Transforming Your Money Mindset with Profit First (EP 781)

[Uncle Marv]
Hello friends, Uncle Marv here with another episode of the IT Business Podcast, the show for IT professionals and managed service providers, where we try to help you run your business better, smarter, and faster. And we are in the middle of Uncle Marv's Marketing and Money Month, and it's going to be an interesting month, folks. I've got several guests that are coming on, and we are going to be all over the map, but we are going to hit this from different angles.

And what I want to do right now is if you were listening to the show back around November or December of 2023, my next guest was Uncle Marv. He was a new friend of the show, and we talked about Profit First, and it wasn't just specifically for MSPs. It was really just the Profit First mindset.

And my guest is a certified Profit First professional, a seasoned business consultant, and somebody who understands the unique challenges and opportunities, specifically in the wellness industry. I am talking about Shannon Simmons. Shannon, welcome back to the show.

[Shannon Simmons]
Hi, Marv. It's great to be here. I love being a repeat guest.

That's kind of fun.

[Uncle Marv]
I like having repeat guests, and it means, one, that guests, my listeners, have spoken about you and said, hey, I like that show. So those are the ones I like to have come back. I should tell everybody you are the founder and CEO of Fit for Profit, and that is where the tie-in goes to the wellness industry.

If I remember correctly, the bulk of your clients were GEMS or associated with GEMS?

[Shannon Simmons]
Yeah, that's true. I mean, I would say GEMS, we have some chiropractors and physical therapists, that sort of business owners in the wellness industry. But I have had some IT professionals in the past and some other related businesses or referrals that are not necessarily in the health and wellness space.

[Uncle Marv]
All right. And yeah, we did talk about that because that was kind of the tie-in where, yes, you had some IT folks. So there was a little bit of overlap there.

But the profit-first mindset, as we found out, I mean, it technically doesn't matter the type of business you are. It's really about handling your money the right way.

[Shannon Simmons]
Yeah, exactly. I mean, there's profit-first now, and there have been a couple of derivative books written, profit-first for micro GEMS and profit-first for construction businesses and things like that. But the original book is just profit-first for any business owner.

So the basics work for anybody, and I find are really necessary for most businesses.

[Uncle Marv]
Yeah, I'm waiting for the book, Profit First for MSPs. I don't know who's got the rights to it, but we'll see when that comes out.

[Shannon Simmons]
Yeah, I'm sure it's in the works somewhere.

[Uncle Marv]
Should be interesting. Just a note, listeners, those episodes that she was on were episode 580 and 584. So when you go to the IT Business Podcast website, just type in itbusiness.com slash 580 or slash 584. That will get you to those episodes, and you can go back and listen. Probably the only real recap that we'll do from there is one just to talk about the profit-first system in general. But before we do that, I want to reiterate the fact that we have a little bit of a shared history in the beginning parts of our businesses where we both had a little tax issue.

And I want the listeners to hear that again. We've had a lot of new listeners since then. So can you share your story real quick, and then I'll follow up with mine.

[Shannon Simmons]
Yeah, for sure. So I started my business over 16 years ago now, back in 2008. And at first, it was really just me, myself, and I doing a really part-time kind of hobby business.

And a few years in, I think 2011, my youngest kid went to school. And I was like, OK, I'm going to do this full time. The other piece that I think is important is my husband lost his job at that point.

And so up until that point, he had a W-2 job. And if you know about taxes, when you have a W-2 job, you have withholding done on your income. And that is meant to pay your taxes in April.

And a lot of us count on that getting a refund in April even, right, as W-2 employees. And really, what his W-2 income was doing was paying the taxes for my business. But I really wasn't aware of that.

I knew it, but I didn't really know it. You know, I'm an accountant. So of course, I knew it, but I wasn't really paying attention.

So when he lost his job and I went full time in business, all at the same time, the revenue grew, the business grew. We were taking as much money out of the business as we needed to live on, which was pretty much everything that was generating. So we weren't saving anything for taxes.

So the next year when I filed my taxes, I knew that I was going to owe money because we didn't have his withholding anymore, but I was not prepared. And so we had a tax bill that we couldn't pay. And as an accountant, that really sucks, you know?

I mean, that's like going to the personal trainer that is out of shape and you can tell. The only difference is you can't tell by looking at me that I have a tax bill that I can't pay. But I'm pretty honest about that story because it's a story that I hear from so many business owners.

And it's really what started me on the Profit First journey. I started a tax account then without it. And I didn't even know about Profit First yet.

So when Profit First came, it was just the natural evolution for me. But yeah, I mean, we all screw up every once in a while.

[Uncle Marv]
Yep, that is true. Yep. And my story is kind of similar.

When I started my business, I started out. First, I started out as a fictitious name business, which you can do down here in Florida. And you could do that for, I think, up to five years before you have to declare your official tax status.

And the first couple of years was fine. I would put aside the estimated tax and pay. And I didn't have an accountant.

I just did my taxes on my own. You know, back, I don't know if Quicken was really in the swing of it back then. I think I used another tax thing.

And then I forgot how I did my taxes. But for the first couple of years, no big deal. And 2000 came along.

And I had a big old tax bill. I got sent one of those letters from the IRS. So that's what got me to realize, oh, I need to change this.

And I incorporated and started officially taking a paycheck, setting that money aside. And that's how my journey started. But back then, when you're just starting out, some of those, you know, when you get a multi-thousand dollar tax bill and your business isn't doing multi-thousand a month.

[Shannon Simmons]
Yeah, your stomach just kind of drops out. Like, literally, as you were talking about it there, I was like, oh, that doesn't feel good.

[Uncle Marv]
No, it did not. So I kind of, like you, got on that journey early. Although, you know, again, there was no profit first.

I had heard about the envelope system, although I didn't really like the envelope system. But I did have a sense of, you know, you need to set aside a budget each month for doing X number of things. Whether it's, you know, the expenses for the rent, the lease, the utilities.

Obviously, your paycheck, conferences, all of that stuff. So I had kind of started doing that, but I still did it in one bucket. So the accounting program is where I separate everything out.

And one of the big pillars of profit first is, you know, setting up individual bank accounts for specific purposes. You mentioned setting up a tax account. And there, I think, is it seven banks?

Or five to seven in the profit first system, if you do it full on, right?

[Shannon Simmons]
Yeah, minimum of five, for sure. Can go really anywhere from there. But I would say five to six, depending on whether you have other people working in your business.

So if you have payroll in your business, then I would definitely recommend six. But if not, you could probably get by on five.

[Uncle Marv]
All right. And I do know that usually the first one, you know, you talk about, there should be an owner's pay, taxes, operating expenses. Those are the ones you got to start with.

Let's talk about a couple of myths about the profit first. I don't want to go too deep into the system itself. A lot of my listeners have the book.

If you haven't read it, shame on you. But in terms of the myths, the first big myth, and I'll be honest, I'll give you a story right afterwards to kind of talk about that. But the first big myth is that, you know, the more bank accounts I have, the more work it's going to be.

So when you hear that, what are the comments that, well, first, what are the thoughts in your mind? And then what do you allow to come out loud?

[Shannon Simmons]
Yeah, it's kind of interesting. Thoughts in my mind are, well, what are you doing to manage your money? Like, how is it working for you right now without having bank accounts, right?

A lot of people have a lot of stress around money. And what we found when they implement these bank accounts, the stress goes down. So the work might go up a little bit, but if the stress goes down, is it worth it?

Kind of situation is kind of the thought in my head. Um, the other thing that I tend to tell people is, like you said, Marvin, the way you were doing it was in your accounting software. And most people are not doing that either.

And so they can't even have one bucket and then go and check in their accounting software to see how much they've spent against their budget. They're really just running blind, quite honestly, from when it comes to money in their business. And so I don't know that more bank accounts is more work.

I feel like people just think money is work, right? Doing anything with money is work. And to be honest, yeah, it is.

But if it's going to work for you, wouldn't you rather have a system that's going to help you do it well rather than just running blindly and letting it cause a lot of stress? So the other thing I say is there are only eight additional transfers that you need to in your accounting software every month when you have profit first. So we're talking eight additional transactions that you need to do.

[Uncle Marv]
Okay.

[Shannon Simmons]
That's really not a lot of work.

[Uncle Marv]
Eight sounds easy.

[Shannon Simmons]
Yeah, it's pretty easy.

[Uncle Marv]
Yeah. The second myth that kind of follows that is a lot of people think that, well, if I set up these eight transactions automatically, then it's almost a set it and forget it type system, which I'll be honest, I can debunk that myth because I've tried to do that. And no, that does not work.

[Shannon Simmons]
Yeah. One of the benefits of using profit first is that you can always improve your business. You learn a lot about your business when you're managing cash this way, and then you can improve the business.

So it's not about figuring out where you are right now and staying there. I mean, most of us don't want to stay there as far as owing taxes, right? Or not having very much or any profit or not paying ourselves.

So if we set it where we are and forget it, we're going to be in the same place we are forever from now. And I don't think that's really what we want. So that's my big answer to set it and forget it.

There are now ways that you can set it and forget it. But I do push back against some of those banks simply because I think there's a lot that we can learn by actually doing it ourselves and then improving on what we figure out we need to do at the very beginning.

[Uncle Marv]
All right. So you mentioned the keyword banks. So after our last chat together, you and I were talking about profit-first friendly banks, because I think when I had looked at this before, and I forget when I got the book, I may have gotten the book in 2018 or 2019.

I remember going to my bank, my primary bank, and talking to them about multiple accounts. And they were like, yeah, we're not going to do that. So I never did it.

And I would do the thing where I had my bank check, my business checking account. I had a business line of credit with them, in that I would have my credit cards that I would set up for travel. I had one for client expenses.

And that was kind of how I kept things separate. I did not have an account set up separately for owners pay for me, although I was paying myself a regular paycheck. And those taxes were recorded properly.

But I did not have one set up for business expenses, rent, utilities, that sort of stuff. So I had my landlord come to me and say, hey, we want to have you, instead of writing a check, pay us by ACH. I said, OK, this will be a great time to get a separate bank account.

I can start that process. Called up the bank that you had recommended. Are we allowed to say their name?

Because I'm going to say their name.

[Shannon Simmons]
Yeah, you can say their name for sure.

[Uncle Marv]
So Relay Bank or Relay Financial was the bank. Getting the account set up, easy. Getting the ACH set up, not so much.

And so that was my struggle with them. And I ended up going with another bank, another account, but I could do the ACHs and stuff like that. But of course, they were absolutely wonderful.

You can sign up once, set up as many accounts as you need. You've got virtual credit cards. I think they did send me a physical debit card when I was using them.

So that was something that I think if people were looking for the easy way to do it, Relay Bank was obviously an easy setup. I don't know if they fixed the ACH thing, but.

[Shannon Simmons]
Yeah, it's kind of interesting. We, I mean, like I said, we do have several clients using them. You can, like Marv said, it's really easy to get it set up.

And then once you have all your accounts set up, you can say, I want a percentage, this, a certain percentage of this account to go to this account every Sunday or every Friday or whatever. So you can set it all up to be automatic as far as the transfers go. We've had different people have different experience with them.

I use them personally and I've never had an issue. And there are other people who have had issues. So I can't say that you won't have an issue.

I can say that most of our people have had a good experience. And what I really like about them is, this is me as an accountant. They are the only bank who really wants to work with accountants and their clients.

So when we send a client directly to them, they actually get a higher level of service. So that would be something where if you're looking at it, and you're really wanting to work with a profit first professional as well, reach out to them and see if they have a VIP referral that they can give you so that you can get one-on-one support then. And maybe they could figure out the ACH thing at that point or any other.

Like I said, there have been a couple other smaller issues that have come up, but they are, I have found their support to be really good.

[Uncle Marv]
Maybe that was just me being stubborn. Because I'm like, this should be easy. I should be able to do this, but I didn't have time to.

I think I sent in a support request and didn't get a quick enough response. That may have been just me.

[Shannon Simmons]
Well, and sometimes when we need things to happen yesterday, they tend to take longer than if we would plan a little bit. And that's myself included in that.

[Uncle Marv]
All right. So let's kind of talk about now, I guess, what's happened in the last year and X amount of months.

[Shannon Simmons]
Yeah. So one of the things that I'm most excited about is we created a program called the Embodied CFO, which is really kind of the next step beyond profit first. And I'll just tell you a little bit about where this came from for me.

I've been doing profit first with clients since 2014. So 11 years now. And we run into so many just different situations.

And it's so interesting to me how, Marv, you had your tax story and that led you to put yourself on payroll. Other people have their tax story, and that leads them to think that somehow they're just awful and they'll never be able to run a business and they just quit or shut down. So it's really just interesting to me how the same situation can affect different people in different ways.

And what I realized was we were running into those situations. For example, we have somebody with over six figures in their owner's pay account and will not pay themselves from their business. So there are, I just tell everybody, everybody has a relationship with money, whether you know it or not, you have a relationship with money.

And sometimes that money, that relationship is really supportive. And sometimes that relationship is holding you back. And so the embodied CFO is really just to help people become aware of what their relationship is with money in the first place and see if there is room to cultivate a more supportive, beneficial relationship rather than living in fear, scarcity.

That's really what's going on with that $100,000 that can't be spent situation. So it's been a lot of fun. We've had a lot of people go through that, but it really has been about, really about that relationship with money and helping people to see where they can, where they can just shift that mindset really a little bit so that they can learn some new skills and really propel their business and their personal lives forward when it comes to money.

[Uncle Marv]
Okay. So before you go on, I have questions.

[Shannon Simmons]
Yeah, I'm sure.

[Uncle Marv]
Because I can understand to some degree, there are business owners that when they, when they first start out, we are told invest everything back into the business. So I could see at that point, you're only taking out the money you need. Uh, but I can't imagine having that much money sitting in an account and not paying themselves.

I mean, they've got to be paying themselves something, right?

[Shannon Simmons]
Something.

[Uncle Marv]
Okay.

[Shannon Simmons]
It's minimal.

[Uncle Marv]
But they're just letting money sit there. And you're saying it's really because of fear. Like they just, they feel safe with it there in case something happens.

[Shannon Simmons]
Yeah, exactly. So I don't really know. I haven't actually been able to dive into this with this specific person, but we've seen similar situations.

It's a lot of times it has something to do with that origin story. And it may not be the business origin story. It may be how they grew up.

So for example, maybe they didn't have a lot of money growing up. And now they just feel like they have it and they don't want to spend it because they don't ever want to go back into that situation where they didn't have a lot of money before. Or the exact opposite can be true.

And this is what is so fascinating to me, because the situations are completely different, but the result is the same. Maybe they had a lot of money growing up. And now they feel like they have to have a lot of money sitting in their bank accounts in order to be safe going forward, you know?

So it's just, it could be either way, but it's about that safety. What feels safe to them in their bank accounts. And so for her, it's having a lot of money in her bank account.

[Uncle Marv]
Interesting.

[Shannon Simmons]
Crazy.

[Uncle Marv]
So my wife listens to the podcast right now, so I can't tell our story. We had something similar where, you know, we had a bank account. It was actually a savings account that had plenty of money.

And it was like, that's not enough. I'm like, wow.

[Shannon Simmons]
Yeah. So yeah, like I said, it manifests itself in like, way different stories can manifest themselves in the exact same behaviors right now. And really what the Embodied CFO program is all about is helping people get to like, what is the cause of that behavior?

And how can we start to like, look at that differently? So look at that same cause and say, you know, that made sense then, but that doesn't really make any sense anymore. Let's take a slight shift in that so that we can again, like some people, it's how can I spend money to invest in a business?

Or I want to have another business. Can I invest in that? But they won't because they need to save the money in their bank accounts.

So there's lots and lots of ways it can be holding you back.

[Uncle Marv]
Okay. So the Embodied CFO program, one is to help them, you know, understand that relationship better. Is it in a sense helping them with a virtual CFO?

Or are they, or is this a, I don't want to call it a step program, but is it something where if a company's large enough that they need to get a CFO? I mean, where does that sit?

[Shannon Simmons]
Yeah. So it's kind of the name of it actually came from people who aren't ready yet to hire a CFO, but they still need somebody fulfilling that role in their business. Okay.

Right. So like even a solopreneur, I like to think about a solopreneur has to wear many hats throughout their day or week or month. Right.

And one of those hats is a CFO. Whether they know that that's what they're doing or not, that's what they are doing. And the more skills we can give them, the more tools we can give them, the better relationship they have with money, then the better they fulfill that role of being a CFO.

Even if it's only for a couple of hours every week or every month, right? They're doing it. And then they, that gives them the ability to grow their business where maybe someday they'll be able to hire a CFO.

But really this is for somebody who isn't ready to hire a full-time CFO, but needs to fulfill that role themselves and doesn't think they're cut out for it yet.

[Uncle Marv]
All right. And for somebody who kind of hears this and thinks, Ooh, what kind of tools are out there that could help me do that? I mean, is there, are there some examples you can tell people ahead of time or are these tools that no, you really got to dig into it because, you know, they're not like tool tools, right?

[Shannon Simmons]
No, I mean, they're not necessarily tool tools, but I mean, there are, you know, we have like a budgeting tool that we work through with people. We have a growth. I don't actually like the word budgeting because it feels really restrictive.

So we actually call it your growth plan. What is your growth plan and creating a growth plan so that you can manage your money towards that growth plan. So budgeting and forecasting are included in that.

We also have some pricing tools. So these are things that like CFOs would be doing for their businesses, but you don't have a CFO yet. You can use these tools.

Cashflow planning tools are all included in the CFO. So in our program, so those are just tools that are out there for other, I mean, you could probably Google them and find tools such as those. We've just put that embodied CFO layer into it.

We've also put the profit first layer into it, right? Because those are systems that we feel are really important for business owners.

[Uncle Marv]
I mean, you made the comment, you know, yeah, you can Google stuff, but I mean, Googling sounds, I was going to use the word lame, that's not the right way to say it because there's so many things out there. And the question is going to be, well, how, how do I know which tools are best? So that's why I asked, I mean, are there, you know, recommend recommended tools that you can go with, or are these tools that you have within, you know, fit for profit that are going to work for them?

[Shannon Simmons]
Yeah. So the tools that we have in the embodied CFO program are ones that we've created. And like I said, we layer in the embodied CFO.

The other part that is really important, I think like Googling tools, using chat GPT to analyze your profit and loss, you can absolutely do that. But if you still don't understand, if you don't have the training to use the tools, it can still throw you right back into that. I just have to save more money because I'll never have enough money situation, right?

Or whatever your story is, you know? So that's why, like I said, we layer the two together. We train people on how to use the tools, not just giving somebody a tool, because you have to use it for it to matter.

[Uncle Marv]
Yeah. For MSPs, taking your 2024 P&L statement and throwing that into chat GPT and saying, calculate my EBITDA probably isn't a good thing to do.

[Shannon Simmons]
Right. And it'll just spit you out a lot of stuff that will probably either really make you excited and shouldn't or really scare you and shouldn't.

[Uncle Marv]
Okay. I know that when we were on before, there was a worksheet that you gave for a download. But I know that on your site, there's a resources tab.

And there's a lot of different tools now. Um, I just want to ask this question in terms of the business fitness guide.

[Shannon Simmons]
Yeah.

[Uncle Marv]
What is that?

[Shannon Simmons]
Yeah. So interesting. Earlier, you mentioned the word pillars, and we also have pillars and love pillars.

Aside from profit first, we think there are five pillars that go into really managing and growing any business. And that guide lays out all of those five pillars. Obviously, one of them is cash flow and profitability, which is really centered around profit first.

We also talk about money mindset as one of the pillars. There's another pillar strategy and execution and then financial foundations and systems and operations. Those are the five pillars.

So that guide gives you a little bit more information and gives you some statements that you can assess yourself and your business. Against to see where you line up as far as creating a fiscally fit business.

[Uncle Marv]
All right. I probably cut you off, but I should go back and make sure that I allowed you to finish with the embodied CFO. Was there anything else that we needed to chat about that?

[Shannon Simmons]
No, I don't think so. The only other I was just going to say, you mentioned the resources page. But if you want the shortcut to that guide, you can do fit for profit.com backslash kit and you'll have the guide. And then there's an actual assessment that is this guide in an assessment formula format. And then there's also a training video that goes alongside that. So it gives you a little bit more insight into the guide that Marv and I just talked about.

[Uncle Marv]
OK, great. And we should still say that you've got your services. You've got both a group service and a one on one coaching program, right?

[Shannon Simmons]
Yeah. And we have bookkeeping services that are just kind of fundamental and foundational to all the other work we do. But some people just need a good bookkeeper and we can do that, too.

[Uncle Marv]
Well, that helps. Yeah, that helps us a lot. All right.

Shannon, thank you very much for hanging out with me again.

[Shannon Simmons]
And it's great to be here.

[Uncle Marv]
I think that's a new frame behind you, right? I know that listeners can't see this, but I think for me, either the frame is different or the pictures are different.

[Shannon Simmons]
Some of the pictures are definitely different. I don't know if it's a new frame or not.

[Uncle Marv]
All right. You got the Profit First book up there and somebody is a baseball star.

[Shannon Simmons]
And some kids. Yeah, I was going to say those are the ones that have definitely changed. But yeah, I have a baseball player and a senior in high school.

[Uncle Marv]
Yay.

[Shannon Simmons]
Yeah.

[Uncle Marv]
All right, folks. So fitforprofit.com. Shannon Simmons and helping understand the Profit First system.

Basically, guides on how to set up and manage it. And I had notes here, but I lost them. Very good.

You started your Fit for Profit in 2008.

[Shannon Simmons]
2008. Yeah. Like I said, just over 16 years now.

[Uncle Marv]
Nice. All right. Well, Shannon, thank you very much.

I was just looking to see if there was a nugget I could pull out. But all I have here is struggling to pay your taxes.

[Shannon Simmons]
It's a super common thing. Not just taxes. Any bills.

If you're struggling to pay them, there's help out there for sure.

[Uncle Marv]
Yeah. But yeah. So folks, go to her site.

Download the guides. They're really great. They can give you guidance on setting up and managing the system and setting up your allocations into profit, owner's pay, taxes, accounting expenses, whatever else you need.

I'll have a link to the Relay Bank. Because even though it did not work for me, it may work for you. It may work for me again someday.

So try that. Shannon, thanks a lot for hanging out.

[Shannon Simmons]
Thank you, Mark.

[Uncle Marv]
All right. That's going to do it, folks. And thank you for downloading and listening to another marketing and money episode in March.

And we'll be having a lot of these throughout the rest of the month. And of course, we'll have our regular shows on Wednesday, 8 p.m. Eastern. And I've got more of the live shows from Orlando at the Zero Trust World from ThreatLockers event that I've got to put out there.

Lots of other things. So just subscribe on any of the platforms, YouTube, LinkedIn, or the Facebook, or your podcatcher at ITBusinessPodcast.com. And on behalf of my friend, Shannon Simmons from Fipper Profit, thank you for tuning in.

We'll see you next time. Holla!