Badass Is The New Black (Season 5) Episode #19 - Cash Confident: Mastering Your Business Finances for Increased Profits with Melissa Houston

Welcome to our latest podcast episode where we're excited to be joined by Melissa Houston, the Financial Strategist, author of Cash Confident: An Entrepreneur's Guide to Creating a Profitable Business, and founder of She Means Profit®! Melissa is a Certified Public Accountant who has a wealth of experience helping business owners make profit in their businesses. In this episode, she'll share her expertise and insights into how you can create a profitable business, and she'll also discuss her regular contributions to Forbes and other large publications. You won't want to miss this valuable conversation with Melissa Houston!

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Let's welcome Melissa Houston to the podcast. She's a financial strategist, the author of Cash Confident and Entrepreneur's Guide to Creating a Profitable Business. And the founder of She Means Profit. Melissa is a CPA who is passionate about helping business owners make profit in their business, and Melissa is a regular contributor at Forbes and other large publications. Melissa, I'm super excited that you're here to have this conversation selfishly a little bit because I'm like in the thick of finance stuff and so I'm excited to have you here and I've learned some important lessons recently that just showcase how important it is. So I'm stoked that you wrote this book and I'm gonna get it in as many hands as I possibly can.

Melissa: Thank you so much for having me. I'm really looking forward to this conversation, especially since you're saying that you're knee deep in your finances right now, so that is awesome because every business owner needs to be aware of what's going on in their business, right? 

Yeah, A hundred percent. And really it's like everyone talks about how we've made six figures, we made seven figures and all these things, but my next question is, but how profitable were you? 

Exactly right.

You talk about that in the book, like it doesn't matter how much money you make, like are you profitable? Is there money coming back in your pocket profit for the business? And that's so important. 

And then profit is gonna make you wealthy, right? 

Yeah, A hundred percent. We don't start our businesses to be poor. A lot of us started to serve and help people, but you know, we wanna make money while we're doing this as well.

And you wanna make a profit after you pay yourself as well. You have to remember to pay yourself first. 

Yes. And so, and often, and I kind of still had that thought process that what I'm paying myself is the profit, but certainly what you're teaching in the book is that you are paying yourself and that would essentially be an expense for your business.

So if there's nothing left over after that, technically you're not that profitable. 

Exactly. And a lot of business owners do confuse that, right? Because they think that they should only pay themselves if they make money. But the thing is you need to plan to make money and you can't depend on the profit to live off of.

Cuz that's not sustainable, right? Because yeah, there's months where you make profit, there may be months when you don't, you have to be able to rely on a regular paycheck from your business in order to keep you going personally. 

Yeah, yeah, definitely. And that was something, you know, a lot of people have been listening for a long time.

If you're new, you know, I launched my first business outside of network marketing GROworkspace, and it just caught like wildfire, a membership site and we had 1400 paying members by the end of month one and 4,000 by the end of month four, six figures. That's amazing. A million, you know, reaching a million dollars in 20 months. And in that first four months we were about 80% profit margin there, you know, it was just me and my sister. We didn't have a lot of expenses. So there was a lot of profit there. 

And I think growing very quickly you kind of talk about this too, is like over hiring. Like you're growing quickly and you know, you start hiring and then all of a sudden things kind of slow down or maybe they table out and then you're like, oh shoot, now I have all these expenses for my business and now I'm not as profitable. And my husband would always be like, what are the numbers? How many members are joining every month? How many members are canceling? And I was kind of like, I don't know and I don't care because we're making a lot of money and this is great. Like do I really need to know the exact numbers? Or I would glance at them, I would look at them, but I didn't recall the specifics. And so I'd say, I don't know, but I know that we're making more money than we did last month.

And so for me as a newer entrepreneur, it was like that was what really mattered. When the numbers start to go down, then I'll really take a look and that's too late is what I'm learning. You wanna talk on that a little bit? 

Yeah, absolutely. Because you know, a lot of people think that growth stages are amazing, right? They're like, we're growing, we're making money, the revenue's coming in and you're not looking at the backend, the expenses that are going out. And if you don't plan for this, the growth stage can be the most riskiest stage in your business. It can be even riskier than when you're just starting, right? Because growth stages take your cash, they're cash suckers. So you wanna make sure that if you're in the growth stage, that you are planning it out correctly. So like you said, when the growth starts to decline a bit because eventually it will level out and it will, you know, maybe drop off a bit or you know, whatever's going on.

You have to monitor what's going on to ensure that you'll be able to afford all the new stuff that you brought on. So having a business plan, especially during growth stages, is really important because it helps you understand at what point you need to bring in extra resources like new hires or you know, if you're maybe a different type of business, maybe you're a product based business or something and you need to expand your manufacturing facilities, whatever's going on in your business, you have to plan these things out really well so that you don't end up in a c cash crunch or put your business at risk. 

Yeah, yeah, definitely. We did have so much money coming in that we weren't distributing at all and I've got a business partner. We were putting into savings, let's save and save and save till we had six figures in savings in there to get us through. 

And then things started to decline and we had to tap into that savings a little bit, you know, and now we have a weekly scorecard where every single week we're putting the numbers in there, you know, profit or loss, not to like make hasty decisions like from week to week, but really understand, okay, we were negative 5,000. Why? Well that's because our Kajabi payment came out this month and our, you know, this other big platform we pay, you know, for the whole year up front came out. So that was 10 K in expenses we don't normally have. Okay, good. Just to get a pulse on it.

And be really tracking regularly. And then looking, I don't know, you tell me- a month, a quarter to then kind of see the overview. What do you recommend? 

Yeah, so I mean there's a couple of things that I recommend. You definitely want to have at the beginning of every year or at some point during the year where you revisit, first of all, if you haven't done it already, you need to create a business financial plan. And then you would revisit to make sure that you're constantly projecting 12 months in advance, right? So that you're planning out what's going on in your business throughout the 12 months. And then you wanna make sure that you monitor your results against that plan. So each and every month you're going to look at your results, compare it against your plan and like you said, do the analysis, understand if you came over that's great, but you wanna know what's going well so that you can capitalize on that. And if you fell short, you wanna know what's going on so you can fix the problem. And I have to say congratulations, I love hearing that you saved up to six figures.

That is amazing because I don't often hear that.

Well it's gone down now cuz we've had to dive into it. I'll point out two parts in the book that I love. We found ourselves in this critical place last year where it was like, are we gonna have a business in six months?

Like if this keeps going how it's going? And it was like, dang, like I really put the blinders out and so I wanna share this sentence that you have in, in the book. “The numbers will never lie to you. They might tell you what you don't wanna hear, but don't be afraid or shy away from them because they offer you the most valuable information to help keep your business alive.”

And it was almost like I was scared to look at the numbers because it might stop the, you know, going up and it's like that's the worst CEO or like business decision you can make. Like they're gonna be honest with you and it might hurt and it might sting a little bit, but it's gonna help you course correct a lot quicker than you know, oh we're seeing him go down and go down. We're like, oh maybe they'll go up or like, we could try this little thing. But like if you're not, if you're not looking then you're not gonna know and it's gonna get to the point where you're at where, where we were at, where it's like, are we gonna have to close our doors?

And we had to make some serious decisions about our business. And then the other line that you have in here that really hit home was “your money mistakes don't define you.” So I was struggling with that a lot. Like, oh my gosh, I'm helping people build their business. And we found ourselves in a place where it's like we have so many contractors, a team of 16 and we're creating so much and now it's the growth isn't there and our expenses are way too high and there's really not any profit now, especially like after paying ourselves and was just kind of in this pickle of we've gotta, we've gotta figure this out. And I was struggling with that. Who am I to teach people about business when I found myself in this place?

But it doesn't define you. I've learned so much being in that spot and now I'm learning even more from your book 

You're right, it doesn't define you and it's so important to remember that business is really a series of mistakes, right? And you're always going to have ebbs and flows in your business because your business is never gonna stay stagnant.

If it were like that, everybody would have a business and everybody would be doing well and nobody would be crying, you know, themselves to sleep at night or anything like that, right? But it's not like that. You're gonna have great times and you're gonna have times where business drops off. But by looking at the numbers, you can anticipate what's going on and you have plan B, plan C in place just to get you through the leaner times. It's so important not to be like, okay, we're making the money now the money's coming in and I'm gonna spend it. Cuz that's what most business owners do. So again, I have to applaud you for saving your money because you need that money, you need those cash reserves for when business is not so great and you need to float yourself.

And that reminds me cuz you have in the book, you have you talk about mindset and your money story and just yesterday my son comes up to me, he's nine years old and he says, mom, what jobs can I do for some money? I wanna make some money, what can I do? And so, you know, I'm giving him some options and of course cleaning out the drink fridge that has sticky stuff all over. It was, he did not wanna do that. I had to come up with something else: vacuuming and washing out the car. And so he had, he had pitched to me, he said, well I wanna make some money because you know, I kinda wanna save for some things. There might be some bigger things that I want. And I knew he had something in mind and he goes, so I wanna make some money and save for it. I said, okay, I will. I'm thinking of him. I was like a contractor with his own business, let me do some jobs and make some money.

And so he makes this money and he is, he's trying to make $20, you know, I find all these things. He's basically working all day and he gets $21 and he comes up to me and he goes, mom, I wanna buy some V bucks, which is for a game on the Xbox to buy a skin for his person, like a new outfit or something. We've always had this thing where it's like the money that you make, you have to save 50% and then you can spend the other 50, which is aggressive, but like trying to teach good money habits. And I said, Avery , I thought you wanted to save for something bigger. And he goes, well I just really want this thing. And I said, I'm not gonna let you do that today. You know, we're starting bad money habits of money in money out, you get money in, you spend it. And I said, we wanna try and create healthy money habits where you're not just constantly getting money in and spending it.

You said you wanted to save, so let's save some, let's sleep on it for a day, you know, and talk this through. And so, you know, that just reminds me of the mindset and a lot of us have these mindsets about money that, you know, we have no idea about. It happened when we were seven or nine and no one course corrected or I see, you know, you explained the situation that you had here that created your money mindset. And so again, your, your money mistakes are things , but if you can re recognize them and that was the first chapter in your book mindset. 

And I love that you brought up these money stories because we all carry them and like even for me, you know,  I consider myself a very self-aware person and I've been working in the finance field for over two decades. So when I started my business, I said to myself, well, or may have had it in conversation, whatever, if anybody had told me that I would have any money mindset issues at this point I'd been there, I'd been there, done it, I'm sure I've got nothing. Right? Sure, yeah. 

But sure enough, as an entrepreneur, I had deeper issues that I was carrying that I had zero idea that I was carrying and they were holding me back in my sales because I had such an icky feeling about selling things and my money story because we can have several of them, right? So one of my money stories was my parents and my grandparents were very much anybody who's trying, selling them, trying to sell them anything, they're just ripping me off. You know, like that mentality. And I carried that with me. Yeah. And it held me back. 

Because I mean, working as an accountant in business, like other people's businesses and in, you know, government and private and whatever, I never had to sell anything. So being in that position where I had to sell things, it was very uncomfortable for me. So thankfully I realized very quickly that something was going on and I went to a money mindset coach myself. Yes. And resolved it. But yeah, you never know when they're gonna creep up is the point that I'm trying to make. 

Yes. 100% or what, or you might not know what they are.

And in the book, in that chapter you have prompt questions for someone too, and you ask them questions for them to kind of get an idea like, do I have issues, you know, deeper issues that I need to handle here? And you have great insights and the stories are really amazing. 

So, I mean really that's the reason why it's the first step in my cash confident framework to be working on your money mindset.

Because that can make or break you as a business owner. If you've got a negative money mindset and you are not creating a positive relationship with money, chances are you're not gonna build a financially viable business. You have to be aware of what's going on so you can replace that behavior, start new money habits, new healthy money habits like you were referring to earlier.

I love that. Healthy money habits are so important. 

Okay. You mentioned framework. Walk us through the framework cuz everyone's gonna wanna go get the Cash Confident book after they listen to this podcast. Y'all like the most affordable thing you could probably get to make so much profit in your business all in this little book. So I know you guys are gonna get it.

So you go through the framework here. So just walk us through the framework. And then we can share with people you've got a free gift for them we can share how to keep connecting with you cuz you've got a group that people can be a part of and then the book for sure. So yeah, share that framework with us. 

Awesome. Yeah, because I've been working with business owners for over two decades and I created the five step cash confident framework myself. So this is my IP and the first step is the money mindset, which we talked about. The second step is to understand your financial statements so that you can read them and get that feedback.

The third step is to create that business financial plan so you have an idea of where your business is at currently and where you'd like to take it to in 12 months. Fourth step is what we were talking about earlier too, where you wanna monitor your results against your plan and also do some tax planning where you can estimate how much taxes you're gonna owe and put that aside so that you don't get a surprise tax bill.

And then the fifth step is managing the cash in your business. So the cash confident framework is not teaching you how to be an accountant or a bookkeeper. It's teaching you as a business owner how to manage your finances in your business so you can optimize the profit in your business because all these five steps work together and when they work together really well, you are optimizing the profit in your business and that is going to be what helps build the wealth for yourself.

Yeah, and I love that you stress that multiple times in the book. Like you don't have to be, you're not training, you know, and learning to be the accountant and the bookkeeper you, but you need to have a handle on it to be this, you know, the CFO of your business and to know and understand so you can catch these things before you find yourself questioning is are my doors gonna be open next year or not?

Because it's not a comfortable place to be. And you make it very simplified and the formula is in here to walk someone through what they should be looking at when you said you gotta create a financial plan. I'm just picturing y'all out there listening like, okay, but how do I do that? You know?

Well that's a framework, it's a step in the framework in the book. So she's gonna walk you through that and make it very simple for you. If you're like me, I'm not a numbers person, don't worry, don't worry. 

You don't need to be a numbers person. You just need to, you know, when somebody shows you how to do it, it's so much easier. When people are looking at it from the outside thinking, I know I need to do this, but it's overwhelming, I don't know where to start. That's usually why people walk away. They're like, I just can't deal with this.  But when you've got that framework and you can walk through step by step, it becomes very manageable and it doesn't take long to learn. 

Yeah and I love that you said it doesn't take long to learn. A lot of you out there listening, you know, time is of the essence for you, your time is valuable and this is one of the things in your business that you must make time for.

 You must make it a priority. It's the health of your business and being profitable. So, you know, make time for it. Read the book, get the information and actually implement and do the steps. Don't just let it be one of those books that you read again, you set it on your back shelf and then you don't do anything.

Very simple actionable steps here to create these money or healthy money habits to teach you kind of the things to be looking at on a regular basis and how to figure out, am I profitable, you know, and what should I be, be monitoring. It's a great book Melissa. It's really awesome. 

Well Thank you. I appreciate that. 

Very needed in this space. I was a nurse before so you know, I'm learning this whole business and entrepreneurial journey just like y'all in the process. And I might be a couple steps ahead, but we're all still learning. And again, like you said, like entrepreneurship is failing, you know, learning through these failures. But I think this book will definitely, you know, eliminate some of those failures that could happen if you don't have some of the basic knowledge. So it's great. Yeah. Yeah. 

That's awesome. Awesome. Thank you. 

Cool. Well you've got a free gift for everyone so you wanna just share a little bit of information on how to get that or what it is and then how to get it and I can, I'll put the link in the show notes as well. 

Yeah. If you wanna get started with the five step cash confident framework, you can download the five step roadmap to a Profitable Business and that'll give you a head start on what you need to know as the business owner to manage your business finances, build that financial foundation for your business. 

All right. So we'll have that link in the show notes. You guys can go download the Five Step Roadmap to a Profitable Business. You can connect with Melissa on Instagram, Melissa Houston, CPA, over there. And then I'm gonna have the link in the show notes to order the book.

So go order it. I'll have the Amazon link in there, Cash Confident. It's been amazing. I've written in it, I've highlighted it, I've done so much in it already. And so I know I'm gonna be coming back to this book again and again to just help support me in the business. So thank you. I appreciate you Melissa, for coming on, for sharing some of your knowledge and having this conversation with me cuz it's an important one to have

 And I appreciate you Krissy and the fact that you are so excited about finances just makes me happy. 

Love it. I love it. Sometimes I say I'm a numbers person, but then like really when you get into it, I'm like, am I really a numbers person? But I like profit like that sounds 

Yeah, you're a numbers person, it doesn't matter to what degree. 

And even more so if you're not a numbers person, if you're the person that's like, I would just do all this for free. Like read the book because if you don't have some money coming in, you're not going to be able to even do it for free. So yeah, I'm so glad that you're here to simplify it, to make it easy for us and to get us cash confident. Super important.

Follow Melissa on IG: https://www.instagram.com/melissahoustoncpa/

Order her book, Cash Confident HERE

Grab My FREE Guide to learn how to turn your knowledge into profit: www.thekrissychin.com/profit