Tony skinner
Hi, and welcome to the podcast channel at podcastmybusiness.com.au. And today we have Craig from m i n t s cd consulting.com.au, talking about how to build or maintain a profitable business. Hey, Craig, how you going?
Craig
Yay. I’m always so good to be on the chat here today, Tony. And, yeah, it’s always great to be spreading the message and spreading the word around profitability.
Tony skinner
Fantastic. And it’s funny i, this event, which is what I call it, that we’re all going through. I actually think there’s lots of benefits to and I think one of the biggest benefits is lots of tiny little businesses that think they’re making a profit or realizing they’re not making a profit, and either they’re going to disappear, or they’re going to realize they’re going to need you To help them.
Craig
Yeah, that’s so true. It’s definitely been been a time and I like the notion of being an event. And the reality in business and in life is that these always events, whether they’re on a global scale, like a lot, one that we’ve been experiencing, or whether they’re localized to specific businesses and industry, or the like, we always have such occurrences and usually easier time for people to reflect on, you know, is my business doing what I set out for it to do? And usually part of that is, you know, is it sustainable financially, together, create the life The, the the guys that they had when they started and it’s very much what we’re seeing right now combined with, you know, time, your views your people just reflect and look at their numbers. Yeah. And we see all the time that people potentially see a profit on our profit and loss report, but They asked the question, well, I’m showing a profit non profitable, but where’s the cash in the business? And I’ve to help people out.
It’s interesting.
Tony skinner
When I, when I first started my other business clicks for profit, it’s been going for over four and a half years in digital marketing. In my first quarter of the business, I had to register for GST because my turnover was more than 70 grand in the first quarter.
Craig
Yeah, that’s Yeah, that’s a great position to be in. But it’s also an interesting one that many people you know, they’ve achieved quite good growth. They’re getting a lot of cash into the business and they go, yeah, this is great. And then depending on how they’ve set up their how they manage their cash flow and a lot, you know, it’s the age old thing as far as, you know, what we sell you we consume. And you know, we see these nice big bucket of money in our bank account, and we’re like, He’s awesome we can be, we can do so many things with that. And, you know, often people don’t go out and spend the money before, you know, they’ve covered off their obligations and you know whether you’ve got the money put aside for the tax and those sorts of things as well. Tax got many people say, I’ve got a different view, I love tax. It’s one of those ones that I sit down and say, you know, what, if I’m paying what you’re attacking me on making lots of money, and I can do all the cool things that I want to do in life, yes, we need to minimize it. But, you know, I cannot believe it’s, if we’re generating income, and we’re, you know, we’re put that money aside so that we can make sure we, we pay it when it’s falling due, then you know, that we’re in a good position overall.
Tony skinner
You know, what I do is that I have run different businesses over the years here and overseas. And what I do is, I don’t it’s a part of Your process, but I pay myself every month. So I make sure that I get money from the business every month. Is that the right approach?
Craig
Yes. Are we okay? Yeah, you got the approach that we promote, we educate and you know, kind of work in a methodology which is sort of core profit first approach based on a book written by a guy called Mike Michalowicz. And it’s one of the tools that we use to help people. And he’s around that philosophy of, you know, painful profit first, funnily enough out of the business. And that’s actually a good starting point, as far as a return on your investment for investing in the business the same as you what you would invest in, you know, shares in PHP, you spent a whole lot of money and time to invest in something and you want dividends from the business. You if the same with your own business, you won’t be able to profit short. We also talk about, you know, putting money aside for the taxes already sort of touched upon there. But then the other part is yes, putting money aside to be able to pay yourself As the owner of the business and as an employee of the business that you know, you’re doing the daily work, you want to make sure that you’re getting paid for that. And so it’s definitely an approach that we encourage on and then you know, with the, with the money that could have left after leftover after you’ve made the allocations out to the different areas of the business, then the money you’re left with in a separate bank account is the money that you need to operate the business off. And you know, that you have to operator off that to be sustainable in the longer term.
Tony skinner
And then, of course, the money left over after you’ve done that is your profit.
Craig
Well, you’ve already bought property here, like you actually got that in there already. So therefore, any money that yes, you do have, even after you if you’re operating really efficiently, then yes, you’re exactly right. There can be further profit further owners pay or depending on what you want to be doing with your business. It could be the sort of increased growth within the business sort of, in VC investing to grow ideally Well, and it’s a way that you can sort of know what to do in that space.
Tony skinner
That’s certainly true. I, I’ve been getting some business during the event, not as much as I had expected, perhaps, but then again, business and marketing, all these sort of things, especially when you’re launching something new like podcasts, my business. It’s a medium to long term strategy. But yeah, I’ve been getting money in and I’ve been putting it on to doing advertising and doing outreach and paying for business cars and all these sort of things. I’m one of those people maybe, again, with my experience, is that money comes into the business, I can then spend that money on the business. I don’t take money out of another business and spend it on this one. I wait for money to come in.
Craig
Yes, bought on a great approach to have this quarantining to, and therefore, you know, each business, you know, is it sustainable, and then They are their own entity to be to be doing that, and you know, exactly right. It’s what you touch upon there is very much that the idea of investing to grow in your business as well. And, you know, it’s an approach that, you know, some people mentioned more or doing a lot about saving money and cutting costs. And it’s actually quite the opposite. It’s more about prioritizing and reallocating money to eat and get the biggest bang for buck. And it’s an idea of, you know, investing in advertising marketing. But also, if you’re doing that to make sure that you’re conscious of what is your return on investment, are you measuring that you’re quantifying it and you’ve got to make sure that if I’m going to spend $100 on an activity, then cool I need to get, you know, 300 400 $500 return of that because, you know, that money’s been split out. So I’m gonna go into a nice profit spot, some some of that is actually tax money. Someone’s got to go to me to pay myself and then I have to walk write off the rest of it, you’re very clear on that sort of return on investment ID.
Tony skinner
Now, I did try something and it didn’t quite work out. So I sort of say that, yeah, it’s still worth trying new things. And you know, what, not everything’s gonna work out not everyone’s gonna give you an immediate profit, or an immediate return on your investment. But just try it and just keep going.
Craig
Yeah, it’s very true. And that’s one of the things you know, if if we all had a crystal ball, we knew what was going to work life will probably be a little bit boring in some ways, and make things a bit easier. But yeah, obviously sharpening but if you’re aware of what it is, and you try it, again, you can say, Well, what does this work compared to the other activity, and that’s that whole idea of the testing and measuring and, you know, from the full circle, you’ve potentially got other activities that you got going on in the business and you’re potentially ideally getting, obviously some some cash flow into the business, and then you know, you’re allocating it in a way that helps you make those forward thinking decisions around. Yeah, do do I keep doing that for another two months, you’re not actually going as well as what I thought cool, I’ll find a different activity that I will have a better return.
Tony skinner
Exactly. And I guess that’s probably part of your system as well to track and measure. Correct?
Craig
Yeah, definitely spot on.
Tony skinner
Mm. Cool. So I’m curious about this. Is your business profitable, but cash flow a struggle? How can a business be profitable and still struggle with cash flow?
Craig
Yeah, well, I’ll give you a classic example of that. It’s, um, you know, that the issue is that a profit and loss report that marks whether you’re profitable or not, is very much a historical record of of what’s been happening and, you know, I had a connection, give me a call one day and he said, Look, I’ve got this awesome business I’ve been working with with growing sales, but they say to me, you know, there’s no money there’s no cash in the business at the end at the bank account at the end. have each month and you can, is that what you help with? Yeah, it is it generally what it help with and, you know, it’s, it’s an example of, they’re making money, they’re reporting a profit, but they’re quite high costs for materials and so they’re buying a you know, sometimes air conditioners, you see a conditioning firm, they’re buying air conditioning in advance, to have someone stop so that when they get the call in, they can go there. So they’re making some expenses as ahead in time ahead of when they’ve got it. And so therefore, that’s taking the cash they’ve gotten from past things. And then there’s also the idea of, you know, depending on what their position has been in the past, as far as have they spent money on, you know, doing certain activities, growth, advertising, all those sorts of things, but have they not, you know, pay their taxes off at the appropriate time to them for when they followed you and because you’re already gone and spend that money on a certain item. tivity and my revenue is still saying that I’m making enough money, but the cash isn’t there to be able to pay that. And that’s because, you know, our, your profit
Craig
And it’s not obviously related to exactly the cash transactions that happen within the business.
Tony skinner
And that’s getting to what I was saying before about, I guess one way of knowing if you are at least making a profit is to pay yourself because at least if you’re paying yourself, you can have some money in your pocket. know people who run their businesses and just go, Oh, yeah, well, you know, I’ll just take it out on the profit. And I’m thinking, Well, yeah, but at the end of the year, if you don’t have an actual profit, then what are you paying yourself with?
Craig
Yes, and I query I’ll get to that point, and then I’ll actually have other expenses that will knock them in the face and go or I’m gonna have to put money back into the business anyway to get to pay those things. So it’s not really paying your health in the idea of paying yourself a sustainable wage. Which is Yeah, what what we’re all about is having a sustainability and, you know, working working off the cash that comes into the business that that helps you then drive what the decisions are that you’re actually making around the business as to what sustainable or not sustainable because you’re exactly right. It happens all the time. People get a lump sum of money they see in a bank account, like Yep, awesome, I’m gonna I can pay my car off, I can go buy that nice thing I can do whatever, whether it’s in the business or out of the business. And then, you know, two weeks later, they put money back into the business and they’re forever doing the yo yo cycle of money and money out. And you know, that’s not healthy for anyone involved in both physical sense or, you know, the the mental stress that can come with that.
Tony skinner
There’s all sorts of benefits to doing things that way, and we could talk about it for a very, very long time. But let’s not do that. Well, why not ask Craig and ask everybody just some tips. So maybe around what people should be doing to make themselves more profitable, how they can spot whether or not they’re profitable.
Craig
Yeah, the main tip that I’d love to give he this notion idea of, you know, touched upon earlier of having multiple bank accounts and you know, a system that I implement, you know, my clients, on average will have six or seven bank accounts to be able to manage their business, cash flow and the like, and some people go, Oh, that’s a bit overwhelming. But what I suggest is that people open up one new bank account to begin with, I call that a profit account. And basically what you start to do is that, you know, for every, every amount of money that comes into the into the business on a periodic basis, whether it’s weekly, whether it’s fortnightly, or the life transfer 1% of that cash that comes into the business into that profit account. So If you get it, you know, hundred dollars comes into the business yet $1 you put it into that profit account. And you know, as you’re turning that into, you know, 1000 10,000 and those sorts of things, as you’re getting those chunks of money into the business, you know, you’re, you’re just putting 1% of that money into this profit account. And by doing that, it has a very powerful psychological impact, where, if those two things number one, you sit there and go, Oh, that’s really nice, I’ve got some money growing over there, that that’s pretty powerful, I want more of that, that might drive you to do more revenue generating activities. And then the second thing I would do is that you’ll see that you’re then going to operate off 99% of the expenses, that you’re running off and you can start to go Gee, that’s achievable. And human behavior means that we get creative and we you know, we work out ways to make sure we can operate off that because all geez I really like that profit money that’s sitting over the other side. And then you know, over time, you can gradually help increment that 1% turn into two turned into three, turn into four. And that’s a way that you can be basically profitable from, you know, day one of starting to do that. And now we turn that profitability that I’m putting inverted commas here, which is not helpful for just audio conversation, but that’s right. Now you can be permanently profitable and operate your business sustainably that way
Tony skinner
Yeah, I like that idea, the 1%. And in fact, I encourage or tell everyone now to go to an open up a you bank online account or another banks online account and set up that account. I have multiple accounts all over the shop. I got one for my business income, separate business account and I know people don’t always do that which I don’t understand. So you can see what’s coming in the ATM. You can see it that your accountant can see it. And then you have something separate and I’ve got one where I put all the tax So text sits on one account. And then you know, what I call holding account or extra cash or profit or whatever it is on top goes into a separate account. So you got to keep those separate baskets.
Craig
Yeah. Love it. You think to my heart, Tony. Yeah.
Craig
It’s literally the Yeah. A version of that is what we help people implement and we hold their hand through that whole process been either set up what’s going to work for them, and we can optimize it for the, you know, personal situations.
Tony skinner
Fantastic. It’s almost like we had a conversation four and a half years ago,
Craig
Craig does piano Yeah, we buy it.
Tony skinner
Yeah, and it just makes business sense.
Craig
And very much a very logical, very behavioral.
Tony skinner
Absolutely. All right, thanks very much, Craig. And that’s m i n t s cd consulting.com.au. And you’ve got messenger for people to message on that, that’s how they can reach you.
Craig
They sure can and across all the social we feel free to connect.
Tony skinner
Right. Alright. Thanks, Craig. Thanks very much for your time