511: From Numbers to Strategy with Anne-Marie Kaden
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How do you navigate the financial uncertainties of running a business? Anne-Marie Kaden, from Tiny Paws Bookkeeping highlights the importance of regularly monitoring financial health and utilizing key performance indicators (KPIs) to ensure your business adapts and thrives in changing markets. She emphasizes managing labor costs effectively, planning for cash flow variations, and leveraging historical data to make informed decisions. Through strategic financial management, business owners can better prepare for seasonal fluctuations and unexpected expenses, ensuring sustainability and growth. Anne-Marie's insights offer valuable strategies for maintaining financial stability and maximizing profitability in any economic environment.
Main topics:
Monitor Financial Health Regularly
Understand and Utilize KPIs
Manage Labor Costs Effectively
Plan for Cash Flow
Leverage Historical Data Insights
Main takeaway: When I talk about financial health, it's really in terms that are very specific to you, as a business owner, not necessarily the industry as a whole.
About Our Guest:
Anne-Marie Kaden has been involved in animal and pet care all of her professional career. She built and ran a successful pet sitting business in North Carolina from scratch to six-figures in just five years. She sold her first business in 2022. Anne-Marie knows and understands the pet care industry intimately and is now operating her second pet sitting business, Tiny Paws Pet Sitting in Colorado alongside her bookkeeping operation.
She holds a BS in Animal Science from Virginia Tech, which provided structure to what has become her life’s work. Anne-Marie has worked in both small- and large-animal veterinary hospitals, managed private equestrian barns, taught riding lessons, and worked on ranches as a wrangler and trail guide.
She and her family relocated to Monument, CO in July 2022 from North Carolina seeking bigger mountains and a more active lifestyle. Her husband, two kids and their canine partner, Percy, enjoy being outside, hiking, camping, and kayaking.
Links:
Previously on Episode 407: https://www.petsitterconfessional.com/episodes/407
annemarie@tinypawsbookkeeping.com
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A VERY ROUGH TRANSCRIPT OF THE EPISODE
Provided by otter.ai
SUMMARY KEYWORDS
numbers, business, business owner, year, expenses, income, month, clients, kpis, important, services, gift, fluctuations, pet, labor, pay, spend, labor costs, coaching programs, uncertain times
SPEAKERS
Collin, Anne-Marie K.
Collin 00:02
Hello, everybody and welcome back to pet sitter confessional. Today we're brought to you by time to pet and pet perennials. In a statistical anomaly, we have almost hit a exact to the day one year anniversary from when we had our current guest on last Amory Kayden is back on the show with tiny paws bookkeeping, to talk about financial fluctuations, forecasting and what to do in uncertain markets. And Marie, I looked up at the date, it's almost to the exact day one year ago where we had you on the show. So I don't know how we pulled that off. But we did. Maybe you can do run some analysis on that. But for, for those who those who haven't listened to that episode, or maybe have forgotten, could you please tell us a little bit more about who you are? And all that? You do? Yeah.
Anne-Marie K. 00:48
Thanks for having me back. Colin. It's hard to believe that a year has already passed. It just feels like things are flying by but I own tiny paws bookkeeping. We provide virtual bookkeeping services specifically for the pet care industry. We work with pet sitters, dog walkers, dog trainers, and pet retailers to provide bookkeeping support in our business.
Collin 01:14
Well, and I know last time, we dove into your, you know your story as being a pet sitting business owner as well, a couple of moves, and then some business financials and stuff that we need to be on the lookout. Since it has been a year, I was curious, what kind of maybe changes that you've seen that we should be aware of, or trends that you're noticing?
Anne-Marie K. 01:36
Absolutely, I mean, we're in a really unique time and period, we're in an election cycle this year, for sure. And that always presents some uncertainty in our national economy. But I think in terms of petsitting, as well. And being a business owner, we're seeing even more fluctuation in our revenues. How we're operating as a business. So specifically, what I've seen in conversations that I've been having with our clientele, is the importance of monitoring financial health, and our business has become much more prominent, we're talking more in the realm of KPIs or key performance indicators, how we can measure what our business is doing for us. And then that feeds into financial planning and analysis, looking at forecasting, looking at cash flow, looking at budgeting efforts, those are just much more important to business owners this year than we've seen in the past, because of some of that economics, uncertainty, inflation, rising costs, labor issues, are all very prominent with our business owners these days. Yeah,
Collin 02:49
it really seems as though when times get tough or uncertain, you kind of have to dig in and really see what's going on. And you said that word, financial health, what does that mean to you in terms of thinking about small business owners? Yeah,
Anne-Marie K. 03:05
you know, a lot of people will throw up benchmarks, which are sort of industry standards, a numbers that that you should watch or where you should be performing at. And I find that it becomes much more important to look at those numbers in terms of each individual business, much like people, businesses are very much unique. Even if we're all pet sitters, and we're all performing at the same level, we're all doing things a little bit differently. And the bottom line is different for every business owner, what they need out of their business is is not always the same business owner to business owner. So when I talk about financial health, it's really in terms that are very specific to you, as a business owner, not necessarily the industry as a whole, although we use that as a starting point. It really becomes what are your goals with your business? And is the business providing for that goal? That's where we talk about financial health is whether or not it's providing for you.
Collin 04:03
That is the business provide. I think that I love that perspective, because we all have different reasons for owning and operating a business. For a lot of people, it's the sole income that they have for their entire family. For many others, their business may be a way to get out of debt, it may be a way for them to supplement income, or could be a fun thing that they're trying to do. All of those will have different, you know, you know, different metrics for them. Specifically, what does profitability mean for one versus the other? And that is where some of those discussions on Facebook can veer kind of sideways when you start comparing from business to business and people are saying, Oh, you need to be at this percent profitability or this is a healthy This is unhealthy. What are you doing? You need this huge step back and like you said, going, Yeah, but But why am I in this business? What is this business need to do for me? And then that's how I can start judging accordingly. Oh, absolutely. And
Anne-Marie K. 04:58
when we talk about business owners who are so low operators, they're the only person in their business, their numbers and their metrics are very different from a business owner who is relying 100% on a team of staff to be out in the field for them. And then you have the person who's in the middle of their, where they're sometimes in the field, but they also have staff and every one of those has different metrics that we're looking at, that relate back to their own individual goals. For sure, I know personally, when I started my business, it was to have extra fun money so that I could travel. You know, for other people, like you said, it's their business has to support and pay their bills. And so my goals as having fun money to play with and go on vacation is extremely different from the person who needs to make a mortgage or rent payment, put groceries on the counter for them. And so where I might have some more flexibility to deal with risk, and volatility in my market, may not be ideal for someone who has to meet certain obligations for their family and household. And their risk tolerance is much lower than what my might be so So absolutely, it's very specific to why we're in business and what we need out of it.
Collin 06:12
Yeah. And it plays into, you know, set those kinds of couple different categories there of like, what do I need for the business to do, then you have to actually look at what the what is the business doing, right? Because you can get all the kind of nice fairy tale numbers of like, Yeah, this is what should be doing. But then run the actual ones and see what that difference is. Then you can also add, and I think we talked about this last time, and Marie, but also the importance of historical look backs of going how has this performed over time? And how off has it been throughout that so that, then you can really start to see like, okay, what are some of the moving pieces here?
Anne-Marie K. 06:46
Oh, sure. I mean, we can take a picture of what today looks like, but it really doesn't inform as much as if we're comparing it to yesterday, or even last month or last year to know what our trajection has been with the business. Are we growing? Are we decreasing in sales? Are we changing tactics? Like, are we doing a different service this year than we were last year? And how has that changed finances? I mean, numbers are great when we look at them for right now. But they tell a much better story, when we look at it with historical data to understand where we were, in comparison to where we are.
Collin 07:26
Yeah. And that that is really important. Especially we talk about service mixtures and how that's happened. I know when we look back to our business five years ago, understanding of like, oh, wow, we were, you know, look what we're making then, like, it's so interesting how, you know, let's just say, you know, $100,000 business can be completely different from another $100,000 business, just because of their services, how they're offered, when they're offered, what the mixture is between them and where that's happening. And that was all really important context that we as a business owner, we have the most knowledge about our business and how we operate. But now we have to then align that with the numbers and see how those fluctuations are happening and kind of understand that why behind those changes to Yeah,
Anne-Marie K. 08:08
the why is the important piece. And it's, you know, we can have numbers that tell a particular story. And then we can have something that's off that we don't couldn't anticipate, you know, maybe changed a big, where we had a big expense, like I had a client whose business owns a vehicle, and that vehicle needed a new engine repair huge expense really put a dent in her numbers. And so when we look back at historical information, understanding that that was kind of a one off, not normal. And the only way that we know that is by looking at lots of data, not just one data point, but looking at it from a holistic view of an entire year or two years, or even five years to understand why we had such a high expense load, which altered our profit margins that year, like what was the reason for it? Other times, maybe it was a natural disaster, maybe it was because the business owner got sick and had to be taken out of the business, all of those inform the reasons why we might have a downturn in money, not just because we weren't performing optimally out in the field, but because there were extreme such, you know, situations that caused it.
Collin 09:21
Well, I know you can talk a little bit about two of the kind of uncertain times and the variability of fluctuations, as far as just frequency of running these numbers is that something that's changed as far as you know, oh, this used to be done quarterly or annually. Now trying to run these a little bit more often to see that pulse. So
Anne-Marie K. 09:42
I think that a lot of business owners check in on their finances irregularly. And I think that is just a function of being an entrepreneur. You wear all the hats, and it's really hard to juggle all the things all the time really well and So there are a lot of things that that maybe we think that we should do better. But the reality is that we look at our numbers when it's tax time, you know, on an annual basis. And that's when we kind of review what happened in a year, what did we make? What did we spend? What do I owe for, you know, taxes now, and that's fairly typical, what we try to get our business owners in the habit of is looking more frequently at their numbers on a monthly basis, we have found that that is sort of an ideal, it allows us to be taking a temperature check of our business much more quickly throughout the year, so that if a change needs to happen, if we may need to make adjustments in our expenses, or what we're charging our customers and influencing our income levels, we can do that much on a shorter interval, we can do it quickly and enact change for that current year, rather than looking back just once a year and go, alright, well, now I need to make a change for this coming year. But we could have enacted that change maybe six months prior and seeing a better turnaround in our numbers. So I think that, for us, ideally, it's monthly, being able to stay on top of of our business financials, so that we can do that change quickly. That because
Collin 11:16
when when things are changing so quickly, and the outside world from month to month, sometimes day to day, it seems like but you know, with so many things going on, it's like, oh, wow, like, I really need to see how this is impacting us personally, because sometimes, you know, let's say, like for us last year, we had a few months where we were really burning through hires, who just they forgot other options or got other things or life happened. And we were going through several months where we would hire a bunch of people, and then they would end up turning around. And we never fully got back the, you know, the revenue from them for the money we spent bringing them on. And so we had these really, really down months. And looking at that, and each month allowed us to go okay, we actually need to go ahead and slow the pace here and change up kind of how we're doing this because this isn't matching what we're getting out on the other side of this right now.
Anne-Marie K. 12:07
Yeah, yeah, exactly. And one of the biggest things that we're seeing that makes a huge impact is labor costs right now. And being able to address it as well, while addressing a big labor team is not always a quick change. And we need to do it small and incremental ways. It can absolutely inform, and we can make quick changes on the customer side, whether it's raising our cost or our pricing structure for clients so that we can meet higher labor costs. Right now, that's a big one that we talk about a lot and being able to meet quickly, and make fast changes, because it's the biggest expenses that we have in our businesses these days. And so if we let it be, you know, if we're underperforming for a long time, I mean, that can have a really big impact on our numbers for us, and so being able to meet that need, you know, right away and make changes quickly and kind of spin on our heels to do that is really helpful and impactful.
Collin 13:06
Yeah, well, because you then like you said, it allows you to see because you know, for us, you know, we kind of know how many average number of visits each day we need to do to hit our own financial goals. Or we need to know kind of what the profit needs to be on each one of those for each kind of our employees and going, if I don't hit those numbers for several weeks in a row like that, all of a sudden, is no, I can't statistically make that difference up later down the line to recoup and be at that same level. So we have to make changes somewhere else.
Anne-Marie K. 13:36
Yes, indeed. And that can that can kind of turn our conversation into cash flow, you know, being able to have the appropriate amount of cash to cover those obligations, can get out of whack very quickly for us. So if we're overspending in one category, it's certainly going to take away from our ability to cover costs somewhere else down the road, too. And so being able to project for that is important. And I think, you know, talking about uncertainty in the economy, and what our business is doing having more frequent fluctuations in income, we need to be watching those numbers more regularly again. So you can make that change so that you're not putting yourself in a position where you can't cover payroll, or you can't make a credit card bill, or whatever, you know, whatever you have that you need the business to provide for being able to see that cash flow before you know deficit before it happens, so that you can find ways to mitigate it before you're in a pinch. Well,
Collin 14:46
so let's dive into that about SARS like strategies with managing cash flow because I know a lot of business owners have that mindset of, well, money just kind of comes in and then it kind of goes out. Isn't that a flow enough? What do you want? What else do you want me to do? And Murray
Anne-Marie K. 15:00
Right, are people who just watched the balance of their bank accounts, that's one that I hear, you know, they look before they spend money to see what's in the bank. And as long as they have money there, then they feel good about spending cash. But it really comes down to understanding the ebbs and flows of your income, knowing what you know, in pet care, we tend to see some seasonal nature to our income, especially if you are heavy on a vacation pet care, business model. You know, people travel a lot in the summertime, they travel a lot and you know, holiday times, but we might have seasons or periods where that slows down for us. And the opposite could be true for a dog walking business, if we have, you know, I mean, they tend to dog walking tends to be opposite to us where we're performing dog walks when kids aren't kids are away at school, and businesses or people are away at work. So on the months when it's summertime and more kids are home and people are more home with their families, we see the dog walk and kind of disappear. So being able to understand what the natural flow is of your business, if there are seasons to it certainly helps us know when to expect a downturn in income. And then being able to find other services that maybe help you offset those lower earning months, they like talking about having a split between dog walking and vacation, Petcare can sometimes help even out the peaks and valleys of each service offering. Knowing when your cash flow is going to be tighter when your income is going to be a little less, making sure that we're not having big expenses in those months. We look at annual premiums for insurance, annual subscriptions to software are things that can be large expenses that are anticipated, and making sure that they don't hit in a month when we're already going to have lower revenue coming in is really important. And I think a lot of people don't understand that they can request sometimes that those annual premiums be changed to a different month in the year, maybe they reset that to have it hit and a different period when they've got better cash flow coming in.
Collin 17:25
Just don't move them all to the same month, right? Because then you're kind of doing
Anne-Marie K. 17:30
them out making them a little bit more even and not having all hit at one particular time of year. Absolutely. That is huge. You know, a lot of times we sign up for all the things as soon as our business gets started, and we lose sight that they're all hitting within the same month or three. And then we have boom, boom, boom, big hits. And if that can't be changed, if forever, whatever reason those are set in stone for you right now, being able to anticipate those big expenses, making sure that you reserve money to cover them in the future. So not just relying on your bank balance today, because you may have expenses that are pre planned coming up that you have to cover. And so kind of having that knowledge and that understanding of your business helps you mitigate or avoid having those, you know, leaner months.
Collin 18:24
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Collin 18:46
looking for new petsitting software, good time to put a try listeners of our show, we'll say 50% off your first three months by visiting time to fit.com/confessional. Well, if you've ever if you're listening, and you've ever had that question of how do I pay my bills in the leaner months, right? This is where that cash flow starts to come into play of Yes, both for your business and your personal life of going. Yeah, if we know a leaner month is coming. What can we do beforehand to plan for that? How do we set a little bit more aside and in the you know, in the bigger months, so that we're ready for that we have some more reserves for those lean times? And how can we kind of balance out the fluctuations average that out throughout the year through understanding when our expenses are when our income is coming in? And trying our best to kind of modulate that through through the year.
Anne-Marie K. 19:36
Exactly. And to even kind of turn it back on our previous conversation of what does the business need to provide for you and what are your goals in there? If one of your goals is that the business needs to provide for your own personal expenses, having a very clear understanding of what that number is, helps inform whether or not we can take it from the business on those leaner months. So We say that you've got to have $5,000 a month, every month for you to pay yourself and the business makes sometimes $3,000 a month and sometimes $10,000 a month, we need to be really cautious what we're pulling out for ourselves are making sure that we have other options to pay our bills on those months, when the business may not provide exactly what you need. And that just, you know, can just kick off so many other conversations about the health of your business. And like, how do we even that out? It's just it just, you know, I mean, we can talk circles around this, but it but it all relates? Yeah.
Collin 20:38
And like you said one of those one of those strategies is what's your mixture of services? What are you offering? Are you offering, you know, seasonal services? Where you I don't know, I don't think petsitting seasonal, but it kind of is right and and dog walking kind of is. So are there other services that you can put out there to your existing clients, to have them use you more frequently for other things that are still in your wheelhouse and of your expertise and fit with your brand. And all of those other things for your business, you know, we're not going to come in and go, Oh, yeah, we offer a dog walking and will polish your bicycle, that's another service we offer, it's like, well, maybe, maybe let's have something a little bit closer into.
Anne-Marie K. 21:22
Exactly, you know, having an add on services, such as deep cleaning litter boxes, or you know, nail trims or be lots of little upsells can help you increase those revenues. And leaner months deciding to do a push for will brush your dog's teeth at our visit, during Dental Health Month, maybe you know if that tends to be a slower month for your business, finding ways that you can promote your own services a little bit more in there and drive. increase in sales for you finding different streams of income, if you didn't want to hire a dog trainer, to supplement your pet care business could be an option for some people. So lots of ways to kind of think around other services to hit to help bridge the leaner months of a pet care only business. And
Collin 22:18
I will say it is tempting during the later months, right? When we're slow, or what do we hear a lot of like, well go out and prove yourself go take that course go do that thing go sign up for the challenge. But it's like, also, if you're spending money on those in the leaner months, you need to be hyper aware of that, you know, I was I was going around and doing some door knocking and talking to other businesses and one of them came in it was a school for for dog groomers and men, the owner was really trying to get me to sign up for their group for level one grooming class that day, you know, and they were they were really good, Amory, they're talking about how much it could add to my business as far as people wanting me to groom and blah, blah, blah. But then I was sitting here going, you want me to spend $1,100 on this course. Right? And right now, whenever I'm not very busy, like, yeah, like, that's hard, because we feel like, Oh, I'll can do this, we'll get busy. So I'll dump all this money in, but then are we actually thinking forward of when I am busy while I have done to do this, and how's that going to average
Anne-Marie K. 23:18
out. And that's important to consider as well. You know, whenever we take on additional learning opportunities, we you have to recognize that there's a cost associated, and there's going to be a lead up cost, whether it's the price that you pay for a course, or learning or equipment or whatever, there's gonna be a Heads up, heads up a front, front loading cost, I guess, is what I want to say, for that before you even get to the earning additional income stage. And so being able, if it's something that makes sense for your business, and it's a passion that you have, and something you want to add to it, you do have to plan for that lead in because it's not going to be an automatic money generator. Right off the bat, you're gonna have some time to either learn the new trade yourself, train someone new, bring them in and build the clientele for it. All of those have to be taken into account. And we can get really excited about new shiny opportunities. And it's important to temper that with the reality of the expense.
Collin 24:24
I was really she was showing me video photos of the of the mobile grooming vans that they also build in with cellmate. It was amazing. I was very
Anne-Marie K. 24:34
I know, it's a fantastic opportunity, if you've got the money to sink into it, and the time and energy and all the things that come into it. But you know, I mean, it's I think sometimes it's, it helps to have a business partner, a colleague, a bookkeeper, somebody who's there beside you to bounce those ideas off so you don't get caught in the shiny right and lose sight of all the things because you just need to have a bigger view of or a more realistic view of what it's going to cost you to do it. So, but it's definitely an opportunity that any business can and should consider if they need to strategize different ways to bring new income for their business, right?
Collin 25:22
It's just we have to be smart about that and know our numbers of what's my baseline, if I spin this $1,100. Now, what's going to happen next month, am I going to be able to cover my bills, then? What's the projected ROI on this? How does that fit like, those are decisions we should we should look at every time that was those opportunities come across, and we see that little dollar sign next to the course or with the training or the books or the whatever going, that has to come from somewhere. And if I don't have the headroom to take that on, I have to delay that to a different month, or just wait a little longer.
Anne-Marie K. 25:54
And that's where understanding your business and your business financials really helps inform those decisions. Because you can't you do have to understand what your business can can handle what what you have an extra funds to devote to an investment like this, and understanding what it will take for you to recoup those costs. And then start making money but you don't know. And it's a gut check unless you understand your financials, as they sit today. And then start looking at it as what it could be done in the future. If you're not doing those exercises is to understand your numbers, it's really hard to make a good informed decision.
Collin 26:36
Well, you talked about looking to the to the future there and down the road there. So let's let's talk about financial forecasting, because that's kind of where this is leading here of going. Okay, I may have a historical understanding of my business, I know where I am today. Let's do a look ahead. But specifically, in in uncertain times, as you mentioned, kind of it's election year, things are already going to get wonky prices are crazy labor costs are doing whatever labor costs are going to do. How do we realistically forecast if I can't even know how many visits I'm going to have next week, let alone the next day.
Anne-Marie K. 27:13
So relying on historical information is very helpful. While it may not be 100% accurate, when we're kind of in uncertain times, and things are changing. And we're unsure if we're even going to meet next year's numbers, at least knowing what we've done. And what we've been able to do in the past can give us sort of a baseline for where we expect the future to hopefully be. But looking and knowing where those cashflow gaps have been for you in previous years, will certainly help you identify where they could pop up again this year or in the future. And so again, anticipating those lower earning months, and the higher earning months so that you can hopefully gain some headway in your cash flow and add to your cash reserves so that you can then hopefully have a buffer when we have a lower performing months, or maybe even in the cases where we dip into the negative cashflow. I mean, that certainly happens and is not necessarily an indicator of a bad business owner or a poor performing business. But knowing when to expect them can help us prepare for the future, prioritizing our spending looking at what's essential for us to cover. If we are concerned that we may not have enough work for all of our labor staff, maybe we have to make the hard decision of decreasing our staff to plan ahead for what we consider to be less than ideal income. So if we're heading into maybe the fall season, when things start to get a little less, maybe we have to let go of an employee and plan to bring them back on in you know, when we head into the holiday season when we can have you know expect to have more work, a lot of companies will operate that way where they have to adjust their labor team. Knowing if you know I always tell people that q1 is a great time to look at their software subscriptions, all the little things that they sign up for that they may not be using to the full extent letting go of monthly subscriptions for software that they're not planning to use, looking at mentoring programs or coaching programs that they're not utilizing to the fullest. If they're not gaining anything from that recurring monthly expense, then maybe it's time to refocus on one rather than three. Just kind of prioritizing where we're spending our money can can really reduce our expenses going into uncertain times. Yeah,
Collin 29:47
well, I know those those coaching programs that that's tough for a lot of people because we sign up for those and we're like, This is it. I'm going to learn I'm going to do this and then the program takes off down the tracks and sometimes we're like well wait, I I'm not, I'm not I wasn't I'm what what happened? And then we kind of stay in them because we're like, Well, this is the month I'm going to catch up, right? And this is the month I'm going to catch up and then this month, and we, if we have to ask ourselves, realistically give it let's make this do my historical look back, right? Have I been able to, and just assess and go, You know what, I think I do need to stop this expense right now, EBI, and save that money and sign back up at a later time whenever it's actually more beneficial to me when I have the time. And when I am going to focus on this because otherwise, this money is just going out the door. And I'm like you said Amory, like I'm not getting any benefits from that. And that's something we don't want.
Anne-Marie K. 30:40
All right, I had a client. She was at the Texas pet sitters conference. And she made a comment that really resonated with me, it's like she spent a whole year in all these different coaching programs or learning spaces where she was gaining lots of knowledge. And she was doing all the steps with it, but she wasn't implementing any of it. And so she wasn't seeing that return, like it was great to know all this stuff. But if you're not able to then implement it into your business, you're not seeing any of the gains from that knowledge. And she was had made a realization that for her, she needed to focus less on the learning and now have a period of time where she was going to focus on the implementation part to put it into action. And I don't mean to speak, give the negative impression of coaches and mentoring because they play a really important part in entrepreneurial growth and what we need as business owners, it's when I see business owners sign up for three or four different coaching programs, and try to maintain that activity that's needed to learn, but then also to implement and I feel like they either are doing one part, well, where they're doing all the learning and none of the implementation or they're struggling to keep up with, with all of the different programs at you know, even it's from the beginning. So focusing down on one or what your a, I guess, having a realistic idea of what you're capable of putting into a program is super impactful. And it forces us to really look at what we can do what we're capable of doing what's realistic for us. And then can we gain from it?
Collin 32:29
What you mentioned software to I don't know how many it's so easy to listen to a talk, go to conference, read a book, listen to a podcast, see somebody throw out a recommendation on Facebook and go sign up for it. Go sign up for the one week free trial, right? And then you may have futz around on it. And then you forget about it. Right? And then that just starts charging in the background. And well, oh, no, I was told I let me I'm gonna get right back to that, that's that productivity software that I really need to track my time or, or that, you know, Canva, that's I'm going to do the pro stuff this year. So I really need to hang on to that. And we kind of convinced ourselves that it's all necessary, instead of again, stepping back and going, I haven't used any of this in six months. So I have got to either commit or hit delete on these.
Anne-Marie K. 33:13
Exactly. And when we're facing these uncertain times, it's really important to get very clear and very precise on what we need to run our business and cutting out the chaff like really whittling down. You know, it's great when we have all the money in the world to spend on all the things to have all the opportunity and the option to use it if we need it in the future. But when we're looking at uncertainty and not sure what our revenues are going to bring in or just trying to mitigate the risk of an uncertain future, it's important to budget, what we can count on what we think that we can realistically bring in, and then anything over over that is gravy, it's really on top of it, you know, like if we make more than we anticipate, great, but if we anticipate higher income, and we've spent for that higher income and it doesn't come in, then we're in a problem space. And so, you know, just get back to projecting and projecting cash flow and be if we're in uncertain times, that's time to be more conservative. It's time to tighten our belts, it's time to look at what we absolutely have to have covering that first. And then if we have extra left over looking at other places to spend the money if we want to. So getting clear on what those priorities are for you and your business will help inform what's essential for you to do your work.
Collin 34:46
And because of that unpredictability, those fluctuations you know, we especially if we started our business years ago, and it was it was humming along doing fantastic. We may have set up our personal budgets for a business that doesn't exist anymore, right? I set up a business, I set up a personal budget, where a $10,000 a month business, well, are you a $7,000 month business now, because that's going to impact your personal budget. And if you are also not bringing these all all these things into alignment, and you aren't making changes with the business to bring more revenue, interchanging your personal budget to match what you're actually bringing in, like, like you said, that's when some real problems happen. And we kind of look up and go, Oh, crap, right.
Anne-Marie K. 35:28
Uh, yeah, and that's a terrible place to, to find yourself, I mean, just thinking about it makes my stomach turn a little bit, and having to be in that place and make what then becomes really hard decisions about your business and about your personal finances. And that's why I think it's so important to be checking in on your numbers frequently to be comparing it to last year to also be looking to the, to the future. And that can feel very overwhelming for a business owner to add on to an already full plate that they're juggling in terms of managing clients managing workload, managing communication, managing staff, like it all just sort of piles on. And so if we can make it habitual, it's less of a daily impact on us, it's less of a negative impact. So we are regularly checking in and we have it as, as a habit, something that we're almost unconsciously doing and looking forward to do. It becomes easier chunk to take at a time. Yeah,
Collin 36:34
well, that's that transparency in our numbers and making sure that they're transparent to us, right. First and foremost, yeah, we're not publicly traded companies. So we don't need to be reporting these out to shareholders or investors or anything like that, where it's transparency for us. And whoever else is at the decision table, if we have a business partner, if we you know, if we have a accountant and CPM, people, that helps everybody be on the same page, and just have it's, you know, the numbers don't lie at the end of the day, like we, you know, it's this is what it is. Now we can talk about why they are that way, but that doesn't change the fact. And so that can be a really good wake up call or encouragement in those moments, just depending on kind of what direction we are needing to take that.
Anne-Marie K. 37:17
And it gives you the flexibility to make a change, right, it gives you I guess, the opportunity to make a change. So if you do realize that your numbers are not in a positive place for where you want to be, just by the sheer fact of understanding and knowing where they are, gives you the opportunity to make an act of change. If you're not looking at them and you don't know and you're just feeling pinch after pinch and you're living paycheck to paycheck. It's hard. If you don't understand where you are to make any effective change to in any direction. You're just kind of blindly walking down a path without any direction really. Our
Collin 37:57
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Anne-Marie K. 39:11
Sure, so one that I think everybody is familiar with is going to be profit. It's and when I say profit or even profit margin, it's what's leftover of your income after all your business expenses are taken out of it after labor is considered supplies, advertising costs, all those things. It's that net income amount. What's left over, when we think about profit margin is the percentage and then becomes a percentage number that we're looking at the percentage of net income compared to total income. So if we bring in $10,000, and we have $5,000 left over, that's a 50% profit margin that we have and knowing and understanding where that sits month over month lets us know whether we're increasing or decreasing our profit. it, whether we're staying in a reasonable place by percentages, I think looking at your numbers as a percentage of your income is a really important because it's hard to say if $5,000 This month is a significant change over the $4,000 I had last month. Yes, it's $1,000 more. But $4,000 could have been a higher percentage, I could have kept more of my money on a percentage basis last month, even though I have less today than I were less last month than I have this month. When we start talking about margins and percentages, I think that it it definitely gives us a more overall picture. And the same is true when I talk about labor and labor margin labor margin is the percentage of your income that is being spent on labor costs. And when we look at a service based business, we usually want that to be somewhere around 50%. Again, we tailor this to what each individual business is doing. And that labor margin looks very different with a business with a business owner who is still in the field performing services but not paying themselves. And a business owner who was completely out of the field and relying solely on labor to come in. So different situations inform where we were which percentage, we want to be at whether we're at 30%, labor margin, or 50%. Labor margin can be very different for each individual business. But those are probably the two that I focus on. Every month with my clients, we're looking to see what profit does month over month and year over year, we're looking to see if they're working with a team what their labor costs are doing. Because it's the largest expense for a service based business, it has the greatest impact on our bottom line. The last one that I look at regularly is revenue growth. And that's the change from one period to the next. So again, if we look at how much we made in March, that's not so telling until we start to look at what was March last year, and the year before. And that's also a different conversation than what is March compared to April or compared to February of the same year. And so it can be hard to look at just one month number, that revenue growth, whether it's an increase or a decrease tells us what our business is doing month over month and year over year. So not just looking again at one period, but looking at it in relation to other periods of time is important.
Collin 42:36
Well, and then, you know, and then that's where that understanding of what our business looked like, last year of going, man, because I know for us when we so we used to do a lot of boarding and daycare in our home and on our property. And then as we made that transition out of that into all out call services. That was a weird transition for us to start look doing look backs on because it was like, oh, man, this March we're way way down. Well, yeah, but our our business was completely different a year ago, because you know, that was a thriving in home, doggy daycare and boarding company. We are kind of a fresh new dog walking and pet sitting company right now. So that's kind of where our context can layer on top of those numbers to give some idea of that and just going because it can be alarming to go oh my gosh, I'm so I'm so far down. Why what happened in panic, instead of going? Well, let's think about what was driving some of these numbers too.
Anne-Marie K. 43:30
And that's an important conversation, when we look at any of our numbers is giving that context of what was happening in your business at that particular time versus what is different now. Because you're right, it can change your numbers drastically and change and and affect our decision making process. But it needs to come with the context of why are those different numbers different? Why is there such a big change between one period and the next. And the other part about KPIs that I just want to interject here is key performance indicators is really any statistic you deem important for business and it can be every business can look at very different KPIs for a client who is looking at growing their customer base, maybe the number of new customers, and that growth of month over month gain and customer base is important to them. Someone who's looking to increase their dog walking revenues, looking at the specific numbers, and very particular terms is important to them. There's no two businesses that look at the same indicators in the same way and that's really important for me to get across is that KPIs are great again, we can have industry benchmarks of what should be and what is typical, but it really depends on what you're doing in your business with your numbers like it's so different business to business. And that's really important for people to understand. Well,
Collin 45:03
and it's also important to know you can slice the numbers 1000s of different ways like you can do kind of whatever you want you at the end of the day, you have to go. But is this is this relevant to me? I think the other day mode and Megan and I calculate, we did a quarterly. What was it? average dollar spend per client served quarter, quarter over quarter to see, to just kind of average to get an idea of not just how many clients were we serving, but how much money we're eating on, on average spending with our company? And then what could we see that's driving behind that? What are some things, but again, that was something that we calculated and then went, Okay, well, that makes total logical sense, I don't think we really need to track that number anymore.
Anne-Marie K. 45:49
But someone who wants to make a push for add on services, or upselling, with their salespeople, or they want to increase income without necessarily increasing pricing, maybe that's a strategy that they're implementing, that would be a really important KPI for them to do. But if it's not your focus, and you're not looking to make those types of changes, that's that KPI didn't really inform anything for you in your business. Right? Right.
Collin 46:14
Yeah, you can have, you can have an infinite Excel spreadsheet with just columns and columns and columns of numbers, right, you can divide everything by everything and multiply it back. Like it's just it's that that can be very overwhelming as a business owner to go, oh, my gosh, there's so many opportunities options here. But that's where it's helpful to work with somebody and ask good questions to go up the infinite numbers of a number of ways I can do these combinations of information, what is generally most helpful, and then maybe a dive deeper as you make those specific changes? Or have those specific needs in your own business?
Anne-Marie K. 46:50
Oh, absolutely. I mean, it's a very personal conversation to have with our clients, because everybody's different in their focus and what they want to change about their business. KPIs are a tool that we use to kind of measure the progress with a goal that someone has instituted for them. And that's really what it comes down to. So we can talk, like you said, about any number of different KPIs we can run. But you know, their ability to track performance for a given goal is where their their butter is like, that's, that's really what we want them for. As
Collin 47:27
far as the profit, I do see, this asked quite a bit on Facebook groups. And, and I know people struggle with how to do this. Do you consider it maybe this there'll be a variation here? And Maria, do you consider profit after I've paid myself as a business owner, or is the profit purely what I take home,
Anne-Marie K. 47:45
it's neither, to me at least. So the profit of a business is what's left over after business expenses are taken out, you then have whatever the owner takes out for themselves, that's separate. That's after business expenses. Liabilities, if you have loans, if you have credit cards that you're paying down, that comes after your business expenses are taken out, so your take home varies, depending on what you want to do. You know, and I think we talked last time about the Profit First method, I know I've talked about it with lots of our clients, where it puts making your own profit, what you need to make a priority in your business and not leaving it to whatever is left over at the end. But when I talk profit and profit margin, it's truly about the business. It's the income that the business brings in minus the expenses, that's your profit, that's the business profit, then that can inform what you're able to, to pay off in in your other obligations, if you have loans if you have liabilities that need to be paid out. And then what do you need for the business to pay you. And so again, we come back to that if you've got to if you are living on a $10,000 budget, and that's what you need to have for your own personal expenses, but the business is only providing $5,000 Then we're in a real money deficit here. And we need to look at either how to how to reduce your personal needs, or increase what the business is producing. But in terms of profit, at the end of the day, that's really just for the business. It really it can inform what you get to take home from the business at the end of the day, but there's two sort of separate pieces that we have to look at.
Collin 49:32
Well and then for the labor you know, that is a massive part of this if we have a team and we're building this out with employees, so we then get to look at that and go okay, well how do I manage my labor costs because if they start creeping up, you know, that could be where I may need to step in as a business owner and take over more visits to control that expense. Or maybe I need to look at how I'm paying, if I'm what's my raise increase if I am Doing raises too fast. Am I starting too high for where I am? What am I price increases look like for my clients and really look at how do we how do we bring that back under control? And again, there's a lot of different strategies for that as well. Absolutely. I
Anne-Marie K. 50:15
mean, when we talk about, you know, businesses operating with the team, and I mean, that's, that's labor is just a huge suck on a business. And rightly so. I mean, it's, it's the thing that allows us to go out there and perform the services that we sell to our clients. And it's a hard it's like you said, there's lots of ways that you can go about making changes with your labor costs, whether it's increasing the income portion, what we're charging our clients, whether it's changing as staff members cycle out, and we have to hire new adjusting where we're hiring from changing our race structure. So our labor costs increase, the longer somebody stays, at least I hope it does, I hope more people are, are paying more as their staff becomes more experienced and you know, stays with you year over year, we expect them to earn a little bit more, but there's, there's always going to be a cap. And there's always going to be a juggling game to play with those expenses, and what we're charging the clients and what is leftover for all of our other overhead expenses. And then it also has to provide some income for the business owner as well. I mean, all of those things have to fit. It's a math equation, like you said earlier, numbers don't lie. I mean, it's a really clear cut. So when we're looking at labor margins, you know, it's another tool just for us to be able to judge how to make decisions on those labor costs.
Collin 51:46
And again, you said that roughly your you should aim for around 50%? And is that all in including workers compensation insurance, you know, if you pay for mileage, all of that needs to be taken into that calculation. Yeah, labor for
Anne-Marie K. 52:01
me, we typically if you use independent contractors, it's it's their contract expense is payroll, wages, payroll taxes, mileage reimbursement, workers comp. And then I also like to throw in transaction fees into that equation, because we assume that for most people, the majority of their services are paid for using a credit card or Venmo, or something that's got some business transaction fees. So we like to build that into our labor costs as well. Cuz we wouldn't have a service that wasn't charged, right to go out and do in that case. So that's what we consider all are all in labor costs. Yeah,
Collin 52:46
and knowing because I know that the transaction fees, that's another thing to have where people go, what do I do with this? Right? Can I do I? What is this? How do I add this to my to my sheet of expenses? Right? Yeah,
Anne-Marie K. 52:57
exactly. And some the decision of whether or not to charge your client that that particular service fee is plays in a whole other conversation that we can have in determining costs there, which is nine times out of 10 regulated by your state and other laws that have to be taken into consideration. But it's, it's all part of this big puzzle of how it all fits together. And I, I just keep coming back to we can't make effective decisions, we can't effectively plan if we aren't paying attention to these numbers. If we don't know where we are today. It's hard to know where we should go tomorrow. Oh,
Collin 53:40
yeah. Well, we talked about, you know, do I sign up for that course? Or not? Well, do you have the money to write? Do I hire this person or not? What do you have the money to? Do I give this person a raise? Well, do you have the money to do like, it all comes back to because those those decisions, like businesses produce stuff and actions, and it takes money to make that happen. And if we don't have the money coming in, to put these things into implementation, and to put them out into the world, we can't put them out into the world. So maybe that does mean well, this was my one year plan, but maybe that needs to go to my five year or 10 year plan so that I can have the income to get to that point. And now I can look holistically at my entire business to go is this matching up? Am I dreaming too big? Am I going out and spending way too much because I'm operating at a $10,000 a month level as a business when I'm only a $2,000 a month business like those are all things to make sure that we're bringing into balance and I it is important to make sure those are matched. Because otherwise if we don't know what's supporting us, at the end of day nothing will and we will be really up a creek
Anne-Marie K. 54:47
I hope that we don't ever you know, get there but but it is. It's true that we can we can very quickly very easily get ourselves into that place if we're not paying attention. You know, it's it Again, it is all about just understanding where you are, where you want to be, what the path is to get there. And your numbers are going to help you inform and make those decisions every step of the way. And if you're not looking at them, it just makes it that much harder to guess where you where you need to go, and what you need to do to affect the change that you want it to be. None of us are in a business to be willy nilly about it. We all have some objective. And we all need the business to produce that objective. That goal that reason for being a business owner. I mean, there's not a single person who gets into business and says, Yep, I just want to throw money away. Just Just pour it down the drain, let's who cares? What I bring in, who cares what I spend, you know, I could lose money, right? No, that that is not any business owner that I've ever met. But they can get themselves in that position, if they're not careful. If they're not watching their numbers, if they're not understanding what their business operations are doing, and all the different pieces that make it up. Emery,
Collin 56:05
I'm so thankful to have you back on the show. Hopefully next time, it won't be an entire year before we get back on. But I do appreciate you coming on and walking us through those KPIs why this kind of information is so important, how can help during financial uncertainty in the economy in our businesses, when we look to figure out what decisions do we need to make? And how do we actually implement those because that's, that's where we all are. So I appreciate you coming on and sharing that with us. For those who are interested in getting in touch with you picking your brain or following along with your work, how best can they do that?
Anne-Marie K. 56:38
Yeah, I always recommend that you go to our website, which is tiny paws bookkeeping.com. And if you go to our contact page, we have a little form that you can fill out. And that allows you to schedule a 30 minute brief introductory call with us, which I recommend, it gives us an opportunity to understand what your needs are and where we can, where our services can help you out. So that's free to anybody who ever wants to sign up for that. Again, it's tiny pause bookkeeping.com forward slash contact. best, easiest way for them to get in touch with us. Okay,
Collin 57:13
perfect. Well, I will have that link and some of your social media stuff on the show notes and website as well. I am always an immense pleasure. Thank you so much for coming on today.
Anne-Marie K. 57:22
Thank you so much for having me. This was a wonderful conversation. I always love digging into these puzzle pieces to a business. So it's what drives us. It sets our, our passion here. So thanks for letting us share a little bit about that.
Collin 57:35
How healthy is your business, we may often think of how we feel about our business or our gut instinct. The wonderful thing is that we don't have to guess we don't have to intuit how things are going. We can look at numbers, we can look at historical data, and we can understand how things are changing in our business. Many times we can be sidetracked by other things burdened by other things in our life that make it feel like the business is suffering. But the numbers don't reflect them. Other times we might feel like we're flying on 30,000 feet and feeling wonderful about how things are going. Because we love our clients and bookings are easy, and staff are coming on board and we're driving. But the numbers don't show a healthy business. Healthy means whatever you need it to mean to meet your goals. It's not a wishy washy thing you set what healthy means for you so that you can do what you want. Don't compare yourself to others. Sure, there are some industry things or there are specific metrics that you can look to. But if you're meeting your goals, if you're happy, you have joy in your life. What more can we ask for? We want to thank today's sponsors Tyent pet and pet perennials for making today's show possible. And we really want to thank you so much for listening. We hope you have a wonderful rest of your week and we'll be back again soon.
