so important to have your, your money mindset in a positive state and you can transform your mindset. It's not like oh, well, this is the way I was born. And that's just the way I'm going to be. No, it's a muscle that works out. It's just like any other muscle, you train it, and it will perform better for you.
Welcome to thrive by design, the podcast for ambitious independent jewelry brands, looking to profit from their products, get ready to make more and sell more doing what you love, without spending every single waking minute doing it. Hey, and if you're a creative fashion or product based business, I want to welcome you to the show. I'll be dropping big tips on launching, growing and scaling your business. So you could spend more of your precious time using your creativity to make money. You ready? All right, let's do this. Welcome to the thrive by design Podcast, episode 407. Hey there, it's Tracy Matthews, chief visionary officer of Flourish & Thrive Academy and the host of the show today. And I'm excited. And we're talking about money today. And I have one of our coaches from our momentum program on the show today, Melissa Houston and she is going to be we're going to be talking all about money in your business and why you need to be paying attention to your money, and how to become more cash confident with your business and yourself so that you can ditch all your money stories, so that you can confidently look at the money in your business and so that you can start running your business on the numbers, which is the most important thing. Now if you're listening to this, and you're like, ah, Tracy, this scares me or I don't want to look at the numbers, I get you there was a time when I like to stick my head in the sand. about looking at any numbers, I didn't want to look at a profit and lost statement or a balance sheet or deal with cash flow statements or any of that. But what I quickly realized is more than likely not dealing with the numbers and not paying closer attention to them contributed to my business bankruptcy, and my first business failing and crashing and burning real quickly. We're going to talk a little bit more about that in this episode as well. And there's many lessons to be learned about all these things, all the ups and the downs. So we're gonna dive in in just a minute. And if you haven't done so yet, I would love to invite you to download a brand new free resource, you know, we're going to be talking about the business e side of business over the coming weeks. And so we're going to be talking about money, we're going to be talking about team, we're gonna be talking about leadership, we're going to be talking about how to hire your first VA and all those things. So if you're someone who is feeling overwhelmed, and your business is growing, and you know that you need some help, but you're not sure how to get on marketing VA, or someone on your team, download the ultimate hiring template, you are going to love it. In this template, I'm giving you the exact job description that I wrote, to hire a marketing VA, I'm going to give you my step by step process to make sure that you're hiring properly. And I'm going to give you some insight tips on how to actually train those people so that you actually have that person helping you make money instead of it being a drain on your time. So if you'd like to download that head on over to flourish, thrive academy.com forward slash hiring template, or you can head on over to the show notes and there will be a link right there. Alright, so Melissa Houston is a certified financial advisor and CPA. She is also one of our coaches over here at momentum. She is a master at supporting small businesses with their money so she helps them create financial projections help them financially plan for their business, and more importantly, helps them become profitable. So let's dive in to today's episode with Melissa Houston. Do you know that most small business owners actually avoid working on and talking about and thinking about the money in their business? This can become super problematic, especially for small jewelry business owners who are often running their business on a shoestring. You know, trying to get the orders in trying to pay the bills, financing all that stuff. And at the end of the day, avoiding the money in your business can be one of the biggest mistakes that you've ever made. I'm Tracy Matthews. I'm the chief visionary officer of Flourish & Thrive Academy and I'm the host of the thrive by design podcast. I also wrote a best selling book called The Desired Brand Effect stand out in a saturated market with a timeless jewelry brand. And I have a very special guest on the show today. She's one of our coaches in our momentum program in that momentum program. We support six figure entrepreneurs who are scaling to multiple six and seven figures and she helps them deal with their money stuff. Introducing Melissa Houston. She is a certified CPA accountant And she's also the author of cash confident. And today on the episode, we're going to be taking a look at how you can become more cash confidence in your business, and start owning the numbers in your business to make great business decisions and to continue growing year over year and pay yourself most importantly, a big wage, because we all deserve to get paid for what we do. Alright, let's dive in to this episode with Melissa Houston. I'm so excited to invite Melissa Houston, back to the show today. Welcome, Melissa.
Hey, Tracy, thank you so much for having me here today.
Well, we are back again to talk a little bit about money in your business. Melissa has a brand new book coming out called Cash confident and today we're going to talk about why you need to be looking at the numbers and her five step framework for creating a successful profitable business. So Melissa, I'm excited to have you here. You've been talking about this book. Another thing I'm excited we're going to talk about this later. But I'm featured in the book, not my brightest story, thing, but also a great such
a helpful story. It is it's super helpful. And I'm so glad that you were able to share your story with us.
Well, thank you. Well, before we dive into some of the questions that I have for you, can you share a little bit about your journey into becoming a financial advisor and to supporting small businesses
row? Yeah, absolutely. So it's funny because my first profession was actually in social work. But when I realized, and it didn't take me long, it took me about six years to realize that that was a high burnout rate. And if I wanted to have a family of my own, I really wanted to give 100% to them. So I decided to go into accounting, got my designation worked in accounting for for over 20 years. And then I decided, you know, I knew there was something missing in my life, I knew I wanted to start my business. And I could see a huge gap between what if accountants the advice, they tell their small business owner clients, and the gap is what the small business owners understand, right? So I saw that and I'm like, you're getting such valuable information from your accountant, but you don't understand. At no fault of your own, you don't understand how to interpret that and how to apply it to your business to make your business stronger. So I knew that I wanted to get into a business where I was going to help small business owners create more profit in their business. Because as a small business owner, you have so much control over the money that you bring in, once you get a good handle on your numbers and understand them.
So what like you know, I think this is just super common, especially for creative types. But I think for a lot of passionate people who start a business, they're really good at marketing and sales and pushing the machine of the engine of the business forward. But they want to avoid the numbers. Why do you think this is?
There's a fear, I mean, there's, there's huge fear, there's no doubt about it. But another thing is, you know, we have so many money, stories of our own money is emotionally charged, right? And you can have stories from, you know, as young as your earliest childhood memory about money, and maybe that you weren't good with money, or that money was always scarce. Or maybe you were told that you were no good with money. And you know, we just carry these stories without even realizing it. And we develop this fear of money. And it's really an irrational fear, because it's not really based on anything other than our experiences, right?
Yeah, it's fast. It's fascinating to me, because people can come from all different backgrounds, but like how does someone who had nothing growing up, end up being like a multi gazillionaire and like, be really good with money versus someone maybe who had a lot of means growing up? Who ends up like squandering away all of the money that they make, like, it's just it's so fascinating to me, or maybe someone whose situation never changes because of their money story. And so I think this conversation is such a, an important one.
Yeah, everybody has a Money Story. And no, too many stories are the same, right? We all have different experiences in life. And I guess it's more how we react to them that makes the difference.
Yeah. And quite frankly, the story that I share with you in the book about my business, bankruptcy and my business failing in 2008, probably was like the seedling of it, although I couldn't happen control what happened in the market. Obviously, that seedling of like maybe my beliefs about money and how I should be spending it in the business probably fueled the whole thing going out.
Hindsight is always 2020. When we look back, we can see the error of our ways type of thing, right? But what I really liked to talk to business owners about is how you can prevent things like that from happening, how you can safeguard your business so that you ensure that you're going to be in business for the long term, and not enough people are talking about With that, well,
let's talk about it right now. Like how can we safeguard our business? I want to ask you about the five step cash confidence framework. Is this part of it? Or is that?
It absolutely is. Yeah. So it's more
about the five step cash copy.
I'm so glad you brought it up. Because, you know, just to clarify, I don't teach people how to be accountants, or bookkeepers, what I'm teaching you is how to have that high level financial understanding of your business so that you can run your business profitably. And the first step is money mindset. And I see that over and over again, with the clients that I'm helping, there's so many money stories that are holding people back from creating that profit in their business. So your money mindset can either make or break your business. So I really emphasize that as being the first step. And then the second to the fifth steps are more tactical, where it's the second step is understanding your financial statements. The third step is creating a business financial plan for your business. The fourth is monitoring your results against that plan that you've made. And then the fifth is managing your cash levels.
Awesome. I'm like writing this down right now managing your cash levels. Okay. Yeah. So let's like break these down. Like we talked about mindset, because I think that's, that's really important. What are some of the tools that you give to people who are struggling with their money mindset? Or if they're kind of their money story, as we mentioned before, is kind of defeating them.
Yeah, I have actually have this really great, comprehensive workbook that I give away as a cash or cash confident bonus when you purchase the book. So if you purchase the book, and you go to my website, I'll leave you the link, if that's okay. Yeah, great, thank you go to my website, once the Houston cpa.com forward slash cash confident book, you will be able to enter your email address and your order number. And then you get five bonuses. And one of them is the cash confident book. And I highly recommend this because I feel that everybody's money story is so personal. And it's 100 page workbook that goes through stories. Yeah, it's intense. But it goes through stories, and there's questions that you have to answer. And these these are really thought provoking questions. So getting a good understanding of what your relationship with money is, is the first step. And then for people who have deeply rooted issues around money, and don't really feel like you know, a money coach, or you know, those type of workbooks are going to help them, I highly recommend going to financial therapist, because these can be extremely deep rooted issues. And financial therapists are trained to help you with that. So if you're somebody out there who's looking for one, you can always reach out to me, I will give you the name of two people who are absolutely fantastic.
I didn't even know there was such a thing as a financial therapist, right?
Yeah, I didn't know either until about five years ago. It's it's a relatively new field, but it's so needed.
Oh, yeah. Like, I wish I would have had a financial therapist like 20 years ago. Exactly. Okay, let's talk about what was step two, again, understanding
two is understanding your financial statements. Yes, your financial statements. So knowing what your balance sheet is, and really understanding your income statement, because your income statement is the most used financial statement for your business.
Okay, what do we need to know about the income statement,
you need to know your revenue that you're bringing in and your expenses that are going out each and every month, and you need to make sure that you're hitting your net profit margin targets?
Okay. And so what is a business to do if they're kind of off track from their target? Yeah,
so that kind of leads into step three, and four, because your income statement is so used that in step three, when you're creating your business, financial plan, you you are building it off of your income statement. And what you're doing is you're looking at where your business is currently. And then where you would like it to go in the next 12 months. And you plan out each and every month for the next 12 months. So if you want to increase your revenues, you're going to calculate that into your your revenue categories. And then your your expenses are going to increase with your revenues as well, right? It's not like you can increase the revenues and not have expenses to go with it. So you plan this out carefully. And you look at your net profit margin to make sure that you're hitting your target. Now I'm going to use 30% because it's a very common net profit margin and it's a really good one to have. If you're calculating it and your net profit margin is a little under, you know, you have to do some adjustments, maybe increase your revenue, decrease your expenses or combination of both to ensure that you're going to hit those targets. And if you find in step four, when you're monitoring your results against that plan that you created. That's where the good stuff is, right? That's where you get the feedback. So if you're not hitting your net profit margin goal, you can see is it because you're short on revenue? Is it because you're spending too much money? Or is it a combination of both? And you make those adjustments you look at your results, timely, right? Like so if you? Yeah, you gotta look at it real time. If you have a bookkeeper, make sure your books are closed as soon as possible at the end of each month, run those reports, have a look at them. So that you know, what needs to be changed, you know, the following month?
Yeah, I mean, that's, that's really good advice. I can tell you on any year that I kind of ignored my books, like, I had no clue I was just running my business based on what was in the bank account. And it's like,
yeah, it's a common mistake, right?
Yeah. But then you're not paying attention to like, what goes out? Or like, if something does go wrong, you're not prepared for it. You don't have enough saved up like all the things.
Yeah. And the thing is, most people operate their businesses like that at the beginning. Because you're going into business doing what you love. Yeah, you're not going in there thinking, Oh, I have to do my books. So I have to know what's going on financially. But if you want to have a financially viable business, because that's what dictates how successful your business is, it's not how much you sell. It's about how much profit you're making that makes you financially viable, then you have to get to know your numbers.
Yeah. And the cool thing, Melissa came in and taught us financial planning over at Flourish & Thrive Academy and our momentum program, which is such a valuable training we did it was so fun. So fun. Yeah. And we have Melissa come back, like maybe once a quarter to do some financial trainings for us. So it's pretty amazing. So let's talk about step number five, managing your cash flow, what do we need to know about that,
you need to be proactive with your cash flow. So you need to look at six to eight weeks out constantly, right? So back to your point where you're like, Well, I just always looked at the bank balance balance to see how I was doing your bank balance doesn't mean that that's money that you can spend freely, right? Chances are, you've got financial obligations that are coming down the pipeline that you need to make sure you've got the cash to pay for. So when you monitor your cash 68 weeks out, you know what's coming in, and what's going out. And if you're going to fall short on cash, you have to have a plan B in place to make sure that you can get through that leaner time.
Awesome. I love that. And it is really important. Because there are months, you know, when we're looking at financial patterns in a business, right, there are months that are good, like we know and flourish and thrive, we make most of our money in the first nine months of the year. And then the last part of the year, people aren't paying attention as much because they are focused on their holiday sales. Like we know that every single year, it's harder to get people's attention. So we adjust for that. And same thing in your jewelry business to your busy in the holiday season. Maybe the earlier parts of the year aren't as busy. So you probably need to like hoard some cash at the end of the year for the following year to float you through some of the slower.
And I love that you mentioned that because it's so important. You can't just look at your bank balance and say, Oh, I've got you know, a large happy balance here. How am I going to spend my money? Am I going to go on vacation? No, because you have to get through those leaner times. And you have to make sure that you pay yourself too. And I have to stress this to small business owners, because so many times I have met with them, and they're not paying themselves and you have to factor that into your business financial plan.
Let's talk about that. Because I was talking with a student in one of our programs. And she's like, well, I use the Profit First method method, and I just pull profit out every month and she thinks that's paying herself. I'm like, paying yourself profit is different than paying yourself your salary. It's not the same,
the Profit First method. I mean, I totally respect the author of the book. And I think in theory, it's a great concept. But it confuses people. They think that they're it's very complicated. There's too many bank accounts. And there's this general perception that they can pay themselves whatever. Like, like it's not going by a structured approach. Right? So it's like, they're thinking that if they're making, I don't know, $1,000 a profit. I'm just keeping this in simple terms, that they can automatically pull out 300 But that's not necessarily the case. Right? They should be paying themselves. Oh, yeah. Before they calculate the profit on those leaner months where you're not making as much then you've got no money to pay yourself.
I know exactly. I was talking with this girl and she like literally what she's like, you're assuming I'm supposed to pay myself a salary and I'm like, Yes. Like you're not paying yourself if you're just pulling skimming profit off the top. This is why people they're not like factoring in their own like needs when it comes to that. And this is not like to shame anyone or to get anyone into a perfect place. And I know like, there have been many times when I've had to forego a salary for a couple of months or something like that to float through a tough time, like, that is a normal thing roll up in there. Yeah, we'll have to do sometimes in business, like it just happens. And then you can pay yourself back when things get better, like all that, but you, but if you're not in a regular cadence of figuring out how to pay yourself something that is that you can actually live off of, and something that is projected into your monthly expenses, then you're never gonna get out of like feast or famine.
Exactly. And it's such an important thing that I made, I created a mini course, that shows people how to do this, and it's completely free. So if there's anybody out there struggling to figure out how to pay themselves from their small business, if it's okay with you, Tracy, I'll send you the link so that you can go and register for this free course and learn how to do it. Because it is vital, you're building a business that you want to be able to depend on to provide you with a comfortable living. And if you don't know how to pay yourself, it's just going to be an issue month after month for you.
Exactly. So I want to kind of come back to like, you know, the feast times, we were talking about, like, you know, holiday times. And I just want to bring this back to like my story, because you feature me, I think it's a chapter, let me see what chapter eight or something. It's under
growing your business,
growing your business. And you feature my story about how my business was growing. And so I thought to grow, I should continue doubling down on the things that had worked in the past. So it was investing in trade shows, and go into the trade shows, and I got to deal with QVC, all this stuff and everything. Like at that time, it just like more isn't always better. I think, figuring out how to do one thing really well and get that working really well. And then slowly add the other things in is important. But what I did is we had an epic year. So I invested all this cash into these trade shows, and I did not make a return on investment. And there are like 20 brands, sometimes a pop, like they're expensive, plus the travel fees and all the things. And so but the good news is, is after I filed for bankruptcy started over with my new jewelry business that was more sustainable, I was really looking at the numbers, it became very profitable very quickly, it still throws off a couple $100,000 of revenue for me a year with like significant profit margins, because my expenses are so low, in addition to what I do for flourish and thrive, which is, you know, obviously, much a much, much bigger company. I learned my lesson by looking at those numbers, but I wanted to just mention like it What would you tell people who are kind of stuck in that like overspending mode, like they're thinking that that's going to grow their business? Like how do you properly like analyze if an investment in growth is going to be a good move?
Such a good question. And I'm so glad you're asking this one as well. Because that's part of Step three, when you're doing your business financial plan, and you're looking out the next 12 months, and you want to grow your business, you plan it out month by month, because what everybody seems to think is that growth is going to equal like, well, I'm growing my business, I'm gonna have so much more money. Yeah. What people don't mention is that when you're in a growth phase, that's actually one of the riskiest times in your business because of issues like you just mentioned, right? You're doubling down on expenses, you've got things going on. And especially if you're a product based business, a lot of your cash outlay is going into creating the product and you don't get the money back until you actually sell the product, right. So you have to plan very carefully through that time of growth to ensure that you're still meeting your profit margins that you set for yourself. And you're managing your cash levels so that you're not overextending yourself.
Yep, exactly, which is such great advice. So my next question for you is, a lot of people asked me about getting investors in their business, and, you know, financing it with debt. What is what's your take on that?
There's a lot of different types of ways you can get investors into your business, right? I'm, personally I like bootstrapping, because it doesn't put you into a financial jam, right? When you borrow too much money and you over extend yourself. That's just a recipe for bankruptcy, right? If you are bringing in venture capitalists or investors that are asking for some sort of arrangement where they're getting capital out of your business like shares like their Use basically you're selling ownership plus profit percentages, then you're losing control of your business. It's no longer completely your business. And a lot of people don't realize that when they get into those arrangements. And then if you've got, you know, family that are investing, you're risking relationships. Exactly. You know, and then, you know, there's the bank, which is probably, well, what I do recommend is, when you're looking at your cash, flow situation and stuff, I always recommend that you set up your bank loans and credit lines of credit when things are good, not when things are bad as a secondary choice, but really focus on the bootstrapping, get your own business there, like your own revenue coming in, grow your business as the revenue comes in and use the lines of credit for when it's absolutely necessary.
That's a great piece of advice. Don't get overextended. And also don't like, if you get into debt. This is like the best lesson that my financial advisor back in the day gave me it's like, if you're getting into debt, have a plan to get out of it. Like if you need to invest in something like let's say you need to put a trade show on a line of credit, or you need to purchase some new inventory or whatever it is, have a plan in your financial plan to pay it off. Don't just be like, Oh, well, I'll pay what I can, you know, once the credit card statement comes in,
exactly, because the credit card is the highest interest rate other than payday loans, you're looking at 20 to 30% interest rate. And a lot of small business owners depend on their credit cards to keep their business going. But it could cost them 1000s and 1000s of dollars in just interest expense alone. That's a huge chunk of money out of your profit line. Right. So if you're going to use your credit card, like you said, that's absolutely the best advice. Have a plan to pay it off by the end of the month. So you don't have to pay that interest.
Yep. Which is great. Awesome. Well, Melissa, what else? What other pieces of advice would you give to our listeners that we haven't covered yet about their money situation in their business? Or their business finances?
Well, what I like to talk about with business owners is to have the courage to dream big. Yeah. Right. Because you are creating your business. And because of the money, mindset issues and money stories that we often are, you know, carrying, we tend, especially as women, we tend to hold ourselves back financially. So have the courage to dream big for your business claim those bigger financial goals. Often when I work with women, I asked them, What are your financial goals? How much do you want to make like for yourself from your business? And 90% of the time I hear? Well, I just want to make as much as I need to live. And I always it's, it's how we're programmed, right? I always challenge
a bunch of money. And
I want to live that lifestyle that I dream about. You know, and there's a lot of guilt. People feel guilty. People feel greedy, if they're wealthy. People feel like they're going to lose friends, or they're going to be judged. They're afraid of how their life would change. You know, like, there's just so many stories. That's why it's so important to have your, your money mindset in a positive state. And you can transform your mindset. It's not like, oh, well, this is the way it was born. And that's just the way I'm going to be. No, it's a muscle that works out. It's just like any other muscle, you train it and it will perform better for you.
I love it. Okay, so where can everyone buy your book? Cash confident? Yes,
I'm super excited. If you're American, you can get it at Barnes and Nobles, and Amazon and Walmart and Target and all the places. And in Canada, I mean, it's pretty much the same thing except instead of burdens and nobles, we have Indigo. So you can get an indigo or Amazon or Walmart, Target wherever you wherever you buy your books.
Awesome. Thanks so much for being here today.
Thank you so much for having me. This was so much fun. Well, thank
you so much for listening to the show today. I hope that you got inspired about how you can become more aware and really own the numbers in your business. Grab Melissa's book, it's awesome. And then make sure that you go check out our show notes. We have links to all the things that we talked about in the episode over there. Head on over to flourish & thrive academy.com forward slash 407 for all of the show notes and links that we spoke about in this episode, and become more cash confident today. This is Tracy signing off. Until next time