Episode Transcript
[00:00:02] Speaker A: Welcome to Biz Talk. I'm Ryan Herpin. On this show, we talk real strategy, real growth, real leadership. And today we're joined by Roderick Robeson, cpa, CTP and founder of Roderick Robeson cpa. Roderick, it is such a pleasure to have you on the show today.
[00:00:18] Speaker B: Great to be here. Can't wait to talk about all the things we're going to talk about today.
[00:00:23] Speaker A: You know, this is one of the fun type of conversations I get to have, you know, given that, you know, I own a business consulting firm. I. I work with people like yourself all the time. And honestly, you're in a world that I like to stay out of as much as absolutely possible.
But the truth is, you know, behind every strong company is strong financial architecture, and behind that architecture is someone who understands the language of numbers. So I really kind of want to first begin a little bit with your story.
So to really kick this off, I'm curious, what led you into accounting? And when did you decide to build your own firm?
[00:01:00] Speaker B: Yeah, so nobody really grows up and says, I want to be an accountant. So I was actually going to be a stockbroker, and I was doing some bookkeeping work for a friend of mine who had a partnership. And I basically came in part time when I was studying for the exam and their tax. I worked with their tax accountant. I'm sorry, their tax attorney. And by the time we were done, I didn't realize this happened. She went to them and said, you need to hire this guy. You need someone who can help you with your financials. Because they had no idea what they were doing, and it just kind of went from there. That kind of led me down the path of accounting. I got a feel for it.
I ended up starting my own firm after leaving corporate America. And so, I mean, there's a long story ultimately behind that, but I do enjoy what I do. I've kind of embraced being an accountant now. And so, you know, I have a lot of fun and I help a lot of people.
[00:01:51] Speaker A: You know, I'm kind of curious as well. You know, diving into starting your own firm is no small feat. You know, most people in the world are too afraid to, you know, go the route of an entrepreneur and start their own venture. But were there any gaps in the traditional CPA services that pushed you to really hone in on your own firm?
[00:02:10] Speaker B: Yeah, so before I became an accountant, I actually worked part time in a nonprofit organization that helped small businesses. My dad was an entrepreneur and he had his own business, you know, and so I went there to to help other businesses in that nonprofit organization. And I noticed that a lot of the clients were not getting the advice that they needed. They were just getting their tax returns prepared. And I found that there was a big gap between taxes being done and helping clients understand the tax code and also how to manage their money. And I said there is a. You know, and thinking kind of back to my dad, you know, really what's driven me around everything I do is my dad being an entrepreneur and kind of seeing kind of what he went through. But, yeah, the gaps that I saw was being that true trusted advisor that helped, you know, business owners grow, you know, save money in taxes, avoid getting into trouble with the irs. And, you know, and also I've had multiple businesses before I became an accountant, and so I bring that experience as well. So it's the accounting world plus my practical experience, things I learned from my dad, who, who had his own business. But the biggest gap, like I said I saw, was the compliance piece versus the strategy, you know, and then just helping clients kind of bridge that gap between being a technician and actually running a business.
[00:03:34] Speaker A: You know, something I've got to highlight is you mentioned the, the gap between getting things done and then preparing and strategizing. Yeah, that is too often an issue that I see where we just get into a mode sometimes as business owners, you know, starting off a new business and trying to hit the ground running as the owner, operator, you get going, going, going, and then you get caught into a position where you're trying to jump back and it's put out fires. Right now there is a lot of breakdown in the sense of having somebody to utilize that can help you plan for what's coming. And in the midst of chaos, and I get caught. Well, you know, with your back turned to the IRS now, kudos to you for being willing to communicate with the irs, because I certainly can't stand it. But, but, you know, early on, what was the hardest part about building credibility as a founder and, and really just hitting the ground running.
[00:04:22] Speaker B: You know, I'm going to say something that's probably going to be. Come off as a little, I don't know, egotistical or arrogant. Again, I looked back to my dad and kind of what he went through and what he needed. And when I started my business, when I immediately left corporate America, my only goal was I'm going to do the best job I possibly can for these clients.
That's the, the lens I went through. And I think, you know, something about that just kind of shined through and that person went and told someone else. I wasn't worried about the money.
You know, I said, the money will come if I do a good job. I have integrity, you know, work my butt off, the money's going to come. And it kind of. And it just built and it built and one person told another, another person told another, and another person told another and, and at some point it just continued to grow. Now, obviously, you know, you can't live off referrals. I know a lot of accountants believe you can, but for the most part of my business, that's really how it grew. I just, I just really worked my butt off. And every dollar I got, I poured it into training, you know, going to talk to lawyers and understanding the tax code. From a legal perspective, you know, you're only, you're supposed to take 40 hours of CPE. You know, I take way more than that. I've probably spent easily several hundred thousand dollars just trying to stay ahead of the tax code, make sure I understand the nuances.
The tax code changes during the pandemic. It changed multiple times. And a lot of firms, because they're so busy being technicians or they're so busy worrying about growing, they don't have the time to then say what changed in the code and what has happened in the code. And so again, all I tried to do is just do a really good job and it just kind of blossomed from there.
[00:06:10] Speaker A: You know, I've got to highlight a few of the golden nuggets that were in what you said, because honestly, integrity and results are the two things you need to be able to grow and to earn that kind of referral development. Right? You know, a lot of businesses like, you know, when it comes to tax, when it comes to accounting, when it comes to consulting, that word of mouth, referral based stuff is a major part of growing your business right in the early stages. But as you build that integrity and you get that, that list of testimonies on your results, now you've got world to step in where, well, you end up on television talking about it as an expert and authority in the field to millions of people. I mean, that's, that's kind of how that happens. But you know, I love that you keep bringing it back to, you know, seeing some of that modeled by your father. That's incredible. I can say I've definitely got a lot of that myself as far as seeing him be an entrepreneur and try to rock that world and dive into it. But you know, something that I find a little interesting and I'm curious about. You know, many business owners, they see accounting as compliance, but you consistently are framing it as strategy. What's the difference?
[00:07:17] Speaker B: Yeah, so compliance just says, this is what we did at the end of the year. Let's put it on a sheet of paper, let's do some math, and then it's over.
And that paper is really the result of, of what happened during that year. Strategy is saying, instead of us looking back and seeing what's happened, let's look back and see what happened. And now let's have a strategy. Let's have a path forward in order to improve, in order to grow, in order to save money in taxes. A way you can look at it is kind of like your blood test. Every year we're supposed to go get an annual physical. We get our blood test. And what do you see on that blood test? You have different things you can look at. You may have your blood sugar, you may have your testosterone, your psa.
There's a range. You don't need to be in that optimal range. Sometimes you're too high, sometimes you're too low. And so when you get that blood test, what we all should do is take the prescription we're given from the doctor, apply it, then we're going to come back later and look at our test again.
That's what financials are.
That gap between the last blood test and the second blood test, getting those results going from out of the high range into the optimal range. That's strategy. And from a tax perspective, the way strategy work is bringing together the three components. I call these three components the anatomy of a tax strategy. And these are the things that everyone should look for whenever they have. Whenever they're interviewing a CPA or they hear something on social media, they should think about the anatomy of a tax strategy. That's the tax law. That's the evidence. And the thing that everybody focuses on, which is, to me, the last thing to focus on is that filing. You gotta have a tax law in order to figure out what the strategy is. And I know a lot of people think the IRS can dictate what the answer is, but the tax law and the courts dictate what the answer is. And so we got to nail everything down to a law. Well, if it's a law and you're going to go to court, what do you need to have in order to succeed? You got to have evidence. So then throughout the year, if you have a strategy, we're saying, here's how we build that evidence to support the law. And so that if you get audited, we're not afraid of the audit, then we put a bow on it by saying the filing, okay, everything we did all year, we tied it to a law, We've got a strategy. We tied it to the law, we got some evidence. Our strategy was to do these things. We have the evidence to support it. And now we're going to memorialize what we did from that first blood test, from that first exam to that second exam, we're going to memorialize it on the paper. And now when the IRS looks at it, if they ever come to us, we already know from a proactive perspective that we've nailed the strategy, we've nailed the evidence, and we can have the results to show from that.
[00:10:01] Speaker A: You know, I find that response to be extremely powerful because if I were to condense this down a little bit and look as well as look at it from 10,000ft, because what I'm really hearing that you're saying is compliance keeps you legal, but strategy keeps you competitive.
[00:10:16] Speaker B: Yeah.
[00:10:16] Speaker A: And too many businesses, they really do just stop at the legal side of things. Once upon a time, myself included before I truly understood the scope of, well, being prepared and actually doing things in a manner that carries my business along, not just keeps me stagnant or keeps me small.
[00:10:33] Speaker B: Right.
[00:10:33] Speaker A: The strategy is to one, relieve stress and to make things predictable. And, well, predictability eliminates unknown. When unknown is not there, we can operate more efficiently effectively not having to look over our shoulder and be concerned about, hey, what next big expense is right around the corner, it's going to smack us in the face, right? What letter we going to get from the irs? I find that peace of mind on its own to be extraordinarily valuable. Extraordinarily valuable. And I try to bring that up to as many of my clients as absolutely possible. Because the right cpa, the right, the right strategy, the right team members can change everything for your business, but also your home life. When you don't have this mountain of stress in your business, it doesn't carry home.
There's nothing to carry home. So having people like yourself in your corner as a business owner, it's a no brainer. So as we come to the close of the segment, you know, we're exploring, you know, we've explored the foundation that, you know, the mindset and mission behind your firm. But, you know, foundations only matter if the systems are strong.
When we come back, we're diving into the numbers because growth without structure is just chaos with revenue.
We are here on biz Talk on NOW Media Television Watch anytime. The NOW Media Television app available on Roku iOS Android, so much more. Or stream at Now Media TV.
You can watch it on the go wherever you are, whenever you want.
Now that we're diving back into this awesome conversation with Roderick, I, I, I really want to talk about structure. So thank you again for being here with me today on the show.
[00:12:21] Speaker B: Glad to be here.
[00:12:23] Speaker A: So, something I kind of want to really dig into is, you know, revenue gets the applause, cash flow keeps the lights on, and strategy is what turns numbers into power, so to say. And, and, and to hit the ground running, I like to ask big questions that carry a lot of weight. But you know, what are the three financial reports every CEO must truly understand beyond just glancing at them?
[00:12:47] Speaker B: Yeah. So obviously you want to look at your profit and loss statement and your balance sheet. But if you want to talk about KPOs, the things that, you know, obviously every industry is going to have, you know, KPIs that they need to look at related to their industry. You know, construction may have KPIs that are different than, you know, an E commerce company.
But the things that I try to get my clients to focus on is their gross profit margin. You got to have enough margin in order to run the business to cover, you know, your expenses and the payer people. The other thing I want to look at is your ROI on your marketing. If I'm going to spend X amount of dollars in marketing, what type of return will I ultimately get related to that? And then obviously you want your net income when look at that and then you want to have a clean balance sheet. What that means you don't want to be heavily weighted in debt, you know, because that's something that can strangle you. What I've seen a lot of people do is they accumulate a lot of debt thinking I'm going to convert this. They make bad decisions and in that that debt that they were reinvesting when they made those bad decisions comes back to kind of snuff them out. Because when that interest expense and that debt service continues to climb and, and then you're not generating enough revenue or enough margin in order to cover that debt service, you basically have kind of strangled your business. And so profit margin, gross profit margin, you know, that revenue minus your cost of goods, so that gives you enough margin to cover the operations. Making sure if you are invested in marketing that you're getting a good return on those marketing dollars. Want to have big net income and then just making sure you, you stay out of getting over leverage. I don't believe debt is a bad thing that will allow you to kind of scale a lot faster, but you just want to keep a handle on that debt.
[00:14:24] Speaker A: You know, it's funny because you actually answered a lot of what my next question was going to be. So I'm curious if you can elaborate on a little bit further. But you know, the question I was going to ask you is where do most businesses mismanage their cash, their cash flows in the forecasting, the tax planning or the operational spending.
[00:14:40] Speaker B: Yeah. So decision making, oddly enough, they may invest in things.
So back to the. I focused on the marketing because I have an actual, you know, real world example. I had a client that we sat down and they wanted to scale and they said, I'm going to spend $50,000 on marketing. And what I communicated to her was before you spend this money, make sure that this marketing person that you speak to, they're going to, if they can't tell you what the, what, you know, the KPIs are for what they're doing, they should at least be able to build you like a pathway for you to measure your ROI. And that business put $50,000 into this marketing. They didn't listen. They lost all of that $50,000 and got absolutely nothing for it. You know, so making good decisions on where you invest, being able to identify where those dollars are coming in, that roi, you know, if you are having debt, that mindset, that ROI mindset is going to help not, not us. You know, being over optimistic about, you know, I see that happening too, where they go get a lot of debt, they get a lot of funding, and they are over optimistic about what they're able to do. And then they go through this money without a plan, without a strategy, and it ends up, you know, imploding. Another thing I see is people not setting aside enough, you know, for paying the taxes that will take a business out because they either don't know that they need to pay the estimated taxes.
I've gotten new clients where they've used their payroll tax in order to fund their business. You know, they're fighting to, you know, kind of pay everybody. So they think, well, I'm just going to pay it back later. And they end up again, very tight, you know, cash constraints, where they're not able to fund their business and they ultimately implode, you know, and so another number to look at would be your burn rate. And that burn rate is how much cash do I have before I basically go out of business? Is the way to look at that burn rate. So good decision making is important. Managing that debt, you know, when you invest something, understanding that I need to get a return on whatever it is I'm investing and not having a pie in the sky type mentality around those investments and your, you know, your future, you know, your future revenue goals, you
[00:16:53] Speaker A: know, I, I, I find that to be extremely accurate. You know, if, if you're not looking at that burn rate, everything goes sideways really quick. I mean, I've seen a lot of businesses start to really fall apart because of the tax planning side of things where they're not setting enough side for taxes when they're not paying attention to that bigger picture. And it's the, almost the procrastination, but it's more of the pushing it off until later. Like it's a future me problem to handle that. Right. Well, future you is going to potentially be going out of business if you don't handle this now. But I kind of want to challenge this thought a little bit because something that I like to keep in mind, especially when operating in a world of people that want to be successful in business and those that really are, you know, if a CEO can't explain their cash position in under 60 seconds, they don't understand their business. Would you agree with that?
[00:17:37] Speaker B: I do agree with that. Again, your cash is the blood. It's the lifeblood of your business. You know, how are you going to pay, you know, your vendors? How are you going to pay your people? So you really need to get a handle on that burn rate. How much cash do I have? How much do I have in reserve? How do I manage it in such a way that I can live, you know, to fight another day? I don't remember the billionaire's name, but he said something to the effect of, you know, every entrepreneur is about 30 days away from bankruptcy. Well, the reason why that's the case is it's not managing that cash correctly, making sure that you're tight on those receivables. You know, if you, if you extend credit to someone, then you got to be tight on getting the collections around those receivables because your, your people aren't going to stay forever if you're not paying them. And then if you try to squeeze money out of, you know, your taxes or, you know, your payroll, the IRS is going to get theirs at some point. You're going to run out of bandwidth is what will end up happening. And I've run into, you know, prospective clients that have come to me And I've kind of explained to them, you know, they kind of blame their prior CPAs saying, well, they didn't do this and that for me. And I was like, well, sir, you never made any estimated taxes. There's not a lot I can do for you right now because there's only so many room, there's only so much room between the cash that's coming in and this mounting debt that just is going to keep accumulating. And so cash flow is vitally important. You know, keeping your eyes on that, managing that, that receivables, you know, managing your payables, trying to extend legally those payables as much as you can.
And the thing that's going to help that is something we said earlier is having a good margin. You know, the. So the margin with a good collections policy, collecting quickly, that's going to help a lot for all of those things and then making, you know, paying those taxes a priority. And just one last thing, if you don't mind me saying, is that payroll piece is vitally important. So there is a thing that is called the Trust Fund Recovery Act. And what that means is if you take your payroll taxes and you intentionally hold that money back and use it for something else, you can look at $25,000 per penalty. And it's not just the owner, it's anyone who knew about this specific instance. And people can go to jail. And that's because Social Security and Medicare are part of that payroll. And we know about the government and Social Security and Medicare, they want those dollars and they will come after you for those dollars. So payroll is nothing to play with.
[00:20:00] Speaker A: You know, I like to put it to, you know, whenever I'm, I'm talking to students or, or early on entrepreneurs, I like to tell them, you know, uncle Sam, he's hungry and he's gotta eat. And if he's not eating, he's coming for you and he's gonna get you. It's just as simple as that. Don't play around with the taxes. You got to be prepared for it, you know, and for our viewers to kind of keep things real simple and to break it down in terms where they can relate, understand and see the picture clearly. How does proactive tax strategy differ from the reactive tax preparation?
[00:20:33] Speaker B: Yeah, so what a lot of my clients, what we do, and every CPA doesn't do it this way. We meet once a month. And so. And when we meet, what do we need to do? We need to have clean financial statements. That means we've looked at everything We've reconciled the bank statements to what's actually in the accounting. We reconcile the balance sheet, meaning anything that's on that, you know, in our transactions, we have support for those things. Then when we're done and we know we have all the information, we sit down and say, here's your net income. Now let's calculate out what your tax ultimately would be. And then we set aside that money. This is just like any other debt. It's not this nebulous thing that we're eventually going to pay on April 15. We then set aside, you know, the money for that. But in addition to that, we get together and say, well, what decisions are you going to make this year?
Maybe you're going to buy some equipment, maybe you're going to expand. Then my role is to say, where in the tax code can we do something to make that investment, save you money in taxes? I'm sure everybody now has heard of one big beautiful bill and accelerated depreciation. And so that would be one of those things we could use in the tax code in order to save you money. So now you went out and invested that money and then you got a tax incentive, you know, to save money in taxes to reinvest in your business. So that's how planning looks. It's before, before we even prepare a tax return, we're sitting down and we're saying, what does the future look like and how do we do things in a intentional, supportable way in order to save you money in taxes again, increase your cash flow and help you to be successful?
[00:22:09] Speaker A: You know, that's, you can kept that super simple and made it as clear as day. And to our audience, if you should be taking notes on this, you should be paying attention because this is valuable stuff. But you know, this has been incredible segment so far. Where can our audience find you? How can they keep up with your work and get in contact with you?
[00:22:26] Speaker B: Yeah, the easiest place to find me is my website and that's r o r cpa.com you can book a discovery call there. Discovery call is free.
Also have a YouTube channel, kind of like everyone else, Instagram, YouTube, you know. But I have a very boutique firm and I, I will help anyone that I can. But the website is the best place to reach me. Book that discovery call and you know, we can go from there.
[00:22:52] Speaker A: And again to our audience, I've, I've got to say, as a consultant who's been in the inside of many, many businesses, very successful businesses and failing businesses, there's one thing in common that the successful businesses have.
It's a good cpa, whether it's internal or external. But as somebody that is looking at the long term strategy, not just the here and now, and not just putting out fires and trying to dig them out of a hole. It's more of, hey, let's look ahead, let's strategize, let's be prepared and let's handle this the right way. But we've mapped out the blueprint, but blueprints don't protect you when pressure really hits. So up next we're talking execution, risk, and what happens when success starts to really stretch your systems beyond what's comfortable foreign.
We are back on Biz Talk with Roderick Robeson and this has been an incredible conversation so far. So I need you to stick in, really grab a pen and pad and start taking some notes because we're diving into execution and really risk management.
So I really want to talk about pressure and, and Roger, this is, this has been incredible. I'm so glad to have you on the show. So thank you for being here again.
[00:24:02] Speaker B: Glad to be here.
[00:24:04] Speaker A: You know, I like to try to phrase things in a simple way to keep people really understanding the scope. But you know, growth is exciting until it exposes what you've been ignoring. And the numbers, they don't lie.
So to dive into this touchy topic for a lot of people, you know, what's the most common financial mistake you see during that rapid growth phase?
[00:24:28] Speaker B: You know, investing in things the wrong way. I'll tell a personal story. You know, I had a project where I was trying to optimize and I spent several thousand dollars on it. And back to decision making, we talked about that before and I did not lay out a good game plan. Like I've mentioned before, you want to lay a game plan out. And so when you have rapid growth thinking, you have, you know, you've already, you're already successful and then you're going to throw a lot of money around. And just throwing the money around is going to ultimately help you succeed. That's a big mistake that I see people make. Another mistake that I see people make is not realizing that, you know, your business is like a person, you have a baby stage. You know, you're a child, then you're a teenager, then you're going to grow and you'll be an adult. But what do you have to do in that beginning stages when you're a baby? You got to take care of it. You got to build the right foundation, you got to have the right Principles.
Because if you don't build those things in the beginning, what happens when it becomes an adult? It's going to fall apart because it doesn't have the principles, it doesn't have the structure, it doesn't have the discipline in order to sustain itself. And so I've had clients that start to get a little growth and they're asking me, well, why can't I go buy that Mercedes? Why can't I go splurge on that vacation? Why can't I spend X amount of dollars on this? What I try to tell them is, do you just wait a little bit, you know, build the systems out so that you build a business?
A true business, by my definition is if you left that business for a month, for two months, for three months, would it be able to sustain you without you losing any sleep, without you needing to be there? That doesn't mean you become absentee. But, you know, with, it's got, you got to build systems so that it can sustain you. So trying to spend money that you, you don't have because you feel like you've had some success, I've seen that kill businesses. So decision making also making sure, you know, you don't try to pull money out too quickly because you believe you're successful. And then one of the mistakes I see people make sometimes is when they're having that growth phase, then they go the opposite, direct, opposite direction.
They kind of go too cheap.
There's a saying, I'm not, you know, obviously I'm not a native Spanish speaker, but I've heard this in the neighborhood before. I believe it's, I'm not going to say it correctly. Loboto saligato, I believe. Sorry. Sorry, caro. I'm sorry. Lobo salicaro. That's, that's how they said. And I apologize for if I didn't get that right. But basically they go cheap in the beginning and they think I'm gonna go cheap and it's gonna be okay. And I pick up at least four or five clients a day that went the cheap route and come to me, and then they end up paying more. So the way I say it is you're going to pay on the front end or you're going to pay on the back end, but either way you're going to pay because you, you really have to be diligent about spending the money. Sometimes going too cheap is going to hurt you. And the places where you want to be, you want to optimize. So nothing wrong with getting a deal like you said the right team, you want to optimize a good lawyer, good accountant, a good insurance broker, you drill them. You do your due diligence, you ask questions. You don't just hire someone because your friend, you said so. And so you got to drill them. Those are the things I see people lose that, you know, they overspend, they underspend, or they pull money out before that business is able to sustain them.
[00:27:55] Speaker A: I, I can 100% confirm that you. That is a very, very good answer because one of the things I really specialize in is helping businesses in that rapid growth phase and really preparing for it and then really executing upon it in a way that turns into consistent success. You've got to prepare correctly.
No, no fast change has ever come without great risk.
So you've got to be prepared for it. But you're right. Either businesses will kind of soak up the idea of, oh, we've got this cash flow, let's start blowing through it, or hey, we're scared that we're not going to always have this cash flow. So it's not utilize the power of it. There's a dichotomy there that has to be balanced and it's vetting the opportunities correctly, Understanding the roi, as you mentioned in our first segment, understanding the return on investment, whether it's the marketing strategy or hey, let's upgrade our systems or maybe let's improve our operational, you know, or productional opportunities through new equipment and machines. And there's a lot of risk in not truly analyzing what is the gain versus what is the potential setback, but having the right people in your corner, as, as you also mentioned, again, it is very, very true. You've got to have the right people. But one of the biggest killers I see in that growth phase is procrastination.
When you're growing, things seem to get really chaotic or heavy and all of a sudden you've got your hand in the mix of many different pots and you procrastinate on some of the big things that need to be done.
Unless you're able to delegate effectively, you'll be stuck in that trap as soon as you get in it. But you know, now that we've kind of talked a little bit about the mistakes people make in that rapid growth, I want to dive into, you know, how should businesses prepare for economic downturns before they actually hit?
[00:29:45] Speaker B: Yeah. So we're going to go back to what we've talked about from the very beginning.
You're going to look at your financial statements and you're going to work every single month, every single quarter and see, you know, how are we doing from a financial perspective. Now, the financial statements will give you something historical, but it also help you to predict. And so the way you, you know, you help, you help yourself from a downturn is you hold a little bit back in reserves. You know, it's, it's like, you know, an emergency fund. I'm sure everyone's heard of Dave Rems, and he talks about the emergency fund. That's a way that you're able to do that. You know, you put a little bit as for a rainy day. And sometimes what, you know, I tell people to do and I do this myself, I'll open up a bank account that's like, I don't have a credit card to it or a debit card. I don't have any access to it. I just let the money go there and sometimes I just forget it there. And then when there's a true emergency that's there, you can pull from that, those funds when you need it without having to have debt. And then you spoke to something that, I think it's not going to sound like it's necessarily something that will help you from a downturn, but you talked about systems. Having systems in place is very important because that will allow you to predict things. It will allow you to eliminate risk.
You know, a lot of us are lone rangers. You know, my dad was a lone ranger. He was the only person in his business.
And sometimes people get the mindset, well, nobody can do it better than me, or I can't trust anyone. You know, those things are just part of the risk. But if you have the right systems in place so you can watch the watcher, so to speak, then that's going to give you more room. You know, I'm going to hire another operating manager and that person is going to give me more room to go get more sales because they're going to do some of those things that don't generate revenue. So that allows me to get more, you know, more margin, allows me to get more revenue that will help me to offset the downturn. And so again, just, just planning, being diligent, staying on top of the numbers, being intentional about everything that you do that will help you weather a downturn.
[00:31:49] Speaker A: You know, I, I, I find this, this question, at least that topic to be a really good point to bring up in a lot of situations, because that's usually the point where Most founders and CEOs and entrepreneurs get really emotional, right? They, they, they freak out. They cut marketing, they panic, they shrink.
[00:32:08] Speaker B: They.
[00:32:08] Speaker A: But the disciplined ones, they actually really refine and sharpen up during that downturn because they were prepared. It's just a new. It's really just a new, I guess, obstacle to overcome. And it really highlights the things you can improve upon. It strengthens your core group, your core team, and your core focus on why you do this in the first place. But, you know, from. From your perspective, which I'm sure I already know, the answer to this is financial discipline really will separate survivors from the leaders in business.
[00:32:38] Speaker B: Absolutely. And kind of speak to something you were alluding to. What some people will do during a downturn is they'll pull back on their marketing and advertising efforts. That's actually backwards. That's the time to lean in. Why? Because everyone else is going to do that. They're going to go, we need to hold these dollars. You're going to lose visibility while you're out there. Because marketing really works when it's repetitive. It's consistent, you're reliable, you know, they know.
Even though you see that ad a million times, there was like, man, I've seen this thing a million times. I get that email a million times. But what ends up happening when you need someone, that person comes to mind because they were consistent, they came across as reliable, and you were ever present, invisible. So you can't allow, you know, this is just part of the game. Risk is part of the game, you know, but you can't allow negative things or downturns to stop you from achieving your goals and being really disciplined and intentional about how you do things, how you spend your money, how you invest, you know, who you bring on your team.
Those things will help you to succeed.
[00:33:43] Speaker A: You know, I could not agree with you more on the marketing side of things because that is usually people cut it out, but that is the time to let you know, really lay into it. Because, you know, like we talked about in between segments, actually is a lot of marketing is all about know like and trust. If people don't see you, they can't know you. They can't feel like they know you. And if they can't know you, they can't like you and trust you. When people see you, they recognize the brand, and when they see you enough, they start to kind of like you a little bit, especially if your message is good. And then because the combination of know and like, they start to feel like they can trust your brand because it's so visible, it's so present. But the first person you're going to call in the time of need is the one you've seen the most, heard the loudest, or they stuck with you because of their message or something.
So turning it off is the wrong thing. You'll get buried in the market amongst the thousands and hundreds of thousands of other businesses that do what you do. So to all of our viewers, you've got to have a good game plan. I know it looks like it's a time to cut back on everything.
It might be for some things, but it's time to buckle down in a lot of other really important areas.
A lot of people see that downturn as a time to, you know, let's slow everything down. Let's just, you know, let's just try to ride it out until things are good again. No, you can be preparing for when the rain comes, and that's the right thing to do. But if you have the preparations well in advance, when the downturn comes, it's just another step. It's another thing you deal with. But this segment's been powerful. I mean, we've talked about a lot. We've talked about risk, we talked about resilience. But leadership isn't just about surviving. It's about evolving. So when we return, we'll define what financial leadership should look like in the next decade. So grab a pen and pad, grab popcorn, grab some coffee, whatever it is you got to do. We'll be right back.
This is Biz Talk on NOW Media Television. You can watch anytime on the NOW Media Television app, available on Roku, iOS and Android. And there's so many other ways to watch us. Or you can stream right at NOW Media tv.
This is a great way to listen to us and watch us on the go and to soak in some of the knowledge that actually makes a difference.
We are back with Roderick, and so far, this conversation has been very, very powerful, extremely important, and really, any business leader, owner, or just somebody who's aspiring to go somewhere in life, this is good information for you to have. So, Roderick, thank you for being on the show. This has been a powerful interview so far. I'm excited to dive into this next segment.
[00:36:18] Speaker B: Yeah, let's do it.
[00:36:20] Speaker A: So what we're going to dive into a little bit now is the future of financial leadership, Right? And really the role of the CPA is evolving, you know, from scorekeeper to strategist, from historian to architect of the future, health of finances. So with that being the case, and I've seen it so clearly over the past few years, especially, you know, how Is technology, you know, automation, AI, real time dashboards, reshaping modern accounting firms.
[00:36:51] Speaker B: Yeah, so it really depends. One of the, I don't know, heartburns, I'll say I have in our industry is a lot of times we won't adopt technology.
And that's not been an issue necessarily. I've had in my firm when we went from desktop to online, I've quickly adapted to that. But the thing you have to understand about technology, that helps us to be a lot better and it gives us more time to add value to our clients. So AI came along and it's instrumental in what I do now. It helps me to put things together that would take me longer to put together to be able to serve my clients. So it helps you to be more efficient, it helps you to save money, it helps you to eliminate mistakes that human error goes out of it. Another thing that know AI will do is it will help you to make plans. We talked about marketing, a lot of things you could do with AI. And what we do in our firm, what we have clients do, is put your marketing in there, put your goals and, and what have you in, you know, whether it's a chat, GPT or any AI. And what it will do is give you a game plan that you can use. Now obviously AI is, you know, it's, it's a, it's a tool that will bring that information together. You got to use your brain. You are the piece that finesses it, you're the person that ensures the accuracy, accuracy of it. But what it really does when you use it correctly is it, it gives you, it buys back time for you. That's what it's done in my firm. And it's allowed us to, like you said, create KPIs, create dashboards and create them quickly. It's allowed us to create financial statements quickly, you know, and so now you can move. This market is a very rapidly evolving market.
So speed is of the essence in business, especially now. And so that's what technology, if you use it correctly, you're not afraid of it. It allows you to do, it allows you to move faster, make decisions faster. It allows you to be more knowledgeable in your decisions. And so it's instrumental in what we do. And I push all my clients to try to use it as well.
[00:38:50] Speaker A: And I'm glad your field is really adopting the use of AI, automation and that evolution of technology because in every other business I work with, utilizing technology properly changes everything, especially with AI. You know, a lot of people are scared of what does it look like, how do you use it? It's too complicated. But in reality, a little time investment, a little financial investment, and you could make things so much simpler, much easier, less stressful, a little more automated and predictable. I think of it as AI is a tool. You're the one who applies the tool. It's all about how you use it.
And if you have the right people and the right resources or just take the time to learn it for yourself.
Goodness, there's so many ways that it could be beneficial. And in the world of accounting, I welcome the utilization of AI because if there's one thing I found is numbers are absolute.
So people can make mistakes. Numbers have a definitive result, they have a definitive place to be in way they add up. It's nice to have some technology in the mix that can guarantee the accuracy consistently, but it does have to be applied correctly. But you know, what financial skill should every entrepreneur master within the next five years?
[00:40:01] Speaker B: Yeah, again, you know, to be perfectly honest, nothing about the financials has really changed. And you mentioned AI. You know, that just helps you to make those decisions faster. All businesses are going to need to master managing their cash flow. All of them are going to need to know what their margins are. You know, having AI doesn't change necessarily the basic core principles you need. Making sure you have internal controls, making sure you watch the watchers. You know, that is what I believe everyone should focus on. As a, as a CFO or CEO, you need to make sure you maintain that discipline. And technology will allow you to maintain that discipline, to do it faster, do it better, do it more efficient. So, you know, burn rate, you know, gross profit margin, you know, making right decisions. Those things are the core of what happens. Technology allows you as a leader to do those things faster, to be more efficient, to measure, you know, you know, to be able to measure, measure better. In the past, you didn't have this technology to rapidly do things. Now we can do things quickly, we can make decisions quicker. Like I said, this market and this environment is moving fast. So speed is going to be important. Speed and accuracy is going to be very important in this growing, in this new economy.
[00:41:17] Speaker A: You know, so one fun way, kind of in my mind, I just thought of, to kind of break that down a little bit even more is, you know, the future isn't less human, it's just more strategic. Technology doesn't replace leadership. It exposes who, well, needs to improve it and who never really had it. You know, it does boil down to you, the leader of the business, the Head honcho, the chief in charge always boils down to them. That's just what it is. And keeping up with technology is never a bad thing. Just don't go way overboard and invest in some magic that is not really a thing yet. Do your research, ask the questions, reach out to experts that you know or that you have seen. And well, including my guest today, great opportunity. But now another good question I've got is, you know, if a business wants to become, you know, acquisition ready, what financial indicators matter most? Because I deal with a lot of exit strategies. One of my big focuses, what's your end game? What's your big goals? And then preparing that business to be as appealing as possible. So what is, you know, what are some of those things, you know, those indicators for acquisition ready businesses?
[00:42:26] Speaker B: Yeah. So I'm going to speak about two things you talked about, the financials. And again, like I mentioned before, some of those things don't really change. And you know, do you, you know, is your, are your sales growing? Do you have margin?
You know, are you spending wisely? Do you have a good net income? But the thing that's going to make you acquisition ready is not just good financials. It's something we mentioned in a previous segment. Can I pull you out of that business and drop somebody else in it? And it continues to run. So it's your systems. So being a lone ranger, doing everything or having one person do five things, that's not going to help you sell your business. Somebody wants to be able to walk into that business and take off where you last left off and continue to grow it. Or they want to do what you did and they want to make it better. But if they got to build out all the systems, they got to create the SOPs, they got to create the policies and procedures, they got to build out the hr, making it, you know, that's not something that can sell. And unfortunately that's kind of sad in the accounting industry. A lot of firms don't build that out and a lot of businesses across all industries don't recognize that and build it out. Again, I mentioned another in a previous segment. A business is, I pull myself away from it as the owner, as a CEO, as the manager. How long can that business survive without me? And the longer that business can go and run autonomously without you, again, it doesn't mean you don't pay attention to what's going on. As long as it can run autonomously without me, that's a business because someone else can come in and acquire it and they can buy it. And I want to just very briefly speak to that. Why it's important that you're not an absentee owner. I have a story related to that. Had a client that had a general manager that came in and just blew the doors off. They were growing by leaps and bounds. And that owner left. He literally just left the business. He was traveling, he was spending the money.
Unfortunately, that business went under because the. The general manager ended up getting a gambling habit and he ended up embezzling several hundred thousand dollars out. And because that business owner was absent and just like, hey, I'm just gonna take my hands off now. Because a lot of people think having a business means I can just take my hands off the wheel and not have to worry about it. You still gotta watch the watchers, you know.
And so having systems consistently looking at, you know, reports, if that owner would have just one quarter, one month, just stuck his head and looked at financials, he would have been able to see where that cash was leaking, and he could have prevented that. So, you know, systems being able to run autonomously, having things that you can do to review the business to make sure it's being steered in the right direction. I mean, that's the job of leadership anyway, is to make sure the ship is going to the direction it's supposed to go.
[00:45:15] Speaker A: You know, I. I honestly. I know you can see me, but the audience could. And I'm over here ready to cheer you on and clap for you. I wish I could give you a megaphone to say louder for those in the back, because a lot of the people I deal with, when they're talking about exit strategy, I ask them, are they trying to. Do you want them to buy you or buy your business?
Because if you're the one that holds all the cards, if you're the owner, operator, you have all the relationships, you handle all the systems.
The business is not appealing. You have to develop a team. You have to delegate well. And you have to watch the watchers. Absolutely. You can't take your finger off the pulse completely. You're asking for problems. You know the saying, while the cat's away, the mice will play. Well, that's a real thing, especially in the world of business, because embezzlement, very real thing. I've seen it. It happens. It's not just isolated to a few in Wall Street. No, that's not how that works.
It's just a universal truth that you cannot take your finger off the pulse completely until you have adequate management measurability and follow up. It's extremely important. But, you know, this conversation has been absolutely incredible. The insight has been very real. Where, again, can our viewers find you, contact you, and get some more of the awesome insight you have?
[00:46:22] Speaker B: Yeah, definitely. My website, rocpa.com you can book a discovery call there. You can give me a call at 512-960-4874. And then I have social media. If you type in R O, R, CPA or my name, you will find me all over social media, YouTube. I have articles. There's multiple ways to get in contact with me.
[00:46:48] Speaker A: Thank you so much for being with me today. This has been a fantastic interview. And to our audience, you know, revenue without structure is chaos. Growth without systems is risk. And leadership without financial clarity is complete guesswork.
Today we talked about building architecture, not just income. We talked about discipline, not just profit. And we talked about preparing for pressure before it arrives, not after. It's burning you down. You know, that's. That's financial intelligence, and that's ultimately just strategy. You know, Roderick, it's. It's been such an incredible interview. I thank you for bringing clarity to me, to the audience, and so many business owners out there so they can avoid some of these issues.
And again, I'm Ryan Herpin, and this is Biz Talk, where strategy meets execution. See you next time.
