take back into their business It didn't used to be that way We used to get on planes and get in cars and drive and go to events which I know we all still do But now being able to get good education is really simple to do So there's knowledge that's out there that's just a just a second away and and I think that The great business owners are adapting that knowledge and using it for that strategy and using it for some financial wherewithal and really doubling down On increasing their business and you know as as we've said many times, you know It's usually in people. It's usually in people or it's in a it's in a change in in product Like thinking about doing what you do in a little bit of a different way Then you what you've done it the way you've done it before Because if if you don't change along with you know consumer habits Then you're going to be a xerox or a polaroid, which is a much different company today than it was five or ten years ago So robin has a question here. Can you see it jason up on the street? Oh, yeah, I guess by the way invest in the people first and chase the revenue. Well, that's interesting robin I don't know if you were on earlier when I used the idea of do you build You know, do you build the income and chase it with expense or do you build the expense and chase it with revenue? I I actually think that right now This is what I think is going on with with clients and I don't know if this is true with the folks that you know robin But I think that your clients They expect more I think that they expect a great company to work with and and price is certainly a portion of that But if you're running a good company, I think that you need to have really great people to execute Whatever your brand promises to your clientele And if you have great people that are going to execute that then the revenue is going to come And I really do think that you can almost create the expense Especially those that are sitting on those balance sheets that we were just talking about You can create the expense of great people and you're going to be able to easily chase it with revenue, especially if if if you have Clients who are asking for quotes and the phone's ringing and your marketing or branding or client acquisition strategies are working I really do think that you can invest in the people first and then chase chase those people with revenue and build out Because my data would suggest as I as as I talked to more and more companies That people are really investing in people in advance of really needing them and building a business of revenue around that And if it doesn't work then you can you can you know Then you can go through and you can prune out Some of the branches of the people that you have to right size the people back to the business that you do have But I think if if you're sitting on a balance sheet that's strong Absolutely go and invest in people people's the hardest part to find right now I think clients are relatively easy and I think they're ready to hire a really great company And I have to imagine if you're joining us today You've got a really great company and so go and do that because I think that you'll be able to deliver some Satisfaction to those clients by having the people that can execute So part of that you know, we've talked about putting the budget together But we haven't really spent a whole lot about executing on that budget and you know, we've got a few minutes left Could you take a few minutes Jason and just kind of paint a picture for us for what happens the 12 months following putting our our budget together what we're supposed to be doing with it Absolutely the number one thing is Don't write a budget and then put it in a drawer and never look at it again A budget should be a month to month budget not an annual budget You can start with an annual budget If that's what your comfort level is say this is what I want my revenue to be This won't my cost to be this is what all my overhead categories to be But you've got to look at a January, February, March and so on and so forth And Tom that goes back to what we were talking about a moment ago about how There's definitely trends in certain months that maybe have a little bit higher revenue than others So you've got to divide it by month and then when the actuals come in You've got to compare those actuals to what you budgeted The the I have people that write budgets all the time and they just put them in a drawer and they never look at them They have a bad year and they wonder why they go. Well, what's your actual to budget? Oh, yeah, that's right. I did write that budget They tend to forget they put in all of this time, you know around the end of the year to build a budget And so I think the number one step is to compare actuals actuals to budget Part of the reason Do you call that do you refer to that as back when I had a real job? That was one of the things I had to do they call that variance analysis And whenever the difference between the budget and the actual was over so many percentages I had to write an explanation as to why Um, I don't know what your real job was but that just sounds incredibly cumbersome to me Um, I think small I don't have that job anymore I don't do it that way, but I do look at I do look at trends. I'll give you an example Um, uh in October, uh, so it was the first week in November. I was reviewing the clients Actual financials and they lost $82,000 for the month. They lost $82,000 a month. That is not what the plan was Until we immediately had to look at we had to immediately. Yeah, yeah, right We do immediately look at the why I mean we stopped everything in its tracks Because if it's 82 in october and 52 in november and 32 in december We've got a burn of cash that is that is insurmountable and we're not going to make it So we got to stop everything that we do and we have to look at it So analysis of numbers and asking that key question why that I mentioned at the top of Our broadcast today is super super super powerful. So I don't like the variances I like to say why are the numbers this way? Well, guess what? We quickly figured out why it was negative 82 And and you know, and we got that down to it was not negative 82 It was some clerical issues it was an employee that was on their way out the door There were some things that weren't billed they had issued bonuses They had done all kinds of different things in a month that just made that month look really poorly But really poor and when we went through and we looked at it We were able to whittle that down to something that was much more manageable But the p&l still said negative 82 and a business owner that ignores that what if that was the gift that kept on giving what if there was some dramatic changes in pricing or efficiency or overtime or overhead or debt or Pay or commissions or something that that was going to repeat itself in november and possibly december That would have been detrimental to the business, right? And so and so that is one of the biggest ways is that I can't Tell you how important it is to look at your historical Numbers in comparison to your current numbers in comparison to your budget It's a three pronged element. You look at january of 2022 in comparison to january of 2021 What was the revenue? What was the cost run those metrics and those percentages? What were the overhead? That's your variance or your potential variance then you look at your 2022 to what your budgeted 2022 is And you look at where you hit the mark or where you didn't hit the mark You've constantly got to be looking at numbers Business owners or managers that put the budget in the drawer not look at it or compare it to the past history They're just I mean they're playing they have good intention But but but poor execution and they're probably going to be You know bit Financially because they're not going to be paying attention to it So here's the deal that I have found with this our industry specifically because our cash flow is so Um strong right we get cash almost daily coming into this business You can float for a really really long time on In a in a a world of deficit without having really making any money because you have cash And so you're paying You know you're paying in arrears, but we see that a lot the people that When you actually run the numbers you didn't make any money this this month, right? Last month so And they could do it for quite a long time Yeah Business the old saying how'd you go broke and I said well really slow at first and then very fast at the end I'm telling you Had a question for jason also Yeah, you bet Would you use a revenue run rate from the last three months average to forecast future ones? Absolutely Especially in this business I think that that is is a really smart way to do it because you're looking at what the trend was again Looking at the historical is what the trend was over the last couple of months to try to figure out What your revenue is going to be for the future now? Obviously if you pick up robin a really large client You want to make an adjustment to that revenue because you'd know that the revenue would be higher But yes, I I love historicals. That's the way that I budget I look at historicals I analyze historicals because I believe as I said earlier the history the back history Which is all things that happened in the past the only way you're able to predict the future Is to look at the history is to look at the history in the past to be able to make projections for what the future would hold So important good data And we talked about But we we were talking about the seasonality part of this as well So if you look at your history and if you know that january is always lower than december Then this january might be higher than last january if your numbers are trending up But you might want to make some adjustments for the seasonality of your business Absolutely, and one of the things that I really coach clients to do and this is just such a big topic We could really talk about it for hours to be honest Is I I tell people if we're going to base it on history Go and run your p&l in the accrual and lis that kind of helps what you know Those that don't know the difference between cash and accrual Feel free to send me a note and I will I'll be happy to record a video or whatever to explain the difference between cash and accrual But the quick answer is accrual is revenue and expenses in real time as they're being As they're being earned or accrued where cash is deposits into the bank account Versus money that goes out of the bank account. You want to run your business budgeting from an accrual Don't let any cpa. Don't let any Consultant tell you that you need to run it on cash because then you're just going to be following the transit cash flow Which is that dangerous place that lis was talking about earlier You need to run it on the accrual what I tell people to do run your p&l For like for those that want to go through this process run your p&l once december numbers are done January through december and sort it by By month so you have january's numbers of your remembers march remembers and so on and so forth dump that into excel And then copy that part of the excel into another exact same mirror image One of them is your 2022 budget and you go in and you change your 2021 numbers based on growth of business changing expenses Changing what your costs would be and you can always go to the other tab at the bottom of excel to go back and Look at what the historicals are to say. Oh rent was always 1500 bucks a month But I know in march it's going to go to 1800 dollars a month and you can go in and then you can look at those history And so you're constantly comparing what the past was to what the current was and that spreadsheet can be built And and can then determine what your total positive cash flow would be You know jay, so we might need to have you come back and we could have a whole Discussion just on that because I know some people are going to jump into quit books and run a pnl And they can see that they've got a little toggle where they can do it cash in a cruel and right depending on how you've got your Books set up if you've got an annual bill and you'd paid it all in january And you can say a cruel but it really isn't going to give you the cruel information that you want to see There's a little more to it in that but uh, that would that would be that would be a good discussion and Yep Jason you're getting to the point where you're you're going to earn the title of smart business moves contributor All right, so hopefully you guys see that um, we have jason's website up here Jason cup.com and it's c upp So um anybody interested in getting more information Reach out to jason, of course. He'll be happy to help you He'll even create a little video for you about the difference between cash basis and approval basis Tom, I don't know if you saw that linda has a question linda. We're out of time Um, that's a too big of a question to get here at 301 or 601 or whatever time it is right now But maybe you could hit us up on wednesday with that question. Yeah, we'll be back. We'll be back back wednesday Yeah, same bat time same bat channel Five o'clock eight five five o'clock eastern liz will be here four o'clock central got it That's right Jason you are awesome. Thank you. Thank you so much. And now you're day while you're traveling and everything else He's working at another client's office. I am now. Seriously. I am I am as soon as I get as soon as I go Get up here. I go back into budgeting process. So Um, it's no no no rest for the crazy, right? Thank you. I really appreciate it. Jason. Appreciate it. Take care. Be good. Bye. Bye