[00:00:01] Speaker A: Welcome to Biz Talk. I'm Ryan Herpin. Today I kind of wanted to start with a bit of a truth that every business owner needs to hear. Revenue can look exciting, but profit tells the real story.
A company can be busy, visible, and growing on the outside, while behind the scenes, the owner is underpaid, the team is stretched, cash flow is tight, and the business is not building the value it should.
My guest today is Linda A. Hamilton, CPA business coach, certified exit planning advisor, and founder of Grow Profit Scale. Through Linda A. Hamilton CPA LLC and Grow Profit Scale LLC, she helps CEOs create well growth plans focused on hiring, scaling, financial clarity, tax structure, operational gaps, and successful exits. Linda, welcome to Biz Talk. I'm so glad to have you here.
[00:00:56] Speaker B: Thank you for having me, Ryan. I appreciate it.
[00:00:59] Speaker A: Now, as we begin to our viewers, I want every business owner watching to ask one honest question. Is my business growing in a way that actually pays me, strengthens the company and builds long term value, or am I just staying busy? I like to break it down into there's a difference between doing more and getting more done. And I really want to help our audience kind of see that today. But, you know, I really want to start this conversation with Linda by getting clear on the difference between revenue, profit and business health. A lot of entrepreneurs celebrate top line growth, but the real test is what that growth produces. Does it create stronger margins, better systems, better decisions, better owner compensation? Or does it create more pressure with even less clarity? So this segment should help our viewers understand why profit has to be designed, measured, and really managed. And something that I like to always bring up to my clients especially is you cannot manage what you do not measure. But you know, the thing is, we don't want to be hoping for, you know, great numbers at the end of the month. We want to understand how things actually work. So, Linda, I, I like to dive in deep and really get to the bottom of how things work. So when you look at businesses that are growing but still struggling financially, what gap do you usually see first?
[00:02:28] Speaker B: Well, that's a great question and I love how you describe the opening because there's often a lot of gaps.
One of my favorite expressions that I often get a chuckle from business owners, but they often just say, oh yeah, is revenue is vanity, Profit is sanity and cash.
I will say it's queen could be king.
It's those three that are so critical together, so vanity. Because, you know, we tend to talk constantly about, you know, I'm six figures or seven figures or eight figures, but they're not really looking at the bottom line. So that's one of the first gaps I see is, you know, you start, you're a business of one, you're doing everything yourself. You get on a second client, maybe a third client, you're still doing all the work yourself. But there's some cracks there that you didn't really have the structure you needed to take on the extra work. And so I often use a driving metaphor if I think of a future model. You know, people say you can't predict the future, but if I look at a business, I can say two paths they can take. And one is, let's say a green line accelerating forward or a red line where we're drifting. The drift is kind of a function of inaction, not really looking at it, not making decisions.
And the green line is a function of making decisions and taking action on them. And if you think of driving, if you have your foot on the gas, you're accelerating towards a particular direction. But when you take your foot off and the car is just drifting along, it's going to end up where it stops. So many businesses, they just drift. They drift. Their cash flow starts being a problem, their profit is a problem, their systems are breaking and they haven't identified where that's happened. So that's the first gap I see. They're growing and a lot of things are going wrong.
Their customers are getting maybe upset over delivery. There's a lot of things. Revenue without structure definitely increases stress, without a doubt.
[00:04:43] Speaker A: You know, especially in the growing phase. You know, we can all put it in many different ways what people experience, but growing pains are a real thing. When you've got operations that are outgrowing your ability to, well, manage it, measure it, and just administrative capabilities, you're going to have gaps, you're going to have issues, and it kind of works full circle. But you know something that I'm curious of your perspective on this one. Why do so many entrepreneurs confuse revenue growth with real business health?
[00:05:12] Speaker B: I think as you know, as the entrepreneurial community, there is excitement around growing revenue. You know, I made that next milestone. It is exciting. I don't want to take away from that enjoyment of building a business.
Why they confuse it is really to be have a healthy business, you have to have both. So when you're looking at your revenue, oftentimes they're not charging enough. So if you're not charging enough, you can't invest back in your business. Maybe you can't hire any help. So as you're bringing in these new clients or customers, things are starting to break down. The delivery is falling apart. There's a ton of bottlenecks and bottlenecks create friction and there's many of those bottlenecks around revenue. So you can't continue to grow healthy. You end up on a hamster wheel if you're not making a profit. And I don't mean profit, just look at your bottom line. I'm talking about profit on each item that you sell.
Business owners tend to sell a lot of things, right? They a lot of services because we're just trying to bring in that revenue in the do really have to analyze is what does it cost us to deliver this revenue and what are we charging? Are we making a profit on each thing that we're selling?
[00:06:36] Speaker A: And that's a really good point because people like to look at the big picture overall. If you can't go down to a smaller level, it's just like going from the weeds to 10,000ft. It's great to be at 10,000ft. As CEOs, executives, owners, directors, you want to be at 10,000ft, but you've got to get down in the weeds sometimes to see, okay, well if this product or this service is losing its tail end or is it actually doing well? Because ultimately one of the things that I seem to notice quite a bit, especially with the early to mid sized entrepreneurs, is we tend to think that more revenue means more success. Not necessarily that revenue does not matter if it cost you more than that additional revenue to get there. Right. So it's, it's identifying, as you said, you know, each product, each service, you know, being able to break down, are we actually doing well on each one of these things? Or you know, something that one of my clients that I've worked with recently, they didn't want to let go of one of their services because they loved it, but it was costing them money in the long run consistently.
So you've got to come up with a plan and either a, you can hang on to the service because you enjoy it, but understand you have to compensate for that loss somewhere else.
But with that being said, you know, as we dive into this a little bit more, I am kind of curious, you know, what financial indicators should CEOs pay attention to before the business starts really feeling out of control?
[00:07:59] Speaker B: Well, one thing you just said that, you know, you have to look at cost of everything you sell, but it's very possible they don't know how to look at cost because they're not tracking it. So in terms of financial Indicators as an accountant and as a cpa, I can take your numbers and prepare a tax return. Right. I don't really need a lot of detail underneath it. But as a strategic advisor and you as a business owner, you need management information. You need to be able to base your decisions. So the one thing is, and I will talk about financial indicators is making sure that you're, whether it's QuickBooks or Xerox, whatever accounting system you're using, that your accountant has helped you structure it. So that provides good data for you to be able to make decisions, to be able to know what it's really costing you. And that can be very hidden. The financial indicators most accountants, probably business coaches would tell you to look at, look at your cash flow, track your cash flow every day, look at your gross margin, that gross profit if you sell products, your operating expenses and what you're paying yourself.
But one of the things that's even more important in financial indicators is to look at trends. I have my clients print two and sometimes even three years of financial statements side by side on columns. You can do that easily in your software. And then look at the trends. You know, sometimes you feel like there's a little problem. The numbers are kind of whispering something's wrong until they're screaming that something's wrong and you haven't noticed it. Trends will identify problems and how deep they are and it gives you if you're looking at those trends constantly, you know, month after month and year after year, things will jump out at you and you'll be able to work with your advisors if you need help on that. So that would the trends often matter more than a single month. So that's really important as well. And lastly on that bookkeeping matters book because you may find in your trends that your bookkeeper or your accountant put things in the wrong category. So is there a problem or is there something in the wrong place which doesn't help your data either?
[00:10:12] Speaker A: You know, I couldn't agree with you more wholeheartedly because when you look at. Yes, and I'll first touch base on the bookkeeper. A good bookkeeper can make a world of difference in number one, the visibility of everything in the business. But seeing the trends, I don't, I can't stress this enough with business owners is looking at one to two, even three, four months. Yeah, it's helpful. But being able to see long term trends, you get to see the implementation of different ideas, different efforts and what effects does it truly have? Because if you're slowly bleeding, you need to see that if you're slowly scaling, you also need to see that. But you know, on this topic, it does make me wonder a little bit more about your grow profit scale process.
How does that help owners identify where money is leaking or getting trapped?
[00:11:01] Speaker B: Well, thank you for that question. And you know, I start with a whole of business approach. You can't fix what you can't clearly say. And so, you know, I am a systemologist, so I'm able to look at systems with people. I'm also a CPA with more than 30 years of experience, so I want to help them look at their whole of business.
We basically connect the dots between your finance, between your money and your operations. Because if things aren't in alignment and they're disconnected, you really can't fix what you can't see. And so by doing that diagnosis, by looking at where bottlenecks are, that is one of the first things I do. Where are things getting stuck? Where are things breaking down? Where are the pains the business owner is feeling? Where are the pains their customers are feeling?
[00:11:51] Speaker A: No, that's a good point that you're breaking. I got to jump in right there because you're breaking it down. So simple. And I think that adds so much value to the viewer because it's easy to overcomplicate. But we'll take a short break and when we come back, we'll talk about scaling and why businesses need systems before they can grow without breaking apart.
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But now we are back to the bottom line and I'm still here with Linda A. Hamilton and this has been an incredible conversation so far. Now she is a CPA business coach, certified exit planning advisor and founder of Grow Profit Scale. Now I want to move into one of the biggest pressure points from really for growing companies and that's scaling, right? This word to a lot of business owners is stressful and even confusing at times because we might not necessarily understand what it truly means. But every owner wants growth, but not every business is built to handle it. Scaling without systems can create stress, mistakes, turnover, cash flow problems and leadership burnout. Now in this segment, we'll talk about what has really to be in place before a business can grow aggressively. From hiring to operations, to planning, financial structure and decision making, you know, rhythm, this is going to be one to tune into. So grab a pen and pad, stretch out whatever it is you got to do. We're going to dive in. So, Linda, thank you so much for being here today. It's such a pleasure to be with you.
[00:13:52] Speaker B: Thank you for having me. It's great talking to you about these things that can really help a business owner grow a successful business. And that is my mission. Grow a successful, profitable business that can adapt and be resilient no matter what changes we're facing in the, you know, with the economy, with uncertainty.
[00:14:10] Speaker A: You know, one of the things that I love about someone like you is you and I both have the same kind of passion and it's. We want to help other people become successful.
There's so much voodoo magic out there of oh, you do xyz, these get rich quick schemes, really, it does boil down to some things that are relatively simple when you've looked at them enough. But ultimately you don't know what you don't know. And until you've been exposed to the right things, what to look at, the right mentalities, perspectives, it can be like a maze. But, you know, to dive right back into this and to keep adding value to our audience. You know, when a business owner tells you they're really ready to scale, what do you look at first to know whether the business can actually handle the growth.
[00:14:54] Speaker B: So I start with, as I said earlier, I do have a whole of business approach. I've been in business and I've been an advisor, both finance, tax and operations for more than 30 years. So I can get a business owner talking. So the first thing I want to look at is kind of why they want to scale. Why do they want this much growth? They want to double, they want to triple what is actually their end goal. The second thing I do with them is I like to have them do two different assessments. One is a wheel of life, a life wheel assessment where different parts of their life are their business, their family, their relationships, fun hobbies, you know, so I get them to kind of warm them up on looking at where these things are in their life, what's making them feel fulfilled and what, what they wish they had more time for.
And one business owner said, well, you know, we often think we have to, we're told to keep everything separate from our business, personal and business. Well, that's true when it comes to money, but when it comes to the life wheel that I'm talking about, I'm looking for alignment.
If you're telling me that you want to double your business and at the same time you want to take six weeks vacation to spend time with your family and your children, I'm going to say, okay, let's look at that. Is it possible to do both? What kind of capacity? So that's where I start.
And then we look at bottlenecks. You know, capacity, that word capacity, is often one. You might not have enough people to do the work, but your systems are breaking down, your business is fragile because there are all these bottlenecks where things are getting stuck. And if you have problems, growth amplifies those problems. The more you grow, those problems get felt more and more and more. So we want to start with looking at your bottlenecks, alignment with what kind of business you're trying to build. And then we want to look at where things can get unstuck so that you are ready to, to handle that growth.
[00:16:57] Speaker A: You know, I do have to highlight something here for the audience. You addressed something very similar to my model and methodology of helping businesses. In the same way I always like to think when I start working with a business owner, executive team, what have you, it's always, I got to start with foundations.
What is the foundation of the leaders being? What's their purpose? What's their passion? What are their core values? What is it they truly desire long term? Is it time with the family? Is it certain amount of money? What is it they're chasing?
And then we can see if everything else even fits into that without compromising who they are and what they're really after. And then it's the business. What is the purpose of the business? What service product like, what need are you filling? What does the demand look like? And it just, you kind of got to keep going from there. But if you don't start with those foundational items, it's doomed. You're looking at potential conflict and just grinding against people's core values in the process of trying to scale. A lot of people say they want to scale until they understand what it truly looks like. A lot of people want the fast, rapid pace scaling and growth where revenue is doubling. But are they really ready to do what's necessary to make that happen? But as we talk about some of those things that break, and you mentioned bottlenecks, you know what usually breaks inside a company when growth happens faster than the systems that are meant to support it?
[00:18:25] Speaker B: Well, you know, cash flow is often one of the first, because when you're growing, you're bringing revenue, you might not be getting paid quickly enough, or you have this new product launch. And you know, as things are coming in more slow, your expenses are usually growing more quickly. They're coming. You have to pay them up front. You're not necessarily keeping up with that.
There are statistics on some very high business failure rates, like only 50% make it past five years. And the failure rates in the first two years are higher. Some of those are totally profitable when they fail, but they ran out of cash. So that's one of the first things that breaks. So you have to really be able to manage that and to. And to forecast it, you know, so that you know what you need. And let's say you're going to be short while you're launching this successful program. You know, you might need a credit line, you might need some kind of a loan, you might have to use your credit cards. But you want to do it intentionally rather than having it become urgent. You know, when the systems are never, you know, they're always. People say, oh, they're important that I have some systems, but they're never urgent.
And by the time they become urgent, you're in chaos. So we want to be able to think ahead of time what systems we need. That's going to be on community, besides cash flow communications and your processes, you can't sustain the growth.
And so the owner becomes the bottleneck. And if it's not the owner, it's some key people on their team, they're the bottleneck because everything's living in somebody's head.
[00:20:06] Speaker A: And that's actually kind of the perfect segue into the next big question I have for you, because you address that the owner can quickly become the bottleneck. And more often than not, that is what I end up finding depending on the stage of the business. Because when you get to a certain point, you've got people that you've brought on that you can trust. You delegated responsibility, they own it. And then it's just conversations. Measurement adjustment. Right. But with that being said, how does hiring either become a growth accelerator or a major profit drain?
[00:20:39] Speaker B: Well, that's a great question. And you know, hiring is tough for pretty much. You hear that all the time with business. There's people are hiring across states there, you know, but maybe they have trouble retaining them. And there's different generations in the workforce. So in terms of accelerating, you have to hire by looking at what's the real need you have.
Because if you in a small business in particular, every hire kind of matters what they're doing. And we just talked about the owner being the bottleneck. That's because everything sits in the owner's head, right? You can't really. You can't train because you'll say, oh, I'll just do it myself because I'll do it faster. And that might be the office manager. Right? It's not necessarily only the owner if they have some help.
So the right hire will help you create momentum and capacity. They'll free up the owner from having to do so many admin tasks and delegation tasks. You really. Because it's not just about the money. It's also about freeing up your time so that you can work on what matters most. And that could be, you know, that might be customers and operations because,
[00:21:57] Speaker A: you
[00:21:57] Speaker B: know, without customers, we don't have a business, so we really have to focus on that. And then if you have the wrong hire, you know, there can be confusion and inefficiency and turnover is expensive. But I would leave people with thinking. People problems are also often their process problems in disguise. And when you hire the wrong person, even that is probably a process problem. Did you ask the right questions? Did you define the role? Did you.
Did you train them properly? So there's a lot of process problems when you're hiring.
[00:22:31] Speaker A: I very much agree with that. And one of the things that I found that has worked for me and for a lot of my clients in the past is it's okay to give somebody a trial basis. It's okay to vet somebody, think they're a good fit and step back, give them the opportunity and. And see how it goes, but also support them. Because if there's one thing I found, there's a lot of salesmen in this world. There's a lot of people that say they're the right fit or look great on paper, but until they're thrown in the mix, do they really want to own things? Do they really want to step up? Do they really want to pick the brain of that person that's got all the answers there so they can take on more of it and help get the owner or the leader or the manager out of that position of, oh, it's faster if I just do it myself. Because even when you bring somebody in, there's still habits and things that have to change, and roles and responsibilities have to be, you know, separated, delegated, and split. And there's a lot of room for error in that. And that is something that is too common that I see nowadays. But if there's one thing I've got to throw in the mix with that is I've found hiring is still one of the biggest problems that I run into. But what I find super appealing is hiring from within through mentorship from leaders that have been there, done that. When I find somebody in a business that has, you know, the work ethic, they show up. They have the discipline, they have the desire to grow and to test their own abilities.
I like to really promote that. The leaders take ownership, mentor that individual, and give them responsibility, but let them fail a little bit and then just be there to support them. But as we wrap up this segment, you know, what becomes clear is that scaling is not just about doing more, it's about building smarter. When the systems are weak, growth creates pressure. And when the systems are strong, growth creates momentum. We're going to take another break, and when we return, we'll get back into one of the most important conversations business owners often avoid until it's too late. And that's exit planning. So we'll be right back.
Welcome back to Biz Talk. I'm still here with Linda A. Hamilton, cpa.
She's a business coach, certified exit planning advisor, and founder of Grow Profit Scale. Now, we've talked about quite a few powerful things.
All of this really adds value. So if you didn't take my note in the last segment, you really should grab a pen and a pad because this is masterclass stuff here. This is stuff you should be taking notes on if you're not in the place you want to be in business. But now I want to talk about a powerful shift in business thinking. Even if I am not planning to sell tomorrow, I should still build the business as if someone may one day evaluate it, buy it, inherit it, or run it without me. Now, this is a hard conversation for a lot of business owners, and I find myself more often than not helping business owners navigate this. But, you know, the mindset changes everything. How we document systems, how we build leadership, how we manage financials and how we reduce owner dependence and how we create real entrepreneur, well, enterprise value. This is a conversation that's so easily overlooked, and I don't want to rush through it by any means.
So what we're going to dive into is powerful, and I please tune into this. But Linda, it is such a pleasure to have you here today.
[00:25:50] Speaker B: Thank you, Ryan. I'm looking forward to this conversation.
[00:25:53] Speaker A: Now, if you own a business, right, this is the segment that I really want everyone to kind of lean into. Right. Exit planning is not just about Selling, it's about building a company that gives you, well, options, for lack of a better way to put it. But, you know, as we dive into this, you know, it's very clear that, you know, the strongest businesses are not built only for today's revenue. They're built for, well, transferability, you know, you know, really sustainability and profitability, leadership depth, clean financials and documented process. You know, this conversation should really be had more often, and I really hope our viewers can truly understand this. But as we dive in, you know, I want to dig into the expertise of yours. You know, why should business owners think about exit planning even when they have no immediate plan to sell?
[00:26:45] Speaker B: That is a great question, one I do love to talk about. And I will tell you firsthand when I often I talk to business owners across the country and, you know, one of the first things I get is, well, I'm nowhere near exiting. You know, exiting means retiring. I'm not, I'm not retiring. I'm never retiring. And sometimes I joke that, you know, the word exit planning gives them hives.
But exit planning, it's not about leaving and it is, it is more about risk planning. So if you go into a business with a mindset of someday I will exit, or okay, maybe that's 10 years from now, maybe it's 15 years from now.
A scary statistic is that more than 50% of exits are unplanned due to a sudden unexpected event. It could be divorce, it could be a disagreement, it could be a disaster.
There's lots of reasons where business a disability, an illness.
So I want business owners to think about continuity instead of contingency.
If you can't go to for 30 days, for 60 days, what happens to your business? What happens to your employees, to your family, to your paycheck, to your customers, to your vendors?
So you want to think about continuity means how does it keep going? So that's where we start.
Like, why bother? Why should we think about exit planning? Because exit planning will help you build a better business for yourself and then ultimately will leave you with the choice someday to own your own future. Do I want to exit? Do I want a lifestyle business? Do I want to transfer it to an employee? Do I want to transfer to my children? But if you don't go into that intentional, if you wait until you're near ready to sell it, it may be too late to have a successful exit, either financially or operationally.
[00:28:47] Speaker A: I agree very, very deeply on this. You know, I tell business owners all the time the best time to start thinking about your exit planning and your exit strategy was yesterday. Really it is, you know, you don't have to move on something big right away, but at least having an understanding of what does it take, right? Is the. Is the transparency in the business? Is there clear understandability in the accounting and the value and really the cash flow? But also one of the biggest things that I find to be the big hang up when it comes to exit planning is succession, is delegation. And one of really business owners, when we start something, we don't create something because, you know, we just think it's a quick money grab. A lot of the time we start something that we're an expert in. And when we transition from the operator to the manager, leader, owner, and then we're going to pass, pass this on to somebody else, it feels like we're giving away a child sometimes.
So there is the process of, okay, well, how do I get somebody to love this business the way I do?
That's something I see a lot of business owners get caught in. Now, ultimately, that's why I try to bring people back to the reason why. Why did you start this thing in the first place? What was the purpose of it? So when you move on, you got something else. You're not just constantly thinking about the business you left behind, but bringing people in. And then I had a really good mentor who his exit strategy was me. I took over his company. I actually did his job as chief operations officer for a year before I had the title, before I even knew I was doing his job. He was really good at delegating responsibility in a subtle way and just supporting through it. But as we dive into this more, you know, some things that we've touched base on what makes a business more valuable, transferable or attractive from an exit planning perspective.
[00:30:39] Speaker B: So that's a big question, right, of what makes a business valuable. And so let me first put on my certified exit planning advisor hat. And there's a lot of information about these types of things from the Exit Planning Institute. You'll find lots of good information today because people are thinking about it, especially with so many baby boomers owning so many of the businesses. There's a lot of exit and also there's a lot of succession going on. And congratulations on your succession story. I also just made my employee of 20 years a partner in my CPA firm, Alana McNicoll. And it's always been that thought that she would become my successor when I am ready to retire.
So the first thing we do when we look at kind of an Exit planning scenario is where's risk sitting? People think it's only, oh, I have revenue and my business made a profit. But it's not just about the profit. When you have a lot of risk and risk shows up across your business. We talked about bottlenecks, we talked about how dependent it is on the owner.
Risk decreases value. So if you can remove risk, you can build a more valuable business as well as working on your gross revenue, proving growth and profitability. So you want to decrease risk. What do I mean by that?
If everything depends on the owner, what are they buying? One, you might get paid less or they'll make you do an earn out, in which case that often doesn't work either.
But you want to remove that risk. Key person dependency risk. There's other risks in your operations as well. So risk is where we want to start. Identify risk. And even if you don't sell, you've removed the risk from yourself. Remember I said think continuity.
By removing risks, you're making sure there is continuity.
If you believe someone on your team can run things, do they know how to do they know the codes to get into the payroll system? Can they run payroll? Do they know the bank account codes? If you really are unable to be there and there's an emergency, where is that risk that things come to a standstill?
[00:33:02] Speaker A: You know, one of the things I do like to focus on quite a bit is the owner dependency.
Something my mentor said to me a long time ago when we were first working together on a few different businesses after I helped him with a major exit of a big manufacturing company. I ran it for a couple years as we sold it to a global giant and then we moved on to building our firm together. So he became my business partner. But one of the things that he helped me understand is when an owner is running everything or business is too dependent on the owner themselves, who's really gonna want to buy it? Because that would be them buying a job, not a profit generating entity. Right? No one wants to buy your job. They want to buy something that's going to create ease, it's going to create profit, it's going to create time openings Right now as we dive into that further, you know, there's not one shoe, one size fits all when it comes to this. You know, there's definitely a dichotomy that has to be made. But how do clean financials, tax structure and operational systems really work together to support a stronger exit?
[00:34:10] Speaker B: Well, that's another very good question. It's a little, it's a Complex one, clean financials means. So a buyer's going to come in and look at, you know, what are you selling them, right? And we just talked about risk.
So risk when it comes to clean financials is a buyer.
You, the seller might say, well, my business is really more profitable than it looks like. I have kind of all these expenses in there that you wouldn't have, or I have my personal car.
I have different things in there. We want to add them back.
If you have too many of those types of things, you're going to make the buyer and their advisors, their accountant and lawyer, who's looking maybe a little nervous that things are wrong or maybe they're questioning whether what they're looking at is real. So clean books matter. You want to separate your personal expenses from your business. If your car has nothing to do with your business, you get it out of the business. So clean books means separating those two things when it comes to taxes, especially today, post Covid, so many businesses are hiring employees across the country, right, in different states.
So that's possibly creating some what we call nexus. You have a connection with other states and maybe you're not paying taxes there, maybe you haven't enrolled in some of the labor laws. So that becomes a risk analysis. So you again, you want to be looking at the risk. When it comes to dependency risk, think of approval. I have this assessment. I use an owner dependency assessment. Are you owner centric? And it could be key person. And we really look at all the different divisions in your company and how involved are you in the approval process. Does everything get approved by you or are other people allowed to approve? Yes.
[00:36:02] Speaker A: Are there other people involved?
That makes all the difference. It really does because the dependency part is extremely important. It's so easy to fall in that loop that cycle, but to our audience, we will be back again. We're gonna take a short break. We'll close with the personal side of business success. Paying yourself what you deserve and building a company that supports the life you actually want. So stretch out, grab some coffee, whatever it is you got to do. We'll be right back.
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Now that we have made it to the final segment of this awesome show, I want to look at this closing conversation with Linda Hamilton. And this has been such a growing learning process now for me, diving into exit strategies and planning and all these different things for business owners to look at, I want to bring this back to the business owner.
So because the center of every strategy, every system, every tax structure and every growth plan is a person who took a risk, a person who built something, a person who deserves clarity, compensation and choices, this final segment should be really should connect business growth to owner freedom. We'll talk about paying yourself properly, optimizing profits and strengthening business value and making sure the company is not only successful on paper, but actually working for the person who built it. So, Linda, thank you so much for being here. This has been an incredible conversation so far. You're adding so much value.
[00:38:08] Speaker B: Thank you, Ryan. This is a very important topic.
Paying yourself and making sure your business can pay you. Otherwise you're just an unpaid employee.
[00:38:17] Speaker A: Yes. And with that being said, I am curious your perspective on why do so many business owners struggle to pay themselves what they truly deserve.
[00:38:31] Speaker B: I don't want to say it's one size fits all, because it isn't.
Business owners have different things. They have different expertise. They go into it for different reasons, different strengths. Some are more controlling than others.
It really starts with that mindset of you're bringing in business and you're not charging enough because you think, okay, you know, the customer will pay X dollars. You set some threshold and you take it. But you didn't think, you thought about maybe some costs. You know, are you, do you have to hire independent contractors to do this? Because maybe you don't have the full expertise. But mostly they have not considered their own salary. Right. Or how much they need to do. If they were working for someone else, they'd be getting paid for that expertise. So it starts with not pricing your revenue at the place that is enough to cover the cost, including your salary. And I get why, because when you first start your business, you're eager, you're just trying to bring in revenue. Sometimes it's for you just want to get started. You want some experience and your startup model, you're willing to take some. You're willing to maybe take less in the beginning, but. But you can't have a business model that perpetuates that.
[00:39:54] Speaker A: That's such a good point. Something that I see especially now.
I've worked with a lot of startups all the way to very large corporations that span over different continents even. But when it comes to small businesses, one thing I see is either A, a business owner that is really reluctant to pay themselves what they should, and B, the business owner who pays himself way too much, way too soon.
There are some that are in between there, but one of the things I've noticed about those that are afraid to pay themselves is they're so focused on making sure the business can run efficiently, effectively, and can keep making money. Right there is that stage where, okay, I can't pay myself if the business isn't actually generating revenue. But there is a dichotomy there. And like you said, be willing to pay yourself maybe a little less in the beginning and work into something that's more feasible.
But if you don't truly know where your financials stand, how cash flow is really operating, and really where the weakness or risk is. Risk. You mentioned risk a lot. If you don't know where the risk is, you're never going to be able to trust what you pay yourself. It's understanding the risk that's there and then those that pay themselves too much, it's a quick way to hurt a business and stop it from scaling or growing. One thing that I've seen in a lot of businesses, especially in the skilled trades, if you pay yourself too much in the beginning, you're opening yourself up for failure in the long run. Because businesses around you, your competition is they are sacrificing what's necessary to grow and take on more of the market. But diving back into your expertise here and picking your brain, what does owner compensation reveal about the overall health of a business?
[00:41:38] Speaker B: Well, so health is about healthy operations and healthy cash flow and profitability. That's what health means. Because to health, it's not just the word we often say sustainable, it's beyond sustainable. It's survival.
We have to look at your business model and I think this is a deep mindset issue because one part that you find is fear of raising your prices. So you're bringing in clients, but you're not charging enough for these costs. So one that's part of business model. Who are my customers and am I in a market with premium pricing? Is it lower tier? Is it volume? What is that? We want to ask the right questions about the business model. The second thing we want to do is you're bringing on many businesses hire independent contractors, right? Not their employees. And they don't really, you know, they often get confused between whether, you know, if they're part time or full time and should they really be independent contractors. But if you bring in revenue. Let's say you bring in 100,000 of revenue and you're paying 90,000 of that out to independent contractors because it's either outside of your expertise or you can't handle the volume.
There's only 10,000 left to cover your other expenses and yourself. So you have to look again at your business model of structuring who your vendors are, how you're going to deliver your services. So the reason it's a part of health is you can't look at one thing by itself. You have to put yourself in the budget. You have to put your salary, whether it's, you know, whether you put it at a lower base that you know you can afford temporarily or whether, you know, whether you set that target, a target like I hope to be paid XYZ in 2 years more market, you have to include it in your business model in evaluating what you should charge, who your customers are and what your cost structure is. And one other thing you mentioned, you know, some overpay.
I don't really have a problem with someone overpaying themselves as long as it's a reasonable compensation. If they're a C corporation, I'll throw in tax rules.
But if you're paying yourself a high salary, but you're really struggling on capacity and bottlenecks, would you be better served using some of that money, lowering your salary and hiring someone to help you remove the bottlenecks?
And that's, you know, when I work with business owners, it's helping them ask better questions and then find the answers. They know the answers. They just need a guide to help them work through the reasons they're making the decisions. They are.
[00:44:35] Speaker A: You know, that's a really good point. And something I do want to also highlight is when you talked about, you know, having contractors and the compensation there, if you're, you know, $100,000 revenue and 90 of that is going towards the contractors, you're not really leaving yourself a whole lot to really cover yourself, cover the business costs, and pay yourself ultimately, you know, and this conversation is extremely powerful. So something practical before we dive into a few different things is what is the first practical step an owner can take this week to begin building a more profitable, scalable and valuable company?
[00:45:12] Speaker B: I think the best thing you can do for yourself is look at your revenue and things. Look at your bottlenecks. Where are the bottlenecks? Where are things stuck? And that they're holding you back, they're creating friction for your customers. And do it from the customer's perspective. You will get so much from walking through that exercise of your customer journey and the operations that support it.
[00:45:37] Speaker A: I would agree with her 100%. So please take that advice seriously because it is a really good first step. So Linda, this has been an incredible conversation. Where can our audience find you? How can they get a hold of you and see the work that you do themselves?
[00:45:49] Speaker B: Well, I have two websites, grow profitscale.com and my CPA firm is my initials L.A.H. cpas.com I use my middle initial. So Linda A. Hamilton. So you don't get the Terminator movies the first thing that will pop up. But I do terminate taxes and business challenges. I have some assessments right on my homepage on grow profit scale. It's kind of de risking. What can you do to remove bottlenecks and remove risk so that you build a stronger business and that you own your future? Whether you want a lifestyle business or whether you want to full scale so that you know you can sell it. It should be your choice. And by looking at it intentionally, we can help you.
I think working with any advisor like Ryan, like myself, can help you ask those better questions.
[00:46:43] Speaker A: You know, it's one of the beautiful things about interviewing you today. I'm always looking out for people such as yourself that can help, especially on the tax side of things. That is an area like I mentioned before we started recording today is I don't touch taxes with a 10 foot pole. My firm stays away from that and we will gladly continue to do so. But one of the things I like to ask briefly before we go into the outro here and the closing of the segment, if you could briefly tell me what is your reason why for doing this? What about this gives you fulfillment?
[00:47:15] Speaker B: I get a lot of joy watching business owners build successful businesses. I'm so, you know, I'm so excited about what they're building and the great things that they're doing. And you know, I see myself as a support role. I'm. I'm there to help them know they're doing the right thing and giving them confidence and motivation. And after more than 30 years in business, I get to choose to work with the things that do give me joy and feel like I can make an impact by helping those businesses be successful.
[00:47:48] Speaker A: I absolutely love that. So thank you so much for being here today. If the audience would like more information about Lynda you, she told you where to find her. I recommend that you do it. And honestly, this has been so powerful. There's so much that we can learn from this conversation and this is what we believe on BizTalk. Business growth should not create more chaos. It should create clarity, strength, opportunity, and options. And to everyone watching, we invite you to keep building smarter, leading with intention, and asking the financial questions that move your business forward.
So stay connected for more on NOW Media tv. We'll see you next time.
