Sarah Delevan is a Food Business Financial Consultant, host of The Good Food CFO Podcast, and CEO of Sarah Delevan Consulting where she helps entrepreneurs in the food industry gain financial sustainability and success.
In this episode, Sarah talks about her role as a CFO and how businesses in the food industry can set themselves up for long term financial success.
In this episode, Sarah also discusses:
- Sarah’s background and her start as an entrepreneur 1:12
- How her own personal mission led to her business venture 3:00
- Lessons Sarah learned as a buyer 7:53
- What a CFO is and what they provide for a business 11:15
- Labor costs for the food industry 19:51
- Why it’s not always about cutting back costs 27:22
- The biggest transformation Sarah sees her clients in the food industry make 29:35
- Profit First and how it can help shift your mindset 36:20
Connect with Sarah:
Website | https://sarahdelevan.com/
Connect with Danielle:
Website | https://www.kickstartaccountinginc.net/
Instagram | https://www.instagram.com/kickstartaccounting
Twitter | https://twitter.com/KickstartAcct
Things Mentioned in Today’s Episode:
Book your FREE Discovery call: https://kickstartaccountinginc.com/book-a-call/
Test your Financial Health: https://kickstartaccountinginc.com/checkmyfinancialhealth/
Learn how to pay yourself as a CEO – https://www.kickstartaccountinginc.com/getpaid
Full Episode Transcript:
Welcome to entrepreneur money stories, the podcast for women entrepreneurs who want to dig into their money stories so they can break free from limiting beliefs around money once and for all hosted by Daniel Hayden, owner of kickstart accounting, Inc. This podcast is a series of real conversations about money mindset with valuable and action packed takeaways for the entrepreneur who’s building their abundant empire. Danielle is a reformed corporate CFO who’s on a mission to help rural breaking female entrepreneurs understand their numbers and gain the confidence to create sustainable profits. And now here’s your host, Danielle Hayden.
Sarah, welcome to entrepreneur money stories.
Sarah Delevan 0:43
Thank you so much for having me, Danielle.
I’m really excited for this conversation. I love nerding out with people who I know, we have a lot of the same similar thought processes between business and accounting and finance. So I’m really excited to nerd out with you today. Thank you.
Sarah Delevan 1:02
You’re welcome. My pleasure.
Why don’t we start with telling the audience a little bit about your background and what your mission in the world today is?
Sarah Delevan 1:12
Yeah. So my background, I mean, I, after college, I was in marketing, which is really weird, because that was like, 19, you know, I don’t know 99. When 2000 was like marketing was very different than it is now. It was a very data driven position. At the time we did b2b. We are a b2b like insurance company. And so I did that for a long time and just always wanted to be a business woman, which I think is very funny to like, think back on, but I really got into food after struggling with like, really bad acne like painful cystic acne. I struggled for four years after college. After college. Yeah, okay. Yep. I mean, I always kind of had, like, you know, as, like, as a teenager, right? I kind of dealt with it. But it got really bad after college actually, like, during and after college. And I took every medication known to man, took the strongest drugs on the market at the time, and it helped for a bit and then it would come back. And I was living in Florida at the time I moved to Los Angeles, I met a dermatologist who was like, What are you eating, and I was a vegetarian at the time. And it just so happens that my body does not respond well to soy, and I was eating a ton of it. The long story was a little bit shorter, so I changed the way that I ate. And I was always like a relatively healthy eater, you know, but I just really needed to be careful about what I was putting in my body. At the same time that I met that dermatologist I read Michael Pollan’s Omnivore’s Dilemma, and I was just like, I must be a part of the local, you know, sustainable, good food movement, and I just dive in headfirst. So I had this full time job as like a b2b marketing, you know, analyst and strategist and had my Blackberry like, in my back pocket while I was volunteering at the farmers market and washing dishes at a cooking school because I just wanted to like learn everything that I could, I started my own food business a couple years after managing markets out here with a mission of getting good food into more homes and more communities across southern California. It was a struggle, I learned a lot blows that business after two years, and I went on to be a buyer for a couple of different businesses, and realized through my company and through the work with other businesses that when you aren’t a commodity food company, you can’t play by the same rules as commodity businesses. And I got the opportunity to look at a set of books with one of my bosses and be like, we’re hitting all the marks, but we’re not making any money. And we can’t comfortably pay payroll on a bi weekly basis. Like that’s a problem. So what needs to change? Like I’m buying all the foods like what if I hit a different target, right, like, so we just went through the process of understanding what our costs were and making sure that our products are priced right and really identified, what targets do we need to hit as a business to actually be profitable. When I saw that it was successful, a light bulb went off in my head. And that became my work as an employee and other businesses that I worked for. And then I stepped into consulting. And that is still my work today.
It’s really beautiful that it started off as his personal mission that has been able to come full circle and you’re able to really impact so many more people by the work that you do today, right by making sure that so many other businesses can bring their products to the market and yeah,
Sarah Delevan 4:45
Thank you. It’s funny to look back and go, Oh, you had a dream that wasn’t meant for you. But that initial dream, like created and allowed for the transition that did happen and like this is exactly where I’m supposed to be for Right now, you know,
it is. I’ve heard the story so many times from entrepreneurs. I think we all have an interesting roller coaster story. I mean, I went, I was started, I went back to school because I wanted to own my own hair salon. I was a hairdresser and I wanted to go to a hair salon. Yes. So that’s the entrepreneurship journey I wanted. Yeah. And full circle, you know, so entrepreneurship, but just very different. Very different dreams. Yeah,
Sarah Delevan 5:26
yeah. Oh, I love that.
Yeah. Tell me some of the lessons that you learned as a buyer before we go into how you serve with clients. But what were some of the most interesting things that you learned? Because we’re hearing so much right now? And I think this is across every single industry about rising costs. So yeah, what are some of the things that you learned during that time?
Sarah Delevan 5:48
Such an interesting question. No one ever asks me that. And I’m like, now that you’ve said it, I’m like, wow, that’s a great question. So I have always been a data person. And one of the things that we specialized in, in my, in the business that I owned, was seasonal purchasing. And we had a spreadsheet, where we tracked what was available from what farm when and what the price was, and we used it initially just to organize what we wanted to offer. In our business. When I became a buyer, it was for a company that was a big catering company here in LA, they’re still in business. They wanted me to buy seasonally, but the thing was for them that we were planning weddings and planning events, 689 months into the future, so I needed to know what would be available then. So we could create a menu for them. So right from day one data was important to be successful in that job for me, right, I wanted to know that I had reliable information. And that snowballed into keeping really accurate data of what I was buying. And so I, one of the issues, as I mentioned was we had these targets, and for me it was I needed to hit 30% food cost. And if they looked at the p&l, and I was hitting 30% food costs, like I was doing my job, and they literally told me like, go buy whatever you want, get us the best quality, just hit that target. And when I realized that, like, Okay, I’m hitting that target, but we aren’t able to pay our team on time, I dug into the numbers, and what I found was that there would be, like, insane differences. And one story I share a lot is Basil was like $22 a pound from one vendor and like $12 a pound from another vendor, and no one was paying attention before to that they would just buy it from whoever they kind of sprinkled around, you know, their business to these vendors that they wanted to stay on in terms
of decision making none to whereby Maizel from
Sarah Delevan 7:53
none. And as I was getting into it, I’m like, Well, I would ask the question, like, why are we buying the basil from this company? Like, oh, I, you know, because we need to hit a minimum, you know, to get it from them, or oh, I hadn’t purchased from them for, you know, a couple of weeks. And I was like, Okay, I’m going to do this job. We’re buying based on quality and price. So that started to happen. And I just would track number one, did we receive everything that we were supposed to receive? And number two, how are my prices changing both week to week and month to month, and then season to season? So I had all of this data there. And I think, you know, business owners will sometimes say I’m so busy, I can’t keep an eye on those costs. It’s imperative, especially in the food industry that I work in, but really any of your inputs, right, no matter what kind of business you’re in, you have to know you have to have your finger on that pulse, you cannot turn your back on that information for a week. Right to really be in control. So I think the biggest thing I learned was that data was my friend, data had a ton of value. And even though other people looked at it like, like, What a boring job or the likeable waste of time, that’s where my power was, that gave me the ability to excel at my job.
Yeah, that sounds like fun to me. And what I hear you saying is that we have to remove the emotion out of it. So by purchasing based on relationship or emotion, yeah. Hitting other metrics outside of profitability metrics, right. Yeah. are thinking that we need them and to keep them as a supplier. Yeah. Today you do consulting. So tell us a little bit about the work that you do and how you work with entrepreneurs.
Sarah Delevan 9:41
Yeah. So we’ve had two companies now essentially, we started out as Sara Delevan consulting, through which we provide one on one CFO consulting services. So I love that work. We’ve got a small, you know roster of clients that we really support day to day and week to week to grow sustainably and profitably. And a big thing for us is that we want business owners to do it on their own terms, right. So like, there’s no one way to build a business. And we want business owners to feel confident in choosing how they want to operate and what they want their business to look like. And we’re there to support them in making that a reality from a financial perspective. And then we’ve got the good foods CFO, which started out as a podcast, because I wanted to be able to talk more about money, specifically in the food industry, but it has evolved into now a community and a membership, which is really cool. So good food business owners can join us there and they’ve got resources and tools and access to me a couple times a month for the support that they may need to just kind of talk through a decision or think through an opportunity so that they’re confident in their financial decision making as well.
One of the questions that I hear all the time, and I had no idea before I started kickstart how many different labels are thrown around. So what do you feel like is differentiates you know, what you do as a CFO? Like how, you know, I can hear people like, Oh, what is Sarah doing? Right? Like, yeah, what does that mean? So how can people interpret that?
Sarah Delevan 11:15
I think that’s such a great question. Because even within the world of CFOs, right, you’ll see a bunch of different labels, like a strategic CFO, a, you know, I can’t even remember what they all are. I specialize in what I call financial efficiencies. So understanding how a business operates, and looking holistically at the financials of the business, and then being able to work with the business owners to say, here’s where if you create change, and like specifically, this much change, right? Here’s what the impacts will be on your business. Right? If you want to grow in this way, here are the cost targets that you need to be able to hit or here’s the price point that you need to be at. Right. So I almost don’t really know how to describe it, other than from an operations standpoint and financial standpoint, I am looking at your business, and I am providing strategic guidance on how you can make your business the financial reality that you want it to be. Yeah, that makes sense.
Yeah. So we work together quite a bit, we have several shared clients. And this has really evolved over the last few years. So when we work together, I want to give somebody some context of how this works kind of seamlessly. So today, right now on a lot of our shared clients, kickstart accounting is going in and creating the foundation of the bookkeeping and providing the CEO, the business owner with that high level information that they then can use with you to continue that strategic journey. What are some of the decisions that you’re helping the specific clients make with the financial foundation that’s been created?
Sarah Delevan 13:15
Yeah, we’re making a lot of really big decisions. Really, a lot of decisions are based around how we want to grow the business. Or how can we successfully grow the business right? So in terms of the food industry, you have many channels that you can sell into, you can be a direct to consumer business, you can you and that could be e commerce that could be farmers market, right, you can be a business that sells directly to a retailer for them to sell your product on the shelf. And then you can be a business who sells through a distributor, who ultimately helps you get onto the retail shelf, you could be a food service company, right? So when we have the good foundational data that you all provide, we can look at the financials and say, What’s the most profitable route? Or how do we which channel do we want to focus on and grow, we also have really clear Cost of Goods Sold data, which is imperative, you know, to a food business as I was touching on and sort of my story, gross profit is a huge indicator of the overall success of of, I think any business but a food business in particular. And there are certain benchmarks that that in our industry, we should be hitting with it, like good food, you know, a sustainable food industry specifically. And so when we know that we’ve got good financials from your team, we can count on that gross profit margin, that gross profit number and then leverage that, you know, to build a profitable company overall, right? I call it operational profitability. Is that net income, you know, line for us and so, you know, what, to me, it’s like the list of decisions that we make with good data is really no less. Yeah. I mean, there’s too many to list.
Well, I think that you, I think that’s a really good point that deciding which avenue in which you’re going to grow your business is really important, because I’ve watched too many businesses try to grow in every avenue. Yeah. And that puts them behind, right, because they have not made that decision. And so I think it’s especially important for the food and beverage industry, however, it’s important for everyone, we can’t grow everywhere in the same way. And so you are able to use your financial data to then make others be able to make that decision and then monitor right, and then monitor what’s working and what’s not working. Yep, one of the things that you talk a lot about is the levers to financial sustainability. Why don’t you talk us through some of the levers, and I always like for our listeners to be able to walk away with like, action. So yeah, what are some of the action steps, the levers that they can pull right now?
Sarah Delevan 15:56
Yeah. So we offer this really amazing service that’s called the profit assessment. And we take a company’s, you know, previous 12 months of financials, and we run it through this tool that I’ve developed over several years. And it lays out for us what we call the assessment, and it’s this really high level overview of a company’s financials. And that’s what we’re typically looking at when we’re talking to a business owner about what specific levers they can pull. So I’m going to sort of lay this out as if I was walking someone through their profit assessments. I think that kind of makes sense. Okay. So first and foremost, we want to be looking at revenue, right? Like, is your business making money? And I think what’s important to know is, is there seasonality to your business? So when we’re talking about sustainability, and we’re talking about, you know, sustainability is essentially having enough money to cover your expenses, right? This business can sustain itself, right? That’s what I think of when I talk about sustainability. And so if you’ve got a highly seasonal product, we work with a lot of chocolate companies. So I mean, it goes without saying that there is seasonality to that chocolate, right, and sales dip when the weather gets hot. And so we need to understand how our revenue changes and do our costs change with it or not? In order to manage our money to remain sustainable? Right? So revenue is really important. It’s not just about how much money are you making, but how much money are we making? And when are we making it? And what does that seasonality look like? And then you can ask yourself questions like, What can I do to boost sales in my historically low months, right? Like, is there anything we can do to drive more sales there? So revenue is important for lots of reasons. And it’s important to track. And I think it’s not just looking at it month by month, but I think there’s power in looking at information over time, right? So like, not in a vacuum, but over six to 12 months, at least.
I love the 12 months, we always send our clients the 12 month rolling p&l. Yeah, because it’s important to look back in order to know what’s Yeah. Right. Yeah. Know where you’re going. Yes, yep.
Sarah Delevan 18:11
So then, a big one, as I touched on a couple of moments ago is your cost of goods sold? And, you know, as I said, this is huge for a food business. But it’s huge for any business, I think, right? Like, knowing what your cost of goods are, is huge, right? Because in terms of a food business, and maybe you can echo back like a non, you know, for a non food business owner, but we have ingredients, and we have packaging, and we have production labor, that is our product, right? Like those costs are our product. And we need to know what those costs are and what percentage of our revenue they each account for. So what we do in our work, because we really break down the cost of goods sold into three main categories, we’ve got ingredients and packaging, we’ve got our production labor, and then we’ve got sort of a minor cogs category that we call other cogs. And that’s merchant fees, shipping costs, things that are involved in things like the selling of your product, right? When you run someone’s credit card, there’s no two nines ends, right? Or whatever it is that percent that you don’t get to have. So we look at that when we’re analyzing a company as a cost of goods sold. So we know how much of the revenue that top line revenue you don’t really have, it’s going to go to creating a future product essentially, right? This is huge. I think about the food business. This is the lever right like you have the most ability to create change in your cogs.
Now, every industry is a huge lever, not just the food industry. So to relate this to applicable For every industry here for our service based business, this will be your direct labor. So if it’s not laid out on your income statement, if your direct labor is actually done in operating expenses, that’s okay. This is an analysis that you can do outside of that, because every business owner is a little bit different. Some people want to see it as a cost of goods sold, some people want to see it as an average expense, that’s fine. It’s an analysis that you can do outside of your profit loss statement. So direct labor for any service based business is going to be your most important cost of goods sold. For any other retail business, this is your if you’re buying and reselling, this is the everything that you need to purchase, in order to be able to service your clients. So I like to think that the cost of goods sold is what you directly need, like you cannot service your client. You cannot you don’t have anything to sell, unless you have the cost of goods sold. So anybody else that’s listening, that is your cost of goods sold. And we always have opportunities here, right? We always have opportunities. Where are we buying from? Just like you were talking about before? Right? Are we paying attention to who we’re buying from quantities that we’re buying? Shipping, that we’re paying to get the product and services to us? And then same thing for labor? Are we looking at who we’re using for our labor cost? Why and then how their time is being spent? Yeah.
Sarah Delevan 21:20
Or is it efficient? And when we do this analysis for a food business, and we see each of those three categories broken down, and we’re looking at them, again, as a percentage of revenue? I’m looking for a couple of different things like is our labor consistent? Right? Like, is it consistent efficiency? When we think about the chocolate company, as an example, right, during their lowest revenue months, their labor costs, literally in dollars, is higher than other months, because they are preparing. They’re literally producing the product for the busiest months of the year. And so that’s where, like we, we want to be aware of how our revenue changes throughout the year? But also, how does our labor change throughout the year? And what can we do internally to make sure that we have the money,
right, so that’s cash management. If you don’t know that you can’t manage your cash effectively to be able to make it through those months to prepare for your busy once again,
Sarah Delevan 22:22
exactly. And then when we look at ingredients and packaging, again, we want to see either consistency, or we want to see a rhythm, a consistent rhythm and how we’re purchasing. Right. So for a food business, we might buy packaging in bulk, right, we’re not going to buy just what we need, and package our product and sell it right, we might buy a pallet of jars and you know, a pallet of lids and you know, 1000s of labels. And so knowing when we’re going to need to do that, right, again, is important for us to manage our cash flow and be financially sustainable and also profitable. So huge opportunity to drive profit in that cost of goods sold. category. So we spend a lot of time there.
Do you have a sweet spot, a specific percentage that you’d like to see your gross profit?
Sarah Delevan 23:16
The most popularly asked question that I get. So I will say this. I don’t say that publicly, because I’m very careful to not state a number and then have a business owner believe that that is right for them. We and we do and it also depends on the channel that you’re in, and the channels that you want to sell through. So we do have benchmarks that we want to see different business apps, but I, I just tried to be careful to not put something kind of standard out there. All right, what’s our next level? So the next thing I like to look at is actually our gross profit in comparison to our operating expenses. So on the profit assessment that I mentioned earlier, we literally are looking at our total monthly gross profit, we call it real revenue. That’s like real money, we have to cover our operating expenses to pay, you know, ourselves as business owners, etc. If your real revenue or your gross profit is not covering your operating expenses, the majority of the months, I like to say at least eight months out of the year, right. So for a food business, if we have to make a giant purchase in one month, right, that could affect our real revenue, our gross profit, and it could reduce it to the point where we aren’t able to cover our operating expenses in that particular month, right? Like I’ve seen food businesses that never have positive gross profit, right? And when we see that and we’re comparing it to what they’re spending in operating costs, that’s a big eye opening moment of like, there’s no way we can be profitable. Given this scenario. The other thing we see is positive gross profit, but it’s just not enough to cover our operating expenses. And what that allows us to do is look at the opportunities that we have. What do we need to do? Do we need to lower our cost of goods sold? And can we write to increase our gross profit dollars? Or are we hitting the right targets for the type of business we are and want to be? And it’s a matter of growing our revenue, right to to achieve higher gross profit dollars? Or are we frankly, overspending in our operating expenses. And I’m not someone who says, like, someone recently told me that my strategy was saving, like someone’s way, like, you can’t save your way to profitability. And I was like, that’s literally no one strategy like that. But it is true. I think that if you find yourself in a situation where your gross profit monthly is less than your operating expenses, you should spend some time analyzing the investments I’m making in my business, creating a positive ROI, or like a big enough ROI for me to continue investing in them this way. So it sounds really simple, right? Like, you know, whether or not your net income is positive or negative. But when you really like zero in on that gross profit number compared to those total operating expenses, you can clearly see that there’s a problem. And then when you’ve got that additional data in front of you, you can say, here’s the problem area. And this is how we drive up our gross profit number, and potentially drive down our operating expenses, right? Or you know what lever it is in your business that you need to push or pull.
I like that you call them lever levers, because it gives us the opportunity, right? When we look at expenses, I don’t want everyone to think it’s always about cutting expenses. Yeah, yeah, sometimes it’s about permission to spend more. Yeah, I was just at a client call this morning, where she didn’t say, I’m afraid to spend money. And I said, but we weren’t, let’s use this time to look at each area of your business, and understand, are you overspending? Or are you under spending, right? Is there an opportunity to spend more of your profits, pay less in taxes, take more at home, and be able to reinvest back into your business. So it’s not always about cost cutting, we can pull and push lovers in every direction.
Sarah Delevan 27:22
Yeah. And it’s typically not just one thing that I find when we’re doing this, you know, analysis, it’s okay, if we produce like, with our labor, right, let’s talk about it even if like direct labor for a service company, or you know, food production, right? Oftentimes, you can create efficiencies within your company, where you don’t have to pay people more, you don’t have to cut costs. And you don’t have to hire more people for that you like in order to produce more revenue, right? Like, you can look at your labor line and go, Okay, that’s higher than I want it to be. But what are my options here? What levers can I pull in this specific category? Can we talk about what our systems are? And if there’s anything repetitive, that we can automate, and save time, right, and like, literally make our company more efficient, and be able to do more with the team that we currently have? Is there just asking those types of questions, right? In food, we often see that like, you know, okay, our team works in eight hours a day, five days a week, because we want them to be employed full time, but like they’re cleaning up and you know, they get to do that on like, a pretty relaxed schedule if we don’t have the need to produce a lot of products. So right there, we’ve identified Oh, we have more capacity to produce. Yeah, right. We just don’t have the sales that are requiring it. So we know that a lever for us to pull is maybe invest in a salesperson, maybe invest in someone who is picking up the phone and driving sales, because we have people here on our labor team who have the capacity to do more, and they want to do more, but we don’t have the business coming in. Right. So it’s like, understanding why the numbers are the way that they are and thinking through what can we do to improve it? And it’s not always cutting back on costs, whether that’s operating or labor, or other types of expenses. How do
you see with your clients, what’s the traditional transformation that you see them go through, we normally see mindset transformation formation as people start to understand their numbers. As you start to drill into this and people are making these types of decisions. What does that transformation look like?
Sarah Delevan 29:35
You are asking so many good questions today. Thank you. I think the biggest transformation is that when people come to us they feel embarrassment, even a sense of shame, about not being good with numbers, or like I’m spending too much. They just sort of come I think with a lot of negativity toward themselves and toward their capabilities. And, you know, our way of operating is this is a guilt free, no shame environment. And we’re here to nurture you and show you that you are doing a good job. And here are other things that you can be doing as well. And we’re here to support you in doing them. Right. And as people start to see, it takes a couple of months, I’ll be honest with you, like, there’s usually a period of doubt, especially when it comes to things like cash management, which is a big one. But they become confident and the shame starts to go away. They stop bad mouthing themselves in our meetings, which I generally try to, you know, lovingly stop, right, like, right up front, but I think that’s the biggest transformation is seeing someone who is just like embarrassed and shameful, become confident and be able to see the future of their business and feel good about it. You know,
yeah, it’s amazing to be able to witness, I think it’s the most rewarding thing that our team and I get to do is give back, give back to entrepreneurs. What are some of the other most common mistakes that you see entrepreneurs making when they are looking at their numbers? or pulling or pushing on these lovers? Yeah,
Sarah Delevan 31:19
I think not tracking additional data is a big one. So we can look at our numbers, you know, maybe we’ve implemented a marketing strategy, right? And or we’ve, you know, we’re investing in marketing. So we’ve got, let’s say, $2,500 going into marketing, and three months down the road, we’re not seeing results, right, our top line revenue is not increasing. A lot of times people will say, Oh, well, I should probably stop doing this. Right. And my feedback to them is what is the data showing you? So I think even when people have solid financials from their bookkeeper, and they’re able to look at those numbers, you can’t necessarily make decisions based solely on that information, right? If you’re investing in marketing, you should have KPIs that you are analyzing that you can say, Okay, here’s what’s working. And here’s what’s not. And there’s levers there, right? Like, if the marketing is driving people to your website, it’s achieving a goal. But if your website is not converting, it’s not the marketing problem. It’s a website problem. So then you can go and fix that. So that your marketing spend is producing the outcomes that you want. So that’s just one example of not looking at additional data to understand the why behind the financial results you’re seeing on your p&l.
Beautiful, what are some of the numbers of strategies that you look at in your business to keep your money mindset strong? I think, you know, we tend to, when we hear experts speak, put each other on pedestals. And so I think it’s important to remember that we’re all entrepreneurs, and we’re here to help each other. So what are some of the things that you look at? And and how do you keep your money mindset strong,
Sarah Delevan 33:04
I love this. So I am a profit first kind of person in my own business, meaning like it, there’s a book called profit. First, I went through the Profit First training and got certified, because I thought that it was a good extension of what I was sort of teaching my clients already. And in order to even think about implementing it, for other people, I wanted to see what that was like in my own business. So I have multiple bank accounts. And I keep an eye on what the balances in those bank accounts are right? Income, and should be at a certain level two times a month when I transfer that money from income to my other account, so I keep an eye on am I hitting my cash flow targets? Right? Is the money flowing into my business? The way that it quote should be, then I’m looking at, you know, I’ve got an owner’s pay account. I’ve got a team pay account, I’ve got an operating expense account, a tax savings account, how are they in a profit account? How are those accounts looking right? My owners pay and you and I just are gonna have a conversation or you just had a conversation about this, my owner’s pay account is getting big, and I’m looking at it going I would love to take home some more of that money. So I’m gonna have a conversation with my bookkeeper and my accountant and talk about what is the best way to do that. I’d like to look at the team account. And if it’s holding steady, then I keep it where it is, right? If it starts to grow month over month, my team is getting raises. So we’ve got a philosophy where we’re lean, and I want everybody in our company to make a lot of money right? So be helpful to other businesses, create efficiencies, be innovative so that our small but mighty team can reap the financial rewards of the work that we do. So those are some of the things that I keep an eye on. But I’ll also share this, I have a spreadsheet that has every single operating expense listed on it, and how much it costs me for the month. So I know what my capex expenses are for the month, and I know what they will be for the year, I know what my projected revenue is for my clients, as well as my, like my known revenue, and then my projections on top of that, so I have this like, eye on cash flow. And then I’ve got an eye on my projections month to month and annually so that I can also keep track of things like, Am I on target, am I the business heading in the direction that I intended to. And if it’s not, then I can go and, you know, pull some levers in my own business, you know, and invest in growth or whatever it needs to be.
I love that you’re using the same strategies with your clients on your own in your own business and talk to me about profit first. So I know we could probably do a whole nother podcast separately on profit first, but tell me tell the audience, what are some of the reasons to use profit? First, I’ve touched on the topic before, but how does that work for you? How do you see it working for other clients? And are there any pitfalls or things to watch for before you jump in?
Sarah Delevan 36:20
Yeah, I think I mean, one of the I’ll start with the pitfall is, you know, according to if you do it by the book, literally, you you open several bank accounts. And that is not for everyone. There are ways around that with a lot of my clients who only have one bank account. And that’s their preference, what we do is we use a budgeting tool. And so we essentially, I love YNAB It is not meant for businesses, but it really does achieve. It gives you a lot of great insight into your cash flow in your business. So we utilize that to be able to say, okay, here is our, you know, owners pay our business tax savings, our profit, our you know, our team pay, etc. And it allows you to break it down that way. So that’s a pitfall. But I think it’s one that’s easy to overcome. And using the cash flow tool, I think is beneficial for, you know, businesses in general. I’m a bootstrapper. I’m a proud bootstrapper. And I think that in a day in this day and age where there’s a lot of focus on investment and getting investment, and people cheering for companies who who have huge investment, you know, what’s missing from that story in the headlines is how many companies get investment and never achieve profitability, never achieved true sustainability. And they may be able to do good things in the world, right? But for me, and for the majority of my clients who come to work with me, they want to maintain ownership in their company, and they want to be profitable. And so what the Profit First mindset helps us to do is see how much money we actually have. So that we can spend within our means. And that doesn’t mean don’t take out a loan. That doesn’t mean don’t use a credit card. That doesn’t mean you can’t, you know, invest in your own business or get investment. But it means you are truly looking at how much money you’ve got in your company. And being very intentional with how you spend it. They use this sort of small plates analogy, and profit first like, and I don’t love it, but I’m going to describe it here. So if you’ve got a really big plate, you’ll fill that plate with food, most of us would eat all of the food, right? If you’ve got a smaller plate, and you put less food on it, you’ll still eat all the food you might be satisfied with. It’s just sort of like a mind trick, right? It’s not the same with money. But in case that analogy works for people, that’s one that they use in the book.
I can see how that could be helpful. I like the envelope. Yeah, what he got me with was the envelope. And I think I’ve told the story, the podcast before but I love making money when I was in high school and you’re babysitting and doing a lot of cash jobs at the time. And so I would literally I would have envelopes and a dresser I had you know, yeah, we saved for everything as I had envelopes. And yeah, I really resonated with that part.
Sarah Delevan 39:18
And the bank accounts for me are very much those envelopes and what it did for me, I’ll share two things. Number one was when I had all of my money in one bank account, and I had a spreadsheet that told me how that money would be used. But I was kind of like your client who was a little bit afraid to spend. And it goes both ways, right? Like some people are afraid to spend and some people like to spend like crazy I was more afraid to spend and when I separated out the money into the different bank accounts, I immediately saw that I could pay myself more consistently and give myself a raise. So I was like oh, okay, I understood the purpose of Every single dollar in my business and I was empowered beyond what I thought I could be by the simple act of separating my money that way. The other thing is like putting away people, you know, hate paying taxes, and the way that I look at taxes is like, No, I don’t want to pay more than I need to, I want to be strategic about it. But the fact that my company is profitable, and the fact that I can put money aside in a business tax savings account that is earning interest makes me so happy. I remember going into my account every couple of weeks to put money in and seeing that balance grow. I had never set aside, you know, 1315 $20,000 before, and I had just done it within my business. And I didn’t feel strapped for cash that made me excited and proud and happy beyond belief, the first year that that happened. So I think that the visual of having your money that way, and having it broken out, I think is really impactful.
Have you had anybody have issues with the percentages? Being high? Do you use his prescribed percentages?
Sarah Delevan 41:07
We don’t use his prescribed percentages? No, because I think it’s, it’s funny, because when I went through the training, one of the reasons I wanted to go through it was because I was I wanted and I’ve shared this on on one of my podcast episodes, I wanted to challenge every belief that they had, and prove that it wouldn’t work for a food business, but then see if we could make it work for a food business. And they were the team was amazing because they they met me where I was at, and helped me to create tools that I still use to this day, because like, for example, their cogs and how they deal with cogs is quite different than how we do in a food in the food business. So they were really, really great about it. But every single company that I work with has a different set of percentages based on you know,
I love this system, I just have a hard time with the percentages. And yeah, we’ll read the book and they start the percentages, they get very defeated because they don’t have the cash. Yeah. And so they have all these checking accounts that they’re probably not paying fees on because they’re not using them. So I’m glad to hear we’re aligned on that. All right, I appreciate all of your time. Is there anything that I didn’t ask you today that you wish I would have? Or that you think the audience needs to hear?
Sarah Delevan 42:20
No, I think you asked really amazing questions. And I think, you know, I’ll just end by saying that, you know, numbers don’t have to be scary. And, you know, having a relationship with your bookkeeper and your CFO, if you have one, is, I think, one of the greatest assets to your business. And so take advantage, you know, collaborate with those folks and build the business of your dreams because it can be done. Absolutely.
Where can the audience continue to stay in contact with you? Yeah,
Sarah Delevan 42:47
so I’m a big fan of Instagram, I have developed so many amazing relationships through that social media app. So you can find me at Sarah dot Delavan dot consulting. You can visit Sarah delavan.com And you know, view old podcast episodes there and learn about our services and then anywhere you listen to podcasts, you can find the good food CFO podcast, so come check us out.
Awesome. All right, thank you, sir. Thank you. Hey, podcast lovers, I hope you’re enjoying another amazing episode of entrepreneur money stories. I had to interrupt to tell you about an exciting new tool we recently launched. If you’ve been wanting to learn how to start managing your business finances, but don’t know where to start, then visit kickstart accounting inc.com/bootcamp. To receive our new five day video bootcamp series. You will receive a video each day that will take you from accounting overwhelm to money powerhouse. So you’re ready go to kickstart accounting inc.com/bootcamp
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