Streamline or Struggle: Financial Systems That Unlock Growth

Are your financial systems holding back your business growth?Or did you just think what systems?Today we're talking about how the right money management framework can transform your business into a profit machine rather than a cash eating monster. Stay tuned to discover why most entrepreneurs are looking at their numbers all wrong and how to fix it. In a world where chaos seems to reign supreme, where uncertainty lurks around every corner and financial markets are now more unpredictable than

ever. There's one place you can turn to to find clarity and control.

Welcome to the Wealth Wisdom Financial Podcast. Hey, I'm Brandon. And I'm Amanda. Join us as we dive deep in the world of personal and business finance to assist you in navigating through the chaos and building the financial future you deserve. We believe when conventional financial thinking doesn't get you where you want to go, you need wealth wisdom. So if you're ready to take control of your financial destiny. Tune in to the

Wealth Wisdom Financial Podcast. Because in that chaotic world, your money shouldn't be. Subscribe now and never miss an episode.

So welcome to this month's theme, growing and scaling. We chose this month's theme because we're passionate about helping entrepreneurs like you build businesses that generate true wealth, not just revenue. This month, we're focusing on breaking through barriers and building sustainable financial success through some smart business systems. So last week we talked about three mindset shifts that unleash a business owner to

grow their businesses. We shifted from income to assets, from owner to operator, and from revenue to profit.

Today, we're digging into how to track profit rather than solely tracking revenue. Profit is actually a much better indicator of business success, yet less than 17% of businesses are profitable. I mean, that's crazy. Less than 17% of businesses are actually profitable. So let's dig into why, and more importantly, what you can do about it.

Okay. I'm gonna tell some stories today. We're gonna start with Rachel. I remember sitting with Rachel in her office. She was surrounded by spreadsheets and financial statements she had prepared to make sure we could talk them through and so forth. Her home improvement company had grown to $680,000 in revenue, but something wasn't adding up. So I was there to help her figure all this out. She said, Look at these numbers, pointing

to the piles. We're bringing in more money than ever, but I'm taking home less than I did two years ago, and I'm working twice as hard, and I just can't figure out why. Rachel's situation might sound similar to you or familiar. You might know a business owner. Maybe not you, but maybe somebody you know. Rachel's business was growing in terms of top-line revenue, but her profit margins were shrinking. Her cash flow was unpredictable, and she felt increasingly anxious about her financial

future. Side note, if you're not hearing this from your fellow business owners or your favorite business owners, check in on them. Great thing, right?They often do surveys to think of consumer sentiment. Are we feeling hopeful or worse about the future? There's the consumer price index where we track inflation. There's not those same kind of metrics or they're not talked about as much for business owners who experience the same kind of thing.

Inflation impacting their profit prices, the employment, right, or non-employment and all the things. So check, check in on your fellow business owners. It's a rough time for them right now. And if and if you're not even the business owner, you're a customer. Check in. Ask, ask how, how they're doing if you like them. Like I think about that as a coffee shop owner back in the day, people would just say, I like my coffee. You just do it because you love it. And those kind of

things. I'm like, yeah, but I still like to eat and those kind of things. And, and being a good person, um, and saying, how are you doing?Really not just how are you doing?Give me my, what you call it. Yeah. Okay. Now back to Rachel. Um, here's what she admitted to me. Quote,I don't even know if we're profitable on most client projects. We just keep chasing more revenue, hoping things are going to improve, end quote. And here's what I told Rachel, Your business isn't broken. Your financial

systems are. Especially looking around at all those papers, it was pretty clear she needed a better way to do things. And I'm betting that many of you listening right now are in the same boat. Now, the difference between struggling at six figures and thriving at seven isn't just working harder or landing bigger clients. It's having the right financial systems in place in the 1st place. These are just nice to have spreadsheets.

They're the essential infrastructure that allows your business to scale profitably. OK, so we talked about

Rachel. We're going to also talk about Marcus. So you get a couple of different examples here. Marcus runs a consulting firm that was stuck around 550,000 in revenue, just 50,000 above Rachel. His team is busy, his clients are happy, but at the end of each month. Marcus would look at his bank account with confusion and frustration. Where's all the money going?He didn't have any spreadsheets. He just had a bank account that he would open and look at it, right?

Little bit different than Rachel. And here's what he said. He said, I feel like we're on a revenue treadmill. Treadmill. Treadmill. Not treadmill. You came from the South. I did. Maybe. Maybe Marcus is from the South. We keep running faster just to stay in place. That's what you do on a treadmill, right? You run faster and faster, but you're not going anywhere. Yeah, this is a classic sign of what I call financial

system deficit. When your business lacks robust financial tracking and decision-making processes, because you don't know how to do it, right?So then we don't have the growth that can actually decrease profitability instead of enhancing it, right?We We don't know how to track that stuff. For Rachel, it was overwhelming options for financial tracking with piles of spreadsheets. out

of the wazoo. For Marcus, it was the more common bank account budgeting system with one big bank account budgeting and there are no spreadsheets or tracking. It simply opened the bank account app and the phone and decide from there, can I buy it?Can we do it?Oh, we look big. You know, all this other fun stuff and really just making a big giant guess and saying, well, I'm profitable. And you tell your fellow business owners, look at this. which doesn't even make

sense, but you know, whatever. Yeah. So here's what's funny. The financial system, the first step that both Marcus, with his lack of any reporting in systems, and Rachel, with our overwhelming amount of reporting in system, not systems, but more just reporting, they both needed the same first step. And that first step is what I

like to call true project profitability tracking. Like many service business owners, they were looking at overall monthly profits, but had no visibility into which specific projects or clients were actually

profitable. So they worked with their accounting people and their team members to design and implement a simple but powerful one-page report that tracked direct costs associated with each client project,team time allocation across projects, non-billable time spent on client management, and profit margin by project

type and client. This is basically a P&L almost for each project that they took on, accounting for the direct cost, the team associated, a portion of the non-billable time, and then it would give them their profit margin for that project. And if you are a business owner and you don't know what a P&L is, reach out to us, we'll gladly tell you. Or And your accountant should be able to help you do this. You don't not have to do this alone. Yeah, hopefully that you-

And if they don't, contact us. Yeah. Okay, anyway, go ahead. So So the results were eye-opening. Marcus discovered that his three largest clients, the ones he was most proud of landing, were actually the least profitable. The demanding corporate clients with impressive logos were eating up team resources with endless meetings and scope creep. Remember, we talked about that in past episodes, that scope creep

idea. Meanwhile, his mid-size clients in a specific industry niche were consistently delivering 40 to 50% profit margins with minimal headaches. Now, which way would you go?And then Rachel realized that the Mcmansions that they worked on were the least profitable because they had fewer selections of high-end materials. So they were, they were limited in the profit margin that they can make. Instead, renovating starter homes for owners who were upgrading and

selling had fast turnarounds, right?They had to get them done quickly and then more flexibility in terms of where they can source materials from and what kind of materials they could use. Armed with this data, Marcus and Rachel restructured their offerings and client acquisition strategies. Marcus implemented tighter scope boundaries for the larger clients, adjusting pricing on low-margin services, and focused business development on the industry niche that data showed was

most profitable. Within six months, Marcus's revenue had grown modestly to 620,000, but his profit had increased by nearly 65%. He was working less and taking home more. So that's Marcus's story. Rachel, what did she do? Well, she adjusted her business's marketing strategy and spent time building relationships with realtors who specialized in selling starter homes.

They often had a few months heads up that people were going to put their homes on the market, plusWho are these homeowners going to for advice about the upgrades they should do to get a better sales price?They're Realtors, right?So it's a natural extension for the realtor to be like, you know, if you redid your kitchen, you could maybe spend this much and you'd get this much more value in your home. They could, you know, share that and then they can introduce them to

Rachel to actually do that work. And then Rachel went realized soon thereafter she got two jobs out of that one referral because not only was the seller selling their starter home. But they were often purchasing their forever home close by and they wanted to make some immediate improvements right when they moved in or

before they moved in. When she amazed them with the her work on the first home, because she was an amazing home improvement person, they were way easier to work with on the second home. And you know that lead to acquisition cost, right?That it's hard to get that first. sell, but that second one is easier, but that made it so much better. She didn't have to spend anything to get that second one. She said to do great work on the first. But project

profitability was just the beginning. The next financial system that changed

everything for Marcus and Rachel was implementing Profit First. Now here's the thing, I've heard so many people who read Profit First, they say, Well, I had the book and the success rate on just you implementing it by yourselfIs very low, very low. But by working with somebody who is qualified, like we are profit first certified to be able to think through. It's not just about making the right systems, but understanding the mindset which we're talking about and

having those power partners there. That's why we do this. So yeah, not just reading the book. But having somebody like us to help you implement it is a game changer. Yeah. So like many business owners, Rachel and Marcus had been using traditional accounting equation, revenue minus expenses equals profit. The problem, profit was an afterthought. Whatever happened to be left over after all the expenses are paid?Somehow there was never much leftover. Go figure.

So when they started to implement the profit first, they flipped that formula. It's now revenue minus profit equals expenses. This wasn't just an accounting trick. They did set up those five different bank accounts at their local credit unions income where all the revenue initially landed, materials and subcontractors, mats and Subs for short.

With that project profitability one pager, they knew exactly how much revenue to set aside to pay for materials and subcontractors, leaving only their real revenue in their income account. And then from that real revenue they could then move 15% to profit. Untouchable for operating expenses, 20% to owners pay that would give. Give them their consistent compensation, 15% to taxes set aside for income, tax obligations and then the other 50% of that real revenue to

operating expenses. This is the money available to run their business, you know, pay for those non billable hours, their website, you know, all those kind of things. So money would come in, and then on the 10th and 25th of each month, they'd transfer it by those predetermined percentages to each account. And this created artificial constraints that drove better financial decisions. Marcus could open his bank account and know how much he had in operating expenses to make

better decisions. And it wouldn't show all of it. It would only show the part that was still there. That was 50% of the real revenue. Now I do want to say on those percentages, it depends on the size of the business. And so some don't don't just say, Oh well, I just make 20% or

whatever depends on your size. And that's again why you work with somebody who kind of knows because your size, if you have a bigger team, probably bring in a lot more revenue, your pace may be a little less than if you're like just a solo entrepreneur, business owner. So initially, Marcus panicked. There's no way I can run this business on just 50% of real revenue. But here's what

happened. When his operating expense account became the constraint instead of his revenue, he started making smarter decisions. And we all want to be smarter, right?He audited all subscription software and canceled tools they barely used, just like we did in the other episode. He renegotiated with vendors. He scrutinized new hires more carefully, and perhaps most importantly, he raised prices on services where his value exceeded what they were

charging. The profit system created immediate financial clarity, which is important. We all want clarity in our businesses. Marcus knew exactly how much money he was available to operate the business. He knew what was happening. His personal compensation became predictable and consistent, and the untouchable profit account began accumulating wealth outside the day-to-day business operations. So he

kept growing that account. Within one year of implementing the financial systems, Marcus's business had grown to 820,000 in revenue, with a consistent 22% bottom line profit margin. His personal income had doubled, and perhaps most importantly, he accumulated over $90,000 in a separate account. More wealth building than he'd managed to in the previous five years combined because of what he had done and how he built that system. Now what about Rachel?

Well, after implementing all this, she noticed her contractors were much happier working on the projects that they starter homes and the clients they would interact with there. She was able to buy materials in bulk. Because they're working on the same consistent types of houses and the material they could use is

more consistent across them. And remember, she started with a project profitability and implementing a financial system called Profit First, but it gave her a huge marketing idea because she was actually looking at the numbers. Of course, you know, home improvements. Rachel's in a male dominated industry.

Her competitive advantage now is that she can grab a glass of wine with the majority of female real estate agents and build relationships with them that her male home improvement counterparts can't.

She's having a lot more fun with marketing than she used to because she's using that competitive advantage, building those relationships with real estate agents that are working with for, you know, starter home sellers moving to their forever home, which is a great market for those real estate agents to be in. And the more they do, the more she can do. And she's loving it. Yep. This is just isn't just Marcus's or Rachel's

story. We've seen these financial transformations happen over and over with business owners who make the shift from chaotic money management systems to financial operations that work systematically. After the break, we'll be chatting through some of the roadblocks that get in business owners' way and keep them from a similar transformation. And again, you might have experienced some of these roadblocks. Ready to take the next step towards

securing your financial future?Whether you're planning for retirement, saving for your dream home, or you just want to make your money work harder for you, the team at Wealth Wisdom Financial are ready to assist you. And now it's easier than ever to see how we might give you a boost on your financial journey. Schedule a 15 minute discovery call with one of us today and let's discuss your questions and your financial goals together. Don't wait any longer. Your financial freedom

awaits. Schedule your discovery call at www.wealthwisdomfp.com/call.

Now some of you may be thinking. And I heard it from Rachel, from Marcus, and countless other entrepreneurs and business owners. Well, I'm not a numbers person. That's why I have a bookkeeper. I've heard that one before. No, I don't have time to look at financial reports. I need to focus on serving clients and growing sales. I've heard that one many, many times. Oh, let me put on my Southern accent. My business is too unpredictable for strict financial systems. That wasn't that good. Anyway,

you know what I mean. Yeah, I've heard that one, I think just yesterday. These concerns sound reasonable, but they rest on a dangerous misconception that financial management is separate from business growth. Yeah, I remember working with, um, another Sophia. We love using this, this acronym, this, uh, pseudonym, Sophia, a talented designer who avoided her finances at all cost. I just don't have a brain for numbers. I'm an artist, she insisted. That's why I hired an

accountant, right?And pay them the money I do. For her?Yep. Yeah. But here's the problem. Her accountant was producing these beautiful to me financial statements that were absolutely ugly to her, right?To Sophia. But also those financial statements would tell her what had already happened. Well, Sophia needed financial insights to make better decisions about what to do next. So Sophia implemented this one-page financial dashboard in partnership with

her bookkeeper. Sophia discovered that she had a brain for numbers after all, when those numbers were presented in a way that connected to her business reality and her artistic sensibility. Colors, you know, fun graphs, charts rather than just numbers. She didn't need to become an accountant. She just needed her financial systems that translated accounting data into actionable business insights. As for the time concern, this is often the most expensive misconception. I worked with Jeremy who ran

$700,000 service business. He was too busy with clients and team management to waste time on financial reports. I, again, another thing I hear all the time. I just don't have the time. Six months later, Jeremy reached out in a panic. His business had grown to nearly 900,000 in revenue. He did something right, rightBut he had to take out a personal loan to make payroll. So what

happened?Without proper financial systems, he had been making growth decisions based on revenue projections without understanding the cash flow implications. He calculated that his lack of financial systems had cost him over 120,000 in preventable expenses, lost profits and unnecessary interest. That's an expensive way to save time. And again, This is why I think the work we do is so important. And people are like, just say, I don't know, I don't have the time.

And I'm like, it's going to cost you. Yep. You pay them one way or another. Yep. Yeah. And let's talk about that unpredictability excuse when your business is up and down, you know, the revenue's up and down all over the place. Well, that's why you need robust financial systems. Pretty much every business has highly variable revenue throughout the year. That was true for Mia, a short-term rental operator. She believed her unpredictable cash flow made

financial planning impossible. But once we implemented proper financial systems, Mia discovered that her business actually followed predictable seasonal patterns. Go figure. And with this visibility, she could build cash reserves during peak periods and to sustain operations during slower months. What had felt chaotic became manageable through proper systems. The reality is this. If you want

to break through to higher levels of business without financial anxiety, You don't have a choice about whether to build financial systems. The only choice is whether to build them deliberately or deal with the consequences of their absence, because financial systems are there. It it is a system if it's not a system still. And so we shared earlier about Marcus's transformation and Rachel's transformation, but we left out one of the most important parts of Marcus's change. The most

telling change is Marcus himself. He now has a clear understanding of his business finances. He makes decisions with confidence because he knows the financial implications. He sleeps better at night because cash flow surprises have been virtually eliminated. Here's what he told us. Quote, For the first time, I feel like I'm building wealth, not just running on the revenue treadmill, or treadmill. Yeah, this is the power of financial systems.

They transform anxiety into confidence, chaos into clarity, and revenue into actual wealth. And here's the good news. You don't need to overhaul your entire financial system overnight, right?Start with just one system. The one that would create the most immediate relief in your business. Maybe it's a project profitability tracking system that helps you identify which clients and services

actually drive the bottom line. Or it could be implementing profit first to ensure you're building wealth, not just generating revenue, which a lot of businesses are doing. Whatever you choose, start small, get the basic system in place, and use it consistently for 30 days, and then refine and expand. The path to scaling isn't about working harder or even selling more. It's about building financial systems that transform revenue into lasting

wealth. So Are you ready to start building financial systems that will unlock your growth and give you insights into what's next in your business?Then join us in the Wealth Wisdom Financial Community. Today we shared in the community a practical framework called the Financial Systems Diagnostic Tool. To get that framework, you can join the Wealth Wisdom Financial Community as a premium member, and it could be the turning point that your business journey needs plus. And this has been there for

quite a while. Every Premium member gets our seven step series to build your success dashboard, which we have given you a beta version of a Google Sheet with some of our best business growth and tracking tools that you can mix and mingle and work with your accountant and make into your own one-page dashboard or maybe couple page dashboard with beautiful things color-coded as Google Sheets only camp.

Also, if you didn't know, we share practical wealth buildingEvery single Wednesday in the Wealth Wisdom Financial Community. Call it Wealthy Wednesdays. If you want to transform your business finances from chaotic to streamlined, join us a premium member at wealthwisdomfp.com/community and we love to see you in there. You get what we publish today, that business dashboard, success dashboard, seven step series, and everything we publish since we started that community a

few years ago. And we use that dashboard regularly like. So I don't know how long. Every 10th and 25th and under Rock Reviews. Yep. So hit that subscribe button and don't miss next week's episodes that's geared towards helping you avoid burnout along the way of growth to growth and scaling. Thanks for joining us. Live long and profit. The stories in today's episode are based on real life, but just like Law and Order, they are fictional and do not

depict any actual person or event. The topics presented in this podcast are also for general information only and not for the purposes of providing legal, accounting, or investment advice. On such matters, please consult a professional who knows your specific situation.