Seeing Your Vision Through the Numbers

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We were recently asked a great question by an entrepreneur on a customer discovery call.

Their question was “ What tools should my business have in place to help me see into the future ?”

By way of background, this is a Small Business in the service industry with 18 employees and doing about $3.5M in revenue with a 15% net profit margin.

We love this question for a few different reasons.

First, it shows that the entrepreneur has a vision.

Second, the entrepreneur wants to use data to make decisions. Amazing!!!

Numbers

Lastly, the entrepreneur is placing some weight on the value that his accounting and finance team can bring to the table as it relates to painting the vision through a financial lens. Doubly Amazing!!!

To quote Gino Wickman, the founder of EOS, “Vision without traction is a hallucination”.

Ain’t that the truth?

We believe a big part of gaining traction is having a clear financial vision that can be executed on a weekly, monthly, quarterly, and annual basis.

Full disclosure, we are a Company that runs on EOS, and we happen to be data experts. 

The system has helped us to grow the Company 3x since graduating from implementation. Even if you don’t run on EOS, this post will surely help you out. 

We know firsthand as some of the thoughts and frameworks have helped us get better.

In this article, you will learn about: 

  1. Obstacles that get in the way of financial vision
  2. 2 tools to give you financial vision
  3. Top 3 Takeaways

Let’s dive in.

Obstacles That Get in the Way of Financial Vision

Believe it or not, the first obstacle that we often see is a lack of vision.

In Jim Collins’ article published in the Harvard Business Review on building your Company’s vision, he describes vision as having two parts. 

It is a 10-30-year audacious goal along with a vivid description of what it will take to achieve that goal. 

It should be inspiring, vibrant, engaging, and clearly defining the “Mountain” you are looking to climb.

At New Economy, our vision is to love Entrepreneurs into limitless possibilities.

So if you don’t have a vision, it’s time to get clear and create one.

The second obstacle we see is the entrepreneur does not have the right Team in place to support the vision. 

Here we are specifically speaking to the accounting and finance team and the value they can provide to support the vision.

There are key roles within the accounting team that have specific skills and functions. There are accountants, controllers and CFOs that can all play roles on the team but stepping into the vision requires specific skills.

Check out this blog on the key differences between roles here.

A mistake entrepreneurs often make is assuming their accountant can handle this role; in most cases, they can’t.

Numbers

In the example of the $3.5M service Company, we believe that a strong controller will be able to support the financial engineering of the vision. They do not need a CFO and an accountant or bookkeeper does not have enough experience.

Another obstacle we see is that the Right Tools are not set up.

Once you have the vision and the right financial team in place, you can then start to think about tools.

A few things we see tools lack are the following:

  • There are no forward-looking financial tools in place
  • The Financial Tools are not built to allow for the running of scenarios
  • The Financial Tools are not updated frequently enough
  • The Financial Tools are not automated where it makes sense 
  • Financial Tools are disconnected from business decisions

The tools are important. They are gauges for the business like those on the dashboard of your car. 

They tell you how you are doing financially against your goals and your scorecards which is an indicator of the financial condition of your business. 

If you’re financially healthy, great keep investing in the vision. If you are not financially healthy, stop and fix the problem. 

Great insights to have. Don’t underestimate the power of tools and their ability to paint a picture of your vision.

Summary

All of these obstacles are easily overcome by making good decisions. 

First, make sure you have a vision. Then get the right financial team in place to support that vision. Lastly, empower that financial team to implement new tools to help paint the financial picture of your vision.

Keep reading to learn about the actual tools.

2 Financial Tools to display your vision

These 2 financial tools will help you with the following relating to the financial resources needed to achieve your vision:

  • Make good decisions 
  • Have peace of mind 
  • Have confidence 

Many entrepreneurs we have met have amazing intuition or “gut”. And we believe combining that with timely and accurate data creates a pretty awesome 1-2 punch.

Here are the two tools.

Cash flow forecasting tool

The first tool is the 13-week rolling cash flow forecast. This tool is all about future-looking cash. Imagine a world where you can see cash flow out over the next 3 months into the future. 

By leveraging this tool you will have a feeling of financial security based on the ability to predict cash flow needs by:

  • Know when, where, and how your cash flow needs will occur
  • Know the best resources for meeting cash flow needs (Debt, Equity, Factoring)
  • Be prepared to meet those needs in advance
  • Set goals for building cash reserves
  • Set goals for paying down debt

And how does this relate to vision? 

We believe that cash flow is the jet fuel that allows you to chase down this vision. 

By having visibility into your detailed cash flows you are able to get a sense of if you are able to support the investments needed to achieve your vision. 

It is that simple. You will gain an understanding of your ability to invest in your vision.

Click here for a more detailed posting and to download our free cash flow tool here.

One-Year Budgeting tool

To produce cash flow, your business needs to produce a profit. In other words, when your business is profitable you will likely have cash flow.

The one-year budgeting tool is essentially your profit and loss statement budgeted out over the next 12 months into the future.

Think of your small business budget as the monthly financial roadmap to obtaining your vision.

You will gain an understanding of the overall investments needed around staffing, operating expenses, and revenue generation needed to accomplish your vision. And whether or not you will need to be profitable and produce cash flow.

Many businesses shy away from budgeting and believe it’s all “crystal ball” stuff.

In some ways it is, but it allows you to consider your vision and how you are going to fund it. 

If you are interested in learning how to create a one-year budget, check out our detailed blog post here.

Here is a pro tip for you. 

Once the budget is created things may go sideways. That is just the way it is. 

At New Economy, we lock down the budget and forecast each month. It’s a similar format but you get to get in there and play with it, unlike the budget which is set.

A forecast is applying the information we are learning and changing the budget to reflect a more accurate picture of what is happening in the business. 

But we always look back to the budget to make sure that we are heading in the direction of the original budget we set.

Summary

It takes some thought and time to put these two tools in place. 

However, they are tools that are “living and breathing” just like your business. They will become instrumental in helping you to make good decisions to build and grow your business and achieve your vision. So our advice, invest to reap the benefits.

3 Key Takeaways

Your vision is very important to your business. Equally important is to ensure you have the cash and profits to chase down your vision.

Here are 3 key takeaways.

  1. Make sure you have your vision dialed in. You want everyone to know where you are taking them too. And also the role that they play in advancing towards the vision. This work takes time, patience, and lots of thought. Give it the time it needs.
  2. Make sure you have the right team in place. To produce forward-looking financial narratives that help you connect your cash resources to your vision you probably need a strong Controller on your team. They will have the right skills to help you articulate your vision in the form of a financial plan.
  3. Empower your accounting team to build and automate the right tools. There is an investment in pulling together both the 13-week rolling cash flow forecast and the 1-year budget. However, the benefits of having these tools in place far outweigh the investment.

There you have it 🙂

Numbers

New Economy Team Members are Experts in Accounting for Entrepreneurs

If identifying ways to decrease your taxes is not in your skill set or you want to gain control of your finances to make smart decisions to build and grow your business, New Economy is an excellent partner. 

We’ll help you get your accounting and taxes done, and done right.

Schedule a time to meet with our Founder, Jeff, and discuss how we can add value to your situation.

Creating a Compelling Company Vision Using EOS – Part 2

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Creating a compelling vision for your Company is extremely important – and it does not have to be complicated or overwhelming.

At New Economy, we have leveraged 8 questions to help us wrap our arms around our overall vision and strategy.

In our first post, (see link here) we covered the first 4 questions:

  1. What are your core values?
  2. What is your core focus?
  3. What is your 10-year target?
  4. What is your marketing strategy?

We highly recommend reading the first post before continuing on. In that post, we share the answers that we came up with at New Economy to help you get started.

We believe in creating a clear vision and communicating it to everyone.

EOS Business

Full disclosure, we are a Company that runs on EOS, and we happen to be data experts. 

The system has helped us to grow the Company 3x since graduating from implementation. Even if you don’t run on EOS, this post will surely help you out. 

We know firsthand as some of the thoughts and frameworks have helped us get better.

In this article, you will learn about: 

  1. 4 remaining key questions to help you create a compelling vision
  2. 3 key takeaways

Let’s dive in.

Refresher: 8 Key Questions to Help You Clarify Your Vision

As a refresher, below are the 8 key questions to help you clarify your vision. New Economy, we have taken the time to answer these 8 questions. 

If you need some background on what exactly vision is, check out Jim Collins’s article published in the Harvard Business Review entitled Building your Company’s Vision. You can find it here. 

Much of this is inside work that no one can do for you. The questions we will present will help you along the way.

Here they are:

  1. What are your core values?
  2. What is your core focus?
  3. What is your 10-year target?
  4. What is your marketing strategy-?
  5. What is your 3-year picture?
  6. What is your 1-year plan?
  7. What are your top priorities over the next 90 days?
  8. What are your issues?

In this post, we will run through questions 5 – 8.

We will provide a bit of background and provide the answer we came up with at New Economy.

Question #5 – What is your 3 year picture?

Having answered the previous questions, you know who you are, what you are, where you are going, and what marketing strategy you will use to get there. Now it’s time to consider what the business will look like in 3 short years from now.

At New Economy, we love the 3-year picture. It allows us to get up to 30,000 feet and dream while at the same time bringing us back down to the ground floor and having detailed budgets for the next 3 years to support that vision.

Also, the decisions that you are making today should align with the direction you are illustrated in your 3-year picture. So the decisions are powerful and must be aligned with getting you to where you want to be.

Our 3-year picture at New Economy is illustrated as follows as of December 31, 2026:

EOS Business

Beyond our financial measurables, we believe that it looks like the following:

  • Culture of high satisfaction days
  • Culture of pay for performance  
  • Key partner to companies running on EOS
  • Best practices and processes to support SAAS, construction, service & e-commerce companies
  • Using speaking, writing, podcasts & video to advance the mission of New Economy
  • Marketing generating leads 
  • Wrap Around team caring for and loving our people
  • Career success plans for all team members
  • Customer success plan for all clients
  • All core processes are operationalized through Financial Cents
  • Increased efficiency through technology
  • Someone else running the LT team besides Jeff

As you can see, we have created an image of what New Economy will look like in three years. 

It is important to have this documented so that you can move into the 1-year plan and start making moves to get yourself closer to your 3-year plan.

Here are some tips for coming up with your 3-year plan:

  1. Schedule time with your leadership team to specifically discuss what it looks like
  2. Make sure everyone believes in the plan and wants it
  3. Encourage feedback and folks to speak up with concerns
  4. Memorialize the plan so you can measure your progress on an ongoing basis

Question #6 – What is your 1-year plan?

Giddy up.

We are now bringing the longer-range vision to the ground level and making it real. This plan is for those who love to get stuff done.

Here we must decide what has to get done this year. 

We believe less is more and have found that we overestimate what we can do in one year and underestimate what we can do in three years.

Our 1-year picture at New Economy is illustrated as follows as of December 31, 2024:

EOS Business

Beyond our financial measurables, we have created Company goals for the year:

  • All core processes run on Financial Cents
  • Customer success plans for 10 clients
  • Career success plans for all core team members
  • 3 experienced new hires

Now you have 1-year goals and a budget in place to support your 1-year plan. At New Economy, we take it a step further and break it down into the next quarter we are facing.

This brings us to our next question.

Question #7 – What are your top priorities over the next 90 days?

We refer to our top quarterly priorities as rocks. These are the most important things that must be accomplished over the next 90 days. 

It’s possible that these rocks connect into an annual goal, and by investing time in the quarter, you are moving closer to the annual goals.

We have created the following measurables for Q-1 of 2024:

  • Revenue is $531,000
  • Gross profit is 49% or $260,000
  • Net profit is 17% or $90,000

We have created our top priorities for Q-1 of 2024:

  • All Team Services running on Financial Cents
  • Make an offer to an experienced hire interested in supporting EOS companies 
  • Set up Time Tracking & Capacity Management in Financial Cents
  • All Operations & Customer Success processes running in Financial Cents
  • Schedule 9 zooms with EOS implementers or integrators
  • Sell $18K or MRR or $39K of total new revenue

We leverage the system of making our goals and rocks SMART. 

Meaning we want them to be:

  • Specific
  • Measurable
  • Attainable
  • Realistic 
  • Time Bound

For more information on SMART goals refer to this Harvard Business Review Article to get you started.

Ok, we are covering lots of ground. We are almost there, stay with us.

This brings us to our final question.

Question #8 – What are your issues?

This is a tough one at first.

But once you get comfortable with openness, honesty, and transparency you can address pretty much anything.

An issue is an obstacle that could prevent you from reaching your targets. The sooner you accept that you have issues, the better off you will be. You will always have them and your leadership team is responsible for solving them.

Currently, at New Economy, we have 30 issues on our issues list. Our leadership spends 60 minutes per week solving these problems which increases our probability of success.

Here are some tips for coming up with your issues list:

  1. Schedule time with your leadership team to specifically discuss issues
  2. Consider all the obstacles, concerns, and opportunities you face
  3. Take them one at a time. Focus on getting to the root cause of the issue
  4. The goal is to remove the issue by solving the problem. Make sure someone is assigned responsibility for any to-do’s relating to the issue
  5. Review your issues weekly

As mentioned, issues can be tough, but once you get into it, you realize that everyone has them. And the more you work at solving problems the better you become.

 

 

You now have a compelling vision with a 3-year, 1-year strategy supported by a marketing plan, and you are dealing with your issues on a regular basis.

But this is one last key piece.

You need to share this vision with your employees. The only way you can do this is to tell them. You must tell them over and over.  You want everyone’s energy going in the same direction towards the common vision, goals, and rocks you have created. 

When that happens, it will create an exponential force helping you to achieve your vision.

Here are some tips for sharing your vision:

  1. Share it during new employee onboarding
  2. Share it at your annual Company meeting
  3. Share it at your quarterly meetings. 

They say it takes folks 7 times before something sticks. So keep repeating yourself here, it’s worth it.

Summary

We have covered all 8 questions to help you create a compelling vision for your Company. We have found that focusing on these topics has helped us to create a  foundation to grow New Economy. 

And you can too.

3 Key Takeaways

This is some heavy and impactful stuff. It will help you to build a solid foundation to build and grow your business. We are living proof.

Here are 3 key takeaways.

  1. Spend some time on the 3-year plan. This should be fun and practical. It should drive the decisions you are making today and connect back to your longer-term vision. Early on, we lost sight of the 3-year plan which can create a rudderless ship. Now we have the 1-year plan lining up with our 3-year plan which helps us to ensure that we are on track.
  2. Run into your issues not away from them. The more open you are to solving your problems, the faster you will be able to chase down your vision. Be open, honest, and vulnerable. Encourage others to do the same.
  3. Constantly share your vision. You need to find ways to get your vision in front of your employees. They are critical to your success. They need to understand where you are taking them and the role that they will play in the vision. Connect those dots for them and you will have alignment that will move them and your business forward.

There you have it 🙂

We are living proof that this system works.

EOS Business

New Economy Team Members are Experts in Accounting for Entrepreneurs

If identifying ways to decrease your taxes is not in your skill set or you want to gain control of your finances to make smart decisions to build and grow your business, New Economy is an excellent partner. 

We’ll help you get your accounting and taxes done, and done right.

Schedule a time to meet with our Founder, Jeff, and discuss how we can add value to your situation.

EOS Business

Creating a Compelling Company Vision Using EOS – Part I

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First off, we would like to say that culture eats strategy for lunch – but that post is for another day.

At New Economy, and in terms of strategy, we believe a big part of our success has been in creating and communicating compelling visions for our team.

We invest lots of time in getting everyone to see the vision of where the business is going and how we are going to get there.

Sounds easy, right? Well, it’s not.

For instance, you may not have a documented vision or are struggling to create vision. Or maybe you do have vision but some staff are moving in one direction and others are moving in a different direction, causing a lack of alignment. 

EOS Business

We believe in creating a clear vision and communicating it to everyone.

Full disclosure, we are a Company that runs on EOS, and we happen to be data experts. 

The system has helped us to grow the Company 3x since graduating from implementation. Even if you don’t run on EOS, this post will surely help you out. 

We know firsthand as some of the thoughts and frameworks have helped us get better.

In this article, you will learn about: lll

  1. 8 key questions to help you create a compelling vision
  2. 3 key takeaways

Let’s dive in.

8 Key Questions to Help You Clarify Your Vision

At New Economy, we love questions. We find they help us to think, reflect, and be more mindful in our approach. We have taken the time to answer these 8 questions.

The questions will help you to clarify exactly what your vision is. 

If you need some background on what exactly vision is, check out Jim Collins’s article published in the Harvard Business Review entitled Building your Company’s Vision. You can find it here. 

Much of this is inside work that no one can do for you. The questions we will present will help you along the way.

Here they are:

  1. What are your core values?
  2. What is your core focus?
  3. What is your 10-year target?
  4. What is your marketing strategy?
  5. What is your 3-year picture?
  6. What is your 1-year plan?
  7. What are your top priorities over the next 90 days?
  8. What are your issues?

This is a two-part post. In part 1 we will cover questions 1-4 and in part 2 questions 4-8.

Let’s run through each question. 

We will provide a bit of background and provide the answer we came up with at New Economy.

Question #1 – What are your core values?

These are a small set of guiding principles for your Company that will never change. They define your culture and who you are as people. 

You will hire, fire, and attract people based on these values. They will be used to make decisions and are traits that your A players exhibit. These are so foundational for your business that we could not imagine operating without them.

Our core values at New Economy are:

  1. Deliver awesome service
  2. Embrace change
  3. Be passionate, own it
  4. Continuous learning and growth
  5. Open and honest relationships

It took us some time to nail down our core values so don’t be discouraged. This deserves your time and attention. The things you value are right in front of you; they just got lost in the day-to-day chaos of running the business.

Here are some tips for coming up with your core values:

  1. Schedule time with your leadership team to specifically discuss the things you value
  2. Consider all the qualities that your A players exemplify
  3. Narrow the list down
  4. Make the tough decisions as to what is truly core
  5. Limit the list to 3-5

Question #2 – What is your core focus?

With everything going on in business, it’s easy to get off track. As a leadership team, we have focused on establishing a core focus and not letting anything distract us from it.

Your core focus is also known as your mission statement. It is your “why you do what you do” or “why your organization is alive”.

All things lead back to your mission. It prevents you from chasing shiny objects and heading down a dead-end path.lllo

Our core focus at New Economy is To Unleash the full potential of the Entrepreneur.

Here are some tips for coming up with your core focus:

  1. Schedule time with your leadership team to identify why your Company is alive
  2. Keep it to 3 to 7 words and use simple language
  3. Let it be bold and come from the heart
  4. Make sure it’s bigger than a goal

Keep working at it. This type of work takes time and comes from within but it’s worth the investment of your time.

 

Question #3 – What is your 10-year target?

Think about where you want to be in 10 years.

One habit of successful companies is the habit of setting and achieving goals. 

In the Jim Collins article referenced above, he uses the term BHAG which stands for Big Hairy Audacious Goal. This helps to create a longer-term vision that is so daring in scope it might seem impossible to achieve.

Our 10-year plan at New Economy is To build a $5M Company where high performers come to achieve their full potential in life.

Since we started business at $0, it seemed to us that $5M was a stretch. We are halfway there and only 4 years in.

Here are some tips for coming up with your 10 Year Plan:

  1. Schedule time with your leadership team to identify where you want to take the Company
  2. Consider a revenue number
  3. Make sure everyone is motivated and on the same page
  4. Make sure it is specific and measurable

We had some fun creating this. 

For us, we landed on $5M as that number creates some financial upside for everyone but also leaves room for a lifestyle, which is important to us. We are keen on attracting A players, which are high performers.

Have some fun with this and be bold. Reset every 10 years.

Question #4 – What is your marketing strategy?

The point of this question is to create a laser-sharp focus for your sales and marketing efforts. 

We are finding the more focused we get the more we are closing on the right kind of business. This will help with creating a foundation for marketing materials, plans, messages, and advertising.

To work through this we have considered our target market and 3 uniques.

Target market

Your target market is your ideal customer.

You know who they are, where they are, and what they are. You know their demographic, geographic, and psychographic characteristics.

At New Economy, we keep working on this. We look at our best customers, the ones we love to work with, and seek out the commonalities.

Our Ideal Customer is:

1) A Growth Stage Co that is:

  1. Mission-driven, values-based, and has a growth mindset and runs on EOS
  2. Revenues and/or investor funding in excess of $2M 
  3. 10+ Employees
  4. Located anywhere in the US
  5. Leverages technology and process
  6. Wants an engaged accounting and finance partner to help them use data to grow
  7. Will be able to afford $3K per month as they grow

We do our best to make sure that our new customers are meeting this criteria. The reason for this is the Company, team, systems, and technology we have assembled will best be able to serve this type of customer.

3 Uniques

These are the things that make you different from your competitors. They make you stand out from others.

If you were to line yourself up against your competition, they might have 2 of these but not all 3.

Our 3 uniques are:

  1. Team-based approach
  2. Entrepreneurs serving Entrepreneurs
  3. Focus on helping you achieve your goals by leveraging data

At New Economy, we provide accounting, financial, and tax services. It’s common and often viewed as a commodity with technology. 

Summary

Ok, there you have it. We have covered core value, mission, 10-year target, and marketing strategy all in one post. We have found that focusing on these topics has helped us to create a  foundation to grow New Economy. 

And you can too.

In Part 2 of this blog post, we will cover the concept of the 1-year plan, 3-year plan, quarterly priorities and issues. So stay tuned.

3 Key Takeaways

This is some heavy and impactful stuff. It will help you to build a solid foundation to build and grow your business. We are living proof.

Here are 3 key takeaways.

  1. Do the deep work of reflecting on the above questions. Don’t focus on getting it right on the first try. In fact, a better perspective is seeking the best answer. And many of these answers are within you, you just need to pull them out. This will take time so schedule a series of meetings over a 90 period and keep at it.
  2. Involve others in the process. We hired an EOS Implementer to help us. Also, we included our team and mentors in these conversations. Having others come alongside you as a sounding board will provide some clarity and get you out of your own head.
  3. Be prepared to share this information. Once you have this all solidified, your job will be to share it with your team to create alignment and have everyone rowing in the same direction. So make sure that you believe it, and can see it as you are going to be asking others to join in your vision.

There you have it 🙂

We are living proof that this system works.

EOS Business

New Economy Team Members are Experts in Accounting for Entrepreneurs

If identifying ways to decrease your taxes is not in your skill set or you want to gain control of your finances to make smart decisions to build and grow your business, New Economy is an excellent partner. 

We’ll help you get your accounting and taxes done, and done right.

Schedule a time to meet with our Founder, Jeff, and discuss how we can add value to your situation.

EOS business

Ways to Make More Money Using EOS

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Who doesn’t want to make more money?

We believe that every business owner should be compensated appropriately for their efforts. And every business owner should decide for themselves what the right amount of compensation is for them. 

Is it $100,000, $1,000,000 or even $10,000,000 per year? 

So if you want to make more money this post is for you. It’s not going to be easy but it sure will be worth it.

Note, at New Economy we believe money is simply a tool to do good things in the world. We believe we are called to be stewards of this resource and not be controlled by it.

Our mission is to help unleash the full potential of the growth-minded entrepreneur.

We want to help you gain control of your finances to make smart decisions to build and grow your Company. 

EOS Business

In this article, you will learn about: 

  1. A new way to think about Compensation
  2. An EOS tool to help you make more money
  3. Where the rubber meets the road on compensation
  4. 3 key takeaways

Let’s dive in.

A New Way to Think About Compensation

Conversations around compensation can be tricky. It seems to be one of those topics that are a bit “off limits”.

However, we have built New Economy in a very open and honest way. 

We are transparent with our numbers. Our numbers are simply a way to measure the financial condition of the business. And if we want to have a conversation around compensation, we need to be on the same page with the financial condition of the business.

For instance, we share the following with every team member:

  • 12 weekly metrics in our scorecard
  • Actual financial metrics on a monthly, quarterly, and annual basis 
  • Budget versus Actual reporting on a monthly basis
  • Forward-looking projections on a monthly basis

If you are not sharing financial information with your team, you should consider it. Perhaps this is a new way of thinking for you.

Your team will appreciate your vulnerability and trust them with sensitive information. The alternative is they make up stories of their own that are not based on data. Maybe they all think you are making $10,000,000 per year and this is your chance to provide them with a dose of reality.

A reflection on money

As stated above, we are strong believers that money is a tool.

How about you, what do you think about money?

Here are some questions that will encourage you to go deeper on the topic. Really think about these questions and write down in your journal everything that comes to mind.

  • Do you feel you are being compensated appropriately?
  • How are you adding value to people? Are you solving their problems?
  • How can you add more value to people? 
  • What is important to you that you believe money will provide?

We believe our businesses are here to serve people. If we are able to solve our customers’ problems or help our employees get what they want, we as business owners will be rewarded. This is not something to take lightly and the beauty of the situation is we are in control of the outcome based on the choices we make.

For us, making more money is only valuable as it brings more freedom to do the things that we love.

An EOS Tool to Help You Make More Money 

Love + Work

Before we jump into the tool, we want to share a bit on love + work.

Yup, you heard that right.

We are big advocates of understanding what you love to do. 

Dan Sullivan of Strategic Coach calls this your unique ability. There are the things that light you up. They naturally capture your attention. They are activities that pull you towards them. These are activities that you are gifted in and enjoy doing them.

In other words, these are activities that you love. You love to do them and you are great at doing them. 

Ultimately, your love for doing these activities produces a contribution for others like solving a problem for them or helping them get what they want.

We encourage you to spend some time reflecting. Here are some questions we journal on every 90 days or so:

  • Have you spent any time considering the extraordinary uniqueness of you?
  • What gets you excited to go to work every day?
  • Do you have a chance to spend some time on what excites you at work? 

See if we spend about 20% of our time on the things we love and grow that percentage each quarter we will continue to be working in our flow. We will be producing value for others that will have a direct impact on our compensation.

But how do we do this…..keep reading.

The EOS tool to make this happen

Making more money goes hand in hand with spending as much time as possible on things that you love and you are great at. These things should be contributing to others in terms of helping to solve their problems and helping them to get what they want.

Have you guessed the tool?

It is the simple yet very effective Delegate to Elevate tool.

The tool encourages you to list out all of the activities that you work on during the day. Further, it has you then drop these activities into 4 different quadrants as follows:

  • Quadrant 1 – Love doing it and great at doing it – This is where you want to be spending the bulk of your time. These are higher-level functions that align with what you love to do and your unique abilities.
  • Quadrant 2 – Like doing it and good at doing it – This quadrant is still high-level stuff but you want to strive to be in Quadrant 1. Here you like (not love) and are good (not great) at doing these functions.
  • Quadrant 3 – Don’t like doing it and good at doing it – This quadrant is getting into the lower levels. You are spending time on things you don’t like. Enough said. 
  • Quadrant 4 – Don’t like doing it and not good at doing it – This quadrant is as low as it gets. Get the heck out of this one!

We all have to start somewhere. When we first started to use this tool, our leadership team members were spending time in Quadrants 2, 3, and 4. But now, we work on the tool every 90 days with implementing the tool.

Implementation of the tool is simply to Delegate Down to Elevate yourself up. This sounds simple but there is a lot that goes into this. 

For instance, you need the right people under you to delegate. These tasks should be aligned with their unique ability. 

You need the resources to support this role. You need to train the person that is taking on the tasks. The list goes on and on in a good way. The more attention that you give to this tool, the more you will be operating in Quadrant 1. 

And the more you are operating in Quadrant 1, the more value you will be delivering, thus increasing your compensation.

Where The Rubber Meets The Road

Money always follows value. If you do something that you love, which provides value to others you will earn as much as you want.

However, you are going to have to really understand the concept of value. 

Gino Wickman author of Traction and Founder of EOS says it this way. “If you are an entrepreneur or leadership team member, adopt this rule of thumb: never do $25 an hour work.

What Gino was getting at is the concept of value. We need to question where we are spending our time and the value we are creating. 

For instance:

  • If we are doing $25 an hour work such as administration and operations that amounts to an annualized compensation of $50,000 per year. 
  • If you are doing $50 an hour work such as managing and achieving goals that amounts to a compensation of $100,000 per year
  • If you are doing $100 an hour work such as creating culture, building a vision, and leading a small Company that amounts to $200,000 per year.

By now, hopefully, you get the point. 

To make more you need to operate as much as possible within functions that you love and are great at doing, which results in contribution to others.

Lastly, we have lived this at New Economy. This does not happen over time. 

When I, Jeff, started the business I was not operating in a leadership role as I was providing services to customers. Over time, I delegated the technical work to other technical resources. This allowed me to actually move into different seats in New Economy’s Accountability Chart. Further, over time, I started to delegate the operations and day-to-day management of the Company which has put me in the Visionary seat. 

And yes, being in this seat has given me more opportunity and control around my compensation allowing me the freedom to do the things that are important to me.

3 Key Takeaways

The delegate to elevate tool is simple. 

But it is a tool that has some depth. 

It can not only be used to help you achieve your compensation goals but help to free up others to some of the things they love and leverage those things to make a contribution.

Here are 3 key takeaways.

  1. Do the work on reflecting on your thoughts around compensation. Get a sense of what money will actually provide to you and figure out how much you want to make. This will take some time to answer the above questions. We suggest writing them out in a journal and revisiting the questions in a 90 period.
  2. Figure out what you love to do. You should know your strengths and weaknesses and find ways to work in your strength zone. If you are spending much of your time doing what you love you will be able to transform this into a contribution and create value for others.
  3. Complete the Delegate to Elevate tool. As we are approaching your end, make it a goal to delegate one thing in each quarter in 2024. By delegating things down that are not in your “love doing and great at doing it” you will enjoy work more as you are doing the things you love and your compensation will increase.

There you have it 🙂

We are living proof that this system works.

EOS Business

New Economy Team Members are Experts in Accounting for Entrepreneurs

If identifying ways to decrease your taxes is not in your skill set or you want to gain control of your finances to make smart decisions to build and grow your business, New Economy is an excellent partner. 

We’ll help you get your accounting and taxes done, and done right.

Schedule a time to meet with our Founder, Jeff, and discuss how we can add value to your situation.

EOS Business

How to Go Deeper with the EOS Data Component of Your Business

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We run on EOS.

It has been game-changing for us. Our vision is clear, our team is aligned with the values and missions, and we are creating a culture that is open to new ideas and discusses challenging issues.

The result is we have been able to 3x the business.

In other words, we are the data component.

And as we all know the tools are simple. It’s going deeper into the tools where the insights and learning are applied.

Our mission is to help unleash the full potential of the growth-minded entrepreneur.

We want to help you gain control of your finances to make smart decisions to build and grow your Company. 

In this article, you will learn about: 

  1. Best practices for the current EOS Data tools
  2. A few additional data tools to support your EOS Company
  3. Ways to go deeper into the EOS data tools 
  4. 3 key takeaways

Let’s dive in.

EOS Business

Best Practices for the Current EOS Data Tools

The EOS data tools are your gauges. If set up and utilized properly, they are going to help you accurately and consistently measure the pulse of your business so you can take effective action when needed. You’ll no longer manage based on gut, emotion, ego, or impulse. 

You will have data. 

Understanding the landscape

Ok, as a quick refresher let’s discuss the EOS data component tools.

  • Scorecard – This is a handful of numbers, between 5-15,  that can tell you at a glance how the business is doing. These are reported weekly, monthly, quarterly, and annually.
  • Measurables – This is a number that is given to a single person to take ownership of.

There you have it. That data component of EOS is pretty simple. We have a few additional tools which we will discuss below.

But don’t be deceived. The power of the tools actually lies in the “working” and “evolution” of the tools themselves. For instance, at New Economy, it took us about a year to land on the right scorecard and we are continuing to evolve it. This provides better data to make decisions and gauge where the business is currently at and trending.

Best Practices

So, over the years we have created some best practices which have helped us to further unlock the 2 main EOS Data Component tools. 

Here they are:

  • Leverage technology. We started way back in the day using a Google sheet as it allowed for sharing and easy updating. We then moved on to leveraging the technology platform Ninety.io. It has been a game-changer.
  • Be persistent and relentless. When we started, the information entered was not correct. In fact, we learned we were measuring the wrong things. But we hung in there and continued to hold the line, it was worth it. So pick a team member, like your Integrator, to be persistent and relentless.
  • Measure “fluffy stuff”. We measure the more traditional stuff like cash in, gross profit, and so forth. But what about keeping a pulse on team members? We measure something called “High Satisfaction” days with our team. We also measure “Core Value Call Outs”. We set goals and intentions to foster and develop the culture we want.
  • Measure leading indicators. Measuring revenue is great but what drives revenue? We measure leads and new prospect zooms which lead to sales. So consider those things that will help you drive towards your desired outcome.
  • Reflect, Discern, and Simplify. The natural tendency is to measure more. We try to step back and really ensure we are measuring only the things that matter. We strive to continue to simplify.
  • Accountability. You need to go there. If something is off track, lean in and give the person taking ownership the opportunity to get to the root cause and fix the problem. This will only happen if leadership is strong and healthy and is willing to go there.

So, keep working on your scorecards and measurables. It should be like fine wine and get better over time.

 

Additional Data Tools

At New Economy, we have leveraged a few additional tools that fit into the data component. We believe these tools help to provide visibility, confidence in decision-making, and overall peace of mind as it relates to uncertainty.

These are tools that are around technology and processes that we leverage to help our clients gain control of their finances to make smart decisions.

Here it goes:

  • 13-week rolling cash flow forecast. Have you ever worried about cash? Well, imagine having a tool that is predicting the cash flows of your business to a degree of accuracy over the next 2.5 months. You would have peace of mind knowing where the cash gaps are coming from and can plan in advance on how to fill them.
  • Financial model. You are familiar with this tool. You know it as the 1-year, 3-year, and 10-year plan. We have taken that tool and built it into the monthly financial meeting cadence. Meaning, we review the one-year plan each month and review for budget versus actual. Why? So we can determine what is off track, fix it, and re-forecast for the remainder of the year. Think agile budgeting and forecasting that make your 1, 3, and 10-year plan stay alive and front and center.
  • Month End Close. Yes, this is a tool. Every business needs accurate financial statements to determine the financial performance of the business. The Month-end close is a tool that encompasses all of the reconciliations to ensure the numbers are correct. This is important because you should be making decisions based on true and accurate information.

For more information on these tools refer to our blog post here

At New Economy, we feel grateful to have the unique ability to help in the data component. We could not imagine running a business without having these tools in place. 

And we feel you don’t have to be a bookkeeper, accountant, or CFO to have financial insights. These financial insights will help you:

  • Increase your probability of success and achieving your goals
  • Get the most out of your business 
  • Reduce your stress level and provide peace of mind

You just need to have the right team and system in place to provide timely and accurate financial information to help you grow your business. 

Ways to Go Deeper on the EOS Data Tools

The beauty of the EOS tools is in their simplicity. They take complicated matters and help to provide a framework to make decisions.

But don’t be fooled. These tools have some depth to them and you need to stay close to them to receive the full benefit.

Since we like lists, here is a list of 10 things to consider when going deeper into the EOS Data tools:

  • Make sure you have the right level of experience for the team member running your data tools. If they are too inexperienced, they will not be effective at fully leveraging the tools.
  • Make sure you keep evolving the tools. Meaning, that the tools and their usage should improve over time. Don’t let them get stale or become complacent with them. Review them quarterly.
  • Leverage technology for the tools. You will become more efficient, be able to collaborate with others, and avoid version control issues.
  • Measure fluffy things. We have scorecard items that are so impactful but they are non-financial and culture-related. We measure things like high satisfaction days and core value callouts which help to create and nurture the culture we desire.
  • Don’t settle for less. Every business needs a cash flow projection, a budget, and ongoing projections that are updated monthly. These tools will give you tremendous insight into the business. Make sure you have these tools in place.
  • Get an outside perspective. Talk to other EOS companies. Seek the counsel of accountants and CFOs who are dedicated to adding value to the EOS community. Feel free to email me directly at [email protected].
  • Think vision and leading indicators. Think of where you want to be and consider the things that have to happen to get you there. If you want sales, measure leads, customer calls, and prospecting lunches as they will drive you toward your desired outcome.
  • Hold the line on accountability. Make sure the numbers are accurate and are being delivered timely. The idea is you can use this data to make smart decisions to build your business. And get to the root cause of off-track data issues.
  • Reflect on the data. Meaning are you learning and applying what you are learning to drive change in the business? Reflect, learn, and apply.
  • Everyone, I mean everyone, has a number. Consider each team member and ask yourself, do they have a number? If they don’t, they should. Connect these numbers into the vision which is connected to the financial plan. Many companies overlook this.

Data is your friend. The tools that provide data arm you with information to support your intuition and gut. It is an amazing combination of having great intuition and data to support it when making decisions.

There you have it. We hope this insight allows you to go deeper into the EOS data component to help you achieve your goals.  

Here are three key takeaways:

  1. Get the right person in the right seat. Make sure that you have an experienced EOS accountant on your Accountability chart to help you leverage your data to keep your pulse on the business.
  2. Leverage your data to make smart decisions. If you have questions or decisions to make, use your budget to understand the financial implications of those decisions. You now have tools to help corroborate your “gut” response to decisions.
  3. Leverage additional tools such as a budget, forecast, and cash flow projection. Every week, month, and quarter you will be gaining new insights into your business. You have the opportunity to apply that learning and make changes that will impact the performance of your business.

EOS Business

New Economy Team Members are Experts in Accounting for Entrepreneurs

If identifying ways to decrease your taxes is not in your skill set or you want to gain control of your finances to make smart decisions to build and grow your business, New Economy is an excellent partner. 

We’ll help you get your accounting and taxes done, and done right.

Schedule a time to meet with our Founder, Jeff, and discuss how we can add value to your situation.

Why Companies Running on EOS Need a Remote Accountant in their Accountability Chart

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New Economy runs on EOS. 

We successfully graduated from a full implementation of EOS with a hired implementer back in 2020. The system has been instrumental in allowing us to build our team, systems and processes, and create company alignment around mission, vision, and values. It’s also helped us support our 3.5x revenue growth since implementation.

So clearly, we see the value in the EOS system. 

Further, we greatly appreciate the EOS community’s shared values which encompass an abundance and growth mindset, doing the right thing, giving before you get, and doing what you say.

We are grateful to be a part of the community and want to help others just as we have been helped.

We have unique abilities in the data component that can be leveraged to help EOS companies achieve their vision and goals.

We want to help you gain control of your finances to make smart decisions to build and grow your company. 

In this article, you will learn about: 

  1. Why to consider hiring a remote accountant and what to look for
  2. The proper seats and core functions to set you up for success
  3. The right tools and meeting rhythms
  4. 3 key takeaways

Let’s dive in.

What to Look for When Hiring a Remote Accountant and Why to Consider it as an Option

What to look for

New Economy is a fully remote Company. We have 15 team members in 15 different states. Further, we have 45 recurring customers that get us into another 5 states, totaling 20 states between employees and customers.

So we know firsthand that remote working works. We have leveraged the EOS tools and meeting rhythms which increase the probability of success. 

We focus on:

  1. Lots and of Leading, Managing, Accountability (LMA)
  2. Focused and consistent Level 10’s, monthly check in’s, 90-day check-ins, Quarterly and annual roll-outs
  3. Focused and consistent weekly, monthly and quarterly scorecards
  4. Documented process
  5. Technology to support the team and customers

Further, we outsource our marketing (awesome plug for Full Stadium 🙂) and legal (awesome plug for Howell Legal 🙂) to remote Companies. So not only are we a remote and outsourced service provider but we successfully leverage the service of others

So here is tip #1 –  Make sure the company has proven experience and examples of success when working in a remote environment. 

Many companies are trying to take advantage of remote working but they have not invested in the technology, process, or systems. They just are not equipped to provide awesome service (core value call out).

Another key component is alignment. Being an EOS company, we have a set of core values:

  • Deliver awesome customer service
  • Embrace learning and growth
  • Be passionate and own it
  • Build open and honest relationships
  • Continuous learning and growth

And we even look at our core values and seek to find alignment with our customers by asking questions during the early stages of the customer journey. Further, by leveraging our core values we have created the characteristics of our ideal customer:

  • Mission-driven, values-based, and growth-minded
  • Revenues and/or investor funding in excess of $2M 
  • 10+ Employees
  • Located anywhere in the US
  • Leverages technology and process
  • Wants an engaged accounting and finance partner to help them use data to grow

 

If this is you, let’s talk.

 

This leads to tip #2 – Make sure there is a degree of alignment around core values, working and communication styles. 

This takes a bit of hard work, but as an EOS company, we know it’s all about getting the right people in the right seats, and the right person just might be someone that is remote.

So now we have a sense of what to look for.

But why should I consider outsourcing to a remote company?

Why to consider outsourcing

Back in June we wrote a detailed blog posting giving 3 key reasons why you should consider outsourcing to a remote accountant. For your reading pleasure, we are including a link here.

But if you like summaries, here are the top 3 reasons why:

  1. You will likely save money as you probably don’t need a full-time hire. You won’t need to worry about space, technology, or benefits. Further, you will not be overpaying a technical person to do admin-type work. We stay in our lane and focus on what we are good at which aligns with the seats and core functions which we will talk about later.
  2. Considering outsourcing will require you to focus and evaluate your accountability chart, your people, your processes, and your technology. And this is a good thing for your business. It will require you to take a hard look at what is working, not working, and why. And one of the things about remote working and leveraging technology and process is effectiveness and efficiency because we have to.
  3. You will have a resident accounting expert on your team who does not need to be trained or managed. They work with different companies so have an inside look into many businesses and acquire best practices. They are focused and specialized in core functions that are specific to their skill set. 

So, by now you should have a sense of what to look for and why to consider outsourcing to a remote accountant.

Keep reading if you want to get a glimpse of seats and core functions in the accountability chart that will help you gain control of your finances to make smart decisions to build and grow your business.

The Proper Seats and Core Functions to Set You Up for Success

ou are probably familiar with the accountability chart if you run on EOS, and if not check out this quick video here. It acts like an organizational chart by really focusing on identifying the core functions of each role.

This is all about getting the right people in the right seats and focusing on accountability for the tasks they are responsible for. 

We figured the best way to explain the ideal chart for a growth-minded organization is to just show it.

We prefer to build this from the bottom up:

First up is your staff accountant. This team member is leveraging processes and technology to perform their core functions. They are the foundation of your accounting team. The old saying is garbage in, garbage out. The tactical inputs of this team member will be at the front end of the strategic outputs you are looking for. 

 

Staff/Senior Accountant

*AR and AP

*Payroll

*Bank & Credit Card recs

*Maintain QB

 

Next up is your Controller. This team member leads and manages the staff or senior accountant. Further, they work with creating processes and policies, and are focused on delivering timely and accurate financial information. 

 

Controller

*Lead, Manage, Accountability

*Month-end close

*Financial process

*Budgeting & cash flow

 

Next up is your CFO. This team member sits on your leadership team. They are focused on being the right hand to the CEO and supporting the overall strategy of the business. 

 

CFO

*Leadership

*Strategy

*Capital raising

*Risk

 

The above 3 seats are key for really every business, but it’s hard for a CFO to be effective if the foundational pieces are not in place. Remember, each role requires unique abilities and skills, so make sure you are setting everyone up for success. 

Here is what a health accountability chart for a growth-minded company should look like:

 

CFO

*Leadership

*Strategy

*Capital raising

*Risk

                    

Controller

*Lead, Manage, Accountability

*Month end close

*Financial process

*Budgeting & cash flow

                   

Staff/Senior Accountant

*AR and AP

*Payroll

*Bank & Credit Card recs

*Maintain QB

 

For more information on the difference between an accountant, controller and CFO, check out this blog posting here.

And here are a few pro tips:

Tip #1 – Start from the ground up. Get the tactical foundational stuff set up before bringing in a controller or CFO.

Tip #2 – Don’t over-hire. Meaning, your CFO or Controller should not be doing admin-type work. Actually, they should not be doing any work outside of the core functions listed above.

Tip #3 – The reality of it is outsourcing can save you money. Focus on the core functions which are based on specialized skills. Use Admin and operations people for all non-accountant and finance core functions.

If you are feeling pain in this area, let’s talk. We have this figured out for you so you can focus on building and growing your Company.

The Right Tools and Meeting Rhythms

Now let’s talk about tools and meeting rhythms.

The Tools

Being a fully remote company, we operate in a paperless environment with all web-based applications. There are hundreds of web-based platforms out there to meet your needs and we don’t have time to go over all of them here, but here are some essentials:

  • Quickbooks Online – Maintains all of your accounting and produces your financial statements
  • Bill.com – Provides bill payment solutions that automate and help with internal controls 
  • Expensify – Provides expense reimbursement solutions that automate and help with internal controls
  • Fathom – Provides month end dashboards and analysis like budget versus actual
  • Jirav – Provides budgeting and forecasting

And the list goes on. The key is to find a tool that is in the cloud and will add value to your life. The goal is to become more efficient as a result of the technology.

The Meeting Rhythms

Being remote, we live and die based on accountability. One of the ways we drive accountability is by having preset meeting rhythms. Much of this depends on the services our customers want but here is a glimpse into the preset rhythms we have in place:

Internal

  1. Weekly Team Level 10’s – Here we all get on the same page for what’s working, not working and solve problems
  2. Monthly Team member one on one – Make sure our team members are set up for success and help them with challenges and issues
  3. Quarterly Check-Ins – These are 90-day check-ins where we provide our team with feedback and actionable insights to help them grow.
  4. Monthly Culture Events – These are geared to help us grow in our relationships with each other. We are looking to build intentional connections and increase trust and credibility.

The above meetings impact our clients even though they are not a part of them. These meetings help to build our team up and provide clarity on timing, expectations, and deliverables. Most importantly they set the tone for our culture which is an internal thing that makes its way into everything we do.

Now onto our client-facing meeting rhythms:

External

  1. Weekly Check-ins – These are to drive alignment and build trust. They are quick meetings to “get on the same page”. Some happen in Slack and others in Zoom.
  2. Weekly Cash Flow – If we are doing bill pay or cash flow forecasting, we have a weekly cash flow meeting. This is to provide insights into cash flow on a rolling 13-week basis. (Read more about creating and following a cash flow model here).
  3. Monthly Finance Zoom – This is a fun meeting and core to our services. Here we present the financials with actionable insights. We are quickly spoon-feeding our customers relevant information from the financials to make smart decisions.
  4. Quarterly Tax Zoom – If we are providing tax consulting services, we connect quarterly to discuss tax opportunities and threats with the idea of providing peace of mind around taxes.
  5. Quarterly Budgeting Zoom – If we are providing budgeting or forecasting services we will meet quarterly to discuss what we have learned about the business and how to apply it moving forward.

Ok, that seems like a lot and there is more. Note, that we love to simplify and can combine and condense where it makes sense.

The key for us is to have preset meetings that drive engagement. This engagement allows us to provide key insights to help our customers grow their businesses. 

Here are three key takeaways:

You made it this far, now for the top 3 takeaways:

  1. Spend time reviewing your business needs as they relate to your accounting department. What’s working or not working? Get this all documented based on the above accountability chart. Once you have established the seats and functions you can then move on to getting the right people involved.
  2. Don’t overpay or underutilize team members. Meaning, your CFO should not be in QuickBooks doing basic accounting work. Further, your accountant should probably not be advising you on strategic business decisions. Build some depth on your team and outsourcing will provide a cost-effective way to make that happen.
  3. Culture. Culture. Culture. We love to focus on alignment. Make sure you take the time to align with a company that seems to have a shared value system. Ask them about their mission, vision, and values and look for areas that resonate with you.  Taking your time to get the right people in place will provide tremendous value in helping you achieve your goals and allow you to focus on what’s most important.

New Economy Team Members are Experts in Accounting for Entrepreneurs

If you run on EOS and building out processes with a focus on accountability is something your business is working towards, New Economy can help. We have the right tools and meeting rhythms to ensure your core functions are being taken care of. 

Again, it’s our goal to help you gain control of your finances to make smart decisions to build and grow your company.

So, Schedule a time to meet with our Founder, Jeff, and discuss how we can add value to your situation.

Small Business Tax Planning

Small Business and Individual Tax Planning

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There is an old saying, “Time flies when you are having fun”–and the end of the year is approaching quickly. 

Here at New Economy, we are having a blast. Our team and culture are healthy, many of our customers are thriving and we are on track to hit our financial targets and annual goals. It’s great news for sure, but with financial success comes taxes.

The good news is there is still time to plan, prepare and strategize. 

Before December 31st you have the opportunity to make decisions to mitigate your taxes, invest in your business, and keep more money in your pocket. For many of you, your business situation will have a big impact on your personal tax situation.

Are you planning ahead as it relates to your tax situation?

If not you should–and here is the good news…

At New Economy, we’ve created a team, process, and tools to help you keep more of that hard-earned profit in your pocket. As we are entering into the fall, now is the time to pay attention to this.

We want to help you gain control of your finances to make smart decisions to build and grow your Company. 

In this article, you will learn about: 

  1. Some of the situations, pain points, and pitfalls of not planning properly for taxes
  2. Our repeatable process to mitigate and plan for your small business and individual taxes
  3. What success looks like as it relates to properly planning for taxes
  4. Top Takeaways

Let’s dive in.

What are some of the situations, pain points, and pitfalls of not planning properly for taxes?

Overall, the goal of tax planning is to avoid last-minute surprises, to make good decisions balancing cash flow and mitigating taxes, and to be proactive in applying tax strategy on an ongoing quarterly basis. 

Situation

First, let’s talk about the situation. If you are an S-corp or LLC with profits at year-end and cash in the bank we are talking to you. As a flow-through entity, the profits of the business will be taxed at your individual level. 

It’s pretty simple and here is an example.

Example 1

Tom owns 100% of Toms shoes. As of December 31st, the Company is projected to have a net income of $100,000 ($500,000 of Revenue – $400,000 of Expenses). Since Tom owns 100% of the Company, the entire $100,000 will flow over to Tom’s personal tax return and be taxed at Tom’s Individual tax rates. 

But what if there was a way to reduce the profits, thus reducing the taxes while reinvesting in the business, team, or future of the Company?

Keep reading.

Pain points

Ok–so based on the examples above Tom is having a great year. However, let’s assume he is not planning for taxes. They are so focused on generating profit that they lost sight of the fact that they actually have taxes to pay.

Ok, great, but where is the pain? 

Example 1

In October, Tom’s financial controller from New Economy told him that his Company is projected to earn $100,000 in profit by the end of the year. (See our post on financial controllers).  With this information, Tom has a choice to make.

  1. Option 1 is to do nothing. If Tom does nothing the $100,000 will flow through to his personal tax return and he will pay taxes at his personal rate on the entire amount. 
  2. Option 2 is to do some tax planning with New Economy’s Tax Advisor. After some conversations with the New Economy Tax Advisor, Tom has decided to buy a piece of equipment. The equipment will enable him to take on new customer orders in the new year increasing revenues by $250,000. The cost of equipment is $50,000 which Tom is able to finance most of. Further, Tom is able to write off the entire cost of the equipment in the new year.

Here are the tax results under each option.

Under option 1, Tom is paying taxes of $24,000 ($100,000 profit x 24% tax rate).

Under option 2, Tom is paying taxes of $12,000 ($50,000 profit x 24%  tax rate). Tom has reduced his net income to $50,000 ($100,000 profit – $50,000 equipment). Further, he is able to grow his business in the new year taking on an additional $250,000 of revenue.

Which option would you prefer? 

You can pay $24,000 in taxes or pay $12,000 in taxes while increasing your capacity to grow revenues by $250,000 in the upcoming year.

We feel great about helping to navigate option 2. He has made a smart decision that is helping him build and grow his business. 

This was a simple example but many times opportunities are missed.

To learn why, keep reading.

 

 

Our repeatable process to mitigate and plan for your small business and individual taxes

Many business owners miss out on opportunities to apply tax savings strategies.

But why is that?

At New Economy, we believe it is the result of two things being people and process.

People 

We will be quick here. 

It is important to understand the difference between a tax preparer and a tax advisor.

A tax preparer is someone who will take your information and prepare your business and personal tax return. Often this is done post-year end when the information becomes available.

A tax advisor is someone who will understand your overall situation both personal and business. They will help guide you to making smart decisions to plan for and minimize taxes. Often this is done prior to year end so decisions can be made.

Of course, this can be the same person. However, just be certain that if you have a tax preparer, they have the skills and ability to advise you on tax matters.

The goal is to keep more money in your pocket by paying less taxes. A tax advisor is able to help you achieve that goal.

Process

Our customers are benefitting from ongoing tax advisory services. 

They are benefiting as they are paying less in taxes, not being surprised by the tax situation, and they are keeping more money in their pocket.

Most people think about their taxes at the end of the year. That is fine, but we think about taxes on an on-going basis–such as quarterly.

The way to support this effort is through process. New Economy has a tax advisory process and here is a high-level glimpse into our system for customers that are interested in tax planning.

  1. Onboarding Meeting – Our tax advisor takes part in our customer onboarding meetings. It is important for our customers to build some trust and credibility with our tax advisor so we jump in head first at the beginning of the relationship. This enables the tax advisor to get a sense of the overall landscape.
  2. Sharing of Monthly Financials – Our tax advisor has access to the monthly financials that are reviewed. This enables the tax advisor to stay up to speed on the financial condition of the business. After all, it’s a healthy financial condition that supports the need for tax planning.
  3. Quarterly Tax Meetings – This is where the magic starts to happen. Our tax advisors have quarterly tax meetings with their customers. This allows the relationship to continue to grow and information to be shared. In that sharing of information, we are able to identify tax opportunities, mitigate tax risk, and advise our customers on all things tax-related. Think of it this way: You have a tax advisor on your team with the goal of helping to keep more money in your pocket.
  • Year-end Projection Meetings – This is where our tax advisor pulls it all together. We typically had 2 to 3 tax planning meetings in the fall. Here we do a detailed projection running “what if scenarios”. Meaning, we talk through various scenarios just like we did with Tom to reduce taxes. We help you create and execute a plan prior to year-end to ensure you are keeping more money in your pocket.

By setting up the simple 4-step tax advisory process we are able to consistently help our clients plan to reduce taxes.

No more surprises around taxes–just peace of mind that you have made smart decisions to build and grow your business.

What success looks like as it relates to properly planning for taxes?

We like to keep things simple.

For our customers, success looks like the following:

  • Peace of mind around their business and personal tax situation.
  • Confidence knowing that they have taken advantage of all possible opportunities to help them pay less taxes.

Our customers work so hard. And one of the outcomes is to have a healthy business that is profitable. At New Economy, we want to help them to plan effectively so they can enjoy the fruits of their labor.

Here are three key takeaways:

  1. Know your situation. Meaning, do you need ongoing tax advisory support? If you have been caught off guard in the past by having to pay taxes, the answer is probably yes. Or maybe your businesses are growing and you are projecting to have a healthy profit. Now is the time to consider your needs in this area.
  2. Assess your current tax person. Are they only tax preparers? Do they have the ability to advise you on tax savings strategies? Even though this can be the same person they often are not. Make sure you have the right team member to help you make smart decisions to build and grow your business.
  3. Don’t wait. As noted above, we believe tax planning is a year-round process. However, as you start to approach year-end, the window starts to quickly close on the things you can do to ensure you are taking advantage of any tax-saving opportunities.

Small Business Tax Planning

New Economy Team Members are Experts in Accounting for Entrepreneurs

If identifying ways to decrease your taxes is not in your skill set or you want to gain control of your finances to make smart decisions to build and grow your business, New Economy is an excellent partner. 

We’ll help you get your accounting and taxes done, and done right.

Schedule a time to meet with our Founder, Jeff, and discuss how we can add value to your situation.

Creating a Small Business Budget

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A small business budget is like a treasure map. Yup, you heard that correctly. Just think of Jack Sparrow in the Pirates of the Caribbean.

Many entrepreneurs and business owners can communicate where they want to be at some point down the road. For many, that is obtaining the treasure i.e. achieving goals and financial measurables. 

But they struggle with how they are going to get there.

That’s where creating a small business budget comes into play. Think of your small business budget as the map to provide the steps to obtaining your treasure.

At New Economy, we believe in one-year, three-year, and 5-year budgets, and as we are entering into the fall, now is the time to start thinking about your budget again. As much as we love the three-year plan, this article is focused on the one-year plan.

We want to help you gain control of your finances to make smart decisions to build and grow your Company. 

 

Small Business Budget

In this article, you will learn about: 

  1. How to get started on preparing your one-year small business year budget
  2. Best practices in creating your one-year small business budget
  3. Utilizing your one-year small business budget to obtain your treasure
  4. 3 key takeaways

Let’s dive in.

How to Start Preparing Your One-Year Small Business Budget.

You might be surprised, but some of the most important parts of creating a budget have nothing to do with numbers or spreadsheets. The first part of creating a budget requires stepping back and obtaining a deep understanding of the business.

Understanding the Business

At New Economy, before we prepare a one-year budget, we spend time getting to know the business. This requires meeting with key team members like the Visionary/CEO, Integrator/COO, Operations, and Sales team leaders in an effort to gather as much knowledge as possible about the business. 

We do this because we seek to understand. We want to be able to offer up best practices and strategies to help you get closer to achieving your goals. And without historical context, an understanding of the present moment, and the future vision it is difficult to predict.

Here are some of the things we seek to obtain and understand and what you should too if you are preparing your own budget:

  • Review existing business and financial information like historical financial statements, tax returns, and business plans.
  • Review and understand unit economics. For example, the cost of making your product or service.
  • Review pricing strategies.
  • Understand management’s vision, growth, and exit plan for the business.
  • Get a sense of the resources needed to achieve the vision. Think people, equipment, technology, and so forth.
  • Understand the finances and capital in place to support the business.
  • Understand the sales and marketing process and review all collateral.
  • Understand the issues and challenges the business is facing.
  • Get a sense of the overall market conditions and opportunities in the specific industry.
  • Review key documents like customer agreements, employee agreements, and bank documents.

It seems like a lot and it is, but it’s important. We typically have a few sessions to do these knowledge and data transfers.

By reviewing all of this information, we are able to obtain a baseline understanding of the business and the direction that management is looking to go. We use this as the foundation for building a one-year small business budget. So don’t rush through, take your time and seek to understand. Soon, you’ll have what you need to create the map that leads to your treasure.

Best Practices For Creating Your One-Year Small Business Budget

Okay, now we are ready to get started.

Tools and Technology

There are many forecasting tools out there, and we are big fans of leveraging technology. This allows for automation, reduction of errors, and possibly some time savings.

A few forecasting tools to check out are:

  • Jirav
  • Spotlight
  • Fathom

However, at New Economy, we tend to gravitate towards either Excel or Google Sheets. We find they allow us to customize the levers and unit economics and inputs specifically to your business. In other words, we have extreme flexibility when building out the budget.

There is no wrong answer here, but staying consistent with a single tool is the best route.

General Framework

At New Economy, we build our budgets much like your historical financial statements. So our budgets encompass three financial statements:

  • The Balance sheet
  • Profit and loss statement
  • Statement of cash flows

You’ll need this to produce budget versus actual information but more on that later.

When building out financial statements, we take a detailed approach and use the chart of accounts in your financial statements to build the budget. Yup, we do it line item by line item based on each account so we create variance reporting at month end.

Further, we build out the financial statements by month. So each financial statement will have monthly balances. The end product is a Balance Sheet, Profit and Loss statement, and statement of cash flows that mirrors your financial statement accounts and is produced by month.

Input Sheets

Next, we move into the input sheets. These sheets are the drivers, the levers that feed into the financial statements mentioned above. By setting up input sheets, you are able to run “what if” scenarios and change your assumptions which will ripple throughout your financial statements.

Here are some key examples of input sheets:

  • Staffing Sheet – This sheet represents the team you have and the new hires you will make. You can add new hires, increase compensation, add benefits, and even remove staff. The idea is to show what your team is going to look like over the next 12 months and how much it is going to cost the business. Again, this is done monthly and at a detailed level. 
  • Operating expense Sheet – This sheet represents the general expenses and overhead needed to support your business over the next twelve months. Think about expenses like rent, insurance, software costs, and marketing expenses. These are your fixed costs and the idea is to show how much it is going to cost the business. Again, this is done monthly at a detailed level.
  • Revenue and Cogs Sheet – This sheet represents your revenue and the direct costs to produce that revenue. We like to get very detailed on the revenue side. For instance, as you build this sheet out, think about the economic units. Meaning, can you build this sheet out showing # of units x price per unit to get to sales? This allows you to make different assumptions around growth. On the Cogs side, it is variable with revenue. We do build them from the bottom up and get a sense of the costs needed to produce one unit of revenue. But we also look at it from the top down and look at the overall gross profit margin as a gut check. Again, this is done monthly at a detailed level.

Financial Statements

This is where the magic all comes together. 

You should have a good understanding of the financials since the budgeted financials are just a forward looking picture of the actual financials you review at the end of each month.

In our framework section, we discussed the basic layout as follows:

  • Balance sheet by month
  • Profit and loss sheet by month
  • Cash Flow Statement by month

Your traditional financial statements that give you a sense of how your business is performing from a financial perspective on a month to month basis. And we have both the actual historical financial statements for each month as well as the future oriented budgeted financial statements out into the future.

Your Actual and Budgeted Balance sheet will show all of your assets, liabilities and equity.

Your Actual and Budgeted Profit and loss statement will show all of your revenue and expenses.

Your Actual and Budgeted Cash Flow statement will show you where your sources and uses of cash are coming from.

All of the financial statements in our budgets are linked up to the input sheets. So any changes you make in the input sheets ripple through the financial statements automatically.

We feel it is important to take a detailed approach to budgeting and have your budgeted financial statements mirror your historical actual financial statements which we discuss in the next section.

 

Utilizing Your One-Year Small Business Budget to Obtain Your Treasure

Now that you have a one year budget in place, let’s talk about the ways to use it.

  • Variance reporting  – Variance reporting is something that happens at month end. Once you close the books for a month and have your actual financial statements we review a variance report. This can be system generated from an accounting system like QBO. The value here is understanding which line items are on track or off track against the budget. Then you can assign a team member to look into why and help understand if any necessary changes are needed to get things back on track.
  • What if scenarios  – We often get asked questions like “can we afford to hire?” Or “if we do hire, what is the impact on profitability”? While most entrepreneurs have a pretty good gut answer we prefer to utilize the data. We would run the hire and salary through the staffing tab to see the impact on the profit and loss statement. Then we can answer the question accurately as to the financial impact of that decision. So you can use the budget to get a sense of the financial impact of any decision you are about to make in your business.
  • Reforecasting  – As the months march on we should be learning about the business. We are aiming for the results laid out in the original budget. However, much of the learning we are obtaining may result in some re forecasting. For instance, maybe we want to increase marketing spend above the budget amount because it is resulting in revenues above the budget amount. So you can use the budget to create a reforecast which is simply changing underlying assumptions in the input tabs based on the direction of the business. But be careful, you want to continue to hold yourself accountable to the original budget.

There you have it. We hope the  road map above gets you closer to your treasure.

Here are three key takeaways:

  1. First and foremost, every Company needs a budget. A budget will help you understand the resources needed to chase after your vision. Further,  budget will help you to determine on a month to month basis whether or not you are on track.
  2. Leverage your data to make smart decisions. If you have questions or decisions to make, use your budget to understand the financial implication of those decisions. You now have a tool to help corroborate your “gut” response to decisions.
  3. Turn your budget into a forecast. Every month, you will be gaining new insights into your business. You have the opportunity to apply that learning along with the financial impact by reforecasting your numbers. We suggest doing this on a monthly or quarterly basis. But keep your original budget intact as those are the goal posts for the year.

 

Small Business Budget

New Economy Team Members are Experts in Accounting for Entrepreneurs

If identifying ways to decrease your taxes is not in your skill set or you want to gain control of your finances to make smart decisions to build and grow your business, New Economy is an excellent partner. 

We’ll help you get your accounting and taxes done, and done right.

Schedule a time to meet with our Founder, Jeff, and discuss how we can add value to your situation.

3 Ways to Boost Your Confidence in Your Small Business

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How Leveraging Financial Data and Your Accounting Team Can Help.

As a growth-stage entrepreneur, you’re constantly dealing with emotional highs and lows based on the various circumstances thrown your way that are not in your control. 

We feel your pain. 

And we have learned that this can impact the confidence you have in your small business. But what really is confidence?

Here are a few definitions. 

  • It is the feeling or belief that one can rely on someone or something.
  • Or defined another way, a feeling of self-assurance arising from one’s appreciation of one’s own abilities or qualities.
  • Or the state of feeling certain about the truth of something.

Which begs the question: Do you have confidence in your small business? And can you increase that confidence in your small business using financial data and leveraging your accounting team?

At New Economy, we believe so.

Why, you ask? 

It aligns with our efforts of helping you gain control of your finances to make smart decisions to build and grow your company. 

In this article, you will learn: 

  • What types of issues might be eroding your confidence in your small business
  • What you can do to overcome these issues 
  • Three key takeaways related to improving the confidence in your small business using data

Let’s dive in.

Small Business Confidence

What Issues May be Eroding Your Confidence in Your Small Business?

There are a few important things to discuss here. 

First off, there is no silver bullet and the game of business covers a lot of ground. Therefore, we will focus on issues on the financial side of your business, which is the space that we play in. But this approach can be applied to any department such as marketing or even operations.

So what could deteriorate your confidence in your small business as it relates to the financial side of your business?

Maybe it’s people, maybe it’s process, maybe it’s technology, or maybe it’s a combination of all three. 

Let’s Talk People

Start with the Right Seats

Before we dive in, let’s discuss the seats in your accountability chart. And here is a question–Do you have a sense of the right seats and core functions needed for your business based on your stage, growth trajectory, and goals?

We believe every entrepreneurial, growth-minded company needs 3 foundational seats, each with a different set of skills and unique abilities (for more, check out our blog on the difference between an Accountant, Controller, and CFO). Here they are:

  • Bookkeeper / Accountant – They focus on tactical things like payroll, bill payment, bank reconciliation, credit card reconciliations, and invoicing and collections. This team member may have 3-5 years of experience.
  • Controller – They focus more on the output which would be things like accurate financial statements, accounting processes, managing the Bookkeeper, and working directly with the CEO or CFO. This team member may have 10-15 years of experience.
  • CFO – They focus on the business. They are a strategy partner to the CEO and they oversee everything related to accounting and finance and will get involved in budgeting, forecasting, and helping to bring plans to life. This team member may have 20+ years of experience.

Now that we have the right seats in place, you need to find the right team members and this is where people come into the picture.

Then Find the Right People to Fill Those Seats

At New Economy, we ask ourselves a few questions about placing a team member in a seat such as the ones mentioned above.

First, are they aligned with our core values at New Economy? If not, they will not be a good fit for our company, and we don’t place them. If yes, we move on to the next question.

Do they get it, want it, and have the capacity to complete the functions needed for the seat? If not, they will not be a good fit for the seat and we move on. But maybe through training and development, we can get them there. And if yes, then we place them in the seat.

So, if you don’t have the right seats, or maybe you have the right seats but the wrong person in them, you will face challenges. Chances are:

  • You are frustrated
  • your team member is frustrated and feeling burned out
  • You are not getting financial information to make smart decisions to build and grow your business

So your confidence could be down to not having the right structure and seats in your accountability chart or not having the right people sitting in those seats.

Consider stopping doing your own bookkeeping or using Tom’s uncle’s cousin who really is a party planner! Take the time to get this right. 

If you get this right, you will have an accounting and finance department that is aligned with your vision and provides useful financial data, actionable insights, and business improvements all to help you build and grow your business. This is an investment in your business that will return extraordinary results.

Let’s Talk Process

The next issue that might be eroding your confidence in your small business is the lack of process. At New Economy we are consistently reviewing our core processes, documenting them, and training others to ensure they are followed by all.

By having documented processes in your accounting and finance department you are ensuring that team members are clear on how to do things and you are mitigating the chances for errors, inefficiencies, or even fraud. Yup, we said fraud which nobody thinks about until it’s too late.

But here is the real reason the documented process is important: It will ensure that over and over again you have a procedure in place to consistently produce a desired outcome in a timely and accurate manner. 

For example:

  • Processes will support the release of timely and accurate financial statements. A process around the month’s end will allow any controller to step in and provide you with financial data that you can rely on to make great business decisions.
  • Processes will ensure that bills are paid on time for goods and services that we have received (we have seen vendors getting paid for things they should not) and that payments are going out at the right amount per the actual purchase order and invoice.
  • Processes will ensure that your business is on track to meet its annual budget. At month’s end, the actual financials can be compared to the budget to show what is on and off track. From there, you can forecast the future based on what you are learning to see how you are lining up compared to the budget. 

We prefer to rely heavily on processes. The process runs the business and the people step in to run the process. This takes time and effort but it is worth addressing in all departments in your company.

So, if your accounting team is always late with providing information, missing key information, or off on the accuracy we can see why your confidence might be down. And it may be due to a lack of processes needed to support where the business is currently at today.

A few final thoughts:

Having a documented process may not be enough. We believe that team members need to be trained in processes. Further, the process needs to be followed by all. So, you need a process to ensure that processes are being followed – yikes! 

But in the end, the process will give you the confidence that you are receiving financial information that is both timely and accurate. And this will give you insights as to how your business is performing.

Let’s Talk Technology

Remember the old days when you used to get a set of financial statements printed on ledger paper?

We don’t! And if someone handed us a set of financial statements on ledger paper our confidence would certainly drop. We’d question, in a healthy way, if we could rely on the numbers.

See, we have built New Economy from the ground up by leveraging a technology stack that allows us to provide virtual accounting and finance services worldwide. It’s faster, more efficient, more cost-effective, easier to build processes, and easier to train team members on how to use technology tools.

However, many companies’ accounting and finance departments are still struggling to adopt new technologies that will increase efficiencies, reduce errors, and allow team members to spend more time analyzing information and providing actionable insights.

The point is: Consider what technology you might be able to use to change the game and build your confidence. 

Here are some examples:

The list goes on and on. 

But the main point is that the use of technology can speed the flow of information up and assist with increasing the accuracy. Further, processes can be wrapped around these technology tools, meaning technology has an impact on increasing your confidence in your small business.

 

What Can We Do to Overcome the Issues that are Decreasing Your Confidence in Your Small Business?

The very first thing we suggest you do is step away from the day-to-day of the business. Most growth-stage entrepreneurs have too much on their plate and it’s hard to reflect and think strategically when you are in the business.

So what do you do?

Take clarity breaks. A clarity break is a regularly scheduled appointment on your calendar with yourself. You define what regular is – a half-hour daily, two hours weekly, a half-day monthly. It’s up to you. The doing of it is what matters.

Note: We like to take these in physical spaces that motivate, inspire, and encourage us. For example, I like to take my clarity breaks in my 1986 VW camper van by the ocean. Some team members like to take them at Starbucks. But the point is, get away from your regular space.

OK, so I am in my van, now what?

We would encourage you to reflect on the above and ask the following questions:

  • Do I have the right accounting and finance seats on my accountability chart?
  • Are the functions for each seat clearly defined?
  • Do I have the right team member with the right skills sitting in the seat?
  • Do I have processes supporting each function in these seats?
  • Are the processes being followed by all? Are they evolving with the business?
  • Do I have the right technology to increase productivity?

Reflecting and answering these questions will increase your confidence in your accounting and finance team and provide you with the information you need to build and grow your business such as:

  • Ways to increase profits
  • Ways to mitigate risks
  • Ways to run smoother
  • Ways to improve business insights
  • And ultimately increase business confidence

We have subscribed to this approach to help build and grow New Economy. You can do this for literally any department in your business. 

But should you want to get there quickly, consider hiring a company like New Economy that has done the hard work for you 🙂

And once you have the confidence in the back end of your business, you are ready to go and ready to grow. You have the foundation built to support the needs of your customers while capturing market share.

3 Key Takeaways Related to Improving Confidence in Your Small Business Using Data and Leveraging Your Accounting Team

If you want to improve your confidence in your small business, consider leveraging your accounting and finance team and the data they provide.

Here are three key takeaways related to improving your small business confidence:

  1. Make sure you know the needs of your business and that you have clarified the roles. Further, make sure that you have the right person with the right skill set to meet those needs by being able to perform the core functions of the role.
  2. Lean into your process and technology. Make sure that you have a documented process followed by all. Further, make sure that you are using the best-in-class technology for efficiency purposes.
  3. Take time away from the day-to-day to reflect. Think about what’s working and not working, and what next people move you need to make. This time is valuable in that it will provide new ideas and actionable insights to chase down your goals.

Small Business Confidence

New Economy Team Members are Experts in Accounting for Entrepreneurs

If your Company’s accounting and finance team is not providing data to help build your confidence in your small business, let’s talk.

New Economy makes an excellent partner because we want you to gain control of your finances to make smart decisions to build and grow your business. 

We’ll help you get your accounting done, and done right.

Schedule a time to meet with our Founder, Jeff, and discuss how we can add value to your situation.

3 Ways to Cut Business Expenses

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As a growth stage entrepreneur, you’re constantly thinking about ways to grow your Company. 

An important thing to consider as you grow is keeping expenses on track. We have learned that growth can suck cash and a big part of that is expense management. 

This begs the question: Do you have an expense management process in place that effectively cuts unnecessary business expenses?

At New Economy,  this is on our minds too.

Why, you ask? 

It aligns with our efforts of helping you gain control of your finances to make smart decisions to build and grow your company. 

In this article, you will learn: 

  • What an expense management process looks like
  • What types of questions to ask when identifying expenses to cut
  • How to actually cut or reduce expenses
  • 3 key takeaways related to cutting business expenses

Let’s dive in.

Cutting business expenses

What is an Expense Management Process?

There are a few important things to discuss here. 

First off, before we get into the process itself we’d like to quickly cover an important financial tool. 

Every business should have a detailed budget. The budget should be prepared monthly and be detailed by line item (Refer to our blog post on top 4 financial tools). In this case, our focus is on the expense line items. If you don’t have this in place, you should. 

Why? You are making important bets and decisions on where you need to invest your resources to achieve your goals. 

Ok, now we can move on to the process which can be achieved at a detailed operational level and at a higher financial level.

Let’s start with the detailed operational level. The benefit here is: 

  •  You are ensuring you are obtaining the proper tax deductions
  •  You are able to manage expenses
  •  You are going to get more insights to budget 
  •  You are minimizing fraud

Every business is different and there are employee expenses such as travel and meals and then business expenses such as inventory purchases and marketing expenses.

Here are a few keys for every business regardless of the type of expense:

  • Have a written policy that is followed by all
  • Keep everyone from employees to managers accountable to the process
  • Ensure the process has built into it proper documentation such as expense reports and purchase orders
  • Ensure the process has proper approval built into it. Meaning, make sure a manager is approving the employee expense report or purchase order

Moving on to the higher financial level. The benefit here is:

  • Having data to make timely decisions
  • Knowing what is on-track or off track
  • Identifying root causes of overspending
  • Fixing problems real-time

Here the process goes back to the budget we discussed. At month’s end, the actual amounts for all expense line items should be compared to the budgeted amounts. All line items should be analyzed to determine what we are learning. 

For instance, if a line item is over in a particular month, why is that? Maybe it’s a timing issue and we had to front-load expenses and no additional action is required. Or maybe, the marketing team has overspent and this needs to be brought to their attention to reduce expenses in a subsequent month to keep things on track.

The key here is to create both types of processes, put someone in charge of managing them, and use the information you are getting to cut business expenses to help you achieve your financial goals.

What Type of Questions Should We Ask When Looking to Cut Expenses?

We believe cutting expenses to achieve your financial goals is both an art and a science. You don’t want to simply cut an expense because it is over your budget. Maybe the expense that is over budget is helping you to achieve your business goals. In that case, why would you cut it?

This leads to our first question. We like to ask: “Does this expense get us closer to achieving our goals?”.

The question is to get you to really think about where you are allocating your capital and get you to prioritize. If the expense is mission critical, then we often advise to proceed with caution and perhaps find other expenses that are not as much of a priority.

Another important question to ask yourself is: “Why is this expense over and above the budget?”.

We have found that getting to the root cause often requires us to go deep. Meaning, we try to ask why at least 5 times to get to the bottom of it. Here is an example.

The marketing budget is over budget for the month by 25% or $15,000 but why:

  • Why 1x – Because the marketing team overspent
  • Why 2x – Because they needed additional support to achieve lead generation
  • Why 3x – Because they underestimated the resources needed
  • Why 4x – Because their original submitted budget was not scrutinized enough
  • Why 5X – Because the process for establishing budgets was not followed

As you can see, as you keep going deeper you get closer and closer to the real why. And by having the real answer you are able to make a smart decision. You can decide to re-forecast and increase the budget over the remainder of the year. Or you can decide to work with the marketing team on staying on budget and lower expectations on lead generation based on the resources deployed. 

Lastly, another favorite question is: “Who is accountable for this expense line item?”. 

We believe that whatever we measure and manage will improve and get better. And part of this is giving responsibility to team members to manage and own the number. 

So back to the example above, we would suggest that the marketing team leader is the person that should be taking ownership of approving the budget for the marketing team. This individual is now responsible for providing thoughts and actionable insights on getting the budget back on track. Never underestimate the power of “who” …..as in, who is responsible and accountable for this.

 

 

How Do We Actually Cut Expenses?

This is a delicate topic. But as your Company is growing, you may find that expenses naturally start to grow. Growth sucks cash in the form of expenses. But cutting expenses is one way to help you stay on track for achieving your business goals.

Here are some tips for cutting expenses:

  • Communicate your “revised vision” with the reduced expenses in the form of a re-forecast to your team. This paints a new picture of what we are aiming for on the expense side. And call out those specific line items and explain the why behind them. The point is, involve your team in this conversation.
  • Have open and honest communication with your vendors. You need your vendors just as much as your team and customers. They are helping to provide the goods and services needed to grow the business. So inform them by communicating timely and clearly so they can plan ahead.
  • Continue to hold managers accountable, ensuring they are driving the change needed to reduce expenses. This should be emphasized as a top priority that needs to follow through based upon an agreed timeline.
  • Keep banging the drum so that your expense management process is followed by all. Let everyone know they can play a role here to ensure the company succeeds.

So as you can see, there is no silver bullet. No doubt you can focus on certain line items but we encourage our companies to think before acting and not making quick decisions. We like to take a thoughtful approach and balance the tension between the short-term and long-term goals of the business.

Note, per the Small Business Administration one of the top reasons Companies don’t make it is they run out of cash. And the reason they run out of cash is they have more money going out in the form of expenses than money coming in in the form of revenue.

So this is a financial discipline worth investing in for your business.

So one last question, how is your expense management process and what needs to change?

3 Key Takeaways Related to Cutting Expenses 

If you want to build and grow your business, you need to make sure you are keeping an eye on expense management.

Here are three key takeaways related to reducing your expenses:

  1. Make sure you have done the hard work of building a detailed monthly budget. Review the budget versus actual by line item each month. Reflect on what you are learning. And determine what may need to change and re-forecast based on your learning.
  2. Lean into your process. Make sure that you have an expense management process in place that is followed by all. Assign one manager to oversee this to make sure that they are banging the drum on the expectations.
  3. Assign team members to be accountable for specific line items. Have them own the expenses and be prepared to offer up the “why”, suggestions for improvement, and take on the responsibility of the execution of any change needed.

Cutting business expenses

New Economy Team Members are Experts in Accounting for Entrepreneurs

If your Company is off track and expense management isn’t your thing, you struggle with building budgets that properly allocate funds, or you want to gain control of your finances to make smart decisions to build and grow your business, New Economy is an excellent partner. 

We’ll help you get your accounting done, and done right.

Schedule a time to meet with our Founder, Jeff, and discuss how we can add value to your situation.

What is the ROI for Digital Marketing?

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As a growth stage entrepreneur, you’re constantly thinking about ways to grow your Company. Considering the world is more virtually connected than ever, with customers spending more and more time online, digital marketing is becoming a vital part of a robust business strategy. Which begs the question: what is the ROI for digital marketing?

At New Economy, it’s on our minds too.

Why, you ask? It aligns with our efforts of helping you gain control of your finances to make smart decisions to build and grow your Company. And to grow your business you are going to have to make favorable investments in marketing.

In this article, you will learn: 

  • What digital marketing is
  • What types of digital marketing channels you can invest in
  • Ways to calculate ROI for digital marketing strategies
  • 3 key takeaways related to investing in digital marketing and the ROI

Note, before getting into any digital marketing strategies it’s very important to understand who your target audience is and where they hang out.

Let’s dive in.

Digital Marketing & ROI

What is Digital Marketing?

Digital marketing is an umbrella term for all of your online marketing efforts. 

This can encompass the following:

  • Content marketing
  • Social media marketing
  • Pay-per-click advertising
  • Affiliate marketing
  • Native advertising
  • Mobile marketing 
  • Email marketing
  • Online PR
  • Inbound marketing
  • Sponsored content
  • Search engine optimization (SEO)

The best digital marketing strategies focus on specific audiences and support the overall business strategy. Today, consumers are relying on digital channels to discover, research, and purchase products and services. Therefore, investing in digital marketing and knowing the return on investment can be a good business decision.

A few interesting digital marketing statistics per Tomas Laurinavicius’s “Mind-blowing Digital Marketing ROI Statistics” are as follows:

  • The average return on investment (ROI) from email marketing stands at 4,200%
  • Individuals who use blogging as a marketing tool are 13 times more likely to get a positive ROI
  • 72% of marketers improve their engagement through content marketing
  • Companies generate an average of $2 in earnings for every $1 they spend on Google ads
  • 64% of internet users are more likely to purchase a product online after watching a video

Pretty interesting stats, right? 

There is no doubt that every company needs to have a marketing budget to help ensure that proper resources are allocated to meet the goals of the Company.

Here is a quick question for you to consider.

What digital marketing strategies are you currently investing in and how do you decide if you are investing enough?

On a monthly basis, New Economy is investing in email marketing, blogging, and content creation which is about 1% of our revenue. As we look forward to 2024 we are planning to increase that investment to 3-5% of our revenue. We still think this is a bit low and are continuing to reflect on whether or not this is enough to help us reach our goals.

Which Digital Marketing Channels Should You Invest In?

Unfortunately, there is no broad-based answer to this question.

As we mentioned earlier, you need a thorough understanding of your target audience. For instance:

  • Who are you trying to reach?
  • What is their communication style and preference?
  • What content do they enjoy most?
  • Which digital marketing channels do they use?

It is worth taking the time to answer the above questions as it will save you time and money in the long run.

At New Economy, we have learned a lot about our ideal customers and where they hang out. So we will speak to those digital marketing channels and why we are investing in them.

Content Marketing 

We believe content marketing is the foundation of our digital marketing strategies. Through content creation, we aim to capture attention and then nurture that interest with email marketing (which we describe below).

Our content marketing takes the form of blogs, videos, one-pagers, client case studies, and social media posts. The key is to create high-quality content that adds value to your targeted customer.

Click here for an example of the client case study. Here we identified issues and challenges that the client was facing and discussed how we were able to help them to go from a place of frustration and chaos around their financial situation to a place of confidence.

Email Marketing 

Even though we get tons and tons of emails, email marketing typically delivers one of the highest returns on investment (ROI). We are about to launch our weekly email marketing campaign with the idea of trying to educate our customers and prospects. Our intention is to build the relationship and establish trust and credibility. 

The end goal is to get our prospects to our website and ultimately generate a conversion via our “call to action button”. Here, we are taking a long-term approach by trying to capture attention and create interest over time.

Social Media Marketing

Here is a staggering statistic: 70% of Americans utilize social media. 

Therefore, this has become a powerful digital marketing tool for growth-stage entrepreneurs. Each social media channel caters to a different audience so it is important to know who your audience is and where they hang out. 

Our focus here is to build relationships with key people at targeted companies. We do this with an educational and informative content style and spend much of our time on LinkedIn, YouTube, and Facebook. 

As we seek to improve our digital marketing strategies, we base our decision on data and not assumptions. So how do we calculate the return on investment (ROI) for our digital marketing strategies?

Keep reading 🙂

 

How Do You Calculate the ROI for Digital Marketing Channels?

Let’s continue on with the digital marketing channels noted above to calculate the return on investment (ROI) using New Economy as a guide.

Content Marketing 

When a Company doesn’t have time or bandwidth to produce its own content, it might outsource its content creation. While staffing someone outside of your office will cost your company money, think of the extra hours your team will have for other productive projects if they don’t have to create content.

Example:

New Economy wants to publish 8 social media posts and 2 blog posts per month. In order to do this it will take some investment in labor and technology.

They use this formula to calculate their ROI:

Internal Cost

15 hours per month x $150 per hour =    $2,250

Technology Costs                              =    $500

Total Monthly Cost                            =    $2,750

External Cost

Marketing Firm Retainer                   =    $1,200

By outsourcing to an external marketing firm, we are realizing a gain. The outsourced firm is able to do this much more cost-effectively. However, the true benefit is the recapture of time under the Opportunity cost. By spending 15 fewer hours on marketing, we are able to spend time on direct sales which could result in a new client and add $36,000 to revenue.

In addition, we look at the ROI through a different lens. If we spend $14,400 ($1,200 x 12 mth) on outsourcing our marketing efforts and get 2 new clients, that’s an additional $72,000 in revenue. This results in a return of $57,600 or 407% return on investment; we will take that.

Email Marketing

Email marketing is a great way to nurture current leads. It provides value and establishes you as a thought leader. We currently spend about 2 hours per week or 8 hours per month on creating our email marketing campaigns.

Example:

New Economy wants to publish 4 email newsletters per month. In order to do this it will take some investment in labor and technology.

They use this formula to calculate their ROI:

Internal Cost

8 hours per month x $150 per hour   =    $1,200

Technology Costs                              =    $50

Total Monthly Cost                            =    $1,250

If we spend $15,000 ($1,250 x 12 mth) on outsourcing our marketing efforts that results in 2 new clients for an additional $72,000 in revenue which is a return of $57,000 or 380% return on investment; We will take that.

There is an old saying. It takes money to make money. 

We believe that digital marketing has a pretty big upside. There are ways to identify the right strategies and then determine if they are generating returns for your business.

So take a look at your profit and loss statement and review your marketing line items. What type of ROI are they generating for your business?

3 Key Takeaways Related to Digital Marketing and Calculating Your ROI

If you want to build and grow your business, you need to make sure you are properly budgeting for digital marketing. Further, you should continuously evolve the return on these investments (ROI).

Here are three key takeaways related to calculating your ROI on digital marketing:

  1. Make sure you have done the hard work of understanding who you are and who your customer is. If you have not done this work, you are wasting your time and money on digital marketing. For real.
  2. Expect a positive return on your investment. We believe it is reasonable to expect a positive ROI over the long term. After all, if they don’t generate a positive ROI, why would we do them? So get serious about your investments and calculate the returns on a quarterly basis.
  3. Realize that digital marketing investments do not operate on a stand-alone basis. This can make calculating the exact ROI for any specific investment difficult but it is worth pursuing. We strive for “reasonable and accurate enough” to make smart decisions based on data.

Digital Marketing & ROI

New Economy Team Members are Experts in Accounting for Entrepreneurs

If calculating returns on investments isn’t your thing, you struggle with building budgets that properly allocate funds, or you want to gain control of your finances to make smart decisions to build and grow your business, New Economy is an excellent partner. 

We’ll help you get your accounting done, and done right.

Schedule a time to meet with our Founder, Jeff, and discuss how we can add value to your situation.

Smalll business financial statements

Leveraging 3 Key Growth Startup and Small Business Financial Statements to Achieve Your Goals

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In this article you will learn:

  1. What are the 3 key financial statements
  2. How to produce the 3 key financial statements
  3. Why they are important
  4. The top 3 ways to leverage the financial statements to achieve your goals

Why Do Growth Startup and Small Business Financial Statements Matter?

Let’s start with some statistics from the SBA.

  • 66% of businesses with employees will fail in the first 2 years
  • 50% of small businesses with employees will fail by the 5-year mark
  • 70% of small businesses with employees will fail by the 10-year mark

But why is this?

  • 82% experienced cash flow problems
  • 42% experienced a lack of market for the product or service
  • 29% ran out of cash 
  • 23% did not have the right team and place
  • 19% were outcompeted

Yikes, these stats are staggering and a bit scary. However, we believe that good financial statements will help you make smart decisions to build and grow your business. 

Before we move on, check out our several other blogs which address cash flow and team building here. They might give you some peace of mind.

Smalll business financial statements

What are the 3 Key Growth Startup and Small Business Financial Statements?

The 3 key financial statements are the balance sheet, the income statement, and the cash flow statement.

These financial statements should be provided in a timely manner (we recommend the 15th of the month for the previous month). It’s also important that they are accurate so we can use them to access the financial health of the business.

Here is a summary of each statement:

Balance Sheet

The Balance Sheet is a summary of the business at any point in time. It is a statement that shows all of the company’s:

  • Assets (cash & payable receivables)
  • Liabilities (debt & accounts payable)
  • Shareholders’ equity

This financial statement assists the reader with determining things like the company’s ability to meet its debt obligations, the cash reserves in place, or amounts owed to the company in the future.

Income Statement

The Income Statement is a statement that shows the profitability of a business over a period of time. It entails all revenue generated by the business, less direct costs, less operations expenses to determine net income or loss. 

This financial statement assists the reader in determining things like gross profit, net profit, and even certain marketing expenses needed to support revenue generation.

Cash Flow Statement

The Cash Flow Statement tracks the sources and uses of cash over a period of time. 

This financial statement assists the reader in determining where the cash went, such as paying down debt or having it tied up in accounts receivable.

How Are These Financial Statements Produced?

There are a few things that come into play to produce the financial statement. We believe the keys are:

  • People
  • Process
  • Technology 

People

In terms of people, you want to make sure you have the right people in the right seats. Typically, a bookkeeper or accountant does some of the tactical work to start the foundation of producing these financial statements. They will focus on the categorization of expenses, the reconciliation of the bank account, credit card account, and all other basic accounts. 

Then a controller-level person would step in to work on some of the more complex parts of the financial statement like revenue recognition and properly matching up revenue and expenses which is important to have a clear and accurate financial picture of the business. 

Note: Use this article to help you spot the difference between an accountant, controller, and CFO.

Process

As for the process, it is key to getting the desired outcome month over month; from doing the basic categorization all the way to the month-end close. These processes should be documented and examined for efficiency. 

This will ensure consistency and accuracy in the production of the financial statements and plays an important role in the delivery of timely and accurate financial statements.

Technology

As it relates to technology, these financial statements are typically produced automatically in accounting software like QuickBooks Online or Xero. 

Note, there is a bunch of work that goes into producing these financial statements, even though they are automatically generated, which is why people and processes are important. However, the overall technology is pretty powerful and inexpensive.

 

Why Are These 3 Key Financial Statements Important?

We believe they will help you to become a stand-out instead of a statistic. The above-mentioned failure rates are scary and staggering. 

But fear not. 

We believe that these financial statements, and gaining control of them, will help you to make smart decisions to build and grow your business. So no more running the business based on your gut. You will have actual data to support decisions around “Can we afford to hire?” or “Should we invest in this marketing campaign?”. 

We have helped many entrepreneurs. No more confusion. No more sleepless nights. Just peace of mind by leveraging these 3 key financial statements.

Top 3 Ways to Leverage the Financial Statements to Achieve Your Goals

1/ Compare your monthly profit and loss statement to your budget. 

This budget versus actual analysis will help you to determine if you are on track or off track with your annual financial goals. The good news is that if you are off track you know early on and you can create a plan to get things back on track.

2/ Review your monthly balance sheet over a period of time for trend analysis. 

Specifically the cash account. Set a goal around building up your cash reserves to cover a few months of expenses like payroll. Then each month review the cash balance to ensure that the cash balance is increasing month over month to support your financial goal of building cash reserves.

3/ Review your monthly profit and loss and drill down on the actual gross profit percent. 

This is the profit you are making on the goods or services you are selling. Consider creating the ideal gross profit percent and create a plan like increasing prices or negotiating supplier costs to reduce costs and watch this gross profit increase over time.

Smalll business financial statements

Achieve Your Goals with New Economy CPA

Mining value from your financial statements can help you achieve your goals. 

At New Economy, we help entrepreneurs gain control of their finances and make smart decisions by producing and analyzing the information provided in the three key financial statements. 

With our help, you’ll have financial peace of mind. 

We hope this article helped you better understand the three key financial statements, but we don’t want to leave you empty-handed. Try out this free Cash Flow Projection Tool for help managing your cash flow.

CONTACT US

 (401) 256-2404

CONTACT US

 (401) 256-2404

Grow your business by leveraging your financial data. We’ll show you how.

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