Long-term financial planning can feel pointless, especially when you’re first starting a business and profit feels far in the future. However, as the CEO of bookskeep and author of Profit First for Ecommerce Sellers Cyndi Thomason points out, the future is exactly what you should be planning for. So how can you set yourself up for immediate and long-term financial success? On this episode of Entrepreneur Adventure, Cyndi breaks down her tips for building a profit-first future.
Have A Safety Net
Cyndi’s mission is to help business owners pocket profits from day one. How? Start by building a profit account that allows you some financial cushion and understanding the cashflow associated with your inventory. How long does your item take in transit? When are you paying for inventory? Planning for all of the above while having a profit account just for yourself guarantees security and peace of mind.
Start your business right. Create three accounts from the getgo: 1) A checking account for general operating expenses, 2) A checking account for inventory, and 3) a savings account. Separate your finances so you can wholly understand your business.
Cyndi recommends new business owners have at least two cycles of inventory payments set aside before launch. This ensures you won’t run out of funds before your second cycle payment is due. Remember, we make bad choices when we’re desperate. Reduce the anxiety with these safety nets and remain in a position where you’re making good decisions.
Plan Your Products
Before investing in products, Cyndi recommends doing an analysis to determine its profitability. Investigate the marketplace and check out your competition. Use spreadsheets to figure out how much you would need to purchase the product for in order to churn a profit. If you can’t purchase it at that price, don’t invest. And this isn’t a one-time thing. You should constantly be evaluating the money you’re investing.
When Should You Take On Debt?
Short answer? Not when you’re just starting out. If you’re in a situation where you need to borrow money and its early, you either don’t have your operating expenses under control or you don’t have your margins under control. Neither scenario is promising for financial success. And don’t take debt for past sins! Think about what your return will be and work out the numbers. You should only be taking a loan out if the result comes out healthy and your business model is dialed in.
You’ll use what you have. If you have a lot of money in the bank, you’ll spend it all. That’s why Cyndi recommends people take everything they’re making in their busy season and place it into a separate drip account. This way you’ll have funds to lean on when you hit a slow month.
Skip the software: Cyndi recommends Quickbooks and Xero and that’s it! Nothing else does the job. And a few words of wisdom from Cyndi: It’s a myth that within your first two years of business you must put everything back into that business. Once you have the capital to start a business, you need to make sure that you’re taking a profit to avoid every entrepreneur’s biggest frustration: profitlessness. That’s where Cyndi comes in. Email Cyndi for help setting up your business accounts and information on her training programs, courses, and weekly huddles.
Resources From This Episode
- Profit First for Ecommerce Sellers
- Email Cyndi
- Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine
- eCommerceFuel Live
Outline Of This Episode
- [00:00:19] Todd’s introduction to this episode
- [00:07:30] How to build a safety net
- [00:23:37] The importance of product profitability analysis
- [00:29:17] Taking on debt for a new business
- [00:35:22] Parkinson’s Law
- [00:58:35] Cyndi’s final words of wisdom
- [01:01:36] Todd’s closing thoughts
Welcome fellow entrepreneurs to the entrepreneur adventure podcast where we talk about Amazon wholesale and how you can use it to build an eCommerce empire, a side hustle or anything in between. And now your host Todd Welch.
What’s up everybody. Welcome to episode number 12 of the entrepreneur adventure podcast. I’m your host Todd Welch and in this episode we are diving into profit first for eCommerce sellers, which is a book written by Cyndi Thomason and she’s also the owner of bookskeep, which is the bookkeeping company that I use for my own business. And in this episode we’re going to help you understand how you can set your business up from the start to make sure that you are profitable and have the cash flow and the money to continue growing your business and not be like a majority of eCommerce sellers who get to the end of the year. They do their taxes and they find out that they didn’t actually make any money. It happens way too often, so do not let it happen to you. Listen to this episode and also purchase Cyndi’s book. I have it on my bookshelf right over here to my right and it’s a great book on setting up your business from the start for profit.
We also talk about how you can do your books properly and also create a budget for your business so that all of it rolling into building your business for success. So make sure you head over to the show notes and get the links and the information we talk about in this episode. Cyndi is giving us a free guide that’s going to help you, guide you through setting up your business for profit first. That’s going to be an entrepreneuradventure.com/12 for this episode. So definitely check that out. And before we dive in, I just want to read a quick five star review that we got over on iTunes from BJ Turner 21 he said, Todd’s podcast is really good! I’ve been an online seller for the past seven years and have seen a thing or two. Todd’s podcast sets itself apart from others with all the honesty and solid advice, Todd doesn’t make himself out to be something he’s not.
And seems to have the heart of a true teacher. Your business will benefit from listening. Well, thank you so much BJ Turner. That means a lot. I’m humbled by those comments. I’m really glad that you’re getting a lot out of it. And if you haven’t already left a four star or I’m sorry, a five hopefully if you like it, if not so much, maybe four star, three star, two star, one star, whatever. Just leave me your opinion over there on iTunes or Stitcher or wherever you’re listening would really be appreciated. And I will read that on an upcoming episode as well. So without further ado, let’s go ahead and dive into this awesome episode with Cyndi.
All right, today I have Cyndi Thomason. She is the founder and president of books keep, which are my bookkeepers. So they take care of all of my accounting stuff so I don’t have to deal with that hassle. And she’s also the author of profit first for eCommerce sellers and is a profit first professional mastery level. So Cyndi, I really appreciate you coming on the episode. I think people are going to get a lot of great information on this, how to set up their business correctly from the start. But why don’t you start by just introducing yourself and telling us a little bit about your background.
Okay. Well like you said, I’m the author of profit first for e-commerce sellers. That’s that’s my baby. It’s what I love to help people with. I have seen the, the benefit of what my clients have been able to do to set their finances up from the beginning to be profitable. So that’s kind of where I like to start when I talk to folks about business. In general, we’ve been around bookskeep has been around since 2014. Started really focusing on profit first in 20, late 2014, early 2015 when I had the chance to meet Mike at a QuickBooks conference. We, we’ve worked with sellers who’ve done everything from RA to private label. Have many of them have got multiple businesses going on. And I think the thing that kind of makes us different is that one, we want them to be profitable.
And two, we’re really concerned about making sure they understand what their financials are telling them. So we’ve got a virtual team here in, they’re all a U.S. Based folks spread out all over the United States, most of them where I’m at in North North central Arkansas. But, but some in Florida, Ohio, just different, different locations. So we really love working with our eCommerce clients because they are kind of doing what I set out to do, which was to create this business that I could do from anywhere that I didn’t have to do the old model of showing up in somebody’s back office in their brick and mortar store and sort through receipts, you know I can work from wherever I happen to be and we use the technology to our advantage. And it was just a really good fit when started working with folks that are e-commerce based because we were kind of after the same thing and understood technology and the benefits of it. So, so that’s kinda how we got started and how we ended up working with e-commerce folks like you, Todd. And I’m like, you were not were talking earlier. Let’s make this episode be something that puts me out of business. So everybody gets their books done right from the beginning.
Yeah. Right. Yeah. I don’t know if that will ever be a hundred percent possible because for me, I don’t really want to do it. I can do it, but I don’t want to do it. Got better things to do. So yeah, that’s where a company like you comes in and it’s a lot more affordable than hiring your own accountant. So yeah. Yeah. Makes sense. Yep. So now profit first. And that’s one reason I reached out to you guys and hired you guys was because you really focus in on e-commerce sellers and now you’ve written this book profit first on e-commerce sellers. And I think the eCommerce world is very unique in a lot of aspects. So just your everyday accountant or bookkeeper could probably do it, but they may miss some unique things that you guys pick up on. So why don’t you tell us more about profit first and why that is, what people who are just getting started in their business or are a ways down the road, why that can help them run their business better.
Okay. when I started profit first in my business, I, I started to understand the, the value of having enough for first of all to pay me, you know, profit first. Really sets up your bank accounts so that you take care of the important things first, like making a profit paying the owners, making sure the taxes are set aside, that kind of thing. And what I saw right away when I started implementing it was that I started to build this profit account that gave me some cushion. So it gave me the ability to have some reserve, which I think is hugely important, probably more important for my eCommerce sellers than it was for me as a service based business. I’m not at jeopardy of being shut down by Amazon because of something that they deem inappropriate, you know? So having a cash reserve was hugely important.
Just for me as a business owner it’s really important for e-commerce folks. So the other thing that that I think is really hugely important for eCommerce sellers is to really understand the cash flow that’s associated with their inventory. Most small businesses like mine as a service business, we have an operating expense cash flow and that is pretty you know, it’s pretty predictable. But when you are working with inventory in your business, the cycle for how often you have to order, how long it’s going to take in transit to get the product to you. Oh, there’s so many factors that impact the cash flow around your inventory. If you have terms, do they expect 30% down, up front and what you know, when do you have to pay that balance? All of those things have their own rhythm to it. And when it’s all mixed up in multiple bank, in one bank account, like many businesses operate, it’s really hard to get a feel for what that pattern is. And then you get surprised, you’ve got a a bill to pay for inventory. And you’ve not set money aside for that expense. So that’s some of the reasons I think profit first is just hugely important for folks getting started. Then you may as well start off from the beginning, setting aside money for a rainy day, setting aside money for your profit and setting and making sure you start to learn that pattern of a cashflow around inventory.
Yeah, cashflow is always the most difficult thing once you actually get your business up and going. I’ve experienced that plenty. And you know, I have a mix of like credit card terms and net 30 terms, meaning I have to pay after 30 days I’ve snuck up, I’ve been able to get a few of them out to net 40 in next 60, which is really nice. And I’ve been implementing profit first and working on doing that more and perfecting it. And I’ve kinda got cheated a little bit where I wasn’t counting those net terms like I should have. And that’s kind of bit me a little bit so that I need to reel that back in and like, yeah, I need to just have all that cash in the bank. When I make those orders, regardless of whatever the net terms are, it’s just going to be a lot more stable and then you’re not up at night. Thinking, you know, how am I going to pay the bill when it comes due here?
Yeah. And that’s to me, ultimately, I think that’s what we’re all looking for in our businesses. Some sense of freedom, security, those kinds of things. And, and if you’re, it doesn’t matter if you’re not reporting to work, if you’re spending your time worrying about things that’s, that’s not having freedom and security. So when people have a lot of debt in their business or they’re worried about making those payments unfortunately it’s not really getting them to the place that they were trying to get to when they started their business in the first place of yeah, I mean, it sounds great. You don’t have to go to work every day, but just replacing that with other worries is not what you’re, it’s not that trade off you’re looking for.
Yup. So let’s say I am just about to get started with selling on Amazon. I don’t really have any money except for maybe a few thousand dollars that I’ve set aside to start buying some inventories. So I can’t afford to hire you yet. How do you recommend I start my business off properly? Setting up the books and profit first and things like that. What would you recommend for people out there to get started?
Well, the bar, the books can always be built retroactively. Now you don’t want to go too many years down the road because then it’s hard to get the information from your bank and your credit cards, you know, after about 18 months, those statements and all are just not as available. I recommend people start with profit first. If you can start with creating just three three different accounts and the accounts would be a checking account for general operating expenses, a checking account for your inventory and a savings account for profit. If you’ll just start with three accounts as a place to get started, you’re going to learn so much about your business by separating out those three things. And what I recommend folks do is, you know, if you’re getting ready to make a couple of thousand dollar investment in inventory, first of all, I would say you might want to wait just a little bit because here’s the biggest thing I’ve seen startups do wrong.
When they make that first order for inventory, they make the first order for inventory, say it’s $2,000, and then they are expecting they’re going to get that money back to be able to pay for the second order of inventory. And invariably it doesn’t work that way. And I recommend folks have at least two order cycles of inventory dollars set aside because before you get that money from Amazon or whatever your network is for paying for it before that cycles all the way through, you’re going to have to place that second order. And so in placing that second order, you may not have the cash recouped yet from your first order. So you might want to delay just a little bit if you’re, if you’re looking at it that tightly and say, I’m not going to launch until I’ve got enough dollars to be able to have two orders of inventory to be able to place two orders of inventory the first order and then when I need to make the second.
So as you set up profit first and you’ve got this inventory bucket, you put the money in the inventory in the inventory bank account, and when you place the order for that inventory, you pay the bill to your vendor out of that inventory. Then as you get your payment in from your sales platform, let’s just say Amazon, when you get that money in from Amazon, you want to look at, okay I’m, I’m receiving say $500 from Amazon, 250 of it. We’re really the cost of what I just sold. It’s what I had to pay out. So you want to move those dollars into that inventory account because that’s replenishing it so that you can place your next order. Then what’s left of that? Take a percent of it, 1% just as a place to start and put that in your savings account and then the balance of it goes into your operating account.
And this is the method that honestly, when I’m working with clients that we’re, you know, even bigger businesses, we start with just this kind of a flow because when you start moving money around, even in established businesses, it changes you know, how much is available for certain things and you’ve got automatic bills coming out. So starting slow is the best thing to do. So this what I’m, what I’m describing for a new business owner is really where we start with existing business owners too. And then as we get that inventory piece and profit piece separated out and that’s all working good, then we get a little fancier with it and do some other things. But I’ve got a guide, Todd that I would make available to your viewers if they’re interested that walks you through the steps for getting a good quick start. We call it our quick start guide. So if that’s something folks are interested in, I’d be happy for them just to send me an email and we’ll send that off to them.
Yeah, absolutely. Where can they email you for that?
Just to my email address, Cindy, C Y N D I at bookskeep.com and if you’ll put a quick start in the, in the subject header, I’ll know exactly what you want and we’ll send it,
Send it right away.
Okay, perfect. And we’ll, we’ll add that to the show notes as well so people can get that easily if they didn’t catch that in the audio there. But yeah, I think that’s perfect recommendation kinda’ ties right in with that. What I recommend too is when people are making those first orders start out really small, don’t be ordering, you know, what do you think you need for 30 days, order, whatever the smallest quantity they’ll allow you, get it into Amazon, test it and then buy more inventory from there. But yeah, having that backup, having that like safety net just makes everything feel a lot better when your bank account and you look at it and it’s almost zero, that’s never a good feeling. Even if you know, you have a big deposit coming in from Amazon at some point I having that cushion there would definitely make a lot of people feel more comfortable for sure.
It also helps us be in a right frame of mind to make good decisions. I think if we’re feeling stressed that sometimes we do things just out of desperation as opposed to this is the best thing for my business. So we want to be in, we want to be putting ourselves in that position where we make good quality decisions and not feel like we just have to do something right now.
Yeah, 100%. If you’re lying awake at night trying to figure out how you’re going to pay for something, you’re not going to make the best decisions for sure. As you move before. And especially if you’re at a point now where you’re living off of your business, that’s can make even more pressure. So yeah, having those accounts, I also have a tax account that I move income over to there to pay for taxes and stuff like that. But starting off nice and easy, especially in the busy beginning will work really well for a lot of people, I think.
Right. And you mentioned people that may have just left their job to focus on this. And that’s one of the questions I get over and over from people is can I quit my day job? And I’m in the book I talk about Jeremy who who came to me with exactly that question. And we, we kind of used profit first to reverse engineer understanding what sales level he had to be at. And once we got those numbers pinned down, then we could, we could use those margin numbers that Mike put together in his original book profit first to say, your business will be healthy. If you can dedicate so much money to profit, so much to pay yourself so much to have taxes and so much for inventory and operating expenses, we know what those percentages ought to be for a healthy business.
So if we know what you need to have as income for yourself personally to be able to leave your day job, if we plug that number in, we’re just doing the math in reverse to get to the big number of, I’ve got to have sales at this level before I can be confident that I can support myself. And so that’s one of the things in the book that if, if one of your listeners is trying to make that decision, it might help them to just go through that reverse engineering exercise and we’ve got a calculator available that comes with the book that you can go in and start plugging in your numbers to know, all right, I’ve got to have this much in sales to be able to be confident. And what we did with Jeremy was we we started funding a owner pay bank account for about three months before he left his day job.
I mean, he wanted to be sure that he could operate his business, keep the inventory cash flow going. All of that could still happen. Like he was in the business before he ever started. So we got those numbers through our, excuse me, through our reverse engineering process. And then we set up the bank account and we pretended like he was getting paid and we set those funds available set those funds aside. So then he had a cushion built up for that. So when he did say, I’m leaving, I’m leaving my job, he, and he moved over into the business. He was, he was able to continue to take that pay out of the months, current month’s revenue. But he also had that three months of cushion sitting there should there be a hiccup. And he knew he could pull from that three months of cushion to help supplement. So profit first has helped us be able to help people make those decisions and have more confidence in them that it’s not just based on a whim that they are, they have some numbers to that can make them feel solid on their decision.
Yeah. And that’s one of the places where I made a mistake in the past is before I was working with you guys and my regular listeners will have already heard the story so I won’t go into deep to it. But basically, yeah, I made the jump trying to go full time too early and found out the hard way. If you don’t have that, those accounts set up right. So you actually know if you can actually take the money out and pay yourself. And I also wasn’t following my finances the way I should have been. So I thought I was more profitable than I really was. And yeah, setting this up from the start, having those cushions, you know, I have an emergency fund now and everything else, which makes things a lot less stressful so you don’t have to worry about it quite as much and you can make those better decisions and just doing it right from the start definitely would have been a lot better.
Yeah. But that’s how we learn and from the school of hard knocks sometimes. So yeah.
Well that’s why I do this podcast. Try to let other people know about the struggles that I’ve gone through. So hopefully they can do it a little bit easier than I did. Yeah. It’s all part of entrepreneur-ism learning and taking those bumps. But if you can learn from someone else, it makes it that much easier and faster
For sure. And you’ll find, please do on your own. But that’ll, you’ll, that’ll get you learn from, you know, there’s always something there that will, that we’re gonna stumble across. But you’re right, getting educated and trying to be learn from others is great. So it’s great thing that you’re, you’re offering that to people to, to learn from what you’ve, experienced.
Yep. Absolutely. Now, anything else that we need to touch on in the book? Obviously everybody should go out and buy the book. I definitely highly recommend it. I’ve got it on my shelf right over here and I’ve read through it myself and I’m implementing in the business. So what else should we touch on before we kind of shift gears into maybe someone who’s already established and needs their books done correctly?
Well, there’s a section in the book that talks about planning your products. And I know that’s always a, that’s the sexy topic, you know, to talk about, you know, launching your new products. That’s, that’s the thing that everybody gets excited about. And there’s a section in the book that talks about how to do the analysis on whether or not this product is likely to be a success from the financial side of things. Now I know you have to investigate it from the side of, you know, the marketplace and is it going to sell and how many competitors you have. But there’s another component to that and that is is it going to yield you the profits to be, to make it worth your time to go through this? And so we’ve got a spreadsheet in the book that helps you look at what your costs are going to be for the product.
But we started kind of, again in reverse and we say, all right, what do you think you can sell this product for? And let’s assume you’re going to take a profit off of this product and we want that to be somewhere in the neighborhood of, you know, 15, 25%, whatever you decide, you plug those numbers in and then it says, okay, Amazon’s going to take whatever fees, how much is going to be left then for you to actually get that product to market. You know, if you’re doing a private label or wholesale or however you need to be able to look and say, is it reasonable that I can find that product at that price? Can I get it made for that price or can I get it sourced for that price? And if you can’t, then that’s a sign right there that you need to walk away.
And one of the things that I’ve seen over and over with people is they get attached to the idea of a product. And sometimes it’s an experienced seller who this was their first product and they just, Oh, but this was my first product and it’s like their first born, you know, I’m like, yeah, but you’re losing so much money on this. So do that evaluation and evaluate it from the dollars and cents standpoint of am I going to be able to sell it at a price that I can take a profit and also get it sourced for that price. So I think that’s another thing that experienced and new sellers need to go through is that product profitability analysis to understand how each product is performing. And you do that at the beginning when you’re getting ready to, you know enter into a relationship with a vendor.
But you need to do it multiple times because what happens is competitors come into the marketplace, you then reprice it or something changes with Amazon’s fees and now your fees are a lot higher or your vendor comes back to you and says, I got to have a price increase. Things change over time. And what happens is that profitability may not look good a year from now where it looked really good from the beginning. So you have to continually evaluate that product profitability because it can, it can really drag your cash down. And that’s what it really comes down to. Yeah. You may be making a little bit of money on it and it’s easy to say, well, it’s profitable. I’m making you know, a dollar off of every one of these. But the bigger problem is that product is tying up your cash and you could be making an investment in a different product and getting $5 or $20.
But you’re letting your cash be tied up in a product that’s not giving you that return. So you kind of have to be ruthless and do this analysis repeatedly and, and evaluate what the other opportunities are for that set of dollars that you’re investing. I, I got to hear, I was at eCommerce fuel alive. I got to speak there two weeks ago and I, I heard one of the one of the sellers, they’re talking about the way he viewed his cash and he said, you know, if I have $100, I think about that as having a hundred soldiers that can go out and work for me. And I love that analogy. I’m like, yeah, those, that, those hundred soldiers, we want to put them to work to, you know, to go out and rescue and bring us back 200 soldiers. Not, not send them off and watch them, watch them languish, you know, and come back with you know, not a very good return on our investment. So, so that’s the other thing in the book along with just some some other inventory ways to think about inventory and things that you should be paying attention to in inventory or a couple of things in there that are not necessarily profit first row specific with the bank accounts, et cetera. But they they came out of our work of trying to get profit first going for people and some of the struggles we saw them have.
Yeah. And that’s very important. I do that basically every week, every two weeks when I’m making my orders, I’m going through that entire process and seeing, well, is it profitable now? Now I’m going to order it again. What’s the sales velocity? You know, how long did it take for me to sell through it and making sure, especially when you have limited cash flow, you’re buying the highest and most profitable products that can help grow your money and that’s how you’re going to grow your business the proper way anyways without taking a lot of debt on for the business. But then, which then adds more stress and things like that. What is, what is your position in the profit first world on taking on debt for a business?
I’m glad you asked cause when you mentioned it I’m like, Oh, we got to talk about debt. Okay, here’s the problem with debt. Debt debt can be a good tool. The situation that I see people get into though is that don’t have their business model really dialed in and as a result, they don’t know what their margin is on their products and they are they hand more money, which means they didn’t start out with enough funding. The issue that I see is most of the starting out do not have enough margin to be able to fund the debt service in addition to everything else that they’re expected to spend on. So I feel like if, if you’re in a situation where you’re relying on debt and it’s early, you either don’t have your operating expenses under control or you don’t have your margins under control.
And neither situation is good because there’s just not enough cash to then fund these debt instruments. And, and to be honest, they’re not a lot of good ones out there that are inexpensive. Credit card is not a great debt instrument and so banks are not really likely to lend you money until you’ve got, they say minimum of two years. I find most of my clients have difficulty even after two years getting a loan. And so that’s where the money might be available at a decent interest rate, but they’re not interested in talking to people that are fairly new. So you’re much better off, you know, staying with the day job a little bit longer, building up a little bit bigger tool, chest of dollars. So that you can be in a position to sustain the business in an organic way and avoid the trap of having to borrow having to borrow money.
The other thing that I have people tell me a lot that kind of justifies the debt is I don’t need a lot of margin because I’m going to sell a lot of this. I’m going to make it up in volume. And I’m like, yeah, but you’re not Walmart. You know, that business model is for so much of a bigger business than what, what sellers are on Amazon. So I don’t think that strategy works either. So you really need to be in a position where, you know, the profit margin on your products is going to be 30% or greater because if it’s not, then you’re not going to have enough to really grow the business and to pay yourself and, and sustain a healthy business.
Yeah. You don’t want to get into those razor thin margins because then one mistake and everything goes down and flame, you know, and yeah, the 30% is what I recommend for people out there to target for that as kind of a minimum and go from there just to, to grow. And one thing I would add on debt is like if you are feeling like you need to take debt to pay for past purchases, then you’re in trouble. The only time you know, you should ever be taking debt is if you’ve got maybe money in the bank, you’ve got the money to pay for everything that you’ve already purchased, but you have opportunity and you want to maybe take a gamble on that opportunity, but make sure that it’s not something that if it doesn’t go good, then you’re going to crash and burn and make sure everything else is set up correctly first.
That’s right. Because and crash and burn is good words because that’s what I say to folks all the time. If you don’t have your business model dialed in, if you don’t have money in the bank, then whatever you’re doing with that money that you get in from a loan, it’s just gonna. It’s like throwing gas on a fire. It’s going to expand all those problems quicker because you know, when it’s our own money, we don’t always make the best decisions, but we can get really sloppy when it’s somebody else’s money. We think, Oh, I’ll just invest in this. I’ve been given this $20,000. I’ll just, I’ll take a chance on this. It’s no fun whenever the payments are due and the money is is not there at all. So I you’re exactly right. You don’t want to take debt for past sins. Think about what it is that you can invest in and what that return should be.
Worked out the numbers. What is the return on that investment that you’re making? And if that, if that comes out in a healthy way and you’ve got your business model dialed in, then, then it’s a time to reasonably consider that. Otherwise. otherwise you’re doing it out of either ego too to grow fast and keep up with other people and then you’re not playing your game or you’re doing it to solve a problem that is somebody you know, that, that you’ve created. And and it’s not the fast, it’s not the fast way to solve that problem that it appears to be. It just is prolonged agony down the road.
Yeah, it is really interesting that mentality when you get a loan. Like I’ve taken Amazon loans before and it’s really interesting cause it’s almost like, you know, your eyes get wide, like I got all this money and so you start like looking for stuff to spend it on and it’s, I have to like consciously like, Whoa, slow down, calm down, let’s let’s do this. Right. And,
And that happens in, yeah. And it happens in in Q4 or whatever the season is. I see it with clients that have like a big season in the summer and, and you know, it’s so to me in what we’re talking about I’ll go into it in the book and Mike talked about it in his book. It’s called Parkinson’s law and it’s basically an economic law that’s been around, right? German named Cyril Northcote Parkinson was in the British Navy and he he studied what happened with the bureaucracy of the British Navy when there were more funds available. What happened and basically they just got bigger and bigger. And the, the, the shorthand version of the law basically says you use what you got. So if you’ve got a lot of money, you spend all of that money and if you’ve got an Amazon loan, all of a sudden there’s more money.
And instead of putting it away and saying, okay, I’m just going to test out this one product. Okay, and I’m going to use $10,000 of that money for this one product. I want to put this other $40,000 just in the bank in case cause I’m going to have a bunch of payments to be made. Nobody ever does that. You know what they always do is they looked for ways to spend the whole $50,000 and then they’re like, now they’ve got to pay go. Every Amazon on payment is taken out to repay Amazon because typically their terms are really short. So right there you’re automatically operating with so much less cash that then you’re in a cycle of how can I buy my next round of inventory because I’m paying for the past stuff that I bought. Amazon’s taking the money to do that. So it’s a, it’s a hard cycle and the behavioral law is this Parkinson’s law.
And what I recommend for people like in the in Q four or whatever your busy season is, when the dollar start really coming in, I mean, I’ve got clients who do like five times during the busy season, you know, and, but our operating expenses are kind of the same month by month and I’m not going to have to buy inventory for a while. And then they start getting really creative and they’re like, I can, you know, I can buy that new laptop and I’ve been wanting to try this software and I’m, we’re going to go on a cruise. And you know, there’s all these things they start thinking about spending the money on and it’s not a great time because you’re already burned out and tired and Q4 and, and you just look at that money and you think, I’m gonna, you know, I’m going to do something special with it.
And then about now mid February or March, you get really worried about how am I going to make my tax bill? Because now I’ve got taxes to pay for it. And so I recommend people take the majority of what they get in their busy season, put it into a separate bank account. It can be that profit account. Some of our clients, we’ve created an account called a drip account and basically it goes into a special account and then they use it to drip out their funds throughout the year. So maybe they they have a big December, but January, February, March
Is really slow and they’re worried about being able to take a paycheck. So we drip out of that account January, February and March to be able to be sure they’ve got a paycheck so that their their family life is not all in jeopardy because there’s no money coming in during that slow time.
Yup. Yup. Very good idea. And another thing that I do is I have a spreadsheet that I use where I do biweekly budgets. So basically once I know how much that disbursement is going to be from Amazon, you have basically like a four day window before it actually gets deposited. And so that’s when I go in and do that budget and have all my expenses in there and stuff like that. Make sure that I have everything allocated to what it needs to be paid for. And then I also go in, I use restock pro to manage all my inventory.
So I look at everything that I could potentially order. I put it in there, I put out the profit margin in there and how many days it would take me to sell out of it. So that way I know I can allocate that money to the most profitable products that are going to return my money back to me as fast as possible so I can keep growing. I seen an interesting meme on Facebook the other day related to selling on Amazon and it was basically the top half of it had a guy like hold it, a bunch of money in front of a Ferrari and it said the day you get your Amazon payout and then the bottom frame said two days later and it showed a guy, a homeless guy, you know, this land there will work for food kind of thing. And it’s, it’s so true that you go through that cycle like every two weeks with Amazon.
Yeah, yeah. For sure. That people are people who’ve already spent that money before they, before it got to them. Really.
Yup. Absolutely. Do you have any recommendations for doing a proper budget? I’m doing it in a spreadsheet. Is that how you would recommend or is there a better software out there for that kind of thing?
Okay. So let’s, let’s talk about budgeting first. It budgeting can mean a lot of things to folks. What I heard you just described as more of a cashflow plan as opposed to a budgeting plan. And so there are tools out there that I want to love, but just none of them seem to be doing exactly what I think they should do. So we, we work with our clients and do like a 13 week cash flow plan and we are working with a new software company right now testing out this product that will do forecasting. It’s more of a monthly forecasting process. So I, I don’t think what, I haven’t found exactly what I, I think needs to exist for, for our clients just yet. This forecasting tool might work. But it, it doesn’t go down to the either week by week or biweekly level, it goes down to the monthly level. So no spreadsheets probably I would say stay with that. There are a number of tools out there that, that I have tested that I’m like, Oh, this is going to be the one and they’re going to do what I want them to do. But they, they have their own limitations and I’ve not settled on one that I think is better than our spreadsheet yet.
Okay. Very good. Well, if you don’t mind, I’ll, I’ll send you a copy of mine. You can kind of give me your thoughts on it and if it’s all good, maybe I’ll put it out there for people as a template in the show notes. That way at least people have something that they can start doing their, what did you call it? A cash flow analysis. Cash flow plan. So yeah, definitely. So I’ll, I’ll have you check that out and then I’ll put that template in the show notes for everybody to pick up if they’re interested in that. But I highly recommend they’re doing that. That’s helped me a lot because then it really shows me if I’m spending too much or if I have extra cash and stuff like that so I can allocate it properly.
Yeah, yeah. That’s it. And you’re being proactive about it and that’s, that’s great. That’s what you really need to be doing, you know I’ll have an accounting business. I think accounting stuff is great, but it’s historical and really where you need to be planning is, is in to the future. And so looking ahead, we recommend people look ahead 13 weeks, which is three months. And so if you can take that system that you’ve got, it sounds to me like it’s kind of a bridge between what we’re starting to do for folks, which is to give them a three month plan, a month by month and you’re just taking that two week period and getting real granular with okay, this is what’s coming on this two weeks. I think there’s place for both things. You need to, Oh, there’s this place for all of it. You know, there you need good historical data that tells you kind of where you’ve been and what worked and what didn’t work, but you also need to use that to factor in the long term where you’re going and longterm and our world is really 90 days and immediate term. What can, what do we need to be doing in the next few weeks?
Yup, absolutely. 100% doing all the planning and looking at historical data is extremely important. That’s where I fell down in the beginning of my Amazon business and it hurt me quite a bit, which you know, I’m still in the tail end of digging
Out of that mess that I got myself into so it can cause a lot of problems.
I, I do want to shift gears just real quick for anyone out there who is ready to possibly bring on a bookkeeper, we can talk about that a little bit and about your services and what you can do for people in that area as well.
One thing that we do for people that are brand new and then we’ll shift into the kind of ongoing bookkeeping, but I really believe that people need to start out right from the beginning and in the software that’s available, whether you use zero or whether you use QuickBooks online, it’s really gotten very sophisticated and I don’t mean sophisticated meaning hard to use. I mean, it’ll do a lot of the work for you. And so one of the things that we offer for brand new people is we have what we call a smart start program. And we will set your books up using our chart of accounts. We will do the mapping to your bank account, to your Amazon account. We recommend that you use a product called A2X, which will it bridges this, the sales data from Amazon over into QuickBooks or zero. It makes all that stuff pretty automated.
And so we, we get all of that set up correctly for you all the mapping done correctly. And then we have three one hour calls where we show you what you need to do, what you need to do when the bank transactions come through, how you need to reconcile it month in how you need to book your entries for cogs and inventory and what reports you need to look at. So somebody that’s just starting out, I would recommend they take a look at that because that’s a way to get started on good footing. For our clients that are more established and they’re wanting to have good books too, that they can have a good you know, historical data to look at for decision making. We do a ongoing bookkeeping service where we we keep up with the A2X account, make sure all those journal entries from Amazon get pushed over correctly.
That it all ties into what’s going on with your bank and with, with your credit cards. If you’re selling on Shopify for example, we, we map all of those, any selling platforms, we make sure that revenue comes in correctly. And just try to ensure that everything that comes through your accounts are dealt with, reconciled and in the proper place. Some areas that I think people mess up on are really matching up the income that they’re getting from, say, Amazon to the cost of goods sold for their products that they sell. I see people, when we take over people’s books from another accountant, one of the things we see over and over as, you know, Amazon’s biweekly, they don’t fit that calendar time period. Now if you use a service like A2X, it takes care of that. But if you’re doing it yourself and you’re just putting it into you know, the time period where the cash was received, then at the end of the month you go and say, okay, well I’ve got this much inventory on hand and you book an inventory adjustment.
It doesn’t match to the time period of when those sales took place. So that’s a place where I see people mess up a lot because they’re assigning the cost for a monthly time period, but their revenue is for a different time period because of the Amazon cycle of payments. So that’s something I think people need to pay close attention to because if you don’t, if you aren’t matching up your expenses for your products with the sales for that time period, you’re making some wrong. You could be making some wrong assumptions about your gross margins.
Yeah, definitely. And you mentioned QuickBooks and Zero. Are those the only two that you recommend starting out or with or going with for accounting because a lot of people like to start using like wave. I was one out there. Fetcher is another one seller board and things like that. But I don’t think those really do the full accounting. Correct.
Of those that you mentioned, wave may I, I haven’t seen anybody on wave in a long time. They didn’t use to, but I’ve, I think I’ve heard recently that they may what you’re looking for is a tool that will require, that will generate both an income statement or a profit and loss statement and a balance sheet. If you, if the tool would generate both of those things, then it typically means that you’re going to, it’s going to have some type of feature where you can reconcile back to an independent bank statement or credit card statement and that’s what you want because that’s really your double check. The, the AI is really good with, you know, pulling in the bank data and all of that now. But it happens all the time where the systems get disconnected and they have to be reconnected.
And then there’s either an overlap and transactions are brought in, you know, in duplicate or there’s a gap and there’s two days that they, the data didn’t come through at all. And the only way you know that you’ve got it right is if you reconcile back to your bank statement, the good old fashioned thing. You know, we used to do with a pencil, you know, that’s really still the only way you know that you’re right, and so you want a tool that’s going to facilitate that because that’s that’s, that’s what gives you confidence in your numbers. It’s something that happens over and over when we work with a new seller and they come in and they’ve been using a tool. And they say, well, my inventory lab is another example. We have a lot of inventory lab folks. They’ll say, my inventory lab number is X and now my earnings are 60% and then we do their books and their margins are 17 right.
That can’t be right. And what’s happened is they’ve, you know, not got the correct cost put in, they put it in one time and then it changed. And they never went back and adjust it or there’s costs that they put the item in that we’re going to go back in and add the cost and they just failed to do that. So their number had a zero there for everything that they sold. So the only way to know that you’ve got the correct information is to go back to the source data and verify and that’s what we do in bookkeeping that those other tools don’t, don’t perform.
Okay. Yeah. And I bring that up in the previous episode that was just released, I was talking with Joe Valley over at Quiet Light Brokerage and I started mentioning some of the other software apps and he’s like, no, stop, don’t QuickBooks or Zero, just use that. And I, I have to agree because pretty much every accountant and bookkeeper out there is going to know those two softwares and you’re going to be able to use it where everything else there is just going to be having to figure out how to eventually get it into QuickBooks and Zero starting out there is probably just the best route, even though it’s going to cost you a little bit, but it’s not too much. What is QuickBooks and Zero online now?
Zero was 30. I just got a price notification. They’re changing and honestly, I don’t remember. Quickbooks makes their product available to us wholesale. So we we offer it to our clients at what and their product is either let’s see. I think there’s a $70 price point now and the lower one I think is 30. So I think that’s right.
Yup. Yeah. There’s certain softwares that you just have to have when you’re getting going. And I think an accounting software that can actually do everything like QuickBooks and Zero or is something that you just have to have. So,
Yeah. And if you talk to Joe, you know I, I had a good conversation with Joe at eCommerce fuel two weeks ago and yeah, I’m sure he mentioned, you know, when you get ready to sell the due diligence required, that process is going to want to look back to make sure that your books are in order for the last two years and they’re going to want to be sure that you’re setting up to where your books are running on a modified cash or accrual basis. And so you may not have to do that initially, but but that’s where you’re going to ultimately end up and investing in a tool like QuickBooks online, zero pairing that up with A2X that just sets you up, that’s done. And you’ve got good information for making decisions and when, when the due diligence comes around, well that’s just a, you know, you’re ready. That’s all in place.
Yup. And that, that training that you mentioned that you guys offer to get everything set up, how much is that and how can people sign up for that?
It’s 9.97. And the other thing that goes with it then I failed to mention is there’s a monthly huddle you can join and one of our team members is on the call and any questions you’ve run into during the month, she can help you you know, untangle whatever mess you’ve got and get things squared away. So it includes that for, for a 12 month period. Our website, just go to bookskeep.com you can fill out the contact us form and we’ll get in touch with you. There is a place online where you can take a look and and see some of the details too. It’s called, we call it smart start. And so the details are there.
Very good. And yeah, that’s a one time charge, right? For that one time. Yeah, if you have the cash available, I think that would be something really good to do upfront just to get it all set up. Right. Just so that even if you’re going to continue doing it yourself, you’re know that it’s done right. And at some point you’re going to want to get that off your plate. That’s just one of the things that a business owner shouldn’t be doing and spending their time on.
Yeah. You know, we started it because so many people came to us and they just were too small to be able to afford ongoing bookkeeping. And we would, we would tell them that, but then they would say, well then when I, you know, and further down the road, can I come back to you? And I’m like, Oh yeah, and then we’ll have a mess. So we just decided that the best thing to do was get them started off. Right. And then when they’re ready to, you know, take it off their plate, they’ve already got our chart of accounts and we can go right straight in there and pick up where they were at in and give them, you know, there’s not a whole big adjustment at that point.
Yup. All right. Very good. Now I know you mentioned you have a course as well. Is that the 9.97 or is that something new that you guys are coming out with?
No, that’s brand new. We just launched it over the weekend. And this is for how to get started with profit first. It’s not a whole lot in there about bookkeeping a little bit, but it’s really taking the book and breaking it down into 10 modules and we go over all the concepts in the book and walk through how to perform the different analysis and how to get started. Right. that is that’s, yeah, like I said, we just started it and one of the things that will be included in that is a weekly call where folks that have bought the course can participate in a weekly call with me or one of my team members to help them get profit first set up and going in their business.
Very nice. And so is that out now?
Yeah, it’s out as of. We just, we’re doing kind of a soft launch. It came out on Saturday. We’re, we’re going to do a little bit more of a major launch in April when when we’ve got some other stuff going on, but we just wanted to get it out there and get ourselves ready for something a little bigger down the road. So it’s brand new. And but it’s all the stuff we’ve been doing for you format where people well then go through it kind of self paced, but then have us there to support them if they’ve got questions.
All right, very good. I might have to look into that myself. So how much is that in? Do you have website for that setup?
We don’t have a website for that. If you’re interested in that, just email me. And again, it’s email@example.com same price on that 9.97. And Oh, I’d love to have I think we’ve got about a thousand people in the mix right now and we’d love to beef that up a little bit just to get some good experience with that before we do our big launch in April.
Okay, perfect. So, yeah, if anybody’s interested out there, that’s Cindy with a Y. So C, Y N D I @bookskeep.com, and that’s books with an S, so B O O K S K E E P .com. So we’ll put that all in the show notes as well, that information so people can check that out a lot easier there. Any last words of advice, Cyndi, before we wrap up here?
I think there is a myth that people have that they should be able to start their business and the first two years they have to put all the money back into their business. And I think that’s I think that’s wrong thinking. And so you may not be ready to start your business just yet. I, think you need to have adequate capital to start your business, but once you know you’ve got your capital, you need to be sure that you are taking a profit that you are paying yourself. Because the biggest frustration that I see people have is that they really they go into it with all these hopes and dreams and turns out to be a lot of stress and frustration. And so it can be great. I mean I love entrepreneurship and I think there’s a lot of opportunity there, but you just need to go into it with the perspective of this is a business that you’re building to.
And if it’s not serving you, if you’re serving it, then that equation is the wrong way. So take your time, get started with a stand from the standpoint of having enough capital and know that the business is going to pay you from the start. Because if you just keep plowing that money back into your business, it will keep using it and you will never get out of the track and you’ll never get to the point of taking money out for yourself. So the hope, shortcuts, all of that engaging from the very beginning set up to take, take that profit first. Don’t, don’t be like so many people right now who are waiting to go get their taxes done to see if they made money. You should be making money every time you get an Amazon payout and you know it because it’s in your bank account. Right?
Yup. Yeah. And I think that those accounts that we set up in the beginning of the podcast, you’re moving some of that, a little bit of my money into that profit account and whether you’re paying yourself immediately with it or using it to build up like a three to six month emergency fund kind of thing, just so when you’re ready to make that jump, you have that cushion and then you’re good to go. But yeah, I definitely agree to at least start setting that money aside from the almost the very beginning so that you can start seeing some reward from what you’re working hard on.
Very important. All right, well, Cindy, I think this was a, another great podcast. I really appreciate you coming on and sharing all the information.
Well, thank you Todd. I appreciate you for being a great customer. So thank you very much. I’m excited that you’re offering this for people so that they can get educated and, and start off on the right foot.
Absolutely. You have an awesome day, Cindy.
Okay, thank you.
All right, so there you go. Another great episode with Cindy talking about profit. First budgeting, doing your books, setting your business up for success from the start. This is not really a topic that a lot of people love. Diving into accounting, right? And budgeting, dealing with numbers. It can be scary for a lot of people. If you take a little bit of time upfront, set up your business for success in the beginning, you will be able to avoid a lot of headaches, the headaches that I’ve been through and countless other e-commerce people have been through. So take the advice that we had in this podcast. Purchase the profit first for e-commerce sellers book. I highly recommend it and set your business up for success from the start. So make sure to head on over to the show notes. entrepreneuradventure.com/12 we’ll have all the links in this episode for the guide that you can download from Cyndi as well as her email over there.
If you want to email her on her course or on that, setting up your books from the start correctly and getting that guide as well. And also I will have the template for my budget that I use every two weeks. So you can pick that up there as well. So thank you so much for listening to this episode. Please do me a favor, share it with your friends that will get a lot of good information out of this. Well that’ll benefit from listening to this. It’ll help us grow the audience. Help me make more of these. And that’s what I’m doing this for is to help you and other people out there so it would really be appreciated and leave a review on whatever platform you are listening on. So again, the link for the show notes and everything is entrepreneuradventure.com/12 and with that, I’m Todd Welch with entrepreneur adventure, signing off, happy selling. Everybody.
This has been another episode of the entrepreneur adventure podcast. Thanks for listening, fellow entrepreneur and always remember success is yours if you take it.