How can knowing your numbers, transform your
Jon Clayton:business and personal finances.
Jon Clayton:I chat with Mamood Raza.
Jon Clayton:All about it.
Jon Clayton:In this episode of architecture business club, the weekly podcast for solo
Jon Clayton:and small firm architecture practice owners, just like you who want to build
Jon Clayton:a profitable future-proof architecture business that fits around their life.
Jon Clayton:I'm the host John Clayton.
Jon Clayton:And if you want a business in architecture that gives you more freedom,
Jon Clayton:flexibility, and fulfillment that go to architecture, business club.com
Jon Clayton:forward slash blueprint and download the architecture business blueprint.
Jon Clayton:It's the step-by-step formula to freedom for architects, architectural
Jon Clayton:technologists and architecture designers.
Jon Clayton:And it's absolutely free as a gift from me.
Jon Clayton:Now let's discuss money matters and getting to know your numbers.
Jon Clayton:Mahmood Reza is a business finance fixer, tax advisor, and author of I Hate Numbers.
Jon Clayton:He has helped thousands of sole traders, business owners, artists, creatives,
Jon Clayton:and social enterprises have businesses, not hobbies, make money, save tax,
Jon Clayton:improve their money mindsets, and reduce their financial stress and anxiety.
Jon Clayton:Mahmood believes that once you understand what your numbers are, where they
Jon Clayton:come from, what they mean, you can use them to make better decisions and
Jon Clayton:ultimately make or keep more money.
Jon Clayton:You can learn more and connect with Mahmood at ihatenumbers.
Jon Clayton:co.
Jon Clayton:uk.
Jon Clayton:Mahmood, welcome to Architecture Business Club.
Mahmood Reza:Thank you very much, John.
Mahmood Reza:That was a beautiful introduction.
Mahmood Reza:It made me go slightly misty eyed, but yeah, thank you for that.
Mahmood Reza:Thank you for inviting me.
Jon Clayton:Don't start crying.
Jon Clayton:That wasn't, you know, the,
Mahmood Reza:I'll do my best not to, I've got my Oscar speech ready, just in case.
Jon Clayton:we'll save that for later if you've got time.
Jon Clayton:Mahmood, um, I know, uh, outside of, of the work that you do
Jon Clayton:you're a bit of an adrenaline junkie on the quiet, aren't you?
Jon Clayton:You'd like to do a bit of scuba diving.
Jon Clayton:You've done some of that in, uh, in your time, haven't you?
Mahmood Reza:have done.
Mahmood Reza:I've done some of that.
Mahmood Reza:I've done some app saving.
Mahmood Reza:I've done some various other activities.
Mahmood Reza:I know you probably think very calm accountant, finance y person once
Mahmood Reza:you're doing things like that, but yeah.
Jon Clayton:It's not, as you say, it's not what you expect.
Jon Clayton:It's the kind of typical.
Jon Clayton:Accountant to do in the free time.
Jon Clayton:So I love it.
Jon Clayton:I love all that sort of stuff as well.
Jon Clayton:Not that I get much chance to do it these days.
Jon Clayton:But yeah, scuba diving and bungee jumping.
Jon Clayton:Awesome fun.
Jon Clayton:But we're not going to talk about that today.
Jon Clayton:What we're actually here to talk about together is Well, it's the
Jon Clayton:start of the new tax year when this episode is being published.
Jon Clayton:So we're going to talk about money and the importance of
Jon Clayton:getting to grips with our numbers.
Jon Clayton:So why is it important that we get to grip with our numbers?
Mahmood Reza:That's a great question.
Mahmood Reza:I think fundamentally, John, uh, if we look at any business that goes in there,
Mahmood Reza:whether it's a private business, a not for profit, a social enterprise, a charity.
Mahmood Reza:Ultimately, in order to deliver your wire, Simon, our friend Simon would say.
Mahmood Reza:If you don't have funds, maintaining your costs, providing a living for the
Mahmood Reza:people who work with you, uh, find a living for yourself, then ultimately
Mahmood Reza:your ability to serve and deliver impact is going to diminish and wave.
Mahmood Reza:And therefore money is an important consideration.
Mahmood Reza:It's not the only one, but it's absolutely critical.
Mahmood Reza:It's like the fuel that goes into your car.
Mahmood Reza:If you don't have the fuel, you can't drive your car.
Jon Clayton:I totally agree with this.
Jon Clayton:I've, I guess, sort of learned this the hard way that I have never.
Jon Clayton:Never been motivated by money, but it's come to kind of bite me on
Jon Clayton:the bottom over the years by not, by not getting to grips of it.
Jon Clayton:So I'm, I'm fascinated about the, this topic and what we're discussing today.
Jon Clayton:So I think it's going to be really helpful which I guess that sort
Jon Clayton:of leads us on to thinking about.
Jon Clayton:Money mindset.
Jon Clayton:So, you know, how the way that you think about money, I've just
Jon Clayton:mentioned, I've never, never really been motivated by money.
Jon Clayton:So how can your mindset that you have about money, how can that affect
Jon Clayton:your finances in your business?
Mahmood Reza:What's a great question, John.
Mahmood Reza:I think if I look at, um, if I, for example, focusing in that world
Mahmood Reza:of business and that sort of big overarching business that Carrick
Mahmood Reza:has a lot of players in there is your behavior and your attitude.
Mahmood Reza:Mixed with your skills and abilities.
Mahmood Reza:It's a thing that combines to give you that ability to do whatever you're doing.
Mahmood Reza:And for me, you know, whether it's a family issue, background, cultural,
Mahmood Reza:whether you've never worked before, whether you've come from money,
Mahmood Reza:whether you've not come from money.
Mahmood Reza:I'm I, I myself have come from a family of nine, got a great deal of money
Mahmood Reza:on the table and all the rest of it.
Mahmood Reza:That influences how you interact with people that influences.
Mahmood Reza:Invoicing clients, invoices, that money being in a consideration there as well.
Mahmood Reza:And I think if you don't win that battle that goes on between
Mahmood Reza:your ears in business, uh, then I think you find it very, very
Mahmood Reza:difficult to maintain a business.
Mahmood Reza:I would imagine it's the same, you know, in your world, John, that you could
Mahmood Reza:have brilliant skills and really be academically minded, but if you don't
Mahmood Reza:have the right stuff in terms of how you interact with people, how you interact
Mahmood Reza:with clients, your right attitude there, basically, you're going to be a useless.
Mahmood Reza:Individual in that post.
Jon Clayton:Absolutely.
Jon Clayton:Yeah, yeah, I totally agree with that.
Jon Clayton:So it's interesting actually that you mentioned about how things like your, your
Jon Clayton:background, your upbringing, those things can influence how we think about money.
Mahmood Reza:Oh, yeah, very much so.
Mahmood Reza:And I think it also about wishing to be a marriage guidance counselor.
Mahmood Reza:It also happens in when you've got businesses where you've got husband
Mahmood Reza:and wife working together, friends working together and all the rest of it.
Mahmood Reza:People in the UK, I think, still generally speaking, Uh, have a
Mahmood Reza:very focused and myopic view about how they should discuss money.
Mahmood Reza:Talk about it for something that's a very grubby word.
Mahmood Reza:Some people react against their past.
Mahmood Reza:So where they may have come from a very impoverished background
Mahmood Reza:or money wasn't a particularly, uh, something that was plentiful.
Mahmood Reza:That influences how they react in terms of conserving money, not necessarily
Mahmood Reza:investing in their business, being very cautious in terms of how they
Mahmood Reza:invest their time and money and energy.
Mahmood Reza:Some people go the other way around and they say, look, I had a very, you
Mahmood Reza:know, my background was such, uh, that I'm actually just going to be reckless.
Mahmood Reza:Some people have left a job that's very well paid.
Mahmood Reza:They go into the world of business and expect that same replica because
Mahmood Reza:they don't really discuss it.
Mahmood Reza:And I don't really talk about it with their friends.
Mahmood Reza:Their colleagues, people in their business and all the rest of it.
Mahmood Reza:It becomes a thing they have to figure out in their own heads,
Mahmood Reza:which is not really probably the best conversation space to have.
Jon Clayton:Yeah, I think it can be something that's quite a taboo subject.
Jon Clayton:For a lot of people, and it really shouldn't be, but it is, um, it's
Jon Clayton:something that I, in particular, noticed in the world of architecture, particularly
Jon Clayton:when it comes to how transparent practices are about what they charge
Jon Clayton:and why they charge what they charge.
Jon Clayton:And, It can be very difficult to find out, you know, particularly thinking about
Jon Clayton:this from a consumer's point of view.
Jon Clayton:If you're looking to find an architect or an architectural practice to
Jon Clayton:work with, it's, it's real cloak and dagger when it comes to the numbers.
Jon Clayton:So it's not just within the business themselves.
Jon Clayton:It's also how they talk about numbers with their clients.
Jon Clayton:You know, it's a real
Jon Clayton:mystery.
Mahmood Reza:agree.
Mahmood Reza:I don't know if you find it in your own space that, uh, that actually
Mahmood Reza:you can sometimes raise a barrier.
Mahmood Reza:It can be an inhibitor.
Mahmood Reza:to actually clients interacting with you because I think my own personal
Mahmood Reza:perception, if I think architects, okay, I also actually think it's going to
Mahmood Reza:be an extremely expensive investment.
Mahmood Reza:I think it's not, you know, I won't necessarily have the funds, even though
Mahmood Reza:I don't actually know what the value and the cost of an architect services and what
Mahmood Reza:they do, and if you're not going to be comfortable talking about money, I think
Mahmood Reza:with people, especially in a business context, it's going to be difficult.
Mahmood Reza:My personal view is when I interact with a new person, client and all
Mahmood Reza:the rest of that certainly don't be driven by money in its own right.
Mahmood Reza:But I think if you're not comfortable having a conversation about money
Mahmood Reza:with prospective clients, with your fellow partners, with investors at the
Mahmood Reza:outset, that doesn't bode very well when you do start generating value.
Jon Clayton:Absolutely.
Jon Clayton:Yeah.
Jon Clayton:It's going to be, uh, it's going to be difficult to, uh, to run your business
Jon Clayton:if you not willing to talk about it.
Jon Clayton:Yeah.
Jon Clayton:So Mahmood, you, you came up with a concept related to money and
Jon Clayton:finances planet do it profit.
Jon Clayton:Can you tell me about that and just explain what that's all about.
Mahmood Reza:Absolutely.
Mahmood Reza:So I think there's two or three things that come to play here.
Mahmood Reza:I've always been a big a believer in what I call planning, not, not a plan, not
Mahmood Reza:a document, not a straight jacket that says, this is what I said I was gonna do.
Mahmood Reza:Therefore, that's it.
Mahmood Reza:I mustn't do anything outside of that.
Mahmood Reza:And it's going to be a fixed rigid because I think the whole idea about
Mahmood Reza:a plan, as soon as you say, this is my plan of action for the next six
Mahmood Reza:months, 12 months is out of the moment.
Mahmood Reza:You've signed it off in your own mind.
Mahmood Reza:So for me, unless you have some perception, what's going on through the
Mahmood Reza:windscreen of your business going forward.
Mahmood Reza:Okay.
Mahmood Reza:It's very difficult to know what you've got to do in
Mahmood Reza:order to get to that end goal.
Mahmood Reza:So for me, it's always been, what is your end objective?
Mahmood Reza:Your end destination?
Mahmood Reza:What is the route?
Mahmood Reza:What is the thing you're actually going to be doing to get you that route?
Mahmood Reza:And I'll have to take give some credit also to a lady called Joe Watson, who
Mahmood Reza:edited my book for me, my copy editor, and in a conversation with her, we came
Mahmood Reza:up with that phrase planet doing profit.
Mahmood Reza:And for me, it encapsulates exactly what a business is going to do.
Mahmood Reza:In order to actually get to that, you know, that end destination
Mahmood Reza:that you will live on if you want for want of a better term,
Jon Clayton:Got it.
Jon Clayton:Got it.
Jon Clayton:So the planet bit is the, obviously.
Jon Clayton:The planning stage, kind of having some foresight into where you're
Jon Clayton:heading and what the destination is,
Mahmood Reza:correct?
Jon Clayton:the do it bit is presumed that's the implementation of the plan,
Mahmood Reza:I mean, what I'd probably add to that, John, is the
Mahmood Reza:planet for me, as you're right, is about destination first, story.
Mahmood Reza:What's the story that you present to yourself, the activity?
Mahmood Reza:Think about things like some people might, for example, be very, uh, what
Mahmood Reza:I would say, very cautious about, say, I want to get to this stage.
Mahmood Reza:And some people might be completely reckless.
Mahmood Reza:It says.
Mahmood Reza:For example, you know, I wish to make a million pounds, for example, but if
Mahmood Reza:you're starting from a base of zero and you're thinking to yourself, it'd
Mahmood Reza:be similar to somebody says, you know, I want to appear at the Albert Hall.
Mahmood Reza:and perform a concert.
Mahmood Reza:Now, if you're like me, you probably wouldn't be let loose because my voice
Mahmood Reza:would probably drive dogs insane.
Mahmood Reza:However, if I'm actually a professional songster or I've actually got some
Mahmood Reza:experience there, the aspiration of the alcohol may not be that unrealistic.
Mahmood Reza:So it's about an objective.
Mahmood Reza:What's your goals?
Mahmood Reza:What's your ambitions?
Mahmood Reza:What's your mindset saying?
Mahmood Reza:And what is your behavior saying there as well?
Mahmood Reza:The doing is the actual implementation.
Mahmood Reza:And it's about the mini milestones that you set yourself
Mahmood Reza:as you go along that journey.
Mahmood Reza:And if we think about anybody who's at the top of their relative game, singer,
Mahmood Reza:performer and all rest of that, they think to themselves, what do I need to
Mahmood Reza:do to actually be able to get to that where I've actually set myself out to be?
Mahmood Reza:So the doing it is a combination of that, how we avoid procrastination,
Mahmood Reza:how we avoid things like imposter syndrome, how we actually become more
Mahmood Reza:confident in ourselves, the actual investing the money, investing the
Mahmood Reza:time, the energy and the profit.
Mahmood Reza:It's the end objective, you know, whatever that figure or that, you
Mahmood Reza:know, your Nirvana looks like to you is the is the result of all those
Mahmood Reza:and it's not necessarily a linear.
Mahmood Reza:You know, but for me, those are three key segments.
Jon Clayton:Could we talk a little bit more about profit?
Mahmood Reza:Absolutely.
Jon Clayton:Are there any guidelines or yardsticks that small business owners
Jon Clayton:can, can use when it comes to profit, because this is a question that has
Jon Clayton:come up within some of the communities that I'm in with people in architecture.
Jon Clayton:What is reasonable to expect or to aim for maybe as a percentage of turnover.
Jon Clayton:Have you got any thoughts on that from your experience
Jon Clayton:working with other companies?
Mahmood Reza:Yeah, I have.
Mahmood Reza:And I would say it's a, it's a classic finance person's response
Mahmood Reza:by their job to say, it depends.
Mahmood Reza:But so here's, here's what I would say, depending, I think you as the business
Mahmood Reza:owner, whether you're an individual, whether you're a part of a partnership
Mahmood Reza:or you're a big conglomerate here, you've got to first of all decide, okay, On
Mahmood Reza:that bit that I get to at the end, you know, in terms of where I want to achieve
Mahmood Reza:there as well, I need to make sure that I've got enough funds to take me through
Mahmood Reza:to cover my cost, give myself a half decent living and that level of profit,
Mahmood Reza:I would say as a startup, I would aim for to getting to a break even situation
Mahmood Reza:probably within a couple of years.
Mahmood Reza:If you do it much quicker than that, that's fantastic.
Mahmood Reza:But typically a break even situation for year one and year
Mahmood Reza:two, where you've actually managed to reward yourself to some extent.
Mahmood Reza:I think it's a great achievement.
Mahmood Reza:Real value and profit actually comes from most businesses after
Mahmood Reza:about five years, by the way.
Mahmood Reza:And beyond the five years, could you sustain people know who you are, they've
Mahmood Reza:engaged with you and all the rest of it, then that's where you're going
Mahmood Reza:to make some excessive profits there.
Mahmood Reza:If you're talking about what should that figure be, it varies
Mahmood Reza:so much from sector to sector.
Mahmood Reza:So if you're a sole trader, so proprietary in your world.
Mahmood Reza:It may be that your target profit is such that you can retain maybe a
Mahmood Reza:couple of months, three months worth of ongoing costs, and you managed
Mahmood Reza:to give yourself a salary or reward that's commensurate with a more than a
Mahmood Reza:living wage as far as that's concerned.
Mahmood Reza:If you've got obviously extra financial pressures because of home,
Mahmood Reza:that might be a different landscape.
Mahmood Reza:If you're working in the retail sector, you know, by benchmarking
Mahmood Reza:other companies, what that can be.
Mahmood Reza:So really for me, I know it's a bit of a long answer.
Mahmood Reza:It's shaggy dog type story here.
Mahmood Reza:It's very much depends on the nature of the business you are and whereabouts
Mahmood Reza:you are in your business cycle.
Jon Clayton:Got it.
Jon Clayton:Got it.
Jon Clayton:Yeah, that makes sense.
Jon Clayton:So for thinking of the listeners of the show who are going to be working in
Jon Clayton:architecture, small business owners, many of them are going to be the sole, sole
Jon Clayton:practitioners, so sole traders, or maybe it's a small business with, you know,
Jon Clayton:two or three staff, something like that.
Jon Clayton:Yeah.
Jon Clayton:So for those people, do you have any further thoughts on any sort
Jon Clayton:of typical margins for those
Jon Clayton:people in the audience?
Jon Clayton:Remember.
Jon Clayton:Don't forget to download the architecture business, blueprint the
Jon Clayton:step by step formula to freedom for architects, architecture, technologists,
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Jon Clayton:Now, back to the show.
Mahmood Reza:That's an interesting point.
Mahmood Reza:I would probably say where I would start from.
Mahmood Reza:If you want to get some sort of a, If you look at that typical practitioner
Mahmood Reza:that's got two or three members of staff, I would probably say, in terms
Mahmood Reza:of service margin, I'd probably be looking for what they call a net margin.
Mahmood Reza:So after you've paid all your own costs, reward yourself.
Mahmood Reza:If you can aim for about 10 15%, that would be a good
Mahmood Reza:benchmark figure to begin with.
Mahmood Reza:That gives you enough funds to leave in the business, gives you
Mahmood Reza:enough reward on top of that.
Mahmood Reza:Obviously, you know, I would imagine all practices, John, are going to differ.
Mahmood Reza:Are they in terms of the client base they deal with?
Mahmood Reza:So a high street practice might be different for somebody working from home.
Mahmood Reza:Somebody who's working with a certain target section in terms
Mahmood Reza:of wealth they've got might be earning a slightly different figure.
Mahmood Reza:As long as you've got enough to cover your costs.
Mahmood Reza:Pay yourself what you think is a decent level of salary.
Mahmood Reza:Okay.
Mahmood Reza:And have, you know, three months worth of overheads costs left over and your
Mahmood Reza:lifestyle is as you want it to be.
Mahmood Reza:That to me is probably a good measure of, you know, a first
Mahmood Reza:initial target to go for.
Jon Clayton:I think that's a good idea because I think sometimes we
Jon Clayton:can get a little bit hung up on like what other people are doing and
Jon Clayton:how other businesses are operating.
Jon Clayton:And the truth is that particularly if you're a business of one.
Jon Clayton:Like the way that you set things up in terms of your numbers and your
Jon Clayton:targets is very much related to you and your, the lifestyle that you've
Jon Clayton:set out that you want to achieve.
Jon Clayton:And it's not necessarily going to be aligned with what the practice down the
Jon Clayton:road is doing in terms of their numbers.
Jon Clayton:So I guess it's sort of taking it at the, an individual approach to it.
Jon Clayton:Yeah, that's, that's really helpful.
Jon Clayton:Thanks for that, Manita.
Mahmood Reza:As you were saying that, John, I think there's one
Mahmood Reza:more thing I would factor in.
Mahmood Reza:If I go right back to the start, you know, uh, I mean, for example, I would
Mahmood Reza:imagine for yourself, you could have, if you wanted to, you know, if you like,
Mahmood Reza:it's actually said, you know what, I'm going to work for another practice.
Mahmood Reza:I'm not going to bother with this high risk rollercoaster world of
Mahmood Reza:self employment work for myself.
Mahmood Reza:And if people make that decision to work for themselves by accident or
Mahmood Reza:design, what you've gotta factor is there's elements they say that they
Mahmood Reza:want from that self-employed life.
Mahmood Reza:So freedom, control, the flexibility, the ability to say
Mahmood Reza:to somebody, I don't actually like you, I don't wanna work with you.
Mahmood Reza:Or actually say, I'm gonna go down this partake weeks off the scuba diving.
Mahmood Reza:So you've gotta factor that in, I think as a social return on top of the
Mahmood Reza:financial return that you're making.
Jon Clayton:That's an interesting point because the truth is that in my
Jon Clayton:experience, that most of us, when we start our own business or become a, an
Jon Clayton:entrepreneur or sole, sole trader it's not necessarily all about the money.
Jon Clayton:It often, it isn't.
Jon Clayton:Anything to do with the money, you know, we obviously we need the money
Jon Clayton:to, to get by, but the reasons for leaving a potentially secure job at
Jon Clayton:another architecture practice and going out on your own is usually because
Jon Clayton:you want more freedom, flexibility and fulfillment in what you do, and not
Jon Clayton:necessarily about wanting more money.
Jon Clayton:But then that's comes back to something we mentioned earlier about Having
Jon Clayton:said all that, that if we neglect to get to grips with those numbers,
Jon Clayton:even if we're not motivated by it, it can cause problems down the line.
Jon Clayton:So I think that's the kind of caveat that I would say on this, that, you know, even
Jon Clayton:if you're not motivated by making loads of money, that this is so important that
Jon Clayton:we do get to grips with our numbers.
Jon Clayton:Absolutely critical.
Mahmood Reza:Yeah, I think you are absolutely right.
Mahmood Reza:Now here, here's another way, another spin on that.
Mahmood Reza:I would say if I was starting over again, I've been doing this for over
Mahmood Reza:29 years now is to say Your first target is going to be to say, what
Mahmood Reza:is it you need in your household?
Mahmood Reza:Okay.
Mahmood Reza:So actually keep your head above water to actually not starting to
Mahmood Reza:get stressed out because you haven't got enough money to pay bills.
Mahmood Reza:That's your first level of target.
Mahmood Reza:And if you can generate enough profit that goes to ideally cover that.
Mahmood Reza:So you can actually cover, keep your head self a float, maybe
Mahmood Reza:a little bit on top of that.
Mahmood Reza:That is your first profit target.
Mahmood Reza:Then you could move out because you take the pressure off.
Mahmood Reza:You take the stress off thinking when we're going to get the money from this
Mahmood Reza:month to go towards the mortgage, the bills, kids, and all the rest of it.
Mahmood Reza:Once you've moved past that, you then find that actually
Mahmood Reza:you're just topping up the tank.
Mahmood Reza:And that means instead of taking a couple of weeks off in a year, You could take
Mahmood Reza:three or four weeks off in the year.
Mahmood Reza:So I would say if you want a profit margin test, it should be such
Mahmood Reza:that actually doesn't, you're not having undue financial pressures
Mahmood Reza:at home and in your personal life.
Jon Clayton:Got it.
Jon Clayton:Sage advice.
Jon Clayton:Let's talk about record keeping.
Jon Clayton:I mean, what is that and why is it important keeping those records?
Jon Clayton:very
Mahmood Reza:companies, our charity commission, if it's relevant, that's fine.
Mahmood Reza:That you've got to do that.
Mahmood Reza:If you don't.
Mahmood Reza:You could at worst case scenario be eating prison food and keeping company with
Mahmood Reza:people you don't necessarily want to.
Mahmood Reza:That's a really extreme situation.
Mahmood Reza:So it's not the compliance side.
Mahmood Reza:It's not about doing the things.
Mahmood Reza:It's also by the way, a criminal offense if you don't maintain records, but
Mahmood Reza:it's, it's what's happening in between.
Mahmood Reza:So if you imagine at the end of the year, somebody says, right, here's my books.
Mahmood Reza:I have to do that myself, take this to my accountant to get
Mahmood Reza:all those tax returns done.
Mahmood Reza:But if you don't have that information that runs throughout the year to say
Mahmood Reza:what are things costing me, how much profit am I making or how much money
Mahmood Reza:am I losing, which clients give me best value, which clients are losing
Mahmood Reza:me money and all I say, if you can't get access to that, then you're going
Mahmood Reza:to find life really difficult here.
Mahmood Reza:And that's where the records come.
Mahmood Reza:It says, keep a track on what you're spending.
Mahmood Reza:Who your customers are chasing up money from people who owe you money.
Mahmood Reza:Nowadays, I mean, we can talk about formats later on, but that's what I
Mahmood Reza:mean by record keeping because your brain is a useless finding cabinet.
Jon Clayton:So what we're trying to avoid is not turning up at the accountant's
Jon Clayton:doorstep at the end of the year with a big carrier bag full of receipts
Jon Clayton:and disorganized mess saying, there you go, you sort the accounts out.
Jon Clayton:So ideally, essentially this is like bookkeeping, isn't it?
Jon Clayton:We're keeping track of the ins and outs of, uh, the money going in and out of our
Jon Clayton:business on a, you know, weekly basis.
Mahmood Reza:hundred percent.
Mahmood Reza:And what I'm probably saying, the risk of probably getting shoved out.
Mahmood Reza:If people are listening to the finance people.
Mahmood Reza:Actually keeping the records just to keep your counselors happy.
Mahmood Reza:It should not be your primary aim.
Mahmood Reza:That's a consequence of keeping good records.
Mahmood Reza:It's about, I mean, look, John, typically you, we've known each other,
Mahmood Reza:uh, for a while, uh, I know in your practice, as you're evolving and you're
Mahmood Reza:pivoting and doing different things.
Mahmood Reza:You'll want information to help you inform the decision and if you don't have that
Mahmood Reza:financial information that goes with other information here Your decision
Mahmood Reza:making is going to be quite narrow quite lopsided So for me, it's about knowing
Mahmood Reza:what goes on So if you're not somebody who likes record keeping I would say as
Mahmood Reza:a bare minimum Even if you know what your bank account is looking like what who
Mahmood Reza:your customers are that owe you money having that access I In relative terms
Mahmood Reza:at your fingertips is such a, what I call an eye opener and it's so illuminating.
Mahmood Reza:It's so powerful.
Jon Clayton:One of the best investments that I've made over
Jon Clayton:the years is in a cloud based.
Jon Clayton:Bookkeeping software the particular one that I use is called free agent.
Jon Clayton:There's all sorts out there.
Jon Clayton:Zero, that's another popular one.
Jon Clayton:Uh, QuickBooks.
Jon Clayton:So there's, we could go on and on, but essentially that, that has made
Jon Clayton:it so much easier for me to just keep tabs on the finances and use it for
Jon Clayton:invoicing, for consolidating, explaining transactions in and out of bank accounts.
Jon Clayton:My.
Jon Clayton:Accountant has access to the software.
Jon Clayton:So when it comes time to sort out the company accounts, it's, it just
Jon Clayton:makes everything so much simpler.
Jon Clayton:And I'm so glad that I took the advice of the advisor.
Jon Clayton:It was a business advisor at my local bank that had said, when I
Jon Clayton:was setting up, I really strongly recommend that you, you, you.
Jon Clayton:Pay this subscription and get this software and start doing
Jon Clayton:this from the very beginning.
Jon Clayton:And I'm, I'm so glad that I did.
Jon Clayton:It's one of the few, one of the few things that I did right from the very beginning.
Mahmood Reza:You've done lots of things, right?
Mahmood Reza:But listen, you know, that advice is exactly as I would say as well as spot
Mahmood Reza:on is don't look at something as a cost.
Mahmood Reza:And that's another mindset issue.
Mahmood Reza:Look, it is a good investment about the amount of time.
Mahmood Reza:And the access to knowing what's going on.
Mahmood Reza:It just gives people peace of mind.
Mahmood Reza:And I think if you're going to do nothing else, invest in accounting.
Mahmood Reza:So it's not that expensive these days either.
Mahmood Reza:But it's a worthwhile, you'll get your return back quite easily.
Jon Clayton:Absolutely.
Jon Clayton:And actually there's some of the banks now that offer it for free.
Jon Clayton:They will offer a package for free.
Jon Clayton:So it's worth checking out what offers are available from the banks.
Jon Clayton:What, what about tax Mammut?
Jon Clayton:Could we touch upon that briefly?
Jon Clayton:Okay.
Mahmood Reza:Yeah, we can actually.
Mahmood Reza:I would say there's two things.
Mahmood Reza:There's the actual what taxes impact on an individual.
Mahmood Reza:And I think there's also what I call the psychological thought
Mahmood Reza:process behind tax as well.
Mahmood Reza:So typically, most businesses tax will affect them in
Mahmood Reza:probably one of three key areas.
Mahmood Reza:And the fact that as an individual, you might have to
Mahmood Reza:pay tax because of your business.
Mahmood Reza:To me is actually a good sign.
Mahmood Reza:It means you're earning enough money who might not feel like it that the
Mahmood Reza:tax plan wants to slice off you.
Mahmood Reza:Number two the in theory, the simple tax like VAT Again, most businesses
Mahmood Reza:at the startup phase, unless they choose to voluntarily register
Mahmood Reza:for V-A-T-V-A-T won't affect them.
Mahmood Reza:They'll be just, they'll ch they'll pay it to their suppliers and all you
Mahmood Reza:are is a tax collector as far as hs.
Mahmood Reza:CC is concerned when you've got to a certain level and you've gotta
Mahmood Reza:do what they call register of that.
Mahmood Reza:You'll basically be a tax collector.
Mahmood Reza:Unpaid, no holiday, no benefits.
Mahmood Reza:You'll be working on behalf of the government collecting
Mahmood Reza:it and paying it over to them.
Mahmood Reza:So the other two, the other main areas are, is where an individual has to
Mahmood Reza:pay tax and where their organization or their company has to pay tax,
Mahmood Reza:but you cannot get away from it.
Mahmood Reza:From the moment we're born to the moment we die, everybody at
Mahmood Reza:some point will be paying tax.
Jon Clayton:Deaf and Taxes, the only two certainties in life, that's what they
Jon Clayton:say, isn't it?
Mahmood Reza:And it's the things that freak us out the most as well.
Mahmood Reza:Even though we know they're there, they're probably the ones
Mahmood Reza:that cause us a lot of stress.
Jon Clayton:Yeah, um, something else that I did when I started out
Jon Clayton:was The, the software I use gave me an approximate estimate of what
Jon Clayton:my tax liability was likely to be.
Jon Clayton:And I had a savings account, but I used to set aside some money, you know, as
Jon Clayton:the money came in, I thought, Oh, okay.
Jon Clayton:That tax liability numbers going up.
Jon Clayton:And it wasn't.
Jon Clayton:Perfect at the end of the year, but it was not far off and it was just an easy way of
Jon Clayton:making sure that the money was there when it was time to come and pay the tax bill.
Mahmood Reza:Uh, that's a good discipline.
Mahmood Reza:A great discipline.
Mahmood Reza:I mean that approach, okay.
Mahmood Reza:If you do it either through software, what we normally advise
Mahmood Reza:clients to say, look, if you invoice a client for a hundred quid.
Mahmood Reza:X percentage of that so much in a pound to take it out of the system,
Mahmood Reza:put it away in a deposit account.
Mahmood Reza:You're going to earn a bit of interest on that.
Mahmood Reza:So you might even get a drink out of the tax people the end of the year.
Mahmood Reza:But when you're looking at your bank statement, you know that more likely
Mahmood Reza:belongs to you, not to somebody else.
Mahmood Reza:And I think it doesn't present false optimism in terms of put that money aside.
Mahmood Reza:It's all saved up.
Mahmood Reza:And therefore, when it comes to that time to pay the bill, you've really got the
Mahmood Reza:money there, you know, bingo, because when you work for somebody, you're having
Mahmood Reza:that money taken off you each week, each month, when you're working for
Mahmood Reza:yourself, you are your tax collector.
Jon Clayton:yeah, it does require a little bit of discipline.
Jon Clayton:Mahmood, that's been absolutely fantastic, really informative.
Jon Clayton:So thanks for joining us today, but what would be the main thing
Jon Clayton:you, you want people to take away from this conversation?
Mahmood Reza:Okay.
Mahmood Reza:I would say probably three things.
Mahmood Reza:If I'm allowed three things.
Mahmood Reza:Obviously my strapline plan it to a profit, but I actually have an idea of
Mahmood Reza:what for you, not anybody else, what for you represents your end point,
Mahmood Reza:your destination within 12 months, two years, three years time, and then figure
Mahmood Reza:out the journey you've got to make.
Mahmood Reza:What does it mean in activity?
Mahmood Reza:And then translate it into a financial plan.
Mahmood Reza:Number two, don't be scared.
Mahmood Reza:Okay, that you don't know things.
Mahmood Reza:Okay.
Mahmood Reza:You know more about financially give yourself the credit ball.
Mahmood Reza:Uh, so don't be hijacked by language.
Mahmood Reza:Uh, and number three, enjoy it.
Mahmood Reza:Money will come if you do things well, but don't set unrealistic
Mahmood Reza:expectations for yourself there as well.
Mahmood Reza:And I just think you've got to be comfortable and confident in what you do.
Mahmood Reza:I have lost count amount of mess ups I've made in my business
Mahmood Reza:life from the very beginning.
Mahmood Reza:Even, you know, in the last few years, I've made decisions that
Mahmood Reza:have cost me lots of money.
Mahmood Reza:I've worked with people that have cost me lots of money.
Mahmood Reza:So you've got to have a real strength of sense of resilience and
Mahmood Reza:strength and just enjoy the ride.
Jon Clayton:That's great advice.
Jon Clayton:Thanks Mahmood.
Jon Clayton:Was there anything else you wanted to add that we haven't already covered?
Mahmood Reza:No funds.
Mahmood Reza:That's very kind of you to give the website address.
Mahmood Reza:Obviously, I will plug my book, I Hate Numbers, which is not
Mahmood Reza:written for accountants, but they would be pleased to know.
Mahmood Reza:Obviously, I want to appear on that Richard and Judy show one morning to
Mahmood Reza:say, tell us about your bestseller book.
Mahmood Reza:But no, if anyone wants to check out, we've got loads of resources.
Mahmood Reza:We've got a YouTube channel.
Mahmood Reza:I hate numbers and a podcast and a weekly vlog.
Mahmood Reza:They're all there.
Mahmood Reza:We're all accessible.
Mahmood Reza:But if you don't know, speak to your advisor, speak to your accountant.
Mahmood Reza:And just as I said, uh, I think that's all I know.
Mahmood Reza:Thank you very much again, John, for inviting me onto your show.
Jon Clayton:You're very welcome.
Jon Clayton:I'll make sure those links go in the show notes so people
Jon Clayton:can access those resources.
Jon Clayton:Mahmood, I've got one very quick final question.
Jon Clayton:It's nothing to do with numbers.
Jon Clayton:I love to travel and discover new places and I think architecture is about place.
Jon Clayton:So could you tell me one of your favorite places and what you love about it?
Jon Clayton:It could be near or far.
Mahmood Reza:Okay.
Mahmood Reza:I'm going to say Barbados, actually, but not actually for the beaches in
Mahmood Reza:the north of the island in Barbados.
Mahmood Reza:Barbados is a lovely island.
Mahmood Reza:I've been there quite a number of times with my wife.
Mahmood Reza:There's a north part of the island called Bathsheba, and it faces
Mahmood Reza:on, my geography is terrible.
Mahmood Reza:I think it's the Atlantic it faces onto, but it's very rough.
Mahmood Reza:Very ready, but very fascinating.
Mahmood Reza:You know, sometimes when you look at fires, for example, they can entrench
Mahmood Reza:you and you just look at them.
Mahmood Reza:You've got the ocean crashing against the rocks and all the rest of it.
Mahmood Reza:So it's got an element of stillness and beauty.
Mahmood Reza:And you just look at it and you think, do you know what?
Mahmood Reza:You're just a mere pimple on the backside when you look at
Mahmood Reza:mother nature and it's raw.
Mahmood Reza:So in the context of the beautiful island, that's a part of the world
Mahmood Reza:that I find particularly tranquil, uh, and particularly fascinating as well.
Jon Clayton:Oh, it's an awesome place.
Jon Clayton:I was fortunate enough to visit many years ago just for a short holiday with
Jon Clayton:my wife and we absolutely loved it.
Jon Clayton:And if you go back, Mahmood, um, Carlisle Bay, recall was
Jon Clayton:a great spot for scuba diving.
Jon Clayton:They had about five, five different wrecks that was just not far off the beach.
Jon Clayton:So, um, put that on your to do list next time you go.
Mahmood Reza:I will do John.
Mahmood Reza:Listen, thanks again.
Jon Clayton:All right.
Jon Clayton:Thanks Mahmood.
Mahmood Reza:Take care.
Mahmood Reza:Bye.
Jon Clayton:Next time I chat with architect Syrah.
Jon Clayton:Kolata about how you can craft a location, independent architecture business.
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