Actionable Steps to be Profitable even in this Economy with Ruth King

Profit & Wealth Guru Ruth King is passionate about helping businesses get and stay profitable by utilizing the latest systems/processes/technology.

Ruth is especially proud of a business partnership she started consulting with when the company had $750,000 in revenues. With her guidance, 16 years later, the company reached $10 million in sales and was sold for $9 million in cash.

Ruth holds an MBA in Finance from Georgia State University and a Bachelor’s and Master’s Degrees in Chemical Engineering from Tufts University and the University of Pennsylvania.

“You can only make good business decisions with clean, clear, and correct financial statements. If your financial statements are garbage, your decisions will be garbage.” – Ruth King

Episode Highlights:

How to make business owners get started with their profitability numbers
Tips for marketing a business (especially for non-online businesses)
How to automate your email marketing
How to get potential clients to respond to your communication
How to budget the finances of your business (How to determine the budget killers in your business)
How to determine the right KPI that will increase the productivity of your employees
Basic rules for firing an employee

Transcript: Download

Video Transcription provided by GMR Transcription Services.

Jaime Masters: Welcome to Eventual Millionaire. I’m Jaime Masters. And today,
on the show, we have Ruth King. She’s known as the profitability
master. She’s coming out with her sixth book, and you can check
her out at ruthkinghvac.com. Thanks show much for coming on the
show today.
Ruth King: My pleasure. Thanks for having me, Jaime.
Jaime Masters: Sixth book. I know books are a lot. So, tell me a little bit about
what this one’s about.
Ruth King: This one is A 101 Dumb Financial Mistakes Small Business
Owners Make and how you can avoid that. And it really truly is
101 dumb mistakes.
Jaime Masters: People are gonna read that and be, “Ouch.” Okay. Well, at least the
ones that I haven’t done yet it will help me with.
Ruth King: It’s like, “I’ve done that one. And I’ve done that one. No, I didn’t
do that one yet, so let’s make sure I don’t do that one.”
Jaime Masters: Yeah. Well, that’s what’s so cool. In reading your bio, you have an
MBA in Finance, but I love that you have a Bachelor's Degree in
Chemical Engineering, so systems, and processes, and tech. are
your thing. So, give me a little update on how you work with
businesses and how you really make sure that their systems and
tech. are up to speed.
Ruth King: Well, 1.) We start with the financial statements, of course. That’s
my thing. And my philosophy is you can’t make good business
decisions if you have unclean, or unclear, or wrong financial
statements, whichever way you wanna put it. If your financial
statements are garbage, then guess what? Any decision that you
make will be garbage because you can’t make good financial
decisions when your data is wrong. So, we start with the P&L and
the balance sheet, and we go from there. Yeah. A lot of my clients,
when we start, their financials are in horrible shape. However, –
Jaime Masters: That’s what I was gonna say. Yeah. Most business owners that as
the No. 1 thing that they do.
Ruth King: Oh, it’s interesting because none of us, including me, started our
businesses to do the financial side of the business. But if we don’t
take care of it, guess what happens? Something will come and bite
you in the butt. You’ll have a tax bill that was a big surprise. They
don’t get a check in the door in enough time to make sure you get
payroll. I mean, there’s just so many financial things that happen if
you don’t have good financials that you can make really good
business decisions on. And the really interesting thing about it is
that financials were developed back somewhere between the 1200s
and the 1300s by the Venetian Monks who had to take care of the
rich Italians’ money. And they had no QuickBooks. They didn’t
have a calculator. Now before, Jaime, you say, “Well, the Chinese
had abacuses.” Yes, but the Chinese weren’t talking to the Italians
at that point. So, they had to do something that was really, really
easy and really, really simple and that you could do with addition,
subtraction, multiplication, and division.
Remember, most of calculus was not invented yet either. So, the
format that they created for our P&Ls and our balance sheets are
the same as they were 1,000 years ago. So, it’s like, okay, there’s
really no excuse. It’s just that I think CPAs try to make it sound
like it’s harder than it actually is. I guess that was book No. 4. The
fourth book, The Courage to be Profitable, explains profit and loss
statements and balance sheets in English rather than accounting
babble. And if you read that book, it will truly tell you what’s in
the P&L, what’s in a balance sheet, and how to look at your
numbers and what they mean, and all that sort of fun stuff. It is
very basic. It is not written in any technical jargon or any Ph.D.
level reading or anything like that. It’s really meant for a business
owner who really wants to know what a P&L and a balance sheet
mean.
So, that’s where we start.
Jaime Masters: Yeah. Interpretation of the data. So, it’s, yay, we have tech. Right.
Yay, we have QuickBooks and calculators because I can’t even
imagine what life would be without it. So, yeah, we should be
grateful at this point. But, like you said, it’s not even about sort of
going through the numbers. It’s about knowing what they mean.
Right? And because of that resistance to not knowing, right,
because it seems so complicated and we’re not smart to do it, we
kind of resist it. So, you’re trying to get past that on your fourth
book and have people understand the basics because it really
makes sense when you get down to the –
Ruth King: Yeah. I work with a lot of heating and air contractors, plumbing,
electrical, and I explain to them they’ve all read a wiring diagram
which shows you how to wire up motors, and parts, and
equipment, and all that sort of fun stuff. And I ask all of them, and
I say, “What did you do the first time you looked at a wiring
diagram?” And they all look at me like I’m, “Did you understand
it?” “No.” “Well, what did you do?” “Well, I worked at it.”
“Why?” “Because I had to know it to do my job.” “Well, this is the
same thing with financials.” The first time you look at it, it
probably looks like it’s Greek, or Russian, or some other language
that you don’t understand the characters for Chinese, or Japanese,
or whatever.
But when you spend 10 or 15 minutes a week just getting into it,
all of a sudden, it starts making more and more sense. Three, four,
or five months later, you are going, “Why did I ever think this was
hard?” It just takes a little bit of practice, which I’m sure
everybody has done when they’re learning a new skill for their
businesses, or they’re going to play golf, which is a never-ending
practice, or tennis, or some sport, or some hobby. Theirs is some
things that you’ve got to practice to get good at it. This is the same
thing. You got to practice financials to get good at them.
Jaime Masters: I think what is so hard, though, is that fear gets in the way, like
scared of what the numbers will say. Maybe, you’re not doing as
well as you thought you were. You know what I mean? Because
they’re so concrete. They don’t lie, which is also, “Oh, crap. They
don’t lie.” So, how do you get people through the emotional part of
it?
Ruth King: Well, that’s the really fun part of it because usually there’s an,
“Oh.” And I will not use the explicative. We do things in terms.
Instead of percentages on the bottom line, we do things in terms of
net profit per unit. So, you have to look at what your unit of
generation is. So, for example, if you’re in, let’s say, a gym. Your
unit of generation is a member. The more members walk through
the door, the more revenue you have. If you are a restaurant, your
unit of revenue is a meal. The more meals you serve, hopefully, the
more revenue you generate. But if you’re not pricing your meals
properly, you still can lose money. So, it’s your unit of revenue
generation.
It might be a billable hour for those companies who are service.
They’re doing marketing service, or they’re providing services for
businesses and homeowners, and things like that where they
actually have people who go into the homes and bill by the hour.
So, their revenue generation is a billable hour. And once you get
there and you look at the bottom line based on our billable,
whatever it is, or your revenue unit, whatever it is, and if your
revenue unit says you’re making, for example, $2.00 per hour,
forget it. Why are you in business?
Jaime Masters: Yeah. That’s why people are scared. They’re, “Don’t tell me actual
numbers. What if I’m working a lot for getting nothing back?”
Ruth King: Well, then, one day, they will wake up.
Jaime Masters: Yeah. Exactly. Exactly. Do you want a hit in the head now or a
bigger hit in the head later?
Ruth King: Exactly. I mean, if you’re doing this just for love and not love and
profit, and a reason for doing it, no, making money can’t be your
sole reason. You have to love what you do. But if you love what
you do at the expense of looking at a financial, you have a hobby.
You don’t have a business.
Jaime Masters: Yeah. So, what happens? So, it’s one thing to go – okay – we now
know what the numbers look like and what we’re shooting for.
Right? And now, we need to get more things in the door, more
customers in the door because I have a lot of people, clients,
people that listen to the show that really focus on marketing and
sales. Right? As long we figure out the marketing and sales, then,
“We’re okay.” You know that’s not true, especially considering all
the testimonials that I’ve seen on your website. So, how do you
start getting people to pay attention to that profitability number and
really change it? So, that way, they are making money for all the
work that they’re doing?
Ruth King: No. 1 is waking up. It really truly is. Once they realize how usually
little they’re actually learning, it’s like, okay, “What do I have to
do to earn more?” And, sometimes, it’s productivity issues. It’s not
always pricing issues. So, for example, if you are paying your
employees for 40 hours a week and they’re only generating billable
work or however you wanna call it, or making meals, or whatever
it is for 20 hours a week, you’re paying them double. Right? You
got 20 productive hours. And 20 hours, you’re paying them out of
the goodness of your heart. Now, yeah, they fudge on their
timesheets and their timecards and everything like that. But that’s
crazy because you’ll never be profitable.
Your employees have to be productive. If they’re not productive,
then they’re not – the likelihood is your company’s not gonna be
very profitable. And if somebody – let me answer your question
about the sales and marketing piece of it. All you have to do is
market. Terrific. Let’s market, and let’s look at it by the numbers.
And I promise you marketing companies hate me because I make
every one of my clients do this one very simple math exercise. As
long as you have a calculator, you can do it. Let’s assume that they
want to charge you $10,000.00 for marketing program “X” or
advertising program “X,” and you’re looking at it going, “Well, I
don’t know if this is a good idea or not.” So, the very basic thing
you have to do is let’s assume your gross margin, which is gross
profit divided by revenue, is 40%. The very basic thing you have to
do is take $10,000.00 and divide it by 40%, and I think that’s
$25,000.00 if I remember correctly.
And so, if your marketing program doesn’t generate $25,000.00 in
revenue for you, you’ve wasted your money. Right? And so,
marketing firms and advertising firms love to give you all these
lovely proposals where you pay us $25,000.00 a month, or
$30,000.00 a month, or $10,000.00 a month, or whatever. And
they take no responsibility for leads or getting results. So, the
question that has to come back is look at your financial statements
in whatever form that they’re in. And see where your gross
margins are. And if they wanna charge you $50,000.00 and your
gross margin is 25%, you have to generate $200,000.00, if my
math is right in my head, to cover their $50,000.00 fee that they
want. Now, what are you gonna do to help me generate
$50,000.00?
Jaime Masters: Totally. So, when it comes to giving them enough time because
that’s the hard thing with any marketing company in general
because they’re, “Well, just give us time.” And you’re, “Okay.”
So, even if they say that they can do that, right, and we go, “Okay.
That’s what we’re shooting for. Those are all of our goals,” how
much time do you give them before you realize, “Oh, we’re just
losing money now.”
Ruth King: Well, I look at it as it depends upon who they’re marketing for.
Right? So, for example, if they’re doing marketing for your current
customers or customers who have used you, let’s say, in the past
year or two years but don’t happen to be using you now, and it’s
we want you back type marketing. They should be generating
those results every single month. If it’s a marketing program where
you’re not known in that particular market or some people have
never heard from you, sometimes, it takes four, five, six months to
make it worth it. But by the end of one year, whatever you spent,
divide it by your gross margin. And a year is more than enough
time. If they haven’t generated the revenues that you need to
justify their expense, you don’t do it anymore. Now, this also
requires that you track, which is another thing owners hate doing.
So, when that lead comes in the door, and it’s a brand-new
customer. Somebody who’s never called you before.
How did you happen to call us today, or email us today, or
however the lead came in? And they will tell you. And somebody
has to keep track of that. Now, there are some software packages
now that, if people call or something like that, you have a phone
number that is attached to a specific marketing program. And you
can just print out the results off of the computer and off the
software packages. So, you can track that way. So, you don’t have
to do it like putting a hashtag on a piece of paper anymore, which
we did in the old days.
Jaime Masters: Seriously. I mean, come on, guys. It’s way easier now. Sometimes,
it can feel more complex because there’s so many things that we
can’t up. We have access to these things, so it does make it kind of
hard. So, when you’re working with a lot of the sort of the bluecollar side of things, I’m just curious on the marketing side, right,
because it’s always an interesting thing to figure out which way to
market is best, especially for non-online businesses. Do you have
top two or three that seem to be working well?
Ruth King: Referrals. And it doesn’t matter whether they're contracting
business or whatever else it is. The best marketing you can do is
referral marketing. You have happy customers. They’ve bought
your products. They’ve bought your services. And it’s not do you
know anybody who can use our company. It’s who have you talked
to about product “X”? Or who have you talked to about our
services in the past month or so? And people start thinking about
the conversations that they have. And I’ll bet one out of three will
have talked to somebody about your great new product or great
new service.
“Terrific. Do you mind if we contact them to see whether they
would be as happy as you are?” “No.” And you have a referral. It’s
a warm lead because, “Susie, or John, or whoever suggested we
contact you. She really liked our products and thought you might
like them, too. Love to talk to you about it.” Boom. I mean, that –
Jaime Masters: Now, is that email? Or how do you contact them?
Ruth King: Any way. It might be texting. It’s how they give you the contact
information. If they’re my daughter’s age, you text everything.
You don’t email them. You don’t call them. You don’t do
anything. You text. Per mom, per se, it’s either a phone call or
email.
Jaime Masters: Generational changes.
Ruth King: Yeah.
Jaime Masters: Well, and that matters. Right?
Ruth King: Yeah.
Jaime Masters: On who your avatar is or your customer. That way, you know what
to do for them because otherwise, if you text too young of a person
or you email too young of a person, they’re never gonna see that
email.
Ruth King: And they won’t answer their phones either. I mean, if I wanna talk
to my daughter, I have to text her, “Can we talk?”
Jaime Masters: Yeah. I can’t say I don’t do that sometimes, so I get it. But
knowing that instead of going, “Oh, our marketing tactic isn’t
working. It’s referral-based, and we heard it on Jaime’s show, and
we sent the thing,” and it was email and not texting.” There’s so
many nuances to knowing your people and doing it in the right
way that makes it easier for them and not as much resistance.
Ruth King: Yeah.
Jaime Masters: That’s huge in order to get the data out there.
Ruth King: Yeah. It is. Remember that marketing is, for all intents and
purposes, the median, the message, and frequency, or whatever
you wanna call it. Okay. It’s who are you talking to? What’s the
message? And how are you talking to them? All right. Depending
upon whether it’s a customer, or a customer who used you in the
past, or somebody doesn’t know you from a hole in the wall, that
marketing will be different, and the messaging will be different.
And probably, the median will be different. So, you kind of – it’s
not an exact – it’s not like chemical engineering.
Okay. Where two times two is four. It’s less than an exact science.
Jaime Masters: Yes. Art forms come into play, which is hard if an owner doesn’t
know marketing really well. And they’re at sort of the lens of what
the marketing company says they can do. And you don’t have
autonomy over some of that stuff. When it comes to automation on
that, are there any software programs that do that? Or do you
suggest just sending out personal emails to customers or whatever
the methodology is?
Ruth King: When I do referrals, I always pick up the phone. I don’t care how
old, young they are because it’s a thank you for using our products.
It’s a thank you for using our services. And I often follow that up
with an email, however, or a text. Tried to reach you today. John
suggested we give you a call. They were really thrilled with our
products and thought you might be interested, too. But I’ll always
try, at least with referrals, to make a phone call, just because it’s a
thank you more so than anything else. And that’s just what I do,
and I find works for me. You might be in a situation where
something like that doesn’t work for you depending upon the price
of your products, and frequency, and those types of things. But
almost everybody can refer.
It’s just that somebody’s happy, but nobody’s asked.
Jaime Masters: Yeah. Do the people actually respond to that because that’s the
other thing? Right? There are so many automated. I prefer not to
be text messaged on things that I’ve used. And if I know it’s
automated, I ignore it, typically, anyway. So, how can you sort of
get past that noise on the referral side and get people to actually
respond to you? Do you follow up?
Ruth King: No. If you’re gonna, do it by email, or you’re gonna do it by text,
or you’re gonna do it by phone, and you have to leave a voicemail.
Okay. Hi, John. Hi, Susie. Your neighbor, your mother, your sister,
your brother, your fellow worker, and their name suggested I
contact you. And if it’s the email, the subject line is your neighbor,
your brother, your sister, your mother, your church member, or
whatever, suggested that we talk. You’ll get your email opened.
It’s not automated.
Jaime Masters: Now that makes sense. But how do you get the person that’s the
customer of yours to actually give you a name?
Ruth King: Oh, you talk to them first. A lot of times, they’ll be using your
product or service. And nobody’s even reached out to them to say
thank you. How many times have you been using something for
years, and nobody said thank you?
Jaime Masters: Yeah. They’re always looking for new customers and new sales
marketing. They kind of forget about all the ones that they’ve
already had. Yeah, definitely.
Ruth King: I’ll give you an example, my running shoe company, who I
absolutely love. I started – how many years ago now? Let’s see.
I’m on 19 or 20 of Brooks, whatever year it is. But they were really
good in the beginning, and they continue to follow up and keep in
touch and everything else like that. And they’ve grown really well,
What they do in the stores and how well they know what they’re
doing. I mean, I don’t go on Amazon and buy running shoes. I like
going into that store. And it’s crazy, but there is a relationship that
I built up with them over a period of time. They recognize me
when I walk in. That type of thing.
So, this is – if you have gotten this rapport with your customers,
then it’s easier to say, “Hey, who have you talked to about running
in the past couple of weeks?”
Jaime Masters: Definitely rapport matters instead of being so cold that, “Hey, tell
me about all the people you know.” And they’re, “I don’t even
know you.” Yeah. Yeah. That makes perfect sense. So, going back
to the productivity piece, like you were saying, especially with
technicians, especially when it comes to billable hours. Do you do
something like a KPI for a number of billable hours? How do you
determine what the right KPI is and how to get your workers to
actually be more –
Ruth King: All right. So, there is a KPI called a billable hour percentage. And
the billable hour percentage is the total number of billable hours
divided by your total payroll hours. And it needs to be north of
60%, preferably north of 80%. If not, you got to figure out what’s
going on. And that percentage can be done from any type of
business. Never mind the construction side of it, but let’s take a
restaurant or let’s take a membership side. All right? Are members
generally – for every member who walks in the door, we generally
generate X number of dollars. What would it take to generate Y
number of dollars? What other benefits can we add? What other
add-ons can we add?
And what can we do to make sure that people are attentive in
taking care of these customers? So, it doesn’t have to be billable
hours. You can do a percentage of whatever depending upon what
your unit of revenue is. Once you start understanding the unit of
revenue of how we make money rather than we sold something,
this is how we actually generate revenue. It’s not necessarily just
the sale of the product. It is the billable hour. It is the cost of a
meal. It is the add-ons that go on with it. So, you have to look at
revenue generation, not like I sold a box. You’re talking about a
little bit more than selling a box.
Jaime Masters: Well, lead indicators.
Ruth King: Yeah.
Jaime Masters: You’re coming up with things that are lead instead of lag
indicators because most business owners will go, “Okay. At the
end of the month, what was our next profit?” And look at it then.
But then, it’s kind of late for the month anyway. Right? You go,
“Oh, crap. They’re going down. What do I do?” And you’re sort of
already –
Ruth King: Yeah. You do it every week. Whatever your unit of revenue is, you
need to know how many of them you had for that week against
what was the budget for that week. So, at the beginning of the year
or whatever fiscal year is, you create a budget for a year. It may be
seasonal. It may not be seasonal. If it’s seasonable, you’re gonna
have bigger months, and you’re gonna have less months in terms
of revenue. And you actually spread it out weekly over a year, so
you know how many units, how many meals you have to serve in
January. The week of January 3rd, and the week of January 10th,
and the week of January 17th, and the week of March 6th, and
whatever else. And you track it every single week. Numbers are
important.
Jaime Masters: Let’s talk about budgeting. The four-letter word that everyone –
let’s talk about budgeting because a lot of smaller business owners
– I know you worked with some smaller, less than a million in
revenue types. Budgets seem like they’re not big enough. Or they
have all these things about why they can’t have a budget at certain
times. When should people start having a budget? I already know
what you’re gonna say, but I want them to hear it. And how can
they get their first few under their belt so that way, it doesn’t feel
so foreign if they actually use it?
Ruth King: Yeah. Well. You start a budget when you start your business.
Jaime Masters: Yeah. I knew it was gonna be. When do you plant a tree?
Ruth King: Think about it this way. If you open your doors and say, “Come
here, world. I’m here.” Nobody’s coming. Okay. You haven’t done
the planning. Okay. And this goes back to our marketing
conversation. And it’s gonna be tough in the beginning as you’re
starting a business unless you have tons of clients that are coming
over or tons of customers who are coming over from where they
knew you from another type of business. But you’re generally
starting over. So, your budget might be two revenue-producing
units the first week.
It might be three-revenue producing units the second. And you
start with a budget. And then, you look at budget versus every
week, or every month, depending upon how you wanna do it, and
you go, “Hey. We beat budget.” Terrific. Why? Or, “We didn’t
make budget.” “Why not?” Because it’s just as important to know
why you beat the budget as why you didn’t make the budget. For
obvious reasons, if you’re beating budget, can you do more of it so
that you’re doing better? And if you haven’t made budget, what
happened?
All right. It might be that your best employee broke their foot, and
they were out for a month. Who knows? Budgeting it’s not hard.
It’s basically a P&L. And the reality is if you’re not gonna look at
your P&L every month, you’re not gonna do a budget.
Jaime Masters: True. Right. Okay. P&L first, everybody. Just so you know, if
you’re not doing that. Yeah. Let’s do that first. And then –
Ruth King: I’ll work on the budget after that. Yeah.
Jaime Masters: Yeah. I think that’s the hard thing, too, when it comes to the
budget. Either they try it themselves, or they don’t totally know
how to do it. And so, it’s almost, “I don’t even understand what it
is saying.” And then, every month passes, right, and they don’t
have enough time potentially to learn how to do the budget. And
so, they kind of throw it away at that point. “I don’t have the time
and space for it.” How can you get people committed just to doing
it?
Ruth King: Well, you don’t start a budget until they understand their P&L and
balance sheet because a budget is just a waste of time because a
budget is basically a P&L every week.
Jaime Masters: Definitely. And I love how you said seasonal because that’s the
other piece that sort of gets in the way of, I know some of my
clients where they’re, “Well, it’s the same. So, now, it feels more
complicated.” Right? Sometimes, it’s this. And, sometimes, it’s
that. But like you said, you’re just doing it based on previous years
and figuring out what sort of the seasonable capacity is that you
moving through and create a different weekly KPI for –
Ruth King: Yeah. Not only that, I mean, think about the monkey wrench that
COVID threw in all of our budgets. I mean, even those who are my
seasonal clients. I mean, who predicted COVID? Nobody. And that
killed a lot of budgets. And guess what? There was not a thing you
could do. One of my clients is in Pennsylvania. And they’re a $2
million company. The month of April, whatever year it was, they
generated $400.00 and some odd bucks in the whole month of
April.
You talk about, “Oh, crap.” Yeah. That’s an “Oh, crap.” Okay.
What are we gonna do? I mean, there was nothing you could do
about it because it was something that was a gotcha-type thing that
we had no control over. And when those things happen, you just
want to have enough cash in the back. And that’s another
discussion for another time. I’m sure. But a budget is just basically
a P&L every month or every week. You can do one every day if
you want.
I don’t know why, but you could. I don’t.
Jaime Masters: There are budget killers that aren’t as crazy as COVID, but
something that you’re, “Oh, my gosh. Budget killer.” How do you
sort of recalibrate?
Ruth King: All right. I’ll give you a real horror story. One of my heating and
air clients – plumbing client, not a heating and air client, as a
matter of fact. The service manager walked out with their two best
plumbers literally. And so, you start your budget over again.
Jaime Masters: That’s a fun day.
Ruth King: Well, that was not a fun day.
Jaime Masters: Yeah. Ouch. Okay. So, wipe the slate clean. Got to do what you
got to do. That’s what business owners have to deal with
sometimes. Not to depend on the universe for anybody that’s
listening, but – yeah. But then, of course, they deal with it. And
I’m guessing they kept going and didn’t throw their hands up and
say, “Screw it. I’m done.”
Ruth King: That happened in March or April of last year. And by December,
they were even in better shape than they were in March or April.
Jaime Masters: All right. Thank you for saying that. Right? I know a lot of people,
especially sort of in the local business industry, “What if I lose my
best people?” Right? Then what? It’s, “Maybe, maybe you could
find even better people.”
Ruth King: Your best people can get hit by a truck tomorrow. You can get hit
by a truck tomorrow. We have no control over when we go. So, it
might not be that they go work for somebody else. It might be that
they are not even on this planet anymore. You have no control. Do
what you can the best that you can. And if that happens, pick
yourself up, dust yourself off, keep going, and you’ll figure it out.
Jaime Masters: Yeah, because we always do because we are problem solvers.
That’s what business owners are all day, every day. Yeah. So,
when it comes to the systems and processes. So, I get the financial
side of the systems and processes. It sort of all intertwines. But do
you ever go in and go, “Oh, this could be automated. Or we need
SOPs for this.” How do we do sort of the backend stuff that’s
important but not necessarily “urgent”?
Ruth King: As they grow, it becomes urgent. It can be an absolute zoo if
there’s not SOPs and there’s not procedures written. The very first
one I would start with is a job description. Never mind the SOP
until everybody knows what their job is. Who do they report to?
What is their job description overview? What are the KPIs they are
responsible for meeting? And I’m bringing the KPI thing back in
there. Once they have signed off on their job descriptions and,
“Here’s what you’re doing. Here’s what you’re responsible for.
Here’s the KPI that we expect of the work that you’re doing,” you
can have weekly, monthly, quarterly conversations with them on
how well they’re doing on their KPIs. And so, if they’re not doing
their job, a disciplinary conversation is not a surprise.
If they’re doing a really, really good job, they’re gonna expect a
bonus or whatever. So, that’s where I would start. I’d start with job
descriptions for everybody. Everybody signs off on their job
descriptions. And then, the SOPs and the policies and procedures
actually come out of the job descriptions.
Jaime Masters: Okay. Tell me more.
Ruth King: All right. So, let’s assume that we have a job description. And
most of you, hopefully, most of your listeners, as they grow, will
hire their bookkeeper. It would probably be one of their first hires.
Okay. So, the job of the bookkeeper is reports to owner. The
bookkeeper’s overall responsibility is to create and produce
accurate financial statements, take care of accounts receivable,
accounts payable, billing, whatever else it is. That’s their job
description. KPIs, make sure that all the bills are billed by every
Friday afternoon. I mean, I’m making things as I go depending
upon what it is. Make sure that all receivables are in the accounting
system by every Friday.
Make sure that all payables are in the accounting system by every
Friday. Making sure that all pricing is done. Making sure that all
expenses are in every single week would be a KPI as far as I was
concerned. And then, what they wanna do. Let’s say it’s monthly
stuff. Okay. They reconcile the checkbook. They reconcile all the
vendor accounts. They reconcile all the credit card accounts. And
they give the owner the proof. The printouts that show that they
were reconciled.
And they produce a draft of a P&L and a balance sheet, which the
owner then reviews and makes sure that everything looks right.
You can tell whether a financial statement is not exactly right just
by looking at it every month because you have a sense of what the
business is doing. So, that would be like a job description for the
bookkeeper. And then, depending upon what software you are
using, whether you’re using QuickBooks, or Sage, or any of the
number of the softwares out there, the actual way that receivables
get entered into the system is gonna be different for Sage than
QuickBooks. It’s gonna be different whether your
departmentalized or not departmentalized. So, the operating
procedures come out of that line that says to enter all accounts
receivable into the accounting system by Friday of every week.
And then, the procedure for that line gets written as a result of it.
And so, the SOPs come as a result of the job description.
Jaime Masters: The roles and the responsibilities. And so, that way, it’s sort of
mapped out. Yeah. And then, there’s no gray area. I think that the
thing that’s so hard is that when owners have employees, and
they’re, “I don’t know if they’re good or not.” And you’re, “Well,
are they doing what they’re paid for?” It’s, “Well, we don’t really
totally know.” Or, “We gave them extra stuff.” Or, “We changed
their role.” And they didn’t reassess any of this stuff or put any
numbers to any of it. So, yeah, of course, it’s a random gray area if
they’re doing a good job.
Ruth King: Well, and they don’t like it because everything comes down to
numbers. And you’re probably saying, “Yeah. You’re a numbers
person.” But the reality is that whether they’re doing a good job is
dependent upon what their KPIs are and whether they’re meeting
them. It depends upon what their job description and whether
they’re following the procedures for that particular job. It all
comes down to numbers. So, I have owners who tell me all the
time, “I hate performance reviews.” I’m, “Why?” “Well, all I
wanna know is how much the raise is gonna be.” Well, I never
give raises during performance reviews. I’ll do them later on their
anniversary type thing because then they expect a raise on their
performance review.
Performance reviews should never ever, ever, ever be a surprise,
ever. It’s like firing should never be a surprise. You got to talk to
them. You talked to them about the bad stuff. They’re meeting
their numbers, or they’re not. They’re meeting their job
description, or they’re not.
Jaime Masters: Yeah. I know it’s communication. And some of it takes a bit to get
in place for sure. So, I’m not disregarding that piece. But firing
people is so much easier when you have this system set up because
they’re kind of doing it to themselves. You’re, “Oh, how can I help
you hit these KPIs? How can I help you – ?” And it’s very kind
instead of being, “We think you suck. Now, you’re fired.” And it’s
a brand-new thing that they never really heard of because they
thought they were doing a good job. Right?
It allows ease for so many other more emotional pieces because of
having the numbers. So, it’s for the ease of you. It’s not just to
have them for numbers.
Ruth King: All right. Here’s my rule about firing, 1.) It should never be a
surprise because you’ve had your three strikes, and you’re out. Or
there’s immediately firable offensives, 2.) You never, ever do it
when you’re emotional. If it’s the right thing to fire them when
you’re mad as you know what, sleep on it. It will still be the right
thing to do in the morning when you’re calm. I had a manager had
an employee do one of those immediately firable offenses. And he
was so angry at him. Brought him in and fired him. And they were
waiting for his wife to show up to come get him. And he says,
“Besides, you’re too old to be working here.” True story.
Jaime Masters: Oh, gosh.
Ruth King: North of six-figure settlement for firing when you are upset. All
right.
Jaime Masters: Precautionary tales. Precautionary tales, everyone. Yeah. Yeah,
because it’s hard to control what you’re saying when you’re –
Ruth King: Yeah. Very.
Jaime Masters: We all know that. Right. Everybody gets triggered in ways. Right?
And preempting is huge. So, I completely agree with you.
Anybody that’s thinking about firing someone, just make sure that
you’ve got that on the list. I know we have to –
Ruth King: One other thing. Never fire alone. Have somebody else in the
room. I have had situations where somebody got fired and went
ballistic. In one case, put the manager in the hospital. So, always
have somebody else in the room because that helps get rid of some
of the emotion. Okay. That was my second piece of firing. Sorry.
Jaime Masters: No. No. Super, super important. Definitely important. And even if
they are remote, do you feel like it’s important to have somebody
else on the phone just in case, or –
Ruth King: Yes. Yes. Yeah.
Jaime Masters: Yeah. I’ve been hung on. Okay. I guess we’re done. All right.
That’s enough. Yeah. I mean, firing, in general, is an emotional
thing for both sides.
Ruth King: It’s emotional. Yeah. It’s very emotional.
Jaime Masters: Yeah. And, well, that’s the thing. I know employees – it sucks to
be fired. It sucks to any of that stuff. But it’s really hard as a
business owner, especially if you like the person. There’s just a lot
of emotion that goes to all of it. So, I just appreciate that finances
can really give you that – so, please, everybody, listen. Listen to
Ruth. Do the finances. There are reasons that will make you feel
better later on because that’s the reason why we do stuff. Right?
It’s not just to come up with numbers. It’s so you can run a better,
more profitable business where you actually get return on your
investment of all the things, and it’s easier. I’m gushing. But I
completely agree with you. All right. So, I know we have to start
wrapping up. So, I have to ask the last question. What is one action
listeners can take this week to help them move forward to their
goal of a million?
Ruth King: Look at your financial statements.
Jaime Masters: We knew it was coming. We knew it was coming. So, if they don’t
have a bookkeeper yet, what should they do? How can they find
the best bookkeeper if they don’t even know what to do? Should
they get one? Should they try and do it themselves so that they can
start –
Ruth King: All right. It depends upon what software they have, actually.
Jaime Masters: Okay.
Ruth King: If they have QuickBooks, Intuit has you go on their website; they
have certified QuickBooks experts. You put in your zip code.
Unless you’re in the middle of nowhere, there’s a lot of people
who come up. Get somebody who you’re comfortable with, get
references, and things like that. The financial statement’s really
important. But also, No. 2 would be to look at your bank
statements online every single day. That is just backup to make
sure that you understand what’s coming in and what’s going out.
Jaime Masters: And you said every single day.
Ruth King: Yeah. It takes five minutes. How long does it take you to log on
and look at the bank statement?
Jaime Masters: No, not very long. I have some over-checker clients that are, “I
have to know everything 12 times a day.” Maybe not 12 times a
day, but maybe once. Okay.
Ruth King: I’d say every morning when you come into the door, the first you
do. It’s like brushing your teeth. You get up, and you brush your
teeth after you have your breakfast, whatever it is. You do that
every day. It’s just like brushing your teeth. Every day that you
walk in the door, you check your bank statements online. If you
see something stupid, if you see a deposit that’s $0.02 or $0.52 or
something like that, and you know you’re not setting up another
account, call your back immediately. There’s been too much of
that type of thing going on right now. And there just trying to find
live accounts. I don’t know any other way to describe it. And so,
the next day, they’ll try and withdraw “X” number of dollars,
$10,000.00, $25,000.00 from your account because they know the
account is real.
So, just be careful. Look at it for anything that’s weird. Look at
money coming in, money going out, and make sure that you know
what it all is.
Jaime Masters: And when does your book come out?
Ruth King: September 5th. You can actually order it online on Amazon. I
actually have a few preproduction copies. So, if you go to my
website, ruthking.info, you can contact me through there, and I can
get you a book if you want it early.
Jaime Masters: Awesome. Yes, because this interview goes out way before that, so
ruthking.info. I’ll make sure we add that to the list, so everybody
can take a look. Thank you so much for coming on the show today,
Ruth. I really appreciate it.
Ruth King: Jaime, my pleasure. I hope that I helped your audience become
more profitable.
Jaime Masters: Me, too. Go do it, people. Thanks for listening.

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