The most important part of starting a business is getting the finances right but many young entrepreneurs are screwing this up. So let’s dive in and find out why. 👉👉Learn About Investing Together at https://theinvestormindset.com/invest This week Greg Crabtree and I dive into why so many business owners get finances wrong and how you can avoid making the same mistakes and turn your business into a wealth building engine. We talk about taking your data and breaking it into a simple and usable model. Think of it as a vehicle - there's an engine and a chassis. The engine of the business has 3 core components: revenue, direct cost and labour and the chassis of the business is all the operating expenses. If you're not making an ROI of 50% or more from your business, then somewhere there's a problem that you need to solve. Greg Crabtree is a speaker, author, entrepreneur and financial expert. Crabtree has used his entrepreneurial skills to develop Crabtree, Rowe & Berger, PC, a CPA firm focused solely on the needs of entrepreneurs, helping them build the economic engine of their businesses. Working with entrepreneurs all over the country in a broad range of industries, Crabtree has simplified financial reporting and empowered all entrepreneurs to take ownership of their finances. He has pioneered a revolutionary metric for driving business profitability: measuring labor efficiency and developing simple benchmarks for company, team and individual performance. In 2011, Crabtree published his first book “Simple Numbers, Straight Talk, Big Profits,” in which he shares his core principles of how to turn your business into a wealth building engine. Crabtree’s community service includes serving as Boys and Girls Clubs of America National Area Council Member, Entrepreneurs’ Organization Global Board (2006 to 2009), ALS Association of Alabama, Boys and Girls Clubs of North Alabama, Atlanta chapter of The Entrepreneurs’ Organization (EO) past board member. Crabtree is a frequent speaker at EO Chapter events, EO’s Accelerator Money Day program and the U.S. State Department’s New Beginnings program for international entrepreneurs. Hit subscribe to join the community and let us know in the comments: How did you improve your business financials?
The most important part of starting a business is getting the finances right but many young entrepreneurs are screwing this up. So let’s dive in and find out why. 👉👉Learn About Investing Together at https://theinvestormindset.com/invest
This week Greg Crabtree and I dive into why so many business owners get finances wrong and how you can avoid making the same mistakes and turn your business into a wealth building engine. We talk about taking your data and breaking it into a simple and usable model. Think of it as a vehicle - there's an engine and a chassis. The engine of the business has 3 core components: revenue, direct cost and labour and the chassis of the business is all the operating expenses. If you're not making an ROI of 50% or more from your business, then somewhere there's a problem that you need to solve.
Greg Crabtree is a speaker, author, entrepreneur and financial expert. Crabtree has used his entrepreneurial skills to develop Crabtree, Rowe & Berger, PC, a CPA firm focused solely on the needs of entrepreneurs, helping them build the economic engine of their businesses. Working with entrepreneurs all over the country in a broad range of industries, Crabtree has simplified financial reporting and empowered all entrepreneurs to take ownership of their finances. He has pioneered a revolutionary metric for driving business profitability: measuring labor efficiency and developing simple benchmarks for company, team and individual performance.
In 2011, Crabtree published his first book “Simple Numbers, Straight Talk, Big Profits,” in which he shares his core principles of how to turn your business into a wealth building engine.
Crabtree’s community service includes serving as Boys and Girls Clubs of America National Area Council Member, Entrepreneurs’ Organization Global Board (2006 to 2009), ALS Association of Alabama, Boys and Girls Clubs of North Alabama, Atlanta chapter of The Entrepreneurs’ Organization (EO) past board member. Crabtree is a frequent speaker at EO Chapter events, EO’s Accelerator Money Day program and the U.S. State Department’s New Beginnings program for international entrepreneurs.
Hit subscribe to join the community and let us know in the comments: How did you improve your business financials?
KEY TAKEAWAYS
1. Take your data and break it into a simple and usable model. Think of it as a vehicle - there's an engine and a chassis.
2. The engine of the business has 3 core components: Revenue, direct cost and labour. Then the chassis of the business is all the operating expenses.
3. If you're not making an ROI of 50% or more from your business, then somewhere there's a problem that you need to solve.
4. There's two ways to attack return - improving net profit or reducing the input of capital.
5. Working capital is a flawed concept.
6. The easiest way to scale is to have the least amount of capital drag/input into your business.
7. Get so clear about your numbers that you're able to directly see and understand how much you can pay staff.
8. If you're not at your best right now, it's because you've let staff be unproductive or you're spending money too far in advance.
9. 90% of businesses grow by speculative expenses spent before they produce anything. For example: the cost of hiring someone does not pay off until at least a couple of weeks after they are hired.
10. The number one distortive thing that new business owners do to their business is not paying themselves the market wage.
BOOKS
The Passive Investing Playbook - https://theinvestormindset.com/passive
https://www.amazon.com/Simple-Numbers-Straight-Talk-Profits/dp/1608320561
LINKS
https://www.linkedin.com/in/greg-crabtree-baa338/
Learn more about investing with Steven at https://theinvestormindset.com/invest
Join the MultiFamilyMBA and get exclusive free training: https://theinvestormindset.com/mfmba
Steven: [00:00:01] One of the most important parts of starting a new entrepreneurial venture is getting the finances right and more often times than not young entrepreneurs are screwing this up. In today's episode, we're going to dive deep into some of the most important factors in running good financials in your business with Greg Crabtree, the author of Simple Numbers, Straight Talk, Big Profit, who is somebody I've looked up to, and has made a huge difference in my life after reading this book, I think you guys are really going to like it.
INTRO: This is the Investor Mindset Podcasts and I'm Steven Pesavento. For as long as I can remember, I've been obsessed with understanding how we can think better, how we can be better, and how we can do better. And each episode we explore lessons on motivation and mindset from the most successful real estate investors and entrepreneurs in the nation.
Steven: [00:00:56] It's wonderful that so many of you have stepped up and registered to partner in future multifamily opportunities together, we follow a very strict vetting process when selecting our operating partners, and all of which have a serious track record at least five years of experience at least 2500 doors that they've actually managed and owned over $250,000 of assets under management. These kinds of guidelines help make sure that we are investing together in some phenomenal deals. And you can learn more by registering at theinvestormindset.com/invest. These institutional silo investments bring benefits to busy professionals and real estate entrepreneurs looking to reduce their taxes and increase the returns. And you can join us by getting started at the investor mindset.com/invest. I look forward to seeing you on the next deal.
Steven: [00:01:54] All right guys, welcome back to The Investor Mindset Podcast. I'm your host, Steven Pesavento. And today I've got a very special guest, Greg Crabtree, how are you doing today, Greg?
Greg: [00:02:01] Very good. Thanks for having me.
Steven: [00:02:03] Well thank you for being here with us because as you guys may know, Greg Crabtree is a speaker, author, entrepreneur and financial expert, and his firm Carr Riggs and Ingram is a CPA firm dedicated to helping entrepreneurs build the economic engines of their business. And in 2011, Greg released his first book, which completely changed the way that I looked at business called Simple numbers, straight talk, big profit, which shares some core principles about how to turn your business into a wealth building engine, and then this year, right now, he's got the 2.0 version of simple numbers coming out, simple numbers, 2.0, rules for elite profit and cash flow. So we're going to talk a little bit about that, we're going to talk about what changed, I highly recommend that you guys buy this book, because it's a game changer. But really, at the core, your book takes complex subjects and breaks it down into a simple process for entrepreneurs to use, and it really changed the way that I look at business, and the way that I run my business. And so as real estate entrepreneurs seem to get this wrong, especially earlier in their careers, when they're in hustle mode. Can you tell us a little bit about the philosophy behind simple numbers? And what it's all about?
Greg: [00:03:09] Well the idea is that is you're going to take simple economic ideas that the best of the best entrepreneurs intuitively knows. And so I'm kind of democratizing the world of entrepreneurism what the best entrepreneurs know intuitively, and help those who may not know it intuitively, but help them avoid the avoidable mistakes. It's not rocket science, anything of the day, but these are principles that are not taught in traditional finance schools. They're not widely known, and most successful entrepreneurs can't actually tell you what they innately know and so as I've had the privilege of working with some of these folks over my long career, I just started studying them and so I've learned more from my clients and never learned from any classroom, they taught me anything on accounting. And so as you kind of look at it and as I'm thinking about it, it is kind of my own Napoleon Hill experience of his studying Rockefeller, well what I've done is study the best of the entrepreneurs and what actually is going through their mind of how they optimize this business and what are the choices that they're making? And then how do I create a way for people to know that because it's not 1000 things, it's a handful of things that makes every business or investment activity really work well.
Steven: [00:04:35] Yeah. That makes sense. We're definitely going to talk about what some of those things are. So really, you discovered this through working with very successful clients, you're often a speaker with the entrepreneur EO organization, and you're working with some phenomenal entrepreneurs there. So tell us what is Simple numbers all about? What are some of those basic pillars that some of the best entrepreneurs intuitively know, and when we read it, we'd say obviously, but many people still aren't applying those in their businesses.
Greg: [00:05:08] First you got to take your data and break it into a simple usable model of let’s say a vehicle, there's an engine, and there's a chassis, so we've simplified the engine of the business to say, every business activity has three core components to the engine, there's revenue, there's direct cost, and there's labor. That's it. Everything falls into one of those three buckets, and so the net of those is the output of the business engine, that's your horsepower, and then all the other cost is your operating expenses. It's GMA, overhead, whatever you call it, we call them operating expenses and that's the chassis of the business. And I've got a right size my engine to the chassis, I can't have a bigger engine than the chassis can support and I can't have a bigger chassis than what the engine can support. And once you get that model down, then it's tuning, and you're really trying to take that and optimize it and once you understand these handful of things, and these rules, then you get the production engine part. But really the thing that I've learned in the last 10 years, is the core component of simple numbers. 2.0 is also tying that output of the engine to the actual investment. And so looking at it in the new book, I really accentuate the concept of return on invested capital, which was a calculation that I did in college, I've never done it for a business until I was actually alerted to this. One of the things in EO is I get to chair an executive ed program at Wharton Business School for EO and so I get to go hang out with real professors. So as a kid from a chicken farm just as an undergrad degree, so I get to rub shoulders with the legit professors. But I've been able to share a few things with them that's opened their eyes, but this one, I have to give credit to Dr. David Wessels, he was the lead professor in that course, great teacher understands a lot of stuff more than I'll ever know and he was teaching in the first years of class and talking about this idea of return on invested capital and so I go back and one of the things that I do a lot of is not common in our profession, well, I have access to all this data. We organize it in the simple numbers format for everybody, so it makes it easy for us to aggregate and study, and so what we're able to do is actually go back and study and say what is the normative return on invested capital of any entrepreneur privately held business. And stunningly, the number that we came up with, the minimum return on invested capital to be a sustainable business in the US market is 50%. The actual average for this 100 companies that we're tracking is closer between 75 to 100%, there's a few models that actually achieve over 100% return. And so, when you think about it in that way, as an investor, why would you invest in anything until you had optimized how far you wanted to take your business? Now money doesn't change everything, you throw a lot of money at something, and in a loop, it's all about execution, but to the extent of the business needs that in reinvestment, this is what fascinated me about finding this, is it really helps build that argument for the entrepreneur to make the best choices or the best returns and then work your way down priority from there. And so from an entrepreneur standpoint, a lot of my clients, once their business really is not accepting any more capital, you can't move it by capital, it's only by execution, well, then they're throwing off free cash flow into what else are you going to invest in? I would say primarily 80% of the entrepreneurs I work with, their first choice is probably to get a real estate, because they don't trust the stock market and it's something tangible that they can put their hands on, and they see it. And so I've had to help them understand, well, here's the return on investment that you get in an operating business when it's operated effectively. Here's the return on investment that you get in real estate, cash on cash, return those types of things. And in that way, they start to understand here's how you compare those things and say, which is the best opportunity and what am I like to do? And it really helps them get some clarity about "okay, well, this makes sense."
Steven: [00:09:26] Well it really helps make it clear how to compare apples to apples, because majority of the time if you're an entrepreneur or a business owner, while you're in growth and scaling mode, investing your business is going to lead to the largest ROI. If you're looking at specifically ROI and you're not worried about diversification. You don't want alternative streams of income, but once you hit that kind of capping off point, as you've mentioned, because you've gotten really clear on the numbers that you're working from, which we're going to talk about in a second. It makes so much sense that smart business owners start to track What that return on capital invested is because as real estate investors, it's pretty common for us if we're flipping lots of houses, and we're borrowing money, or we're raising money, or we're doing all these different things, we might be into a deal with no money in, right? It's not uncommon in the single family world, it's less common in the syndication world, because of course, we want to have skin in the game with all of our investors but I think that really is going to change a lot of people's perspective when they can start to see, "okay, well, I put $100,000 in my business, and I'm making 50% or more on it." and if you're not making that, then clearly, there's a whole, there's a problem somewhere in your business that you need to solve. So talk to us a little bit about how you guys go about tracking data, or some of those data points that are kind of the basics that are a must if you're going to follow the simple numbers formula.
Greg: [00:10:53] So think about it, there's two ways to attack return, I can improve my net profit, or I can improve my capital position, I can find a way to put less capital in it and turn it over. And so most entrepreneurs are blind, whereas a real estate investor understands, what's my down payment? So what I've really tried to do is say, okay, well, if you understand, I got to put 20% down to finance this property for real estate. Well it's the same concept but there are ways to actually sometimes put less down, and so the idea and do it responsibly, where I'm doing it for free. And so in essence, we taken the balance sheet, that sheet that entrepreneurs never look at, when we say we break it down into three components, those trade capital, these are the things that turnover in the business, AR, inventory, minus accounts payable minus deferred revenue, customer deposits and those things, it's that net number. Now what we were taught in college in the world of finance is this concept of working capital, I will tell you right now, just do not ever talk about working capital ever again, because it's a flawed concept and what's flawed about it is this, working capital is my trade capital number, but it has cash on the asset side, and [00:12:15 Unintelligible] and current notes payable on the liability side. It's like no, I understand why the financial guys put it in there but they're solving a different problem than you're trying to solve. You're trying to say what is the market turnover of assets and liabilities that turns over with my business. Some businesses don't carry AR, some businesses don't get any trade credit. Some businesses don't carry inventory, but each business has its own signature. But if I work effectively with customers and vendors, I can shrink that trade capital number and the reason why I don't include cash or debt is because those are choices. I can choose how much cash I have in my business; I can choose how much debt I use in the business. That's not part of a market force and so I've got to deal with that market force piece. The second piece is then I'm looking at infrastructure capital, do I have equipment facilities, minus the debt associated with it, so I linked the debt to the asset. This is where Pacioli, who invented accounting in the 1400s, we haven't evolved very far in accounting since then and we should be connecting these things, not keeping them in separate places, and nobody understands them. And then the third piece is buffer capital. So that's cash minus a lot of credit, that's every account on the balance sheet in three buckets. And it's not a left and right of the balance sheet, it's three chunks of capital that you have in the business and they're definable, and they're manageable. Once I know those, then what is my yield that I'm getting off the deployment of those assets? Simple as that, and as you start to understand it, like I said, we've taught clients how to have less trade capital invested, so that they can live off of a thinner amount of profit and then once you get that alignment of 50%, or better return on investment profit of the capital, now I'm ready to scale. And so actually, from the original bio, you said that it might change the subtitle because as we started getting close to finishing the book, the last thing you do is the final naming of it. And we actually call it Rules for smart scaling, and we think this is actually the right way of looking at it because the easiest way to scale is at the least amount of capital dragged to what you're doing. [00:14:39 Unintelligible] a good example, so we've identified, we got some clients in multiple location real retail, and so we've got the ones that put their money up for tenant improvements in their building to open up a new location, they need the 50% return standard. And what we've determined is if they can add actually find a financing source, which there are some out there, there's an SBA program, 7/8 program that you can sometimes use to do 100% financing with the right lenders on that to where you can turn that tenant improvement into an operating cost, which is really what it is because it really should be spread over the life and the lease as a cost, and we get hung up on this idea of it being dead. No, it's really, pseudo [00:15:25 Unintelligible] is really what it is. And so then I'm lowering my profit number but I'm also significantly lowering my investment, my upfront investment in the business and so we show this one retailer that in their next location, if you finance the tenant improvements over the five year lease term, you'll actually increase your return to 150% return. Now think about it like this, if you're executional trying to grow a multi-location retail business, would you rather have something that gets out of the ground with little to no capital input and gets 150% return or do you want to have something that requires a $250,000 cash chunk, every time [00:16:09 Unintelligible] say go, and is only going to get you a 50% return? I think that's a pretty easy decision to make of saying, you know, I'm committed to the amount either way, so I'm not changing your commitment
Steven: [00:16:22] Yeah. It's super easy, because when you can see that when debt is used in a very intelligent way, when you're actually connecting that to real numbers from your business and you're able to see that I'm going to spend this money either way but if I finance it, I actually leverage and lever up the return because I'm borrowing money at one set of dollars, and I'm getting a 50% return on the dollars that I use that I'm actually able to make the spread. And that's really a syndication one on one, that's real estate investing one on one, whenever we're buying a property, we're usually getting it, but a lot of business owners are thinking like that. So I think it's brilliant that you're able to recognize this and help people to kind of get to that place. So for the business owners that are listening, and for the real estate entrepreneurs that are listening, and they don't feel like they have a good hold of their numbers, they might consider themselves the hustlers. They might be the grinders, they might be the people who are going out there, and they're getting deals done, and they're making money, despite the fact of their lack of financial knowledge. Where do they start and how do they start putting together a process so that they can manage their business like a business?
Greg: [00:17:25] Well so in terms of real estate, and if you're looking at that, so I have my clients, I call them my real estate entrepreneurs, and so I try to get them to think differently. So there is a transactional element to real estate and then there's an operating element to real estate. And so if you think about it, we developed a couple of clients that were kind of in multiple steps of the real estate process. So they were developers, and then they also manage the construction and then they also own some of the property, and then they also manage the property. Well guess what I just described four different business activities. So to be a developer, is a services business. Now the great failing of developer mindset is you don't take in -- there's a portion of that developer fee you got to live off of, if you're a developer, you need to have food, you need to have shelter and it's the developers who take their whole development fee and throw it into the deal. You're forcing yourself to have to keep selling off your cattle to actually live rather than, well let's milk some of them and see if we can actually live a little bit longer. And so the idea is finding this balance between what is the amount that I need to live off of and essentially, I'm creating an operational model for a developer to say this is the amount that you take as a salary you live off of, and then you're taking the profits of the development business, to buy into the deals and have long term investment. So that's how I solve them. So then you go to the construction side, "okay, I'm managing construction." well, guess what? That's your general contractor. So operate like a general contractor and understand that there's requirements for you to be profitable. You got to run it like a responsible contractor, what parts do you want to self-perform? What parts do you want to subcontract, but at the end of the day, you should make an acceptable profit of what a general contractor is going to do, or else don't be in that business. Let somebody else do it who knows what the hell we're doing. Then you move to the next piece, this is okay. Well I'm now an investor in the building, that's probably the easiest part to understand, either you earned your way into your ownership or you leveraged, you put some money down and you leverage the rest, that's fine and so you just got to look at that property and say, rule number one, don't fall in love with it, it won’t love you back. The moment it stops performing well, refresh your portfolio and sell it and move on and do the next thing. And then the last piece is being the property manager, and we see a lot of this. I've actually got quite a few clients in the property management world and what we've really shown them is, it's actually one of the easiest businesses to turn into the metrics of it, I'll give you this, there's a simple metric for running a property management business, it's called a labor efficiency ratio over 2, now in property management, we don't even make a distinction between direct labor management labor, we just say, of all, the simple things that you got to understand that you cannot violate in a property management business is, for every dollar of management fee that I get for managing the properties, I can only spend 50 cents of that dollar of revenue for labor to run it, I got to make everything fit within that parameter at a minimum, and if I'm a little bit above it too, that's great, I'll make a little more profit but we've monitored a lot of these businesses and you can run a 1 to $5 million property management business and make 15 to 25% profit on it, but you got to stick to the 2:1 labor efficiency ratio, and that's the key.
Steven: [00:21:09] That's definitely an important piece, and what you're really underlining there is because you're getting so clear about your numbers, you're able to directly see and use some of these ratios to understand how you back into what you can actually afford to pay for people. And this is a concept that I really appreciated from the book, your first book, was this idea of a salary cap, we see all the sports teams, they run with a salary cap, you need to work within the cap, and so if you spend a lot of money on one player, then you will have to spend less money elsewhere. Can you tell us a little bit about how that plays in the business world, and how some of our investors or real estate operators can start thinking about that when they're looking to scale?
Greg: [00:21:44] Well I think in terms of if you’re running an operating real estate activity, you've got to look at it from that same standpoint. Now what we always tell people is labor efficiency ratios, like I said, I've looked at enough property management businesses, I can tell you, that one's a hard two to one. So I got to produce $2 of management for every dollar of all labor in that one. For other businesses, it's a little more complex, we take labor and break it into two components and you'll see that more in detail in the second book of direct labor and management labor. And so direct labor accountable to gross margin, so revenue after cost of goods sold, and then we hold management labor accountable to what we call contribution margin, so gross margin minus direct labor is that output of the business engine, and that's what management labor is responsible to, what we find is direct labor is all over the board, given the business models, I mean from a staffing model is usually the lowest, it's in the dollar $30/40 range, which is pretty dreadful. You can have some business models and the fours or fives or sixes, but typically when direct labor efficiency gets above a two, you've got to enhance it one of two ways, you either got to enhance it with extreme processes that are better than the market, or got to enhance it with technology. And so that's really the thing that typically moves that number up to scale to some degree, what we find is management, labor efficiency, that contribution margin per management labor dollar, it's actually a fairly consistent number for most businesses, between a four and a five once you get out of the black hole, and you get from four to 5 million and up, that number kind of settles in in that range. Probably the only exception are businesses like in the professional services world, where the owner of the business is a high income producer, they're really a direct labor person, and then you just got some admin staff that your management labor, so that's the only time you see a super high management labor efficiency. But here's the thing, we always tell people --
Steven: [00:24:04] So when you're saying -- just to just to cut in here for a second, and when you're saying management labor, is that a four to a five? You're saying for every to $5/6 earned, you're spending $1 on management, or is it actually the flip?
Greg: [00:24:22] So for every $5 of contribution margin, kind of what most people call gross profit. So revenue minus cogs minus direct labor, it's that number, I need $5 of contribution margin for every dollar of management labor. And so that's kind of a general ratio. Now what you're going to see is there's actually a pretty close number on management labor too though, this is where revenue is a really slippery number to base anything on, so that's why I like margin because you filter through the pass through kind of crap, you know, the business model. But we actually stay pretty close to an 8, to a 10 to one of revenue to manager labor in many models. But here's the thing, I will tell people, you actually have the answer in your own data right now, if you actually took your data and put it and bucketed it the way that I show you in both books, and you actually break between direct and management, you're going to be able to look back in time, don't look at monthly data, look at least rolling three and preferably rolling 12 data, but you're going to look back in time and say, when we were at our best, and why are we not at it now? And it's because you've allowed some things to transpire, or you've allowed people to be unproductive, or you are spending money in advance of where you want to get to and the next thing. And this is kind of another new discovery that we have in 2.0, is this concept of launch capital. So as I've talked about before, you got trade capital, buffer capital, infrastructure capital on the balance sheet, well, there's a fourth capital that hides on your P&L. Now they don't teach this in school, because they really don't know it. These are people that probably hadn't even run a business before. The thing is, is 90 plus percent of us grow our businesses, by speculative expenses spent before they produce anything. Just think about it. I mean if you spend on marketing, does every person that you hire that works for you, are they immediately productive the first day that they show up? No. And they weren't needed to do what you were doing at the moment; they're needed to do the next thing that you do. Well guess what, that's the definition of capital. But it's an expanse in your books, and so what we've done is developed some techniques to isolate these things to say, here's the normative run rate of your P&L. And here's the stuff I'm making bets on. So now let's talk about how good I am at betting, and let me improve my odds at betting and I'm telling you the results are stunning. That once we get people to understand and isolate their bets, I've seen they either become better at betting, or they become more cautious at betting and we've had people once we quantified what it is that they're looking at to grow their business, they go, "no, that's not going to produce that much , so they don't think we're going to do that. And it's like, good.
Steven: [00:27:32] Yeah. It's like either one of those outcomes is actually phenomenal because what you're really getting to is that once you're able to start seeing clearly what your numbers are, and for any of the business owners that are listening, you know there's been times when you've been scaling, and you've been spending a lot of money, you've been hiring people, and all of a sudden, the books are showing that you're not profitable, but part of the business that you're not making that bet on is still producing in the exact same way but there wasn't necessarily a good way to track that. So I definitely can appreciate that. So there's something that you often talk about, which I think is really important for all small business owners to think about. And it's this idea of making sure that you're paying yourself a living wage, that you're paying yourself not living wage, but you're paying yourself the accurate wage of what that role would be.
Greg: [00:28:24] Well to us the first step is, are your numbers speaking truth, and so are you creating any distortions? The number one distortive thing that entrepreneurs do to their business is not paying themselves a market wage. 10% pay above market wage, and so you got to adjust that back out and then the other 90% are under paying a wage and they're giving themselves too easy of a layup to hit a profit target because they're really taking it out the back end of the business as a distribution. And I do make an argument in the first book about one, there are some tax issues in the US that could make that an issue, but just forget the tax aspect of it. I mean I'm batting 1000 on this, every time I've gotten a client to pay themselves and market-based ways that was under paying themselves or even not paying at all. In the next year, they not only made that way, but they made more profit too, because now they're looking at truth in their financials. And when you start to look at it that way, you can really start to not have to do these mental Olympics and play the excuse game of, "well, we really didn't make that much profit or yeah, we really made more profit than that." and it's like, listen, how about we just show how much we really made and let's work with truth. And it's a whole lot easier to play in that way.
Steven: [00:29:48] Well I just have to articulate how important this book is to all of you folks who are listening, even if you're just on the investing side, to understand the numbers that go into business, but especially if you're an operator, especially if you're running a business, even if you're running a side hustle, you need to read this book, because it will completely change and reeducate you on some of the most important things of accounting. And when it comes to running a business, the finances or everything really comes down to, and so for the folks that are looking to learn specifically about how to put their numbers in the kind of process that you really talked about in the book, obviously, they can buy a copy of the book, what are some other ways that they could go about doing that or how can they find somebody that can help them with that?
Greg: [00:30:35] Well certainly, our firm is there to help folks that -- I kind of look at it from the standpoint that I put it out there. We've got tons of people who use our process, who've never contacted me to do anything for them, and I run into them, and they tell me their stories of how much it's changed their life and change their business. And that makes me happy, I'm glad but there are plenty of people who are confident with it and we've got services that we can provide to help them go through and here's the one thing I would say, the most common result is a lot of people are hesitant to come to us and say, "well I want to clean up my numbers first, [00:31:12 Unintelligible] listen, one of my team's best skill sets is we can make sense out of bad data. We're good at that, because the thing is if you go to an accountant, and you say clean up my books, well, you don't really know what you're going to get on the other side and so what we're able to do in our planning sessions that we start engagement with, is we're able to take your data and make reasonable assumptions if things are kind of out of luck because we always say, if I get a large enough body of data, I can normalize it, because even bad data has patterns to it. And so because we really are just putting patterns to your data, we can kind of fix a lot of those things in the model on the fly and give you a picture of here's what your data can tell you, if you decide to move ahead with this process. So here's what it actually has happened for the last three years, now let's show you what's possible and we always say there, here's what you can do to fix it. Many of them will need us to help them to do some of it, they don't have the resources to be able to do it internally. We're good either way, because I always like to tell people says listen, I don't have to look far to find something to do every day. So I don't need to sell people on something, we're just happy to help when people see us as the answer to that. And so certainly reach out, just shoot me an email and one of the folks on our team will follow up and happy to chat about kind of how are we do it.
Steven: [00:32:35] Yeah. Well how can people get in touch with you?
Greg: [00:32:37] The best thing is email greg.crabtree@cricpa.com, there's also a contact page on the book website is simplenumbers.me there's actually one of the things for those of you that want to try to take a stab at it yourself, which is always a good thing. There are some free tool downloads on the simplenumbers.me website, some videos of talks I've given, even more expansive. If you actually just go on YouTube and search for Greg Crabtree or simple numbers, quite a few of my presentations have been recorded and people have put them up, so it's a great way to kind of learn more about the concepts and those things as well.
Steven: [00:33:21] Highly recommend you guys do this. Like I said, I had a good friend and entrepreneur friend of mine recommend your book a few years ago, it was a really big eye opener and I think I want some other people to have that same experience. I pass along your information to a lot of people so I know we're going to reach a lot of folks with this episode. So thank you guys so much and thanks Greg and we'll see you guys next time.
Greg: [00:33:41] Thank you very much.
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