How to Prioritize the Top 3 Financial Issues Facing Your Business with Spencer Sheinin

Episode 507. If you’re like most entrepreneurs, you probably hate accounting. The information your bookkeepers and accountants bring isn’t at all understandable or helpful, and you know you’re not getting the information you need to run your business.

If you’re like most entrepreneurs, you probably hate accounting. The information your bookkeepers and accountants bring isn’t at all understandable or helpful, and you know you’re not getting the information you need to run your business. You’re stressed, fed up, and even embarrassed about the state of your books. But you don’t know how to make things better. One thing is certain: you can’t afford to spend time learning to account—nor would you want to. I’m talking with Spencer Sheinin, founder and CEO of Shift Financial Insights (and rare breed of BOTH accountant and entrepreneur) who’s here to tell you that you don’t have to be an accountant to understand your financials.

 In his new book, Entreprenumbers Spencer lays out the surprisingly simple path to financial clarity, and how to turn your financial weaknesses into power by learning how to effectively direct your accounting team.   How? By getting entrepreneurs the information they need, when they need it, and most importantly, in an intuitive, simple-to-use format.   

Here is what you will learn!  

  1. How to Understand the Major Financial Issues In Your Business.
  2. How to Prioritize the Top 3 Financial Issues Facing Your Business
  3. How to Finally Feel Empowered with Your Accounting Practices, and more.

And don’t worry—it isn’t an accounting lesson!   

The first 30 people who reach out to Spenser get a 30-minute free analysis of their business as long as they are on Quickbooks. 

Service Business Mastery Podcast


Tersh Blissett: [00:00:15] Hello, everyone, out there in podcast world. Hope you have a great day. You’re listening to Service Business Mastery Podcast. I’m your host Tersh Blissett. I always forget to say that. I just assume people know that I’m Tersh. But today’s episode we’re going to talk accounting, you know, numbers and crunching numbers and just there’s going to be a boring episode, so you might want to turn it off, na, I’m kidding. Now we’re going to do the exact opposite. We’re going to talk about the it’s exciting.

Tersh Blissett: [00:00:42] Today we have Spencer Shannon Sheenan. Shannon. You got it, Shannon.

Tersh Blissett: [00:00:49] Ok, I always write it down grammatically like so it’s sounds and and then of course, I’ll hack it up every time. But I’m super excited because Spencer has a book out. And when this episode is released or when you’re listening to that, it may not we may not even have the covered issue anymore. But his book was released a few weeks before the pandemic started and spread. So it was great first for a little bit. And then, you know, it’s everybody’s attention went elsewhere. And but I’m excited to learn more about the book and then also to talk a little bit about Ultra’s.

Tersh Blissett: [00:01:34] And if you’re not familiar with an Ultra, you’re about to learn about an ultra and the glutton for punishment.

Tersh Blissett: [00:01:42] And we were talking before, like my leverage every week, whenever I have my group meetings with my team is if I don’t meet my goal, I’m going to run a mile. And so, like, that’s my motivation to get my goals completed each week so I can imagine running a hundred miles and swimming and biking and all that. Did you do a triathlon?

Spencer Sheinin: [00:02:04] Also, I’ve also done Ironman. But yeah, before the show we were talking more about just the ultra marathons, just the running side as well.

Tersh Blissett: [00:02:13] Well, anyways, welcome to the show, Spencer.

Spencer Sheinin: [00:02:17] Right on target. Tersh. Nice to meet you.

Tersh Blissett: [00:02:19] Absolutely. Absolutely. So tell us.

Spencer Sheinin: [00:02:21] Oh, it’s going to be fun. I can I can already tell it’s going to be fun, because when you know, when people are talking, either we can find a way to understand our numbers better and actually make them more interesting. And sometimes, you know, I won’t sound like a normal like and I promise. But when people hear about the ultra thing, they kind of they love talking about that, too. So I’m happy to go wherever we end up here.

Tersh Blissett: [00:02:41] Well, this is really cool. A little bit about your background. You’re a CPA and but you’re not a normal CPA. You’re someone who can talk to people in the trades and have a normal conversation.

Tersh Blissett: [00:02:53] And our eyes don’t glaze over when we talk. So we’re good to you. What’s your background like? How did you get into this?

Spencer Sheinin: [00:03:02] Yeah, so I actually well, I am a CPA, I consider myself an entrepreneur first, so I know way, way back in the day I did my CPA and I ran for the door as soon as I had my degree.

Spencer Sheinin: [00:03:15] And I actually was became an investment banker for a year as well. So I was doing stuff. We are doing financings and mergers and acquisitions and huge public companies. And believe it or not, I ran for the door after that as well. I had enough of working back in and I was in my early 20s at the time.

Spencer Sheinin: [00:03:32] And back in the day I had a roommate and the joke was, you know, I’d get up, I’d leave, I’d throw the paper down the hall.

Spencer Sheinin: [00:03:40] His room is down the back and that was his alarm clock. And I get home after he was in bed. So like, I was literally work. I’d be at work at by six thirty and I’d be home at about two thirty. And I’m like, nothing nothingness. So yeah. Yeah. So I got out of that and I actually ended up through a long story which we won’t get into here. Getting into my first business was actually a manufacturing business. We made skincare products, believe it or not, and one of them was hand sanitizer. So if I was in that business now, I’d be telling it instead. I’m in accounting. And and that sort of evolved into I had a business partner there and we actually got into construction. So I’m pretty familiar with the trades business. We did a high end custom homes in Vancouver. It was a business you had like.

Tersh Blissett: [00:04:25] You can’t. Yeah, you can’t. You can’t sneak that in. All right. Go ahead. Hand sanitizer to construction. Yeah. In the same business. How is this?

Spencer Sheinin: [00:04:37] So it was a different business, so my partner so through, again, a long story, which you don’t need to get into here, but I connected with my business partner and we went out and acquired the skin care manufacturing business and we all met together and he still had the construction business. And I knew that going in.

Spencer Sheinin: [00:04:55] And I was young and not very intelligent at the time. And he was about 12 or 14 years older than me and had quite a bit of business experience. But he didn’t have kind of the the office side, the accounting side, the finance side that I did. So we thought it was a really great partnership and it turned out to be an amazing partnership.

Spencer Sheinin: [00:05:14] And then when his partner out of the construction company retired, that was probably six or seven years into the manufacturing business. He invited me and they said, can you help me come in and just put the systems and process into place into this business? So it’s not quite as chaotic. So we were we were partners in two businesses together at the same time.

Tersh Blissett: [00:05:38] Ok, and one more in transition.

Spencer Sheinin: [00:05:42] Ok, yeah, I’ll slip one more in and I’ll give you a little more before I get there is I was also involved in a cold storage business, so we had four facilities in Washington State. So it’s basically refrigerated warehouses where, you know, being in the Pacific Northwest, a lot of fish, as you could imagine, beef, butter, those types of things. And interestingly, carbon fiber, carb, some types of carbon fiber have to be kept at a certain temperature before they’re manufactured. That’s how they actually get their rigidity. I’m not technical enough to understand that. So we actually had at one facility almost fully dedicated to carbon fiber. So somehow I found myself involved in these three businesses. And just for scale, you know, I’ve had businesses anywhere from a few employees, but in total, I’ve had over three hundred employees now. So I’m kind of the range of size of businesses. Never, never any monster businesses. I don’t really understand billion-dollar business. So how do you manage five thousand people? That’s not my gig.

Spencer Sheinin: [00:06:40] Some people are good at that, not me.

Tersh Blissett: [00:06:42] Most people that are listening to this, a lot of people that are listening to this, they’re going to be like, how do you manage more than 10 people?

Tersh Blissett: [00:06:48] So, yeah, well, there’s that. I’ll answer that. I was a monster business.

Spencer Sheinin: [00:06:54] Yeah. Yeah. So so that sort of had all of those and then, you know, twenty-eight happened and there was a real challenge in each of those. And over the next number of years we consolidated change, you know, did the things we had to do and ultimately around where are we now. I’m going to say around six years ago or so now I, I had so my partner and I split up the businesses. We took one of them. He took the construction business. I took the class, the manufacturing, which was the right call. We’re still friends today. It was just the right thing at the right time. Excuse me. And then we sold the cold storage business to a company that was buying up a bunch of small independent ones, were in the cold storage world. Even with four. We were small independents and I kind of was like, what do I do? Like, I you know, I’ve exhausted these businesses. I you know, some went really well, some well, not so well. You know, like every good entrepreneur, I’ve had some success, some wins and losses. And, you know, I was at a point where, you know, I’m forty six now is ish and like a I don’t really want to retire. And B, I’m not at the point where actually can I still have to work. Even if I was, I would still want to work. Right. And I was actually at a speaking engagement, you know, before the show we were talking about different speakers we’ve seen and one of them was a financial speaker is really great. He was really good but really technical. And so I’m a CPA in the audience. And I was like, listening, superintending. Okay, I got it. I got it.

Spencer Sheinin: [00:08:24] And the rest of the room or other entrepreneurs somewhere trade somewhere, creative agencies somewhere. Exactly. Straight over their head. And at one point there’s a bit of a joke. It’s kind of funny. I tell the story in my book where I actually corrected them and everybody started laughing because they weren’t even keeping up. And, you know, just because I was I’m a CPA, I could and I’m numbers inclined write like numbers have always come pretty easy for me. I know creativity does not. So we all have our strengths and everyone laughed. And after the talk at one of the other entrepreneurs looked at me, he said, hey, can you put this in my business for me? And I was just like this light bulb aha moment where I’m like, wait a second. This stuff is critical.

Spencer Sheinin: [00:09:05] Entrepreneurs know they need it. Business owners know they need it, but they don’t know how to do it. They don’t know how to like, get this actually to work in their business.

Spencer Sheinin: [00:09:14] They don’t even know what questions to ask. They don’t know where to start. They don’t know any of that. So I just had this thing. I’m like, wait a second. Like, I am a CPA, understand all this stuff. But I’ve also been an owner. Like, I understand we’re being pulled in a million different directions. We don’t have time to sit down. And a lot of owners aren’t going to want even to learn this stuff. So and I really just I was kind of into. I would call it a system, if you will, just to help entrepreneurs really understand their numbers in just a simple, intuitive, straightforward, I don’t have to be an accountant way. And I think a lot of accountants actually fail owners, entrepreneurs by how they deliver, you know, here are your financials and run away and controversial like, I don’t even know what to do.

Spencer Sheinin: [00:09:58] So that’s sort of how that’s how I got to be doing what I’m doing now.

Tersh Blissett: [00:10:02] Now, that’s really, really cool.

Tersh Blissett: [00:10:04] So long story doing for the run on sentence. There is so but it’s computing the math in my head.

Tersh Blissett: [00:10:14] It was about six years after you started doing this, before you wrote the book or before it was published or released basically ish.

Spencer Sheinin: [00:10:22] Right. Yeah. So I so there was I took about a year, year and a half where I didn’t really do a whole lot. I was trying to figure out what was next in my life. I’ve never really taken time off like that. It’s always just been go, go, go from one thing to the next, like like any good entrepreneur or this. There’s no downtime. Yeah, exactly. And so I said, you know, this time I’m not going to rush into something. And part of my getting out of that business, I didn’t love what I did. And that to me, if you don’t love what you do, it’s like it was time for a change. And so that took me a little bit. And the other really funny story as I was, I got into just doing some advisory work. There’s actually a pretty robust tech scene in Vancouver. And I just kind of got into the scene. I met somebody, I met somebody else, and I just became an adviser because I although I wasn’t a tech expert, just core business, foundational stuff I’ve been doing now for 15 years at the time. And a couple of them kept saying, will you be our CFO?

Spencer Sheinin: [00:11:19] I’m like, I don’t want to be your CFO. But for a small tech company to have a CPA, you know, somebody who’s got a decent resume on their team will always look good. So I said yes. And I was just like, I can’t get anything from any like the bookkeepers. Like, I they’d ask me questions like, how can you ask me that? Like, that’s bookkeeping 101. Or I’d say, can I get this report? And they didn’t have it. And so the funny part, I was on that conversation with my old director of sales from the skincare business, and I said, you know, if I finally out of Anna and I and it was our own controller, I said I could put an end to all of these businesses. She could clean them up and then I could do my thing as CFO. And she’s like, well, have you talked to Anna?

Spencer Sheinin: [00:12:04] Like, no. She goes, we’ll call Anna because it’s not happy where she’s at. And I was like, oh, so I called. And I’m like, OK, Anna, don’t quit your day job. But here’s what I’m thinking. And she called me two weeks later. I said I just quit my job. I’m like, I guess we’re doing this. And I said, literally the job. And she quit her day job. And so I was like, OK.

Spencer Sheinin: [00:12:24] And I, I called everybody I was advising on. There was three or four companies that are like, hey, you know, I can’t I’m like for X dollars, I can take care of this and we’ll be there like that. Great. And literally, that’s how some of the business is called financial insights with the idea of shifting the financial experience of the owner. And yeah, we just went in and that’s how it started. And we’ve built and grown from there and had our ups and downs like every startup. And that was four years ago. And now we’re kind of getting to the point where we’ve got things dialed in, getting reports that that, you know, I just think makes sense. Like it’s all about making it be intuitive and make it where I can actually make good decisions because that’s really the part that inspires me that I think, you know, as an owner, as an entrepreneur, you know, like we have employees, we have communities. Wow. We’re always trying to build our own business. We’re actually impacting a lot of people around us in a very meaningful way. You know, we have the opportunity to create great experiences for people as employees. We have a great opportunity to create great experiences for our clients. And if we don’t have the right information and we’re driving our business the wrong way, it doesn’t matter what we do, we’re just going to be stuck always. And so I want entrepreneurs to be able to have a bigger impact because they get they know like, oh, well, every time I get this type of client, we lose money. Every time I get this type of client, we make money. Oh, I’m going to just go after these clients right now. Like, it’s literally that simple once you’ve sort of gotten the stories. And so that’s what the book is about. It’s about how to uncover the stories that are buried within your financials. It’s about, you know, how to completely paradigm shift your relationship with numbers, because for most people it sucks and it doesn’t have to. That’s a thing. It really doesn’t have to be.

Tersh Blissett: [00:14:16] Yeah. So that’s it’s very true. And that statement is it resonates with a lot of people, has in the past has resonated with me. Very much so, yeah. I’m even a numbers person. Like I went to school for engineering, like I was legitimately in a no-go in person. But when it comes to accounting. It’s not even the numbers part that freaks me out even to this day, it’s like. Does that go above or below the line like it’s always that is like that gray area and then, of course, the IRS is going to just throw me under jail if I make one mistake and that’s how I lose sleep at night anyways? But that’s I mean, the way it’s it’s just the ignorance. Ignorance is bliss. And I don’t know what questions are the right questions to ask and that it’s not Blissett when it comes to accounting.

Spencer Sheinin: [00:15:06] Ignorance of pain.

Tersh Blissett: [00:15:08] No. Yeah. It’s like, you know, everything. And then you go do your taxes and you’re like, no, it’s not great. It’s actually really well.

Spencer Sheinin: [00:15:17] And, you know, like I kind of a lot of that comes from, you know, like I’m I went to school for three years to learn how to write, interpret and create financial like it’s essentially its own language and it is actually a language. And there are technical elements to it and there are rules to it that if you don’t go to school for it, it’s like, how can I hand you financials and expect you to read it and be like somebody sending me a set of plans. I’m like I mean, I can kind of look at that. Yeah. I guess I’ll wall goes there and that looks like a word. But I, you know, I mean, I couldn’t do anything with a set of plans where trades. Exactly. It’s literally that different. And yet we seem we as accountants seem to think it’s OK to hand off a set of financials and think, here you go, we did our job. And I think that’s we have into the college. So there’s where we failed.

Tersh Blissett: [00:16:06] Yeah. And I wish that, of course, we all wish that certain things were different in schooling in general. But I wish there was a course that said, hey, look, you’re going to be dealing with a bunch of dummies. You need to dumb this thing way down like you’re at a from one to ten, you’re at a ten. You think you’re you’re you’re going to bring it down to a seven and that’s going to be fine. You need to assume everybody else. Is that a one? Even if they are good in the industry, they’re probably at a three. So you need to break that way down because if you leave it at seven, you’re still over.

[00:16:43] A lot of people said, well, and and I’m going to flip that numbers around for a minute then. And I, I actually do a fair amount of speaking on this topic as well. And I do kind of an example. And I, I start with, you know, on a scale of one to ten, how comfortable are you with your numbers, you know, in terms of, you know, they’re easy and quick to understand you. You’re really on top, like you genuinely understand your numbers and you have a plan of action to deal with it. And it’s super intuitive. You know, a lot of people like three, four to one. I had somebody say six and then about a minute later, like, they really unnecessary. And so it’s you know, I look at it, if people are at a three, how do we get them to an eight, nine or 10? Yeah, in that way, that’s super easy because, you know and, you know, I don’t think it’s about teaching entrepreneurs how to understand accounting. I think it’s about teaching accountants how to deliver the information differently.

Tersh Blissett: [00:17:38] Yeah, and I agree, because when you look at a piano and nobody’s actually taught you like what you what you’re looking at, you know, it’s funny when you had that conversation or overhear the conversation that, hey, you made fifty thousand dollars net profit this year and then you’re like, OK, well, where is it? Because my checking account does not have a thousand dollars in it. Yeah. And so it’s like that, you know, odorless over here in those types of conversations are funny, but not funny at the same time, you know. Yeah.

Spencer Sheinin: [00:18:14] Yeah, and I mean so and that there’s two elements to that as well, there’s no one is the are the books being done properly? Right. And I would just call that the basic hygiene. That’s the boring stuff that everybody thinks of as accounting, the hygiene, that’s the invoicing, the receivables, the payables, all the garbage that nobody likes. And then you layer on top of that what I call the insights know what are the what are the stories that are buried in there? So like what is what are the numbers trying to tell me that I don’t know. Are there. So the pain is twofold. It’s am I even getting it right? And I don’t know how to know if my bookkeeper is doing it right or not. And then and like I said, no to the insights. You know, what is what is what’s the most important thing that I’m learning here? And you know those to me, a good example of that just to share. And I’ll sort of tell a bit of a story. So this is one of our clients is a creative agency. So they do digital marketing, that type of thing. And and super high level conversation they had the prior year. They had ninety seven different individual jobs that they build before. And I think each one of those you got to find, you got a win, you got you got a staff, you got to oversee that. And we found that of those ninety seven. So we’ll call it one hundred jobs. Just to make it easy, 60 of those 60 percent were what we called small jobs. So 60 percent of all of those transactions represented eight percent of their revenue, 60 percent of their jobs represented eight percent of their revenue. And OK, who who’s going to complain more?

Spencer Sheinin: [00:19:50] Your big clients, your small clients, small clients, always your small client when you’re on the phone going, why am I wasting my time talking to my small client? And then I got to go fix all these problems.

Spencer Sheinin: [00:20:03] Right. And so 60 percent. And I mean, yes, the big jobs take more time and there’s more effort. So it’s not like a 60 40 effort, but you have 60 times you have to invoice. And then somebody didn’t pay and you’ve got to then they’re upset and you’ve got to redo the work and whatever it is. So literally just that one story which they didn’t recognize, they put a new minimum job size it and they just said, we’re not taking job. And yeah, sure. This is our best client. They wanted us to do it. OK, this is our first job, but maybe we can get a big job. OK, some strategic reasons to break the rule. Totally cool. And they switched it. Not within six months. They replaced all 60 of those jobs with two jobs. Yeah. So how much easier does your life get? How much easier does your office get to. That’s just one type of story that like when you’re saying you’re frustrated or you don’t understand, it’s like if you have that kind of direction and another kind of client, like we did the same thing. But one part of their business was where they made all their money.

Spencer Sheinin: [00:21:06] So all the other parts of their business, they were not making money and not bring that whenever they do that.

Tersh Blissett: [00:21:13] Do you ever see, like, it’s almost a loss leader so they can get more like, again, if it’s strategic and there’s a reason to do it totally cool.

Spencer Sheinin: [00:21:24] Like, yeah, we like the digital marketing does. I don’t know of an audit of your marketing for five grand or for an ad or whatever you want to call it.

Spencer Sheinin: [00:21:34] That’s why I’m totally cool with that. If you’re the numbers and your story inside the numbers can prove that it’s working because if it’s like we’re doing a bunch of loss leader stuff and it got us one job. So overall, you combine the loss leaders and the one job you got the team.

Spencer Sheinin: [00:21:52] Yeah, that ain’t going to work. You know, we have a client where they haven’t been called a feather test and that’s like there is this job going to work in the long term. And it’s like, well. It.

Spencer Sheinin: [00:22:04] That’s their task and so does the loss leader makes sense, so it’s not just a loss leader for the sake of loss leader, it’s loss leaders specifically figuring out if it’s going to work.

Tersh Blissett: [00:22:13] Yeah, that’s a really good point. And then another thing for the tradespeople that are listening the HVAC, I’m talking specifically one of the things that will really kill an HVAC company. They don’t realize it is warranty claims. So we have to go pick up before it gets billed to our account.

Tersh Blissett: [00:22:37] And it could be thousands of dollars. It could be the 50000 dollars that should be in your checking account, could be sitting in a corner over there. And that’s all the warranty parts that never got taken back to get refunded included. So in your book, you show 50000 dollars, but you you have 50000 dollars with the trash sitting in your corner over there and stuff.

Spencer Sheinin: [00:22:58] And so you put on top of that. And I promise I’m not going to get into any technical accounting here. But when I talked about the hygiene, the basic getting the numbers right, this is we’re making sure and by the way, I can get into kind of a few questions that your listeners can ask their bookkeeper just to get a sense if they’re going to be good enough so we can do that in a minute. Where I was going, though, is kind of what you’re talking about there. There’s different ways of calling a job, costing classes or whatever, but really knowing that each job, how much you make on each job, how much each job costs and if there’s warranty claims getting applying it to that. And so when I was talking about that example of the ad agency that had one hundred jobs, you know this to me for for a lot of your listeners in trades and different where they have jobs is probably the most powerful analysis you could do, which is a rank order list of jobs. And you can do this in a picture format to I love pictures, but rank order jobs based on how profitable they were.

Spencer Sheinin: [00:24:02] So you take your total revenue minus your direct costs. And this is when you were saying, is that above the line or below the line? You got to have an accountant that knows whether it’s above or below the line. I can clarify that pretty easily for you, if you like. So your direct cost, your your revenue minus your cost equals your profit or contribution per job, margin per job. You can hear those words are interchangeable and then rank order by that contribution per job. And what happens almost without fail, you’re going to you the 80 20 rule is almost always at play in business. Right. You’re going to say, you know, I did 40 jobs while I made all my money on my first eight or 10. And the rest. Yeah, I made a few hundred bucks here and there. But like, you know, if you made 50 grand, I guarantee thirty five or forty case that was made in your first 10 or 12 jobs. Like that’s just the deal.

Spencer Sheinin: [00:24:53] And the rest of them, you were just trading dollars and those things like the warranty work and not just the cost of the parts, but the labor associated with doing the warranty work, all of that has to get coated in the accounting system. So that and then now, instead of getting handed a pencil like imagine. So here’s I love that you brought this up because there’s a great illustration. So instead of here’s your pencil, you’re like, OK, well, I made 50 grand. Here’s your here’s your your profitability by project and you rank order by the most profitable to the least profitable.

Spencer Sheinin: [00:25:28] And you go down to like, oh, I remember that job. I remember that job, that job, that job.

Spencer Sheinin: [00:25:32] And now what you can do is start what’s common about those top five, six, ten fifty. However big your company has jobs. What’s similar between those and how can I now focus my energy and attention to getting more of those jobs and less of the jobs down at the bottom? Imagine if you got rid of three of those jobs at the bottom and added three of those jobs at the top. Your life would change your litter. And I don’t want I’m not trying to sound like a motivational speaker, like excited guy kind of thing. Your life would change. Like imagine, though, like you had that how clear that information is. And now you’ve got three more of those amazing jobs and three less of those crap ones at the bottom. Like that’s what I’m talking about in terms of insights. You’ve got to get the hygiene right and that’s getting the right bookkeepers and the right accountants doing the right thing. But then it’s pulling the story out. So that warranty sorry, you got me all excited when you talk about warranty because I was in construction. So I know all about warranty work.

Spencer Sheinin: [00:26:33] That’s that’s a silent killer.

Tersh Blissett: [00:26:35] It is. And I think about the guys that I talked to, the guys and gals that I talk to, that they’re like, there’s only 24 hours in the day and I’m working myself to the bone. And in their mind, they’re like, OK, price jobs correctly. They think that they do, but they don’t know their true job calls. They’re the whether they should be like they’re fully labor rate, what they should be billing per day or per man hour like they don’t. Understand that one hundred percent, so they’re just charging what the competitors are charging or like a little bit less than the competitor so they can get the jobs and then they’re working constantly and not no money, extra money to show for it. And that’s a perfect example of what you said. Once you once you bring this to light, then you can see what.

Spencer Sheinin: [00:27:25] And one of the scariest things to do when you start to get this good information, I’m going to pull something up for you and I’m going to do a share screen because I will show you an example of this I’m looking at. I have another screen. It looks a bit weird.

Spencer Sheinin: [00:27:40] Let me see if I can pull it up. Yeah. So I’m going to be very you’ll see, it’s I can’t do that, I have to do the other one.

Spencer Sheinin: [00:27:57] But it’s really scary for entrepreneurs when it’s when you find out that you haven’t necessarily had the right. Clients to then stop taking on those bad ones where you’re underbidding your competitors and it’s like, oh man, I’ve got and I’m going to show you here, I’ll do a quick share screen. I just pulled this up here. Here you should be able to see my screen. Yeah, it’s got. OK, so there’s some redacted data in here because obviously I have to be careful. But like, imagine if you had this. So this is you’ve got your income that you’ve got your cost of goods and this is a marketing company. So their numbers look really big. It’s not quite as big as it looks. And then this is what I was talking about, your gross profit. So, you know, if you take the income minus your cost of goods, you’ve got your gross profit and it’s rank ordered. Here’s a perfect example. Look at this, the top one. I’ll make it a bit bigger for you.

Tersh Blissett: [00:28:54] Yeah. For anybody listening to this is right.

Tersh Blissett: [00:28:58] Your top four for clients, your that’s your top three clients or making.

Spencer Sheinin: [00:29:06] Almost everything. Oh, yeah. And then you come down to the bottom and you’re seeing like twelve dollars. Twenty one dollars, twenty six dollars by the time you invoice that.

Spencer Sheinin: [00:29:15] So, you know, like this company had made two hundred gross revenue, gross contributions. So this is a bill for your overhead costs, your office, your reception, that kind of thing. So a couple hundred grand, right. You come back up to the top, you know, the first one, two, three, four, five, six. That’s fifty seventy, eighty, ninety, one hundred.

Spencer Sheinin: [00:29:35] That’s one hundred and twenty K right out of two hundred and something. In the first six customers, and if you’re listening, you don’t see it. This report is two pages long.

Tersh Blissett: [00:29:46] Yeah. That’s right.

Spencer Sheinin: [00:29:48] So that’s a story, right, and then you can and here’s like I was talking about pictures before, like here like this. So this is like imagine like a this is the opposite of the Koven, right.

Spencer Sheinin: [00:29:59] This is it. Is it going flat where you can see the based on how many customers you have, what percent of your profit you’re making with the number of customers? So here you can see out of them that looks like about call it 80 customers. The first 10 are contributing like 60 percent of your profit. Know, you go to eighty or seventy-five percent. Twenty-five of your like a third of your customers are seventy five percent of your your where you’re making your money. So why are you spending so much time not making money.

Tersh Blissett: [00:30:33] Yeah. Time, effort, energy money on marketing to the dreadful stress stress.

Spencer Sheinin: [00:30:40] Right. And then all those ones at the bottom like and I asked you before who doesn’t, who complains the most. Who doesn’t pay the most. Yeah. There’s no customers because they can’t afford it. So we’re going we’re often going after the wrong customer. And and so then you think, well, who’s going to fill that? And you know what? I’d rather have my competitors busy doing busy work, spinning, just barely breaking even or maybe breaking even with all these customers that are too demanding that aren’t contributing enough. And and, you know, it depends on the type of business you’re in. I get it. Some businesses are more transactional. So there’s a lot of smaller transactions. You have to get really good at making those uber efficient. Like you just there’s no question if that’s your model and some models are like that, I’m not saying. But, you know, for trades you think about I mean, you can tell me about your business like this. This ring true for you?

Tersh Blissett: [00:31:30] Absolutely. Absolutely. Yeah.

Tersh Blissett: [00:31:33] I mean, and then and then they go after the ones that they can’t get approved or financing or they can’t. They can’t. They want the cheapest, like they’re they’re calling ten companies to get the price shop immediately.

Tersh Blissett: [00:31:45] I’m like, that’s not our client. We’ll just call, but that’s not our client. And, you know, we’re going to present everything that they need to for the comfort of their home and fix it properly. And they’re like, whoa, that’s way more expensive than anybody else like. But we’re going to fix it, right?

Spencer Sheinin: [00:32:04] Yeah, I mean, so like the model you have is is, you know, just a high quality but not cheap product. I mean, that’s no different than us. And it’s like there’s and I kind of look at it like you probably see other people do their work and you’re shaking your head. God, like, how can you even charge for this? This is embarrassing. And like, I just and there’s different strategies there. There’s there’s McDonalds and then there’s, you know, pick your favorite steakhouse. Right. Like people people there are buyers for all of that. And it’s really a question of who do you want to be as the entrepreneur and getting super clear on that, because also, if you’re trying to serve a high end steak and serve McDonald’s, chances are you’re going to screw them both up.

Spencer Sheinin: [00:32:47] So what we did with McDonald’s, do McDonald’s, McDonald’s make a lot of money. You can make money doing McDonald’s. This isn’t a critique of being a low cost provider. That’s a strategy. But you have to operate your entire business aligned with that strategy. Don’t don’t try and be both.

Tersh Blissett: [00:33:03] Destroy yourself. That’s what we did with. So I have two companies. One of them is the McDonald’s version. And then and then Service Emperor is more like a Ruth’s Chris or something like that or a boutique restaurant.

Spencer Sheinin: [00:33:19] You’re going to be hungry. Yeah. Yeah, right. And so it’s it’s very much like so Tri-Star is my other company and Trust are the guys are going to run ten to 12 service calls a day, whereas Service Emperor they’re going to run three service calls a day, you know, run less service calls, higher ticket prices.

Tersh Blissett: [00:33:39] But they they’re more involved with the client. They spend more time there. So, you know, three or four service calls a day over an eight, 10 hour period versus 12, maybe 15. And they’re just run and gunning as fast as they can.

Spencer Sheinin: [00:33:54] There’s no relationship and nothing wrong with either of those models. But I love the fact that you’ve split them into two different completely organizations. And let me just sort of come back real quick on the accounting thing and one other real challenge that’s going to happen. So, like, imagine, rather than just doing a service call, you’re doing full installations. Right. And maybe it’s a new building or whatever, and it’s a big project. And, you know, I I’m going to take it. It’s a high rise and you’re doing multiple installations on different floors. So it takes three months to do the installation. One of the other problems from the hygiene side, and this is going to happen for a lot of trades that are doing a larger projects is let’s say let’s say you’re lucky enough that you get a deposit, right. It’s one hundred thousand dollar job and you get a fifty thousand dollar. You know where I’m going. And yeah. Yeah. So a lot of people what they’ll do is they’ll take that fifty thousand dollar deposit and call it income. Well you know, so that’s, that’s a cash basis accounting. And then there’s accrual accounting and everybody hates cash versus accrual accounting and it’s confusing. But basically let’s say it’s one hundred thousand dollar job you do over three months and you do a quarter of their work month, one a quarter, their work month, two and a half of the work in month three. And you finish at that. Right. But you get fifty grand up front and month minus one before you start and you get fifty grand a month for after you’re finished.

Spencer Sheinin: [00:35:12] And so a lot of people work hard. Fifty grand revenue and month minus one and fifty grand revenue in month four. But all of the work happened in the middle. What accrual accounting is going to do is it’s going to say we’re not actually going to take any income, we’ll take the cash, always accept the cash. Right. Get the cash in your back. But we’re not going to call it income. Until we actually do the work and then we’re going to because we did a quarter of the work in month one, we’re going to take twenty five thousand dollars. We did a quarter of a working mom, too.

Spencer Sheinin: [00:35:43] That’s another twenty five thousand of income. And then maybe it’s 20 grand of costs. That’s our labor was 20 grand. Our materials, which 20 grand, whatever. We’re going to match that up in a month.

Spencer Sheinin: [00:35:53] Three we did 50 percent. So we’re going to take 50 grand even though we haven’t even received that money. So whether you receive the money first or you don’t receive the money till after, it doesn’t matter. Your income needs to happen when the work is done, that’s how you’re going to figure it out. And when you were talking about that, well, it says I made 50 grand, but there’s no money in my account. That could be the warranty. If you gave out, it could be that you’ve recorded a bunch of deposits where the work hasn’t been done or worse. You recorded the deposits last year, right. Your year end is December and you’ve got a nice fat check in December. And you’re like, great, I made 50 grand. And then this year, now you had to do all the work associated with that. You got no money. Well, that’s like I’ve seen all these weird timing differences. Like I feel like it was our busiest month ever and we lost money. Well, yeah, because you took the income three months ago when you didn’t do any work. So that’s that’s sort of another technical complication, which I don’t expect. And here’s the thing. My whole and know the whole idea in the book and what I’m offering in the book is I don’t expect you, the owner, to go and fix this. This is not what it’s about. It’s actually empowering the owners to know what to ask, to have some examples, to challenge their bookkeepers, to be empowered, to know how to what questions ask and why and what to expect. What’s a gold standard reporting package? Like I showed you a quick example here online of like here’s a report that you can go to your account and say, I want this report. And if they can’t get it, you find somebody that can. Yeah, because there are accountants out there that can do this.

Tersh Blissett: [00:37:28] Absolutely. Absolutely. So where do we find your book?

Spencer Sheinin: [00:37:34] Amazon, of course, will do the Vanna White entrepreneur the surprisingly simple path to financial clarity and for the for the if you’re looking at this.

Spencer Sheinin: [00:37:43] That’s actually not me. There’s like a silhouette, kind of like is supposed to be a half Superman, half dollar sign. Kind of. I like the graphic that somebody came up with, but it kind of looks like my solo does don’t guy. It’s not. And I didn’t even think about it.

Spencer Sheinin: [00:37:58] And but for the record, for the ladies listening, I actually was looking at the graphic of having a guy, you know, man and a woman back to back with that. You just got too busy. So I’m not trying to be egotistical and only have a guy there. There’s lots of great, great women entrepreneurs as well. Yeah. So it’s available on Amazon. You know, if you Google it, you’ll find it quick. And entrepreneurs, dot com, there’s obviously a link there. And the other thing on entrepreneurs dot com is there’s a bunch of free downloads. So there’s a sample recording package that, again, it’s like here’s something that’s going to make it really easy. Here’s the type of pictures. You know, I’ll do one more real quick screen share if I can.

Spencer Sheinin: [00:38:38] If you don’t mind. But like I just because so much of what I do is visual, I just thought I’d. There we go. Yeah, you know, like a sample recording package where it’s like, OK, here’s cash flow forecast. It’s a picture you can see, like, you don’t have to be an accountant. Like, what do you see here?

Tersh Blissett: [00:39:05] Tersh is going to dip in May, you know, there you go.

Spencer Sheinin: [00:39:09] You’ve got a problem and may like you don’t have to be a rocket scientist. Here’s another example. Like net income. There’s a lot going on here. I’m just going to help you seconds.

Spencer Sheinin: [00:39:18] I mean, it’s if you look at just January. So this is the January report, right? The yellow line is the current month. The green line is last year at the same time. And the gray line is your budget. If you have a budget, we won’t get into budget conversations that the yellow line is that higher or lower than last year, Jolanta?

Spencer Sheinin: [00:39:40] Yellow line is at higher or lower than budget higher.

Spencer Sheinin: [00:39:44] Are you doing better than budgeting last year or worse, better.

Spencer Sheinin: [00:39:49] Zero zero complications, zero confusion again. Here’s the same thing on a year to date basis. So before we looked at just the month, now we’re looking at how you’re tracking over the year. And I’m not going to make you go through each of these slides. But again, your net income, you can see it. It’s better than last year, better than budget. I know I’m on track. Great sales, same thing. And you can literally go through and I’ll stop sharing.

Spencer Sheinin: [00:40:14] So we don’t I’m not doing a full presentation, but that’s the kind of thing that I’m trying to help people see that if you take this example recording package, you take these pictures I just showed and go like I want this literally in three minutes. You can understand your financials better than if you took an hour trying to decipher the piano. It shows the trend that shows last year. It shows if you’ve done a budget again. Well, we’ll see if that conversation will assume the answer to that. Yeah. And so, like, that’s the type of thing. And so some of your bookkeepers are going to be able to do this and some aren’t. And, you know, and part of the other problem that I think is super important to share and I you know, your guys will really get this, you know, an accounting departments, not unlike a job site.

Spencer Sheinin: [00:41:04] Right? You’re building a house. And I was in the construction business. You’ve got your general contractor. You’ve got a bunch of subtrends. And depending on the size of the job, you’ve got a couple of laborers right there, homeless, cement, digging ditches, that kind of thing. The same sort of stack of people is in an accounting department, right? You’ve got your CFO directors of finance below that. You’ve got your controllers, maybe assistant controller, and below that you’ve got the bookkeepers and they all have different responsibilities and skills.

Spencer Sheinin: [00:41:32] And so a bookkeeper is kind of like the laborer on a job site. They’re an important part of the project. But you wouldn’t go to labor to build your house, would you? Right, exactly. But we often, especially for smaller businesses, you know, you’ve got four, six, eight, 10 employees, you can’t afford a controller and a and a CFO, so you end up just going with a bookkeeper. That’s exactly like hiring a laborer to build you a house there. And there are some wonderful bookkeepers out here. This is not a shot at bookkeepers anymore than it’s a shot at laborers. And you need other skills, so bookkeepers may not have the skills to create this, so that’s what I that’s one of the other problems.

Spencer Sheinin: [00:42:15] And so, you know, again and I’m I think I see you checking the time and I’m checking the time to have a phone over here, OK?

Spencer Sheinin: [00:42:26] Ok, you’re fine, you know.

Spencer Sheinin: [00:42:29] And so Entrepreneur Numbers is going to help guide the owners as to how do I ask and relate to my accounting department knowing that I may have some shortfalls. Some of them may or may not be able to create this report. Some of them may or may not be able to figure out properly. Do I have a call today with a new prospect where then we do kind of like audits and free audits for people if they’re potential prospects? Right. And so I was looking at the information. They have no cost of sales, meaning they have they’ve got nothing above the line that you were saying or not one cost. That’s not possible. And they think they’re doing a good job with their accounting. As they said, our hygiene is really good. And now I have to be the bearer of bad news and say, dude, you don’t even have any cost of goods. Like no business has no cost of goods. It’s not possible. It’s not possible. So something is really broken. So that’s what entrepreneurs this is really designed to help keep that information out and really be a guide to help know what really great looks like. You know, if you don’t know what good looks like, you don’t know how to get there. You know what good looks like. Even you may struggle to get there.

Spencer Sheinin: [00:43:41] You don’t have to go through a bunch of different people to finally get someone who can deliver this for you. At least you know where you’re going, you’ve got the map, absolutely, you know what to ask. You’re driving from Savannah to Seattle, you know, if you’ve got a map, it still takes a long time, but at least you can see which direction to go if you don’t have a map. All right. At least I’m going to hit the water. So I’m not going to do that. But other than that, I don’t really know where to go.

Tersh Blissett: [00:44:08] Absolutely. So cool! Can they connect with you or learn more like from you at the website?

Spencer Sheinin: [00:44:18] Yes, so ENTRPRENUMBERS.COM is one place you can find me, you can find me on LinkedIn, my last name is Shane and SHE IN IN and now you’ll never forget it. And yeah, if you’ve got somebody who’s really stuck or struggling or.

Spencer Sheinin: [00:44:36] Yeah. Wants to have a chat, they can reach out to me. not dot com. Somebody booked it and wanted to talk to me for 14. Thank you. Yeah. And I said not a chance. I just think that’s dirty work and I’m not going to participate. So I want to go shift financial docos, Spencer Financial, go feel free to shoot me an email. And if you’re first, I don’t know, let me think about this. I don’t know how big your audience is, but first, half a dozen people that reach out. I’m happy to do a three half-hour consulting. I’m happy to look at their books. I’m happy to just see what’s going on. I’m happy to just have them ask me some questions. Yeah, that’s just an offer out to mind my gift to your listeners. And if any of them are actually on quick books, the other thing I can do, and it’s there’s a few kinds of independence in here, so I can’t do it for everybody, obviously. And they have so much capacity. We’ve developed our own reporting software. I hate the reporting that comes out of any accounting software. I showed you kind of a couple of pictures there. If you’re on cookbook’s and are happy to sign nondisclosures, you know, we’re in the business of seeing financial information, we can actually connect to our recording software and show you the types of reports that you might be able to get if you have the right hygiene and that type of thing as well. So whether you use us or not, I. I don’t care. I’m here to help. And you can take that report, go back to your account and say, give me this. So again, first half dozen or so people, that region. But you got to be on Quickbooks because we are software is connected to quick books and maybe zero. But Quickbooks online. Yeah, OK. Maybe zero zero has got a couple of issues that I don’t love. It’s not a bad software. It’s just it’s not it’s hard to get as much detail out of zero as you can get out of Quickbooks.

Tersh Blissett: [00:46:26] It’s crazy. I was ignorant and to the fact that there were other platforms out there other than Quickbooks, other than the CRM or the ones. Yeah, that’s that’s crazy. How much those out there.

Spencer Sheinin: [00:46:41] Yeah, so for our model, like what we did, I just share this going, you might find it interesting we are we only take on clients using cookbooks online and we’ll convert from other formats to cookbooks online like that where we know how to do that.

Spencer Sheinin: [00:46:54] It’s kind of like the Southwest Airlines model. You know, they only have one type of plane. Their mechanics learn how to fix one type of plane. Their pilots learn how to fly. One type of plane are concerned how to fly one type of accounting software. There are so many out there and everybody’s on a different one that if our accounts were learning them all, like we would do as good a job. So kind of when you were talking about your high end model, very nesh like this is our right customer, that’s what we’ve done as well. Like we don’t want to mess around and try and serve everybody. So I’m not just saying, you know, I’m not just saying it earlier. I’m actually living what I said we do. So we’re very specific on who our right fit is for sure.

Tersh Blissett: [00:47:29] Cool. Spencer, thank you so much for coming on the show and sharing everything we didn’t even get to talk about. Right. I was not much anyways. But next time I’d love to have you back. It hurts.

Spencer Sheinin: [00:47:38] I’ll just tell you, it just hurts. And we can probably leave it.

Tersh Blissett: [00:47:41] It hurts me to watch it so I can only imagine how bad it hurts.

Tersh Blissett: [00:47:49] Yeah. Yeah. Well I appreciate it and thank you to everybody that’s listening or watching. This episode of the Service Business Mastery Podcast is a podcast focused on service business owners, managers and technicians who are considering becoming business owners themselves. If you have any questions, don’t hesitate to reach out to Spencer or myself and until next time. Have a wonderful week, sir. Thank you.

Meet the Hosts:

Tersh Blissett

Tersh Blissett is a serial entrepreneur who has created and scaled multiple profitable home service businesses in his small-town market. He’s dedicated to giving back to the industry that has provided so much for him and his family. Connect with him on LinkedIn.

Joshua Crouch

Joshua Crouch has been in the home services industry, specifically HVAC, for 8+ years as an Operations Manager, Branch Manager, Territory Sales Manager, and Director of Marketing. He’s also the Founder of Relentless Digital, where the focus is dominating your local market online. Connect with him on LinkedIn.

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