Ep 46: Mastering Profitability with Michele Williams

This transcript was auto-generated and may contain errors in spelling or inaccuracies in the spoken words.

Hello and welcome to the Real Women Real Business podcast. I am your host, Shauna Lynn Simon. And today, I am being joined by Michele Williams of Scarlet Thread Consulting and Metric Solutions. Now, Michele and I actually go way back. We were just discussing this. Don't ask us to put an actual date on it because as you get older, things kind of blur together. But Michele was actually a co-author. You might recall talking about this book a couple of times.

I've had LuAnn Nigara on as a guest. I've had Claire Jefford on as a guest. And Michele Williams was also a co-author of the book that we all wrote together. So be sure to check it out. It's called A Well-Designed Business, The Power Talk Friday Experts. It is available on Amazon. Be sure to grab it. But Michele is here because of all of her incredible knowledge when it comes to finances and profitability and, of course, how all that relates into your small businesses or your larger businesses.

and how that helps you to live the life that you wanna live and have the business of your dreams. So she has extensive experience in finance, in business management, and she offers coaching, mentoring, she does fractional CFO services. She helps her clients to achieve that financial clarity and operational efficiency and help them to make informed decisions that drive their businesses forward. Now, if you have listened to this podcast before, you know that I am a...

data-driven kind of person, my own personal background being an analyst. I do not love the accounting side of things, but I love the numbers. So profitability is totally my jam. And actually, Michele has her own podcast as well, Profit is a Choice, and I was actually a guest on her podcast a few years ago. Again, don't ask us actual dates, but back in the day. And so she has been talking about this topic before it was cool, let's just say, because I would say that it's become a really hot topic.

in recent years, especially as the cost of living continues to increase as economic uncertainty continues to unfold in different areas. But this isn't a new conversation. So today we're going to get into it. So, Michele, welcome. Shauna I am so excited to be here. This is this is fun. I was so excited when you reached out. I was like, yes, let's keep talking. We had so much fun when we met the first time and as we

coordinated to do the book and just different things. And so I think this is, I love what you're doing. Congratulations on the new podcast. We need all the good podcasts out there. I'm a podcast listener as well as creator. And so I know what it takes and what goes into creating a podcast that is relevant and that matters and that really has a heartbeat behind it. And so I love that you're being so intentional with this one.

See you need and you're trying to meet it. So thank you for that. I so appreciate that. Thank you. And yeah, I mean, that's definitely high praise coming from you because you have so much experience in the podcast world. You know, I spent so much time guesting on podcasts and I always knew I wanted to create something of my own. But, you know, took me a little while to kind of figure out what was the message that I wanted to serve. And I think that you have to follow a podcast that's

along the lines of what it is that you actually are passionate about, which is something that you've done. And again, I mentioned this in the introduction, but it's so true that you've been talking about profitability since long before it was cool to talk about profitability. People often get stuck on the revenues and how much money you're bringing in. Well, none of that matters if you don't understand your profitability from things. So why is it so important to understand how money works in a company? I know this is kind of like an obvious question, but like.

Why does this matter? Because I know so many people are probably listening to this and like, I mean, do I really have to get into the numbers? It's stressful, especially these days. Some people find it just stressful to even look at their numbers. So what's the value for someone? And I will also say at the event that we did together, there was one woman that I was speaking to and I asked her about her numbers and she answered to me. She said, I don't know. There's just always money in the bank. So I assume I'm profitable. So maybe speaking to people like that.

about the value of this. That's a little scary, it's interesting when you say that I've been talking about this before it was cool. It is true. So I'm just going to give a quick snippet of my own history so people understand why this is so important to me. I started my career working for Dun & Bradstreet Software, building financial application software. OK, I did that for 10 years.

worked in like the actually building of the software to do the things to support companies, never thinking I'm going to have a company that's going to need all this knowledge. And I came home to raise my children and I, not even with a huge plan, started a custom window treatment light design company on the side. People started coming to me and asking me to do these things. Well, I didn't know how to price anything properly.

I didn't really understand the difference between wholesale and retail. I mean, I knew mentally what the differences were, but how that applied to my small business, I didn't really have a good application model for that. I'm working around my kids' mother's morning out and nap schedules because they're little. And I am just sewing up a storm, I'm installing and I'm giving advice and consulting and doing all the things. And I don't know how to charge for it appropriately.

And then I find myself at the end of the day, owing money to my company for serving rich people for their homes. And I'm not a dummy. just honestly, I think part of it was because I was so passionate about what I was doing that I let the passion get in front of the financials. I thought the business part I'll figure out later. I'm going to chase the passion. Well,

When we were effectively at that point, a one income household and you know, my husband was making money and I was pretty much taking his money so I could serve rich people in my hobby. It didn't make any and paying for childcare while I did it, you know, I had to sit down and have that moment of wait a minute, if I was making six figures in software, there's, I shouldn't be at least negative numbers as a profit. I had revenue.

I just didn't have the same amount in net profit to be used. I wasn't paying myself a healthy salary and I didn't have money to make the business sustainable. And so I had that hot moment of what am I, am I going to continue this? Because I could honestly spend all my time with our kids and not lose money. that's possible. Why are you working to lose am I working to lose money?

Yeah. to lose time and energy and all those things. Well, and I also- sense. And I also want to add to that, you know, I talk often about what I call the accidental CEOs, which I feel is the majority of my audience listening. And these are people who are just like you. They followed a passion, not a plan. That's right. That's exactly what I did. All passion, no plan. Like no plan. None. And so I hobbled along for a couple of years because the money was coming in and people were buying and they wanted and-

You know, I was producing a good product and doing all of those things. I was great at customer service. Like I knew how to do all that, right? To some degree. And then I got to the point where I was like this, I'm losing money in my quest to fulfill my passion. I could go back and do this for free for fun. And so I had to make a hard decision. You know, am I going to be in hobby or am I going to be in business?

And so then I started defining what's the difference between a hobby and a business. And I made the decision I wanted to be in business. And then I started looking at what are the business things that I did not have to your point. I did not have a vision. I didn't have a mission. I didn't have a strategy. I did not have any set hours or set templates of anything. So everything was like from the beginning.

from the beginning. starting from scratch. Reinventing the wheel, so to speak. And some of that's natural in that stage, but mine was more than normal. And so I, having been in corporate and led corporate, a lot of that was always done for us by the management, the upper, upper management teams or the marketing teams. And so at my level, you know, manager of a development that's not what we were doing. We were just doing the work.

And so I went back and was like, that's what all those dog and pony shows were about. So I thought I'm going to create my own little dog and pony show. If you've been in corporate, you know what I mean? They pull you into this big hall and they raw, raw, re around the mission and the mission and you're all supposed to get so excited. So anyway, I thought I'm going to create my own excitement around those things. And I started writing them. And as I started writing them, I started realizing this reconnection of my heart to my work. So because here's the thing I will tell you. And I can tell you from having experienced it myself.

and having coached so many women, I've coached thousands of women. If you do not put the money behind the passion at some point, the passion will no longer remain. It will burn out. You will be exhausted. You will be demoralized. You will be all of those things that remove joy from what we're doing because we don't think that it is being appreciated properly.

And so especially if we were taking that passion and trying to make a job out of it or some type of a business out of it. So I started realizing it had to be, there had to be a value statement around the work. And the way that I had to do that was I had to start blocking all of those things that were getting in the way of me doing the job that I needed to do. So once I kind of set up this framework,

as I call it, you know, the mission, the vision, the why, the values, the culture, all those things. Here's who I'm going to be and here's who I'm going to do. Then I started looking at there's a great book called The Gap and the Gain. What's the difference? Jim Collins, yes. Or no, was that Jim Collins? Sorry. Yeah. Yeah, I think it is. Well, I'll have to look. Either way, I've read The Gap and the Gain. Yes. love it. Don't live in the gap, live in the gain it helps you start to look at what is the difference between where I am and where I want to go.

Yeah. And how do I get there? Like, how do I start creating strategy and goals and tactics and all the things? And so then once I did that, I realized I had to align my financials. So when we're talking about financial understanding and companies that can make money at the revenue level and not have money at the profit level, it is because we are either not, there's a difference in looking at the numbers and saying, I know the numbers and using those numbers for decision making.

Right. Brilliant. They're the same thing. They're not the same thing. And there are a lot of people that are using a lot of these terms. Like you said, I talked about it before it was cool. Well, that was around 2003. And I thought I better get my act together. I'm never going to make any money. So I committed to understanding the business and putting practices in place that would support not only my business growth, but my financial growth. Then I aligned my financial plan and budget.

to the strategy, like here are the hours, here's what I need to make, here's what I wanna do, here's the numbers that I need. How do I align these two so that I'm saying yes to the right yes and no to the right no? Like I'm not saying yes to everything, right? So it's like, you can see it even in the book with LuAnn I'm talking about this. So then I go through when I start making money, well, what happens? The IRS comes calling, because we're in the US. Hello, where's my tax money, Michele?

Well, Michele made that money. Michele didn't think about taxes the same way. Michele brought, I brought that some of that money home to live. And then I had to realize I needed to start saving for taxes. And so, you know, over the years I've made the mistakes by not sitting down and laying out these full blown plans for my business. And so what I'm seeing a lot now is I'm seeing people that have

this desire to have a business. I am seeing people with 500, 800,000 million, 2 million in revenue, but they're not making the net profit they need to make because here's how we make money. It's really not hard, right? It's very simple. It's not easy, but it's simple. You sell the right product and right service to the right person at the right price and you manage the heck out of it.

So if you think about it, right product to right service, that's what is it that I do really well? What is it that my company provides really well? At the right price, that means I know my pricing structure. I know what my cost of goods are, what my gross profit is, what I need to make. To the right person, I know my ideal client. I'm serving at the best of my ability. So now I'm working within that mission, vision, value cultures, right? Once I've done all that, I've managed that I've bought it well, I'm selling it well.

I've got a gross profit, now I got to manage it well. That comes down to what are all the expenses, who's on my team, where are we setting up shop, how are we managing that money so that we have some at the end of the day, not only to pay the owner who normally gets some level of payment from net profit, right? Whether it's their full salary or partial salary.

There's also something about sustainability in the company. So if we don't have net profit for sustainability, there is no way the next year we can invest in any type of growth mechanism for the company. It's also about expecting what the return on investments are gonna be. I am shocked at the people that are out doing all these marketing things and nobody ever sets the standard of if I'm gonna invest over here, I wanna see three times that investment within this timeframe and here's how I'm gonna track to see that happen.

just shooting money out of a cannon and hoping that it works out. And sometimes it does. Those are flukes. Those are flukes, right? It doesn't always work out the same. It's what we want to find is a repeatable process that says, if I'm going to play this gamble on this marketing opportunity, here's what I need to get out of it. And when it doesn't, or if it doesn't, I know when to...

cut bait and say, I'm going to go like fish in another pond. I'm not going to keep throwing good money after, you know, bad. Yeah. And there's so many things that I want to dig into here because you're so speaking my language, but just quickly on the marketing thing and talking about the return on the investment. One of the things that I discuss with my clients all the time is about when it comes to marketing ventures, campaigns, whatever you want to call them, you have to identify what is your objective, first of all. So I just had this conversation with clients earlier today.

of if social media is a great example. Are you trying to be an influencer on social media? Are you trying to gain clients from social media? Or do you just want to have a presence on social media enough to remind people that you exist? If someone looks you up or someone recommends your company and they check you out on Instagram, you've got some nice pretty photos on there. You know, what's your objective? Because there's a difference in what your strategy is going to be to how much time, money and effort you're putting into that. I had a client reach out to me last week.

She was told she should be in this trade show, this local trade show. And I won't give all the details about the type of business she's in or the trade show or anything else, but she was told she should be at this trade show and she wanted to get my thoughts on it. And I responded, okay, well, do you think your ideal client is at this show? And if so, what percentage of attendees do you think is going to be your ideal client? And then what is the message you're sharing at the show? Like, what is it that you're actually promoting?

Because you can be there with a little table and some postcards to give out to people, but that's not enough to capture attention. So the shows in like two months from now, do you have the time to put together the booth that you want to have with the promotional materials you want to have with the offer that you want to have? An offer doesn't necessarily mean sale, discount, whatever. It's just what is it that you're promoting? Generally, when you go to a trade show, you're promoting one core offer of some sort. What is that going to be?

And as I'm going through all these things, she responded about, she's like, well, I kind of thought that I was just going to like set up a table and hand out some pretty business cards. But I'm understanding now that there's a lot more to this. I said, I want you to sit down and identify whether or not you think your clients are going to be there and then identify how much time and money, because your time is worth money, how much time and money it's going to take you to prepare to spend the day at the actual event. If it's multiple days, how much time is that costing you? Are you bringing staff members to this?

How much is that costing you? And at the end of the day, what is it that you need to sell at that trade show just to break even? And then what is it that you need to sell to be able to look back and say, that was worth my time and effort? And you start- the same thing with show houses. I mean, how many, like on the, I work with designers, right? I had just earlier today, Michele, we have an opportunity to be in the show house. What do you think? And I said, what is your budget? You need to budget for the time it's gonna take you for the show house.

The time it's going to take you to do the work, usually for those that are listening, if they don't know, you're paying a lot of your own way in that show house. you know, we're talking 50, $75,000 budgets for somebody to have a buy-in to do a room in a show house. And then my comment was you're going to have time away from the office because it's, you know, do you need overnight stays in a hotel and food and staff? And by the time you're done, it's not just the show house and all the work, it's all the

the missed opportunities in other places, or the people that you want to serve even walking through, like who were they bringing in and how much are they bringing in and what does it look like? And is this a short term return or a midterm or a long term? Like, you know, some of these people, it might be two years before they build a house and call you. it's really for any same holds true if you're looking to hire somebody. Like, I get this question, should I hire two junior people or one senior?

person and I'm like, okay, well, let's look at the workload. What do we need to do? What do we need to hand off? Do you have time to train? If you don't have time to train, we give senior. If you've got time to train and time to invest in another person, we can go more junior. So everything is a trade off between time and expertise and money. And it's stopping to take a look at all of those things before you're making, but see that is strategic business. That's the thing that I teach is how to make, how to think of strategy and then break it back down into tactics.

I love to serve at the point where strategy and financials intersect. I love that. What happens is a lot of people are asking me about my financials, my financials. Well, all they're really asking me, they're asking me for more than they know they're asking me because you admit again, back to the whole before it was cool. There's a lot of people talking now about profitability, but what they're really talking about is gross profit.

They're doing a lot of you can mark up X percent or you could have X percent gross profit margin and now you're profitable. That does not make you profitable. That is saying that you can sell a product. Profitability happens at the end of the day after everything has been paid. And then I see people that have positive net profits, but they owe hundreds of thousands of dollars on the balance sheet. Well, that's still not getting you very far either. So there's, it's a whole money management.

that intersects with a strategy. And so if we're looking at our financials separate from our strategy, in isolation, those financials might look great. But when we look at them aligned with the strategy that we're trying to put out there, there may not. I have a free offer on the website that is a financial health checkup. And I usually have people take it twice a year. All of my private clients take it twice a year. They take it in the beginning of the year and they take it in the middle of year.

But you just go in and answer on a scale. There are 20 questions on a scale from one to five. How would you rate yourself? And then it gives you a score and it tells you how to improve your score and where to start looking like. Here's where you need to go focus. Like one of the questions might be, I have a budget and I manage to it. One, two, three, four, five. Do you or don't you?

And for some people when they say, don't even know the questions I'm supposed to be asking. I'm literally telling you the questions you're asking yourself, right? And if somebody just made like an 80%, like which I think could be like all fours, not even fives, all fours or some threes, fours and fives, you're gonna do way more than the average business owner because it just means you're even looking and monitoring and measuring the numbers, not as a separate data point.

but how they're used in analysis. You started off by saying, I don't really love accounting. What I'm taking that to mean is you don't love the process of doing the accounting and putting in the books, but you love the data points so that you can use them for analysis so that you can make decisions. And that's- enjoy doing the actual bookkeeping, accounting, debits, credits, and balancing all that stuff. Right. No, but give me a spreadsheet with some numbers any day and let me Which is fine, right? Let the bookkeeper and the accountant

put the numbers in their right places and then hand it to you. But the power of the numbers isn't being able to read a P &L and read a balance sheet. That's the starting point. That's not where the power is. The power is in knowing what that is telling you and how to use that for forward movement and acceleration towards this very clear vision that you've created. And I think that is so important right there because that's exactly what I was referencing when I said I don't like accounting, but it's

doesn't mean that I don't love this. And I think people get so scared off. Maybe you had a traumatic experience in high school on a math test or whatever, and all of a sudden numbers scare you. we're not using complicated formulas. You don't even have to calculate the formulas necessarily, because the tools exist to be able to support you with that. But you have to know how to interpret what the numbers are telling you. And that's exactly like that.

do you just hit the nail on the head with that one? Because that's exactly it. Yeah, being able to use that and then strategize with it. And even going to the financial health aspect of it, you can potentially be in debt and be struggling with revenues. But it doesn't necessarily mean that you don't. If you're watching your numbers and creating a plan, you are in a better position than the person who's not paying attention to the numbers. It might look like they're making more money than you. But if they don't have a handle on things, you are going to have a stronger long-term growth.

than the company who's not paying attention to any of this stuff. Because that company is not paying attention. They can't scale. They can't grow. You cannot do that successfully if you're not paying attention to your numbers. You can't. So I have just to shout out the freebies because there are three of them that work really well together. One is financial plan. That is this is the money I need. Right. So how much do I need to bring into my home? What do I need to do? What tax bracket am I in so that we can know how to manage the money?

The second is of course the financial health checkups that tells me what I need to be looking at. And the third one that we're adding in, we actually are putting it out on the website this week, is how to create a budget. Because what we want to do is create this plan, this financial plan that aligns with our strategic plan. This is what we say we want to accomplish. This is how much money it's going to cost. And this is how we need to spend that money in every area so that we can get there. And so it's like having all of these things, these

templates, if you will, to support us and to help us make a plan so that we know and a budget scares people as well. Budget is just telling your money in advance where it's going to go. It's just making a decision in advance on where the money's going to go. It's not it shouldn't be scary and it's not meant to tie our hands. What it's meant to do is make us radically focus. I mean, and.

Going back to one thing that you talked about earlier that I just wanted to circle back to because we actually talked about this a little bit off air as well about your vision and how getting that clarity on your vision will help you in so many ways. Profitability is absolutely one of them, but people often have a hard time drawing that line between having a clear vision and profitability. And frankly, a lot of people, especially in January, start of the year, they're talking about their vision, they're talking about their goals.

And a lot of these are just sort of like vision board dream type things. But the key to a vision is to get really, really clear about what is it that you're building? Why are you here? Why are you doing the things that you do? It's one of the things that I focus on a great deal in my coaching program. It's the very first pillar that we cover because to me, there's no point in doing anything else in your business until you have that nailed down. Because you are going to burn yourself out if you're not clear on that because that's how you make the mistake of saying yes to everything that comes your way.

saying yes to opportunities that maybe aren't as profitable as they need to be. And you end up going in so many different directions without that clarity, without that focus that you need. So that's gotta be the first step to things. And like I said, people don't often see that line from that to profitability, but again, you're building that foundation to ensure that you're going to build the strategic business and you're making decisions based on what it is that you actually want. And the side effect of that is exactly what you spoke about is the side effect of that is

The fact that you fall back in love with your business. yeah. Reignite that passion. So I heard the other day, I did not create this phrase, so I'm not taking credit for it. But I heard it said on a podcast that when you're thinking about strategy, ask yourself, where do I want to play and where do I want to win? And I thought that was brilliant because it's like what?

What is it that I'm trying to do and trying to accomplish is another way of saying that. just where do I want to play? Like what sport am I playing on? How am I going to win? Yeah. We're not in this to lose them and to win it. Right. No. Going back to what you said earlier, but like you can stay at home with your kids and make more money by making zero dollars. By not losing money. By not losing money. Right. This is not hard. You know, so strategy is the number one thing that we teach as well. We teach very, Ashley is.

It's kind of a secondary thing for us, but it's all kind of primary, which is, who are you? What are you trying to accomplish? What do you want to do? And now what is the vision? What is the clarity that you're trying to get? I love to explain it this way. And so maybe this will help your listeners that are thinking about it. If you were to open the door to a closet, and I tell it because I went to California for a trip one time and I was put in the primary suite.

and I had all of my clothes. live in Atlanta, Georgia. I had all of my clothes and I took them all out and there was no closet in the whole room. I a sauna, but it didn't have a closet. But the joke is, you've got all these clothes, we gotta have somewhere to hang them. Well, your strategy is the bar that we hang it on.

And so if you've got a clear strategy, I can now build an operational plan that matches the strategy. I can build a hiring plan that matches the strategy. I can build a marketing plan that matches the strategy and build a financial plan. So it's like opening the closet and there's a solid rod in place and will hold the weight that you can put on it. And every aspect of your business, you're putting it on a hanger and hanging it on that strategic plan. And they all work together like a capsule of clothing, like a wardrobe capsule. That's what we're trying to create.

things that go together and work together. Business is nothing but a bunch of pieces and parts. You give me any business and I will tell you what it's made up of. It's made up of finances, it's made up of marketing, it's made up of operations. It's all the same stuff. It hasn't changed in decades. It hasn't changed. It's how we're putting the pieces together.

That's what's most important here. And so if we don't have a strategy that everything is very siloed and they may be great in isolation, but they might not work together. Like this might be an awesome marketing opportunity, but I may not have any money to invest in it. And so it's the merging of all of these things focused on one strategy. That's what provides success and it provides rest. You had talked about, I'm pre-air.

We talked about just why are we building businesses that exhaust us and that remove our joy? Are we doing that to make a couple of bucks? I don't think anybody wants to do that. Our businesses are meant to serve us, not the other way around. And we can get twisted up due to our passion and our desires sometimes to where we built this business that is so big or so demanding that we are serving the business.

Not saying we don't work in it and not saying we don't love the business and we don't care for it. But at some point, we've got to be, there's got to be a clarity on what is the business meant to do for us. And we have to keep that in check. Otherwise, it's like I tell my clients, if you don't set boundaries, that business will eat up everything you give it. It is a machine and it will take and take and take. So we have to create the boundaries and that very clear strategy with that vision.

helps create those boundaries that the business has to work and live within. And the same thing within the finances. Yeah. And I mean, whatever your boundaries are, cut them down further. I think it's easy, going back to the whole passion-driven aspect of things, it's really easy for us to get a little bit caught up in, but I love what I'm doing. So I don't mind working some extra hours, but I love what I'm doing. So I don't mind throwing in an extra couple of things for this client for no charge.

When we keep using that, but I love what I'm doing, it's a terrible trap. And it's how I burnt myself out back in 2017 because at no point did I feel stressed. At no point did I feel overwhelmed. I was loving life. Was I working all of the hours of all the days though? Absolutely. I was burning the candle at both ends. I was having a great time doing it.

But my body was like, no, no, no, you can't do this. This isn't cool. So my body decided to give me a bit of a reality check on that when it took me three years to recover. So we might think to ourselves, but I love what I'm doing. Therefore, we can justify getting rid of the boundaries and doing all these things. But first of all, at some point, you're not going to love it nearly as much because you will get weighed down by it. But secondly, even if you love what you're doing, it doesn't make it any less worthwhile that you should be getting paid for. Your expertise still matters.

you still matter and your health still matters. so thinking about exactly what you just saying, like, what are you sacrificing for this? Even if you don't have a family traditionally at home that you need to, I I live alone with four cats and certainly they miss me when I'm gone, but it's not the same thing as feeling like I need to get home so I can have dinner with the kids or anything. But it doesn't mean that I don't have responsibilities or social commitments or things that I just want to do because I want to enjoy life. My dad,

passed away a few months ago and I've spoken about this on a couple of previous podcast episodes about the legacy that he left behind. And my mom read a beautiful poem, it's called The Dash, and she read this at the celebration of life. And I'll give you the gist of it, essentially, it sounds like you're familiar with it, Michele, but for anyone who's not familiar with it, talks about a man who visited a grave site or was at a, spoke at a funeral, I think it was, he spoke at a funeral and he

read the date that the person was born and the date that the person died. But he said, but what really matters here is the dash between those two dates. How did you live your dash? Did you live your dash to the fullest? Yes, you want people to remember you. If you were successful in the business that you ran and you touched people's lives and you helped people and you led with that passion, that is absolutely something to be super proud of and have people remember you by. But is that the only thing?

You want them to remember you by that like, well, you know, I didn't really see much of her outside of her work hours, but man, she really built a solid business. Great. That's not what I want my legacy to be. Don't get me wrong. Yes, I want to be respected for the work that I'm doing, but not at the expense of the personal connections and the social connections that I can have because I've allowed myself that with the business that I've built. So one of the things that I have recommended

to my clients that find themselves caught in that swirl of, I just want to give and I just want to do, and this is so easy and I'll just add a little more, is I have them acknowledge every time they do it. So what is the clear scope of work that the client's paying for and where's every place that you go above and beyond, either in time, materials, whatever it is, and write it down. Then we're going to put a price to it. Then I want you to look at it and I want you to ask yourself if you were willing to give that up.

because in isolation, everything seems reasonable. It's the pattern of behavior, right? If you did that twice during the year, I would be like, kudos, you really were caring. If you do it over and over and over, then like I told somebody, I think it was yesterday, I said, if you find that you are always going above and beyond and over and over and over, just increase your prices because you're telling me that that is the minimum level at which you want to serve. So just increase the prices to balance it.

Instead of fooling yourself and always giving it because it will create resentment. For clients that are, you know, over givers, I will say to them, here's the thing, if the client that you're giving to doesn't recognize it as a gift, in other words, I threw that in or spent four extra hours, but I never told you, I never billed you, I never put it on the invoice, you never saw it. They got a gift they don't even know they got. So now when you're expecting them to thank you,

or something else and they don't instead they ask you if there could be another renegotiation of the bill and you're over here thinking I've already given you four to six extra hours but they don't know they got that gift. You're right you get resentful yeah you get resentful so I said either acknowledge it and then ask yourself if you're willing to do it and if you're not put it on the bill but it's starting to train ourselves to really look at the cost of what we're giving and doing and if we want to absorb that cost do it.

Still show it on the bill though. They'll show it on the bill, courtesy, you know, whatever. They need to know. Sometimes the way to work around that is to create a budget, a company budget. This is how many hours I'm willing to donate. Goodwill hours, goodwill hours, goodwill money, whatever it is, this is what I'm willing to do. And then you have to go to the budget and ask yourself, is this the time I want to use it? Kind like when you watch some of the singing competitions and each judge gets a save.

Like every person that comes up, they know they have a save for that person that they got voted at, but they got to ask themselves, are you the one I'm willing to do it for? Just stopping ourselves enough to have that pause to ask the question then makes us very intentional with how we're spending our time and money and where we're capturing the value of valuable products and services. So true too, because the other thing is that like if you are

to your point, like we've got to show the courtesy hours, we've got to show the hours that we're actually charging to the client and that we want to give to them. But if you're looking at this and saying, well, you know, it's not that big of a deal, just give a few hours here and there, or I'll just give this a little bit of time, but they're not needing it. Like they're not asking for it. You haven't done anything wrong for them to merit that. You've got to think about what other time are you spending that's not billable that you are going to get caught up on?

Anyone who's in, and my audience is beyond just home stagers and interior designers, but given my experience in both those fields, a lot of our audience isn't, is in those fields. And I'm going to speak to interior designers, especially on this one, because we all know there are going to be times where something goes wrong on a project and you have to eat it. That is the only course of action. You cannot charge your client for something that was your mistake or you have failed in some way, not necessarily you, but your rep.

the experience has been diminished, whatever it is, and you have to eat a cost on something, those times are going to happen. So why are you just volunteering those times? That's right. Then it's just more and more and more. And if you hand a client a couple of comments on that, if you hand a client a bill that says, gratuity hours or hours that we didn't comp, not asking for compensation for gifted hours, however you want to phrase it, there's so many ways.

If you're doing it on every invoice, that should be a trigger to you. Hello, Michele, don't do it on every invoice. But now you've taught the client to expect it. You got it. It's like when the coupons come in and you're like, well, just wait and you can go get the coupon or don't ever buy it without the 50 % off or whatever. So we've got to start thinking about it. So just even capturing it first internally and then externally will make us stop and go, wait, what's happening? What am I doing?

Do I need to increase my prices? Do I need to charge for a broader service? Do I need to fix something? What do I need to do? Because if it's showing up over and over, I will tell you most people don't even recognize how much money they're leaving and losing by just not charging for what they're already doing. And you know, I think I'll admit I'm guilty of having those conversations with myself.

and have gotten better over the years of not feeling like I need to give someone everything and the kitchen sink. And I'm talking in my coaching, in my online training. I mean, I've got online training courses, for example, that I've put a ton of effort and knowledge and insights into. These are my blood, sweat, and tears have gone into these. So why am I discounting those? And I continue to maintain them. But it's easy to look at them like, well, it's just a digital product. It doesn't cost me anything to give it away for free.

Well, wait a minute, that's not exactly true. Why am I giving away the things that I've worked hard to gain this knowledge, to put it all packaged up together in a nice, easy little module course that you can now take and apply in your own business? So not only am I providing value to you, but I'm potentially making you money. But for some reason, I shouldn't get paid for that. Don't get me wrong, we're all going to have our

are free things that we're going to give away to help people to do better, to gain some traction on some things. But it doesn't mean that we have to give away everything for free. And some people are just going to go and get the free stuff, and that's fine. That's why the free stuff is there. You don't have to hire me afterwards if you just like my free stuff. But understand that the things that I, if you want to get access to me one-on-one, if you want to get my training, it's like all of those things do come at a cost.

And there is a price that needs to be paid for those things. That's exactly right. So I think, you know, as we're looking at creating companies that make us money, it's about knowing how to make the money, knowing how to price our products and services well and sell to the right client and then how to manage the money so that we have the profitability that we need. The last thing that I would say on just looking at like that, like a little mini P and L.

is when you look at net profit, net profit does a lot of heavy lifting in a business and we don't give it credit for the heavy lifting. In other words, net profit does things like it pays distributions or it pays a salary if you are a sole proprietor. It has to cover the taxes on all the profit.

is what we would use to pay bonuses quite often. It is what we would use for reinvestment into the company. It's what we use to pay down debt. Sometimes we use it to have additional retirement funds and things like that. So if we don't know how to make net profit, we don't make the most that we can, we are eliminating our opportunity, capital investment, to build, to grow, to do these things for the next year.

And so one of my favorite things to have people do is write the job description of your net profit. So the way that you would write a job description for an employee, what am I expecting net profit in my company to do? What is the heavy lifting I'm expecting it to do? And now what is the amount in each of those categories that I'm expecting that profit to have at the end of the year? Because I can then start rolling back up my financials.

so that I can understand how much money I need to bring in to satisfy what I actually need at the end of the day. Amazing. so I also, I'd be remiss if I didn't touch on this though. I mentioned your other company at the start of this, talking about Matrique, is it Matrique Solutions? You got it. Am I getting that right? so this is software solutions. Like this is SaaS product that can help business owners for like giving them a lot of these tools or

Pretty much all of the tools that you're saying, I'm not going to do it justice. Tell me a little bit about how that is a game changer. Because I mean, we've talked about spreadsheets. And I'm sure there still some people whose eyes are rolling into the back of their head because they're like, my gosh, I can't use a spreadsheet. And so how does this help to solve some problems or challenges? So yeah, thank you for that. Over the years, I've been coaching since 2013. But I've been teaching pricing courses and financial courses since about 2009.

And so during the course of teaching all of these, I was delivering spreadsheet after spreadsheet. Here, do this. You want to know what the cost to have an employee? Here, do this. You want to know how to do your financials backwards to say how much money you need to make? Do this. You want to know what your billable capacity is? Here's another spreadsheet. Like I was over here producing spreadsheets for everybody. And in 2021, I decided to try to pull them together into a dashboard in Excel.

And we did that and we used it for a few months, but we started running into some of the limitations. And so I hired a development team. Of course, I originally came from development of software. And so we built Matric Solutions, which is an adjunct to your financials, meaning you can load in your QuickBooks information or other financial information, and then you can use it to do top-down, bottom-up financials, which might look something like...

I want to make $100,000. I want to pay $30,000 in taxes. want to have $10,000 in profitability left in the company. And I want to put this a bunch of my retirement. And it works its way back up with you answering questions to tell you what your revenue needs to be to make that happen. You can tell how many, what your...

parameters are for how you're working and how you mark a product and it will tell you how much you need to sell, how many hours you need to bill out if you, you know, bill for your work. So it will lay an entire financial model out in front of you. We can do startup cost, we can look at run rate, how long is my money gonna last me? We can look at project profitability across all types of, you know.

scenarios and it is not just for interior design or staging. It is for small businesses. So it's built with all small businesses in mind, but it is, it is that modeling tool. Like what, how do I use the numbers to go forward? That's what it is. So it is a piece of software with a subscription model that you can use to model out the future and the changes and what's happening so that you can actually attain what you have on the strategic plan. Absolutely brilliant. Something that

is so needed for every small business. you identified a challenge that every single small business owner faces and you solved it in one simple software. So good for you. A couple of clicks and you're done. Yeah. Amazing. I'm so excited about this. Because I just learned about this today as well. I was not aware that you had done that. So I'm so excited about it. We'll definitely put the link for that in our show notes as well. Listen, if there is one

takeaway. We talked about so many different things here and naturally our conversation tends to go all over the place. You know, we started talking about profitability and throughout that there was the entire thread but we touched on so many incredible different aspects because I think again people forget about all that profitability entails. It's not just about talking about your numbers so much as the the whole strategy behind it but if there is one takeaway for our listeners today, if there's one thing you want them to take from this episode and apply it today, what would that one thing be?

So this is the way I sign off all of my podcast and it says something like this, profit doesn't happen by accident. And so I think if we can stop and recognize that profit, especially long-term sustainable profit, it happens because of intentionality. And when we think about what it means to be profitable, I told you there's like a Bible verse, what does it do for a man to gain the world and lose a soul?

So if you think about it, profitability in business is about more than the numbers. It's about profitable speech, profitable marketing, profitable team members. Like we are all working towards or away from profitability with every decision and choice that we make, right? We're gonna make mistakes, we're gonna have failures, but we've got to be intentionally looking and define what profitability means to you the same way that we're defining what net profit needs to be.

What is it that is profitable? Like it's profitable to me to have people that want to come to work and want to be there, to have a culture of inclusiveness, a culture of joy and excitement and passion for what we're doing. That's profitable. I would take a little bit less money if everybody was happy. I don't want tons of money and everybody hates each other. Like, sure. Yeah. So it's really the opportunity to define profitability and recognizing it doesn't happen by accident.

And I love that you are saying that each individual business owner has the opportunity to define what profitability looks like, feels like, and means to them. Because that, think, right there, like, let's take back that control. That's us. That's not your accountant that's saying that. That's not anyone else that's dictating. That is about you getting to decide what profitability looks like to you and be intentional working towards it. Beautiful. Thank you so much. let me say this just on that because I think this is interesting.

Our profitability needs shift and change as our businesses grow. Yeah. Like I work with a lot of individuals who are now looking on how to sunset their business. Do I close it? Do I turn the lights off? Do I sell it? Do I merge? What does that look like? Their profit needs, their money needs from that company, if we're looking at it from the money perspective, are reducing because they're moving into a retirement phase. Right. And so

We have many people that started these businesses when they have young children at home. Their needs might be very different than when those kids go to college. get a heck of a lot of women calling me, my kids are entering college, I've got to kick this thing into gear. Or I've gotten a divorce, I've got to take care of myself. Like there are life situations that happen that require, remember when I said, what does the business need to do for you? not what, you're not just here to serve the business.

Identifying profitability for the company and what that looks like is telling the business, this is what I need from you and this is what I'm going to give you to provide that for me. Perfectly said. So beautifully said. And you're absolutely right. Yeah. And thank you for adding that. That's such a great final note to end on. So thank you. Michele, this has been.

an absolute joy to have you on the show. I'm so glad that after several years, I finally got to return the favor and get to have you on my show. So thank you so much for bringing so many great insights. And you make it so simple. As you said, it doesn't necessarily make it easy, but it is simple. So thank you. You're very welcome. Thank you for having me. Amazing. So listen, if you're listening to this show and you're enjoying what you're hearing, don't forget to leave us a review. Subscribe to us on your favorite podcast platform.

And the best way, as always, that you can really show your support for us, as well as your fellow female entrepreneurs, is to share this episode with someone that you know is going to gain some value from it. Until next time, everyone, keep thriving.