Justin Deese (00:06.956)

Welcome to another episode of Freedom Blueprint podcast. If you are hanging out with us on YouTube, then you can see my super special co-host guest, my amazing wife, Kristen. And if you're not, then you get to listen to us and you get to hang out with us in your.

in your ear.

Appreciate you coming and hanging out all the way in the studio in the.

I did have to take 42 steps to get out here.

it is a long ways. So what are we talking about today?

Kristen Deese (00:42.094)

Today we are talking about whether or not as a business owner you need to know how to do everything in your business.

I think that's a really good topic. think that most people like as they're trying to grow in scale or not grow in scale as they're trying to just get their business going. think a lot of times they get jammed up on that where well, what's your opinion? Do you need to know how to do everything?

Well, you're successful home service business owner. Do you know how to install an HPC unit?

Not even a little bit. I can barely operate the thermostat. That's not true. I got a really good app.

So I guess the answer is no. You don't have to know how to do how, like the actual step-by-step tasks of how to do everything in your business. Doesn't mean it can't get, like it doesn't have to get done though.

Justin Deese (01:31.074)

Yeah, so I think about where people get a little bit hung up on that is that you have the trust but verify right like you've got to trust this being done, but you also have to verify that it's being done correctly. So I mean what maybe we'll take this from the angle of. Let's call it accounting since that's kind of your specialty. So from an accounting standpoint, I've never really known anything about that part of the business and obviously it's because that's always been your lane and which we

We had some challenges with that at the beginning to where I wanted to be all up in the middle of everything and know everything going on, which you're probably better off to tell that story. It's probably worth telling. Tell them if you're picking up what I'm putting down there.

So if you've read our book, you might recall this story. Early on, as most businesses do, cash was a big part of everyday conversations. And a lot of times it was the lack thereof in the cash situation. And so when we first started, we both had online access to the bank account. But I was the one who was primarily doing the accounting tasks.

every minute.

Kristen Deese (02:46.766)

But he would get in there and he would open up the bank account and he would look at the balance and regardless of anything else, he would decide in his head whether or not that balance was enough to go buy something. And most of the time the answer for him was yes. so then I'd be like, oh my gosh, we're having a cash crisis. And he's like, I just looked at the account, I understand. Anyway, he'd get in there and he would just like rustle stuff up. And.

And it was because he had access to online banking. So what we did is we came up with a system where I could give him enough information that would satisfy what he was looking for, but not bog him down in the details, because he's not like a details kind of guy.

And so I would give him like this is the bank balance this week and these are the things that we're about to have to pay because you know Just because it's money in the account doesn't mean it's not earmarked or something So here's the list of things that are coming do that we're gonna have to pay this week Here's the current balance that we owe to our like two or three major vendors that we were had on account

Here's the current balance of the credit card that we were using just like the high points of information from a cash standpoint I would give him that report once a week That was enough information to keep him satisfied kind of felt like he knew what he needed But wasn't so much that he was like digging in our account and asking me. What is this? and I'm like dude, that's the insurance We have to pay that something that we have to do every we have to make that payment So instead of getting grilled by right? Yeah, can we not pay that so instead of getting grilled by what we were buying?

rest of

Kristen Deese (04:24.976)

which was the stuff that we needed in order to run the business. was, okay, here's the high level of where we are.

The other thing that it did is if I didn't give him any information and then we came up into a cash crisis, then he felt blindsided because he felt like he didn't really have any information to see it coming and anticipate it. And so being able to use that cash on hand report allowed us to share information back and forth and may not have to say, hey, we have a cash crisis. He could see it himself.

Yeah, I could see it on the horizon. And then you're like, if you could stop checking the balance. Which, I mean, I think that most business owners, they get start, especially as you're getting started, I mean, that's just part of it. Because one, you're excited, you're curious, you you don't know what you don't know. And that's one of the hardest things about when you get started in business is you don't know what you don't know. So.

Well, and it's really exciting to see the deposits come into the account.

Absolutely. Just be deposits in.

Kristen Deese (05:23.51)

You know, it's exciting and always that and always just that. So, so really kind of one of the things that I thought would be kind of cool to talk about today is that idea of being able to figure out what curated information the business owner needs to feel like they are secure enough in their financial data without necessarily having to know like specifically how to do every single little task in the accounting department.

Because I think that to a certain extent, a business owner's time is probably so much better used in a more strategic format than the little nuances of accounting.

Well, and for the most part, and I feel like this will be a pretty good statement to make, a very true statement, is I don't know anyone in our industry that got into the home service space and went, man, I can't wait to learn accounting.

I know one person. Who Can I say his name? Charlie Bonpy. damn.

now.

Kristen Deese (06:36.552)

Yeah, okay. So one.

He's actually a second generation, so that's not even how he got in the industry. But interesting enough, over the last however many years, when we first met with him, first met him and got to know him and his family, and he was just such a different business owner, and it was nice that he wasn't, he didn't make that transition from technician to business owner. He went straight to business owner. And for us,

We didn't really like I didn't start out as a technician necessarily.

I mean, sort of, but it was really short.

I my face off and trying to generate money and I feel like that was something that I was pretty good at doing but as far as turning the wrench and making things happen was definitely not my strong suit. But it did teach me, I had to learn a lot of other skills in order to keep the business moving and driving forward. what is it, what is like.

Justin Deese (07:39.212)

I don't know two or three things that business owners really need to learn to trust but verify without necessarily needing to know how to do and I'll say this again. I know for a lot of people listening there like yeah, but your wife does that but and I get it but. Other people are not they don't have their spouses still don't know how to do this right as far as accounting. I could not log into our QuickBooks.

if if my life depended on it. couldn't even now get into any online banking if my life depended on it. Like there's a certain things that but I do get reports and that's what I live off of. And then if I have any report when I get my report, if I have any questions, then I can ask my question.

And that was actually going to be the number one thing was it's not about knowing all of the little tiny intricacies. It's about being able to spot when something looks off and ask the right questions to figure out if something is off or not. being able to know what your historical

key points are so that when they are different, can pick, you can spot it. And what I mean by that is not just revenue, everybody knows what their revenue is, that's the easy one, but like percentages of labor, percentages of material, percentages of overhead.

You should have a pretty good grip on to about what your average is on those things in your different departments. And you want to strive as a business owner to get to a point where you can look down your financials and be able to say, hmm, that looks different. You don't have to know why it's different. You don't have to know what made it different. You just have to be able to spot that something feels off and start asking questions because that ultimately is what ends

Kristen Deese (09:38.134)

up uncovering if there is something to uncover. listen, 99 % of the time, it is not fraudulent activity. It is almost always either maybe a bill forgot to get paid or got paid twice in one month. That happens quite a bit. Or maybe an expense got coded to a wrong account. Or there could be other operational things that are going on. Very rarely do you actually see fraud

or stealing in the company, that's not to say it doesn't happen. So make sure that you're protecting yourself against that. But it's almost always not some sort of intentional malicious thing. But if you see something, say something.

Yeah, ask the question and I know for me, even though I still couldn't get into the QuickBooks if I needed to or whatever, but when I'm looking at a PNL, I know percentage-wise what questions to ask.

Like if I'm looking through it and I see typically we spend, let's say 1.1 % on fuel and now all of a sudden there's 3 % on fuel, I'm gonna ask the question. so a couple things have to happen in order to even ask that question. One is you have to have the report in a timely manner.

And two, you have to have someone that you're reviewing the information with. Right? If you're like looking at it you're like, well, it's 1.1. Now it's three. Why?

Kristen Deese (11:05.934)

you

Yeah, you gotta have somebody that you can ask the question to. just like a quick pro tip is anytime, especially for overhead expenses, anytime I'm reviewing overhead expenses with a company, I always, always look at three months next to each other. So month one, next to month two, next to month three. And month three is the one that we just completed. as next week I'm gonna start doing everybody's financial reviews, we're gonna be reviewing February. So that means I'm gonna be looking at February, next to January, next to December. And so for all of our overhead

head expenses, one month doesn't give you any point of reference. Yeah. OK, two months, it might look different than it did the month before. That certain expense might look different. But it's not enough information to start giving you any kind of trend. You still really don't have a good point of reference. But three months next to each other will start to show a trend.

I don't do more than three months because it gets to be a lot of numbers. And I understand that business owners aren't really number oriented and spreadsheets are not fun and whatever. That's totally fine. So three months is like a happy.

Well, it tends to take your, you know, like you mentioned earlier, like your invoices got paid twice in one month. That tends to work.

Kristen Deese (12:16.014)

You see that well and you can pick it out. So like if you don't see an expense last month but you see a double expense the month before, then it just means that the timing wasn't quite right on how those expenses were entered. But anyway, so we look at three months next to each other. So yeah, in the fuel situation, if it goes from 1.7 to 1.6 to three, I'm saying, hey, what happened here? Did my wax bill get recorded twice or is the dating a little funny or did

Do I have somebody filling up a personal vehicle with a company card? Or do I have really poor dispatching and we've got guys running across the territory six times a day in a really haphazard way? I mean, there's several different things that could come from it, but the point is that I'm noticing that fuel was twice as much as it normally is.

Yeah, and I know we're using accounting right now and that's the example we'll keep going through. But realistically, that's the same even for, I mean, KPIs or KPIs. And you should have a good scorecard for everything in your business so that you're crystal clear on really when to ask questions. I think as a leader of the business,

Your job is should be to be as strategic as possible. I know that's not possible all the time and there's people that are running smaller companies that are in the truck and running and gunning and all that stuff. So it's very hard to be strategic, but once you get to the point where you're not having to do that as much, you should be managing the results of what's going on, not micromanaging each task. And this is a really good example of that because now from each of your department heads or leads or whatever it is, you should be getting.

a report and accounting is one of the biggest ones that you should be getting that kind of report from on a regular basis. And I'm gonna kick this question to you. What do you feel like is considered a reasonable amount of time for you to get and be able to review a P &L?

Kristen Deese (14:19.078)

You should have a totally completed P &L by the 10th. There's no reason, by the 10th of the month, there's no reason that you shouldn't have all of your stuff received back from whoever's doing your bookkeeping by the 10th. I have clients who the statement drops on the first and they're ready to do their financial review on the third. So it's definitely, most definitely possible. So the...

What we were originally talking about was knowing how to do everything versus that more strategic side of things. There's been a couple times even just recently where there's been a realization in the business owners that.

Well, let me say it this way. They feel like they would need to know that because they don't have anybody in their business that they can trust to do the things. Because you have to let go a little bit. Right? Like you have to be able to let go a little bit of some of the responsibilities and some of the tasks in the business. That is delegation. That is inside and outside of accounting. And so it's difficult to let go of something that you don't really quite know fully how to do.

because then it comes into how do I know that it's being done correctly.

Well, here's a good one. Numbers don't lie. Like I am in general, I'm not like a numbers pro. Like I don't see numbers and get all giddy. Like you see spreadsheets, you're like, But numbers don't lie, right? So it's nice to be able to set up a system to where you're getting these numbers on a regular basis and you're able to review the business and make decisions based on that versus making decisions on feeling.

Kristen Deese (16:11.67)

Or the bank balance. Right, right. So yes, the numbers are those key data points. Those are what's going to tell you how the business is performing, good, bad, or otherwise. We've run businesses off of gut feeling before, it's not super fun and amazing. Stressful. So yeah, if we can be.

if we can be strategic about it and then seeing their numbers and then knowing what to do after that, after like I see this, my labor percentage is too high or my supply percentage is too high, whatever it is, then knowing what to do with that information is kind of a different, but as the business owner, that's what you need to be figuring out. You need to be figuring out if my labor's too high, how do I fix that? Not how do I enter my payroll into QuickBooks?

Right? Does that make sense?

So. Yeah, that does. So, well, and so in my head, anytime I think about our business from a number standpoint, I always think about like the things that can crush you the fastest. And it's not typically your fuel expenses shot up a percent or two. Normally it's your labor and material are so out of whack or you're running and those numbers are.

above 80 % you know whatever it is that just that's the kind of stuff that I think is the as the leader of the business. That's the kind of stuff you should be watching on a day to day basis and to your point not how do I enter this expense into?

Kristen Deese (17:55.202)

whatever, whatever software or yeah.

or how do I book this call into my software? You should have an overall concept of what the end result looks like and you should be coaching your people and being a leader on getting that result that you're looking for.

Well, and to the point of booking calls, I don't know how to book calls. That's not in my lane, right? I don't know that you could book a call at one point. don't know if you still know how to do it or not. point is that we were very purposeful about bringing the right people on the team to do the things that we either didn't know how to do or didn't find joy in doing.

my way through it.

Kristen Deese (18:41.611)

which again you know though we don't need to know how to put all of the expenses in quickbooks but somebody does and so and why yeah

Well, technically you do know how.

But we do need to know what to do with the information that's coming out of the things. it doesn't mean that you not knowing how to do it doesn't mean it doesn't need to get done. It just means that you don't need to know how it's done. don't need to know how it's made. You just need to know how to use it.

care how the watch is built just that it works yes yeah that's great so what's a let's see we talked about gas being a we talked about labor and materials what's a pro tip on that

So separate your technician labor from your admin labor and put your technician labor in a cost of goods sold. There's a lot of times that I see payroll just gets charged as payroll and like one line of payroll expenses in books, especially on companies and businesses that are smaller and newer.

Kristen Deese (19:52.046)

the cost of your materials and the cost of your technician labor, you have to know those numbers by department. Have to, have to, have to. I cannot stress enough how important that is. Most third party resources, unless they are specifically doing your books in accrual and know the industry, you're most likely not going to be getting that information unless you bring it in house.

or you're using a company that understands why that's so important. I'm gonna partially plug myself here. Go for Partially not. It is so, so, so important that you know those numbers. If you are off, even by just a little bit on labor materials, you are pulling money right out of your net income. Right out of your net income. The reason that we wanna know that they're different by the different departments is because different departments perform in different ways

You have the mic.

Kristen Deese (20:49.176)

level of of departments are different. So we want to make sure that we don't have one department covering up poor performance of another department. It's very very important to know that information. pro tip would be make sure that our technician labor is above the gross profit margin line.

like it. And another thing, tell me if I'm right or wrong on this. And this is not, this is going to be confusing. I already know it before I even said it. One of the other things is I know a lot of times when we talk to people and they're rattling off their numbers or percentages and I'm a very much a percentage guy. Like I, I understand percentages way different than way better than numbers, but consistency, like how important is it for people to be consistent with how they enter their

How they enter their? I mean, it's required. Like it has to be consistent. Even if you are doing it consistently wrong, continue to do it consistently wrong. Because at least the information that you're getting out of your system is the same. So if something changes, can see through the numbers that something changes. if the information is not getting entered consistently, then if something happened in operations to change the number, you would never see it in your own.

Thanks.

Kristen Deese (22:10.141)

numbers because this stuff isn't getting entered consistently. So really, really, really important that it's consistent. Even if it ends up you find out that it's consistently wrong, at least it was consistent.

Right now again that's not mean yes payroll but to Kristen's point separate them as fast as you can separate them because yeah your service your install your sales like all those departments have completely different numbers and completely different KPIs that they should be running and if you're lumping all of them with your admin yeah there's no way you would ever catch.

You'd never, yeah, you'd have a really difficult time catching if your pricing isn't right, because that's really what it comes down to. You have your revenue at the top, and then you have your cost of goods sold, which in most cases, the two biggest numbers out of that is gonna be labor and materials.

and then have your gross profit margin and then you pay for all your overhead and then you have your net profit. That is the five points of every single P &L of every company that there ever was. Well, if you are not maximizing your gross profit margin, which is making sure that your pricing is right to cover your labor, your technician labor and your materials, then you are shorting yourself to be able to cover the overhead. The overhead is gonna be there, so it's there.

Yeah, that's not going to change for the most part.

Kristen Deese (23:31.568)

Right. For the most part. And so by undercutting yourself at the top, you're actually taking away that from the net income at the bottom. If your pricing isn't right, you don't know if your pricing isn't right, if you don't have a good cost to get sold. It's a whole chain reaction.

and then efficiency and then there's that whole thing. There's definitely a lot to it, but I think to the point of what we're talking about today is, well really it's do you need to know how to do everything? No, but you need to make sure that things are in the right order and you're looking at your numbers in order to be able to run your business correctly and understanding your, let's call it above the line and below the line. Numbers would be a really good place to start.

Yeah, and asking questions. If something doesn't look right, ask a question. I think we might have talked about this in the book at one point, but if you have team members and you ask questions and the responses that you get are brushed off or more words and no meaning or seem to be extremely baffling on purpose.

Dig deeper. Dig deeper. should be, everything in your business should be extremely transparent. And if you ask an employee to show you the chain of events that got you, got the number that you're seeing on the report, they should easily be able to show you exactly the chain of events that got it there. And if they can't, then you need to be asking more questions.

That is such a sensitive topic and throughout the years, I mean, we've seen that, we've seen people just completely taken advantage of and we go into the details, but it's awful, it's terrible and it's unfortunate and people make a career out of sometimes taking advantage of small business and that's really what it is. I we've seen people that go from business to business to business and literally their entire career is about taking advantage or.

Kristen Deese (25:35.374)

It's amazing if they would put that much effort into being a productive member of What could possibly happen?

Weird, so weird, so weird. All right, so any closing thoughts as we wrap up our hangout time today?

Well, so when we talk about key data points and KPIs, key performance indicators, knowing what points to be looking at, what you should be measuring if you're not micromanaging the process of accounting, what's the high level to keep you feeling like you have enough information that you feel good and confident about the financial health of your company.

I would say that a big step to help you get there would be to come to the two-day workshop happening in May that will help you figure out what the KPIs per position are going to be and how they're going to get tracked daily, weekly, and monthly.

Yeah, that would be powerprofitworkshop.com. It'll be in the show notes. Definitely come check it out. Actually, we've got it's going to be a fun event. It is going to be a workshop, but we do have some pretty cool people coming to hang out and it will fill up fast. This is a smaller event. It's not designed to be.

Justin Deese (26:51.128)

hundreds of people, it's less than 50 people and we're gonna dive in. We're gonna talk about your business. I don't wanna say that you might get uncomfortable because I don't wanna scare people off from attending but the truth is growth happens from being uncomfortable and sometimes in order to learn and to grow, just like working out, it takes a little bit of that getting uncomfortable for a second in order to make that breakthrough to figure out like here's the thing that I should be doing in order to grow my business or be the leader that I wanna be

have a business that really is designed to be fulfilling in your life and not a burden.

That's no fun. your business so it doesn't run you. Yeah. there you go. was what it was. So in everything that I do, I try to make the theories of accounting and numbers as easy as possible because I understand that not everybody is a numbers person like I am. that's too.

You can own it or it can own you.

Justin Deese (27:52.812)

I like you're getting really good practice with me. Because I'm not... I'm not...

But here's the deal. So I can remember in elementary school crying over math homework because I didn't get it. And it was so frustrating and it just, didn't click. And I can remember crying over math homework. And so.

I am not anticipating tears at the workshop, but I understand that this stuff does not come naturally in all cases, and that's okay. So the uncomfortability sometimes is just revolving around that area of unknown, and then once it's known, then it's not uncomfortable anymore. And so the, you know.

The workshop is partly numbers, but it's also partly, okay, cool, now that I have this information, what do I do in the operations of my business? How do I lead my people in a way that will help us get to these goals that we're setting? So I'm gonna push a little bit on the numbers side, but then we're also gonna pull back into the zone of comfort with, cool, let's work on some leadership stuff too. I'm super excited about the guests that we have coming and the speakers that we have coming to help and stuff, so it's gonna be awesome.

Great, I the information, now we're away.

Justin Deese (29:09.358)

Coming up in May again powerprofitworkshop.com the information will be in the show notes. Get your tickets fast before they sell out matter of fact by the time this goes live this may already be sold out. I don't know but go check it out for sure. Thank you so much for coming as always and being a guest co-host and now that have the studio done.

you're going to be on here a lot more because well you're better looking than I am so it's nice to have my visual piece you know so anyways appreciate you coming and hanging out and gosh we look forward to seeing you on the next episode and at the workshop so thank you