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Common Accounting Mistakes That Can Hurt Value
Wayne Richard is the Partner and Director of Global Operations at Bean Ninjas, an accounting firm that equips 7-figure e-commerce entrepreneurs with the tools they need to scale their business. He worked at Hewlett Packard Enterprise as a financial analyst before starting his entrepreneurial journey in financial management.
Wayne began college in sports management but made the switch to accounting. He graduated from Isenberg School of Management with a Bachelor’s of Business Administration. He is a father of five and a triathlete who enjoys bringing confidence to business owners.
Here’s a glimpse of what you’ll learn:
- [04:34] Wayne Richard discusses his shift from sports management to entrepreneur
- [10:10] The value of consistently having a vision for the future
- [15:18] Wayne’s recommendations to avoid common mistakes
- [21:01] Why every business owner should review financial reports
- [27:16] How to capture key performance indicators based on capital
- [33:34] Wayne explains the importance of templated reports for an eventual exit
- [38:46] Forging a path to achieve financial freedom
In this episode…
Are you curious about starting your own entrepreneurial journey, but not sure where to start? Do you want to successfully scale your business for an exit but are worried about tracking finances?
If you are looking to exit your business, Wayne Richard recommends utilizing operational finance tools that are affordable to create a highly sellable and valuable business. Wayne has over 20 years of experience adding value to businesses by restructuring workflows of bookkeeping and accounting processes. It is important to set aside time to review financial reports, so you have the ability to reinvest profits for scalability.
In this episode of the Quiet Light Podcast, Joe Valley sits down with Wayne Richard, Partner and Director of Global Operations at Bean Ninjas, to discuss having confidence in the details of data and financial reports. Wayne talks about making a change to drive numbers up, why you should hire an e-commerce bookkeeper, and common mistakes that decrease value and prevent your eventual exit.
Resources Mentioned in this episode
- Wayne Richard on LinkedIn
- Bean Ninjas
- Eytan Wiener on The Quiet Light Podcast
- Quiet Light
- Quiet Light on YouTube
- Mark Daoust
- Joe Valley
- Quiet Light Podcast email: [email protected]
- The EXITpreneur’s Playbook: How to Sell Your Online Business for Top Dollar by Reverse Engineering Your Pathway to Success by Joe Valley
Sponsor for this episode…
This episode is brought to you by Quiet Light, a brokerage firm that wants to help you successfully sell your online business.
There is no wrong reason for selling your business. However, there is a right time and a right way. The team of leading entrepreneurs at Quiet Light wants to help you discover the right time and strategy for selling your business. By providing trustworthy advice, effective strategies, and honest valuations, your Quiet Light advisor isn’t your every-day broker—they’re your partner and friend through every phase of the exit planning process.
If you’re new to the prospect of buying and selling, Quiet Light is here to support you. Their plethora of top-notch resources will provide everything you need to know about when and how to buy or sell an online business. Quiet Light offers high-quality videos, articles, podcasts, and guides to help you make the best decision for your online business.
Not sure what your business is really worth? No worries. Quiet Light offers a free valuation and marketplace-ready assessment on their website. That’s right—this quick, easy, and free valuation has no strings attached. Knowing the true value of your business has never been easier!
What are you waiting for? Quiet Light is offering the best experience, strategies, and advice to make your exit successful. To learn more, go to quietlight.com, email [email protected], or call 800.746.5034 today.
Hi, folks, it’s The Quiet Light Podcast where we share relentlessly honest insights, actionable tips, and entrepreneurial stories that will help founders identify and reach their goals.
Joe Valley 0:29
Hey folks, thanks for joining me on another episode of The Quiet Light Podcast. Appreciate it. As always, this podcast is brought to you by Quiet Light Brokerage where every entrepreneur on the team has turned into an advisor. First they were entrepreneurs in the online world where they all built, bought or sold their own online business, then join the team as an advisor. And if you have not picked up a copy of the EXITpreneurs Playbook, please consider it. It’s great for both buyers and sellers. And it’s actually great for our next guest. As he told me after he read it, he is the head of operations for the US for a company called Bean Ninja. His name is Wayne Richard. And he has shared chapter 11 with a book he downloaded it from exitpreneur.io. He’s read the whole book, but downloaded chapter 11 and shared it with his entire team to help them understand pad backs so that they can better serve all of their clients in the e-commerce online world. So this particular podcast we’re going to talk a little bit about Wayne’s background, which is fascinating. He’s not your typical bookkeeper. He’s a triathlete. He’s a data five. He thought he was having the third kid and then they went up a triplet, so it jumped to five pretty quickly. And he always knew he was going to be an entrepreneur, but it took took a while to get there. So he is an entrepreneur. He is head of operations for Bean Ninjas in the US, and serves online clients in the e-commerce world. Let’s just jump to the intro. And here we go with Wayne, Wayne, welcome to the Quiet Light Podcast.
Wayne Richard 2:12
Thanks so much for having me Joe.
Joe Valley 2:14
Why don’t you give us a little bit more background on yourself and what you do over there at Bean Ninjas?
Wayne Richard 2:19
Sure, a little bit about me. I’m partner and director of global operations at Bean Ninjas. We manage a global team and equip seven figure e-commerce entrepreneurs with the financial tools they need to enjoy business success and lifestyle freedom. Bean Ninjas helps e-commerce businesses know through greater organization grow through greater visibility and confidence and better predict and plan their financials. I personally live out my lifestyle freedoms as a father to five kiddos, including triplets. And as a triathlete. I’m currently training for a half Ironman.
Joe Valley 3:00
It’s gonna say the look here for the folks that are listening instead of watching. You don’t look like a typical bookkeeper or an accountant. Not that. I don’t mean to insult my friends that are bookkeepers and accountants but you look healthy and fit and strong. Like, I generally don’t see. People think of bookkeepers as nerdy, I guess, right. And I’m nerdy one with glasses on right now because my eyes are killing me because I’m getting old. But yeah, you you don’t quite fit the mold. So how did you land into this bookkeeping accounting role?
Wayne Richard 3:34
Sure. So it’s funny, you mentioned I had a friend in a CrossFit class that we would do. most mornings he would call me the certified public assassin. And then of course, that movie came out with Ben Affleck, the accountant. And it may have changed the perception, I hope. We’re now accounting can be sexy, if you will, and we can be fit. So maybe I’ll be part of that change a dynamic. Hey, good. As we were chatting a bit earlier, I didn’t originally have an idea of being an accountant, you there’s a lot of education and training that goes in to our profession. My interest throughout University in college was in sport. So I went to the University of Massachusetts where I’d grown up and went in with the intent to study sports management. And the first class you attend, they tell you about the career opportunities, but they tell you that they’re really gloomy. You likely will graduate with a four year degree in debt with student loans and be offered a position where you may have to work for free or based 100% on commission of sales for something like season tickets. And we’ll work very long hours and not have much of a lifestyle outside of that job and balance that out. I went to my Next class, which was accounting 101. And they introduced me to the idea that opportunities are limitless. accountants are needed in every industry. every profession, every business, hospital, school sports organization requires accountants. So I made my way right over to the administration building and changed my major to accounting in spent my time then after college working in either finance or accounting for the last 20 some odd years, but now
Joe Valley 5:33
you’re an entrepreneur, you know, the rest folks, you’re not, I want people to understand that you’re, you know, running an entrepreneurial organization. And you have to think about all aspects of that. And you’re not just to a CPA or a bookkeeper. And I want people to understand that you are somebody that they can talk with and connect with, how did you make that leap as an entrepreneur, were you always wanting to be an entrepreneur or starting your own business.
Wayne Richard 6:02
So it’s, it’s funny, because Looking back, I was the boy that had the paper out, and the guy trading baseball cards for sports games and trying to craft deals and bring in my my younger brother to service of larger paper route and paid him, you know, we collectively pool our money and buy more video games. And I always had that interest, I think I got I fell into the traditional path that was shown to me, in growing up in a very blue collar town, you know, the route for those that could go on to further education was to get a good degree, work for a big company for your career be taken care of through retirement, and I fell into that false sense of security, I came out of college got a great job first offer, making a great sum of money, having worked $6.25 cent an hour work, steady jobs, checking IDs and weight rooms, to then making $50,000. In your first year, while sharing an apartment with five of my best friends. It felt like I was wealthy. So you know, I didn’t pursue anything entrepreneurial for quite a bit of time. And then you get into the demands of, of marriage and children. And I have five children,
Joe Valley 7:21
the pleasures, you mean the pleasure. So just as clarification, your wife might be listening
Wayne Richard 7:27
to great joy and responsibility. So it wasn’t until I was put in a position where I had to make a key decision. And it was a big pivotal moment for me, where my manager called and shared with me his gratitudes. And what he felt was the best path forward for me in our organization. And that was to relocate my family to either Dallas, Detroit or DC, I was aware having been a manager responsible for laying off a large portion of my team of what the severance offer had been for others. And I explored that and they shared with me, I could get the same offer, where it provided me a tremendous runway to make a run of something on my own. And within my corporate career, at times, that really were critical for me to have a side hustle, I was presented some interesting opportunities. My wife was in nursing school, we had two children at the time. And I was approached by a friend that asked if I could moonlight and provide some accounting and bookkeeping services in his small business. And at the time, he asked me to throw out a rate. And I threw a rate out there that to me seem very high for the level of effort that I would provide. But he accepted, he’s like, absolutely, that sounds great. And I was able to add value and get into his business and restructure some of the workflows that he was using to manage his bookkeeping and accounting and payroll processes. And it always sat with me as an idea Wow, like if I could serve as one customer on four hours at this rate? Well, five customers would replace my income and I then had the opportunity and you know, after discussion and you know, some soul searching but really some by and also with with my wife, you know, we had five children. I had always been the primary breadwinner in our household.
Joe Valley 9:27
We did you have the triplets while you were in the, in this transition period?
Wayne Richard 9:31
Yeah. So I, I launched a business with five children, 10 month old triplets, a new home, we had moved into two months prior, and a wife who had just graduated from nursing school. So if my wife is listening, the critical moment was, you know, really Joining Forces and as a team, having that buy in that this was something that we would work toward together. She sacrificed and she would pick up shifts at the house. hospital working nights, leaving the family all with a vision. You know, as an accountant within having been very much involved in sport, I very much believe you need to have a vision vision of where you are looking to go, what are you looking to achieve?
Joe Valley 10:16
Your goals? Yes.
Wayne Richard 10:18
Because then you step into the baseline. Well, I want to get to here, where am I today? Well, if I want to,
Joe Valley 10:24
are we talking about reverse engineer your path to those goals, my goodness, way, different language,
Wayne Richard 10:29
you may have thought I’ve read the book. So, so here, you know, it was it was just very much that, you know, I’ve been involved in as a triathlete, you know the distance you need to get to and you know, the relative time you want to get there. So then you back into where am I in week one. So here it was, it was kind of that commitment to my wife that hey, after this many months, if I don’t get here, then I’ll go back to the traditional thing I wasn’t, wasn’t trying to burn the boats or, you know, I really had that severance to say, if this severance runs out, and I’m not earning at least you know what, enough to cover our fixed living expenses and provide a lifestyle somewhat comparable to what we had had before, then I’ll go back to a traditional route. But, of course, as the story goes, and through what my father in law had shared with me early in my career, your success will be defined by the books you read, and the people you meet. I was fortunate to meet some people during that time period, that really provided me that, that courage, that visibility, that this was something that was going to take off.
Joe Valley 11:43
It’s great. It’s you know, it’s our stories are not all that dissimilar, except that you would allow more courage than I did, because I was single, when I started my business, I had a two family where the rent in the front paid for the mortgage. So I live in debt free, I had some student loans and whatnot. But I didn’t, and I didn’t have that 32 week runway of income, but I had about $10,000 saved up. And I remember that first client that I negotiated the deal to do media buying for them. I was willing to accept something like 15 $100, and I consulted my wife. And she said you are worth so much more asked for three. And they didn’t bat an eyelash and hired me for $3,000 a month. And that was the beginning of it. And it’s very similar stories. I think having a strong supportive spouse or mentor in any way, helps propel entrepreneurs to greater success with more balance in their life. But we could talk about ourselves all day long. And let’s not do that, because what I really want to do here, based on the conversations we’ve had is talk about some of what you’ve learned, you know, with Bean Ninjas, and working with entrepreneurs, and some of the common mistakes that they make when they’re doing bookkeeping on their own or with an inexperienced bookkeeper. Before we jump to that, though, just a what is the typical size of the client at Bean Ninjas? And who are they? Are they brick and mortar stores? Are they online stores? What are they?
Wayne Richard 13:29
Sure So it varies in terms of size, but roughly we best support those that are in the mid six figures up as high as 25 million. Okay, that’s just a handful tends to be e-commerce brands selling on Shopify and or Amazon or multi channel, we’ve now begun to service more and more customers that are getting into retail locations like Walmart Whole Foods, and have kind of a wholesale component to their business
Joe Valley 13:58
Are those the the online folks that got big enough to get into big box stores or they just started
Wayne Richard 14:06
in a very trendy products that Walmart typically wouldn’t have on the shelves, Whole Foods similar through success in Amazon provides opportunity then for them to get on the shelves at Whole Foods. Very cool.
Joe Valley 14:21
So you’ve seen a lot people from doing a half million a year in revenue up to 25 million. I want to sort of hone in on what some of the common mistakes are that they make and how they can rectify themselves. those mistakes themselves before during or after hiring a company like yours or any other bookkeeping firm. So if you could just start talking What are like what’s the most common mistake you see people make when they’re, I guess doing their books on their own, which which everybody knows I advocate for hiring an e-commerce bookkeeper. much cleaner books, much more success. That’s when you can focus on growing your business. But regardless, some of them still say, I can do that. And they become what Jackie is right? Don’t be a Jackie read the book, don’t be a Jackie, don’t say I can do that you’re not a teenager, give us a give us one of the most common mistakes.
Wayne Richard 15:16
Most common, it’s not the first, but the most common certainly is using spreadsheets or other manual processes. Instead of cloud accounting software, there’s tools that are very affordable. Zero is our preferred cloud accounting solution, but also QuickBooks Online, where you can integrate tie into your banking automate bank rules, set up your accounting, so that is far more efficient, but provides for greater visibility and clarity into the financial reports that you would share to multiple audiences, the three most important the tax man, for everybody, regardless, if you have interest to exit, and sell your business to you, as a business operator, you need to have operational finance. And that comes through insights and data. That’s a reflection of those decisions you’ve made in your business through numbers that come about through these financial reports. And then, if you’re very much aware, to a broker, I we’re seeing more and more interest is call it to a buyer, but enough to be absolutely, we’re seeing more and more interest from our sellers in a not only it’s not exactly exiting, but understanding where their business may be valued. So that they can make arrangements to create a higher value, opportunity to exit at a certain period of time, or just have an awareness of where they stand.
Joe Valley 16:47
When it comes to spreadsheets, look, it’s easy enough to start there. You know, you’re bootstrapping your business, you just try to keep the wheels on the bus and see if you’ve got something to operate and you get a ballpark idea of your numbers. You’re six months old, you’re not exiting, that’s okay. You still have to file taxes, your life’s gonna be a lot easier. When you go to file taxes if you just can provide your CPA with a real p&l not not a spreadsheet or it’s it’s it’s funny thing because we say not spreadsheets, but what do we do when we export a profit loss statement from QuickBooks? Zero, you have put it in a spreadsheet, right? You save it to excel. But you know, I’ve personally pf so that
Wayne Richard 17:31
there’s no alteration,
Joe Valley 17:33
right, right. PDFs. That’s, that’s good for the for the CPAs. I’ve sold businesses, folks, I think I talked about it, Bob in the book, as gentlemen, that was his goal was to retire at the age of 50. And join the ministry. He had been running a business on a side hustle for about a decade and wanted to sell the business this is gonna be worth I call it a million bucks. And he didn’t have any bookkeeping, it was a napkin and a credit card and bank statements. He built the p&l in Excel files on his own from the bank statements for three years, I told him to hire a bookkeeper he wouldn’t. We still went and listed the business went under alloy twice, and it fell through twice. And buyers couldn’t put their finger on why it fell through. And my belief is it was because of the lack of confidence in the details in the numbers and running the business like professional, he finally hired someone like you Wayne and you know, they put it all into zero, I think it was at the time, export it to excel lo and behold, the numbers are exactly the same. But it was done professionally by a bookkeeper. And we went to the backup buyers switched it up a little bit, but ultimately ended up selling the business for about $50,000 more than previous to ello eyes. He he got 20 time return on investment. I mean it was a good investment today. And his numbers were better. So if he had done that all along, he would have been able to analyze the reports that someone like yourself could provide and look at let’s say, I feel like I’ve told this story 100 times but it’s because I’ve been recording podcasts as a guest but I was at a mastermind event where the coordinator owner of the mastermind got up on stage and talked about his own brand. And how important it was to have good bookkeeping and numbers analysis and this person did about $40 million a year in revenue and you know it was a lot of it was recurring revenue. He said I noticed something a couple of months in a row with regard to freight charges. It was it was off it was just it felt like it was high. So we dug into it because we had the reports they were giving us that little bit of a red flag. He said if I hadn’t caught that would have cost me about a million dollars on an annual basis. If he hadn’t caught it now his numbers are so big, you know he you know Missing a million dollars in a 40 year, maybe it’s not that it’s hard to find, right? Or it’s, it’s hard to find. So I chatted with him afterwards. And this is where you and I understand things a little bit. Not only would he have you lost a million dollars in the process, right. But his business was worth about an eight time multiple. Wow. So he’s not losing a million, he’s losing 8 million in the value of his business. And all because he was not using spreadsheets, he was using a good qualified ecommerce bookkeeper, they gave him reports every month that he can analyze. And he was able to see that mistake, you can take that number and divide by 10. And it’s still going to happen if you have the right details to pay attention to not an Excel spreadsheet that you put the numbers into yourself or somebody else does. But you’re pulling all reports from your bank statements from Amazon from your Shopify store, all that good stuff. It’s It’s It’s given to you on a silver platter on a monthly basis. But I think it’s great, because
Wayne Richard 21:00
it creates the visibility and clarity, we see a lot of brands they come to us and they’ll share with us their Shopify sales traction, why go to the dashboard, and I’m able to see my businesses growing. But if they’re not particularly aware of their contribution margin, their gross product margins, their customer acquisition costs, there may not be any fuel left for covering their wages and goals around what they hope to earn in the business, you actually alluded very nicely to transition. The next common mistake we see is failing to set aside time to do bookkeeping, and review financial reports. We often see people that do have integrations into zero, they did go about getting QuickBooks set up and linked into their bank, but they never run and look at the report. what’s critical is to take time to put like a date on your calendar, time to review the results that are generated from the activities from either your bookkeeper, whether you have someone on your staff, a va, someone that’s doing the categorization, the transaction processing, or an outsourced bookkeeper like like our team at Benin, just but invest the time to review. It can be a quick comp, it can be 15 minute, everything’s on track numbers are great. When we look at the trends in line with our plan, things are amazing. But that time also provides you that opportunity to have a bit of focused attention to look into the trend lines to look at is this is what I always ask is do you like these numbers? If we don’t like the numbers, then we need to make changes and changes come about through operational decisions made strategic decisions made in the business? Because all the numbers are are a detailed account in numbers of the decisions you’ve made in the business. If you don’t like how much you’re spending on software subscriptions. Well, how long has it been, since you’ve reviewed subscriptions to see if you have duplicate?
Joe Valley 23:04
I see that all the time. Absolutely.
Wayne Richard 23:07
What are you paying for? Do you do you see value in continuing to pay for that service provider? That subscription? Did it make sense to go to that mastermind and bring the entirety? You know, if so, then then we justify and we say yeah, we like these results? If not, well, let’s work on some things we can change to drive different results in the future numbers.
Joe Valley 23:30
Yeah, I think that’s brilliant. The business that you’re operating folks that are listening or hoping to buy is very likely your most valuable asset. So why in the world would you set aside one hour a month to be on a call with Wayne to review the numbers, look at what it did for that person that I spoke about that almost lost a million dollars, it would have cost him eight in the sale of his business again, divide by 10. It’s still an awfully big number. Before we jump on to one of the other common mistakes when I wanted to back to a term that you used contribution margin, and I hear thrown around a lot. I’m wondering if you could give the audience a simple clear definition of what contribution margin is. Okay. So
Wayne Richard 24:17
in the in the point in which I referenced it, we, as e-commerce specialists uniquely categorize expenditures across four major areas. So we lump together cost of sales, which are your product costs, fulfillment merchant processing fees, to calculate your gross product margin, we then take away as the next major grouping customer acquisition costs to calculate a contribution margin after marketing. All that means is this is so if you had $100 and you spent $50 on cost of sales, your product fulfillment, you’re left with 50. If you spend another 20 on customer acquisition Paid social, you’re left with $30. That $30 is the margin or the fuel that’s left to cover wages and team cost, which is our third category, and also operating expenses. Now, that gets you to different margins that we’ve coined operating margin that then allow for you to see your bottom line, profit number. Now, what we hope to get to is building a business that allows for you to have significant enough margins to meet your desired spend in customer acquisition, while leaving a budget available for you to take in earn market base salary at a minimum within your business, based on the contributions to blood, sweat and tears that you’ve made to build something quite amazing, that serves others, and then also profit. At the end of the day, you want to have something retained earnings and ability to reinvest in is we’re aware in e-commerce. Business is not built on profit alone, it’s cash in the bank. So it tends to be that those profits then reflect as cash that you can then make those decisions on inventory, restock purchases, hiring firing new products.
Joe Valley 26:25
And so on the cost of sales, if you’re selling on a third party platform, like Amazon that’s included in the contribution margin numbers, because it’s cost of advertising in a sense. Yeah.
Wayne Richard 26:37
Yeah. Yep. So it varies, you know, Shopify will have a different Chart of Accounts than we will in Amazon business, it actually leads into, again, a common mistake, we see incomplete or inaccurate chart of accounts for their industry. So what we see is folks will use the template by plugged into QuickBooks, it has a template for retail, and I use that one. Well, that the chart of accounts is a list of sales and expense categories that you reconcile or categorize your bank transactions into. But the biggest function of your chart of accounts is it helps build out the reports your income statement, your balance sheet. So having a chart of accounts that’s based in insights from your industry, will allow for you to more easily capture key performance indicators that tend to be routinely asked when potential buyers are exploring your business, when bank or different lenders are making decisions on offering you capital, through loans. So it’s important for an e-commerce brand to look to an e-commerce specialist, at a minimum for an idea of a chart of accounts that can best support, bringing clarity and visibility into their financial
Joe Valley 28:04
reports. It’s so nice to hear I see all sorts of different Chart of Accounts, I’ve been doing this for a decade, probably reviewed 5000 p&l during that time, I’ve know I’ve had over 8001 on one conversations, and they’re all different, they all look so vastly different. No two are alike. Even sometimes, obviously, when you know they’re using same firm like yours, the details of the business are different. Any anything else jumped out to you, I’m thinking of one common mistake, but that I see that I used to see I see less and less of it. But let’s hear, let’s hear if you’ve got something.
Wayne Richard 28:38
So I do so it really it’s it’s from the beginning, most most brands launch, it becomes very difficult for you to fund the business without utilizing a personal credit card. And it may also be that you’re utilizing and paying expenses from personal bank accounts. For Business purchases, it’s okay, if you have a credit cards that have been opened in your personal name, that are used for business transactions. But try to make that card exclusive to business transactions. Try not to merge in your daily Starbucks purchase with your software and subscriptions that are coming through to support your e-commerce brand. So we see a common mistake using personal bank accounts or credit cards for business purchases, and there not being a separation so that we can clearly get things organized to present the true mark the true profits that are coming through the business.
Joe Valley 29:38
Yeah, that’s called commingling folks. And it’s either when you do it with two entities and two different brands, or two different businesses in one QuickBooks account or one tax return, I should say. The you know, the daily Starbucks and whatnot. Maybe you’re writing it off as office supplies, which I guess is okay, because you could if it’s if it’s delineated properly You could still do it as an add back to make sure you don’t lose that and people are thinking, come on and add back for a cup of coffee at Starbucks, well,
Wayne Richard 30:10
that’s 30 $500 a month.
Joe Valley 30:14
That’s a lot. Yes, a lot of that’s almost $4,000 a year on Starbucks times, four times multiple. You just you just lost $16,000.
Wayne Richard 30:23
Yeah, that’s assuming you’re not buying for your tea. Now good entrepreneurs, you’re gonna you’re gonna reward your team, right? That’s more than $6. A session. Yeah. And that’s what’s that’s what’s interesting, I do want to say thanks for writing the book, because you’ve provided to someone like me a new service offering, right? Now there’s opportunity for e-commerce accountants to take that add back chapter, the book, and say, Wow, we understand how important financial reports are two, creating clarity and visibility into a brand’s numbers. We’ve talked already about planning having a number you’re working towards? Well, there’s opportunity now for e-commerce accountants to build a template and report of trailing 12 months with the appropriate categorization in your chart of accounts of add backs, so that they can be clearly articulated and transactions set against bank rules to code them consistently. So that now the opportunity in the discussions with the customers, well take a look at the traction that’s been built over the last 12 months, when is it a good time to now explore, reaching out and and getting listed the traction over 12 months 16 months ago, might not look as favorable as today based on that intent to make sure that the business is being run, mindful of, you know, mindful of the end goal in mind of having a successful exit.
Joe Valley 32:02
That’s interesting. I hadn’t thought that it you know, the book itself and chapter 11, in particular would benefit people indirectly, because you know, it bookkeepers will be looking at it going, aha, okay, if I can just maybe,
Wayne Richard 32:19
maybe, maybe I just, I just presented a new opportunity. I shared the chapter with my team, I downloaded the free chapter, shared it with my team. That said, I’d love for everybody to take a read through this, and we’ll discuss it in our monthly call. Because it is it is critical one, I would say also, being someone that services, dozens of brands, we do want to be consistent across the team, which it’s not just Wayne Richard that’s providing services to all of the Bean Ninjas customers, there is a team that’s built behind us that that helps support the effort. So to bring a common understanding that has been presented in a way that I had never seen, we had supported brands that had exited, and we’d support it and been in due diligence conversations, and at the table, but the manner in which we now have within this playbook to create these templated reports, we can then easily share them across when a when a customer of ours presents the idea that while it’s it’s in my my three year plan to position to exit, we can then ask wow, you know, we have this tool, trailing 12 months income statement, appropriately recognized and that add backs across these major areas, they may not all apply, but let’s have a conversation. Because if they do, or if you’re interested in bringing in or spending money in a way that may not impact that price, you may be in a position to still get the benefit of the spend, but also not fear the penalty of the impact that it could create on a potential buyers
Joe Valley 34:02
offer. Yeah, to dumb that down. If you’re launching a new product, the very least breakeven on it. Because if you lose $5,000, you actually lost the five plus that times maybe three or four. So they might have lost one in $25,000. You know, it’s really interesting getting that level of detail in the books and the fact that chapter 11 would help e-commerce bookkeepers and all of their clients because folks that are listening, y’all spend money in fourth quarter on things that you don’t need to spend money on. They’re not business oriented, right? The last time I reviewed a p&l, there’s like 18 $100 in December, and nothing the rest of the year in office supplies and it’s because you bought a new laptop or a TV or whatever.
Wayne Richard 34:43
And it went back to school starts office supplies. Yeah, absolutely. Time businesses will mentor
Joe Valley 34:51
and you think that’s just benefit you and you’re going to reduce your tax burden and that’s good enough. But when you go to school, Now, it’s going to cost you a lot more than you saved on your taxes. If you can’t identify it in QuickBooks and you will forget, or zero, you will forget what that bump in that particular month was because you have so much going on. And you’re gonna be overwhelmed drinking through a firehose, when you work with an advisor trying to drill down into all of this. So the more that someone like Wayne can get that organized for you, the better off you’re going to be and the higher value you’re going to have simply as that, no question about it. Are we going we’re running a little low, we got time for one more Golden Nugget, what do you have for us, I’ll
Wayne Richard 35:37
get I’ll get pretty particular to either. I’ll point this one toward Amazon sellers. One common mistake we routinely see is Amazon sellers recognizing income based on the net settlements from Amazon, rather than the true sales figures that were generated in their business and clearly are identifying the Amazon fees against those true sales numbers.
Joe Valley 36:05
So let me just let me just dumb that down a little bit. You’re the the people that you’re talking to about a referring to are taking their deposits, what they’re getting paid from Amazon and counting it as total revenue. That’s where you’re back to the what’s the contribution margin Wayne, there’s nothing in the contribution margin as far as Amazon fees go and advertising goes because it’s already out of that number, you’re just putting in the deposit, which is bad, because your buyers won’t see what you’re spending on on Amazon advertising and things of that nature.
Wayne Richard 36:40
And you You may also not have clarity into mistakes that Amazon may make mistakes. Absolutely. I believe, too. there’s a there’s a prior podcast where there’s some resources get to
Joe Valley 36:53
that, right, we just had him on Eytan Wiener was on talking about how much how much inventory, Amazon loses and how to get it back? Yeah, well, that’s great. You know, I’m guilty, I did that myself, but I did it with my, when I was doing it on my own, like my bookkeeping on my own, and I’ve grown up in a more mature, so I don’t do that anymore, I have to talk the talk, as well as walk the walk, or walk the walk, as well as talk to talk, you know, what I mean, folks? Where mine was, you know, direct consumer on my website, and I would just, you know, it was only a two and a half percent merchant fee. And so I would just really, I just put in the, you know, 97.5% deposit instead of 100%, and then an extra line for the merchant fee. It was hard for me, it was hard, I was doing it on my own. And it was a struggle, and I shouldn’t have been doing it on my own. I should have paid, you know, a nominal fee relative to the what we spend on cars and boats and all sorts of things. You know, paying for your type of services, and incredible return on investment, in my opinion.
Wayne Richard 38:05
Absolutely, no, and I thank you again, the book read to me, as a as a service provider as an amazing commercial. To get out there and advocate for the services, we believe in the value of the service that we provide, and really work toward building opportunities to create just great greater visibility really in control over the numbers. as I alluded, you can you can get to the point that we see a mistake also, too that sellers know that things are bad. Brands will know the business financials are bad, and they don’t want to know how bad so they don’t go into the exercise. But you can’t make things better, unless you have a plan and a clear decision point to make them better understand the baseline of where you’re working from, and then taking and making some key assumptions on a path to achieve those goals.
Joe Valley 39:00
I agree 100%. Folks, as you can tell from the conversation we had, you know, Wayne is not your typical keeper, very relatable entrepreneur himself and is just trying to help, right? It’s Yes, he’s running a service. Yes, he’s running a business. But it’s always with the goal in mind of helping you build a better, more valuable business for yourself and your family. Wayne, how do people reach you? How do they learn more about your company,
Wayne Richard 39:27
you can simply go to beanninjas.com there’ll be all information available there. I’m on LinkedIn. So if they want to connect if they have particular questions that they want to dress, I’m always available to chat in always, the greatest joy that I have is everyday being able to spend time with entrepreneurs hear the amazing stories of how they came about growing and scaling their businesses, but more particularly where there may be a pain point within their business that I’m uniquely fit to address and help them conquer Awesome, I
Joe Valley 40:00
appreciate your time. Thanks for coming on.
Wayne Richard 40:01
We appreciate it. Thanks so much Joe.
Today’s podcast was produced by Rise25 and the Quiet Light Content Team. If you have a suggestion for a future podcast subject or guest, email us at [email protected]brokerage.com. Be sure to follow us on YouTube, Facebook, LinkedIn, Twitter and Instagram and subscribe to the show wherever you get your podcasts. Thanks for listening. We’ll see you next week.