Financial Clarity for Business Owners with Special Guest Mark Anderson of Know Your Numbers

What separates successful business owners from those who constantly feel like they're chasing the next challenge?

In this episode of RHP Market Talk, Natalie Picha, Partner and Chief Experience Officer (CXO) of RHP Wealth Management, sits down with Mark Andersen, CPA and founder of Know Your Number Accounting to discuss the financial habits, key metrics, and decision-making processes that help business owners build stronger, more profitable companies.

Whether you're focused on growth, preparing for a future liquidity event, or simply looking to make more informed business decisions, this conversation offers practical insights to help you lead with greater confidence and clarity.

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Whether you are beginning your financial journey now or have already taken steps toward your ultimate life goals, we are here to guide you.

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Transcript

Welcome And Why Clarity Matters

Natalie Picha 0:09

Welcome back to RHP Market Talk. I'm Natalie Picha, partner and Chief Experience Officer at RHP Wealth Management. In this episode, I'm joined by Mark Andersen, CPA and founder of Know Your Numbers Accounting. Mark serves as an incremental controller and CFO, helping business owners move beyond simply tracking numbers to truly understand what those mean. Through financial analysis, business advisory services, and practical coaching, he helps entrepreneurs gain the clarity and confidence they need to make better business decisions and build stronger, more profitable organizations. Many of you may already know Mark from his own podcast, Business on the Run, where he shares practical insights to help business owners better understand their finances. One of the most common challenges we see at RHP when we're working with families, business owners, or investors is that people often make important financial decisions without fully understanding the numbers behind them. For business owners especially, financial statements can feel overwhelming, confusing, or even intimidating. Yet the businesses that thrive over the long term are often led by owners who understand not just what their numbers are, but what those numbers are telling them. Today, Mark and I are going to discuss why financial clarity matters, which numbers business owners should be paying attention to, and how understanding your own financial story can help you make better decisions with confidence. Well, Mark, welcome to RHP Market Talk.

Mark Andersen 1:49

Thank you. It's great to be here, Natalie.

Natalie Picha 1:52

I am so excited to have this conversation. I know we have got a lot to talk about today. Super excited to share with our listeners what you do and what value you bring, particularly to the entrepreneurs and our business owners that we work with. But I want to start out a little bit and say, tell me a little bit about your background and really what inspired you to start Know Your Numbers.

Introduction

Mark Andersen 2:14

Oh, that's I I think it's a great story. So I'm I'm glad you're asking. Believe it or not, I actually started my career as a golf professional. And I'm right out of high school, I started to go down the golf route. And I'm not to confuse anybody, I didn't play on tour as much as I would have loved to have done that. That was a dream, but you have to be so talented, it's ridiculous. I was the guy at the golf shop. I was giving golf lessons, running tournaments, that sort of thing. Spent about seven years in Florida and eventually moved back to Texas and to skip in a few little little things here and there, but to make a longer, longer story short, I decided I would go back to college. And I decided to do to get my CPA. And so I st when I was when I started, I was actually in academic probation at Alvin Community College. Oh, wow. It was bad. It was bad. I want to say I had it was a lot closer to one than it was to two, let's just put it that way. Oh my GPA. And um, so anyway, when I went back, obviously nobody wanted to give me any student loans with that kind of track record, right? I didn't have a problem with that after that, but I did have to go to my dad and go, hey, can you help me, you know, get this first semester under my belt? And he's really supportive. And I I got that in there. I want to say I took 19 hours of class and got straight A's. Um so from that point forward, no problem with financial aid and all of that. And we were off to the races, and , you know, to to skip a little bit of the school part of that story, , I ended up getting an internship at an accounting firm called UHY. And I wanted to, I wanted so badly to be a partner, and um that started to fade a little bit. Um, I got tired of working the public accounting hours, as I'm sure you're familiar with.

Natalie Picha 4:13

Oh, absolutely.

Mark Andersen 4:14

Um maybe not directly, but you you know what an audit is all about and what that looks like. But I did that, and my the firm I was working at ultimately got purchased. And they got purchased by BDO in 2014, and I just didn't like it. It it was a completely different culture. It used to be where I could walk down to the partner's office to discuss an accounting issue and leave the office with a plan forward to deal with the client, right? Well, when BDO came along, if we had some sort of an issue, we had to run it up the national flagpole, so to speak. And that could take weeks. And it was like, we're not really doing a very good job of serving clients. And and actually they lost a boatload of UHY clients not too long after that acquisition. But I decided to leave after about giving it a I could feel like I gave it a fair shot in about nine months.

Natalie Picha 5:09

Uh-h .

Mark Andersen 5:10

And then I decided to do contract accounting. I was doing I was doing CFO type work for businesses that they, I mean, they needed full-time accounting staff and and CFO level work. So I did that and kind of turned the accounting records around on an interim basis. And I would, I would do that. Um, but an opportunity presented itself with the last contractor that I was a contract that I had. It was it was backed by private equity, the business that was was um though that I was working with. And they had hired me and they had hired a a contract CEO as well. And that CEO and I became friends, and he was like, Mark, I am so tired of this gig. I am going to quit. And he was billing them $50,000 a month to do this, and he was like, I'm done. I'm I've had it. And it was it was it was hard work and it wasn't easy to deal with that private equity group. But he decided he was going to start a couple of businesses, and he was like, I want you to do the accounting for it. And that was kind of how it started. It started with two clients like that, and I started to do wow, , do that. And eventually I just was like, you know, this is a whole lot better because I was waiting between gigs, like sometimes, you know, four to eight weeks between one project and another. And I was like, you know what? If I just have tons of little clients like this, I will be able to scale it for one, to do a lot more for a lot more clients. But also the the income risk to me goes way down because if I lose one small client and just replace them with two others down the road, then hey, all the better.

Building A Financial Fitness Framework

Natalie Picha 6:48

Right.

Mark Andersen 6:48

Um, so that was kind of the birth of know your numbers. And it started with me as a solopreneur, and I built out what I call the financial fitness framework for our clients. And it and it starts with basic accounting because most of the time when we take on a new client, it's it's all wrong, right? And then we just kind of progress them through these various stages in terms of education and and quality meetings so that they could take, I like to call it operational action that we use the financial statements as a source of diagnose issues, and then we take that issue and we go, what do we do with the business to improve these numbers? So that operational action was really kind of the next step. And I loved that because it was so different from audit. I loved audit, but the problem was we have this line of independence that we can't cross, so we can't help our clients, right? We they have to do all of the work and figure that stuff out. We can sit there and point all day long, problem, problem, problem, go fix it, right? Um and this way I could roll up my sleeves and fix it myself. And anyway, so it started with me having suffering margins. I'm I'm basically I'm doing the all the bookkeeping all the way to the financial reporting and realizing that I'm spending too much time doing the bookkeeping side of it. So I hired a bookkeeper, and that just kind of started the hiring trend. Um, so er as the business has grown, I hired a bookkeeper, then I hired an accountant, and I stepped out of the operational side of the business, and I'm working more on marketing. And now, literally today, we just hired another bookkeeper to a full-time bookkeeper to help to serve our clients. And we're going to get a lot more aggressive here with marketing and sales to just try to help as many small business owners as we can.

Natalie Picha 8:39

Well, one of the things that you mentioned in this in your story is first of all, I love audit. Don't hear that statement very often.

Mark Andersen 8:48

I tell you, I love more as getting out of audit because I didn't really realize it at the time, but I I describe it this way. It's like the reason I got out of accounting was so that I could actually go skiing in February if I wanted to.

Natalie Picha 9:02

Ah, yes.

Mark Andersen 9:03

That was how I described it because that was a world that was oblivious to me at the time, right? Especially living in the South.

Natalie Picha 9:10

Yeah.

Mark Andersen 9:10

Um, I you know, so anyway, I I did enjoy the work. I enjoyed the people, I enjoyed the clients, maybe not so much the work hours.

Natalie Picha 9:19

Well, the other thing that you mentioned is the ability to create a story from the numbers.

Mark Andersen 9:26

Yeah.

Natalie Picha 9:26

So it's not just about having good accounting practices, but it's about understanding your story so that you can improve your numbers, you know, completely. I I think that when we are working with clients, part of why we work so hard to build out very detailed and dynamic financial plans for people is we want them to have as much information as they can possibly have to create the story they want to create. And if you don't understand where you are today, it's really hard to know how to make the better decisions to get where you want to go. So, you know, that's that's part of when I think about what know your numbers is doing for business owners and um entrepreneurs, I think of it as you're doing that for for for the business. That's sort of what our financial plan does for an individual. Or we're also working with, you know, multi-generational families.

The Numbers That Actually Matter

Natalie Picha 10:27

So what when you say that, you know, know your numbers, what numbers are you really referring to? What numbers are you talking about?

Mark Andersen 10:38

That is a great question. And I will say it depends, okay, because every business is a little bit different, right? But the the source documents for knowing those numbers starts with the financial statements, the balance sheet, income statement, and cash flow statement. It starts with those three. From there, I like to look really at ratios, right? Financial ratios, like the current ratio, maybe it's the cash flow ratio, or maybe it's gross margins or or operating profits, whatever those those are, right? So what we try to hone in on is um, you know, like looking at benchmarks and go, okay, in this industry, your margins should be X, but yours is Y. Why are yours so much lower, right? Um, so that that's kind of how it goes. And so we try to we do a do a couple of things with our clients. When when we complete the books for our clients every month, we send them an email that outlines a number of areas that they should consider looking into. And then we also offer them the opportunity to book a call with us so that they can talk about those things in greater detail. And honestly, those clients that take us up on those calls are the ones that I enjoy working with the most, and they're also the most profitable because they're curious and willing to do the things that are needed to change and improve their businesses. So there's there's no one be all end all number because every business is different. I kind of describe it like golf, right? There are tons of statistics that you can look at for a golfer. And honestly, like I'll give you an example, the number of putts that they're hitting every um an 18 hole round, their average number of putts, that could be completely meaningless if they're missing all the greens. So it's important to know what numbers to look at. And you know, because great, their their putting looks great, but if they're chipping up, getting real close every time and two putting, that's not very impressive if they're missing the greens every time. It's the same thing with this. If if if they've got a super awesome current ratio, well, we're not going to worry too much about that. Good job. We're glad you're in good shape. But it looks like your margins for for operations are suffering. Why is that? So that's how we kind of look at look at that sort of thing.

Fix The Books Before Analysis

Natalie Picha 13:01

So let me ask you, just step back from an operational standpoint. How often is it that you put you onboard a new client? When we're onboarding clients, it's interesting. We're we're going to meet them wherever they are, wherever they are in the moment. And we have clients that bring in all of their spreadsheets and they track everything. We have clients that have never tracked anything. You know, it's interesting to see. So when you're working with these business owners, , clearly they're running a successful business. You know, they're they're looking to you for for assistance. How often when you say, well, I want to see all of your current financial statements, can they provide those to you?

Mark Andersen 13:39

Well, we're in a very unique position. So I I should elaborate a little bit on on one detail about the the firm that I haven't really mentioned yet is, and that is we deal only with clients that are using QuickBooks Online. So we have the benefit of being able to look at their their books, right? And usually what it what all of our core services start at the bookkeeping level. Because if the accounting records are wrong, you can do all the financial statement analysis that you want, you're doing it off of bad data. And if you're making decisions off of bad data, you're making bad decisions, right? Yeah. So we start by by analyzing the the books, the accounting records, and correcting them. I it's kind of like I like to describe it like this. It's like when you open up Google Maps and you know you're in one spot, but the little blue dot is somewhere else. And maybe it just needs to sync up to where you are. But that's kind of the way that I describe bad financial statements. Yeah, it's kind of close, but until we we correct all the accounting issues that you you have in the books, you can't rely on them. You you you certainly won't get to where you want to because the GPS is going to tell you to go someplace you're not supposed to go.

Natalie Picha 14:54

Right. Right. And so when you think about, I know one of the other things that's mentioned is is doing the CFO work. What what are the what are the services that really follow under that fall under doing CFO work?

Cash Flow Mismatches And CFO Help

Mark Andersen 15:09

Well, I I would describe it as doing like forecasts. And you know, for the clients that we serve, we really try to get them focused mostly on their ratios, right? And looking at key metrics, I feel like that's one of the biggest areas that we help small businesses with. Um I'll give you an example from from years ago. I had a client that was factoring their AR, meaning they were they were borrowing off of it, right? For those that may not know what factoring is. And they had no idea how expensive it was for them to be factoring. They were like, hey, listen, all we're we're getting cash in, and that's the way, you know, we're able to pay our bills by doing this. And I'm like, okay, that's that's great. But you know, your lead time from invoicing to collections is 90 to 120 days. They were in the oil field services business. Right. And they're they're not understanding the terms and those delays like they should, right? They're paying payroll, they're they're paying their people five days after they they perform services, but they're not getting paid for those services for sometimes up to 120 days. So what we did, and it took us over a year to turn this around, but I was like, look, focus on accumulating cash so that you can you can survive that long lead period between providing services and getting paid. Because they were they were they were doing business with like the Baker Hughes and the Apaches and stuff like that. And it's you know, they they also did go and say, hey, listen, we want to negotiate better terms. And and that helped a little with not not so much those clients, but some of the smaller ones they were doing business with. So that that was another area, right? They were able to speed collections in certain certain areas, right? Um, but if you want to do business with the big dogs, you're going to take whatever they give you, right? But the the point of the story was we set them up in a cash flow situation that put but that where they didn't have to borrow anymore. They had enough cushion in the bank to float the payroll for that long time period, and as a result, saved them a lot of money in those those factoring fees.

Natalie Picha 17:23

So well, that's interesting because I think that's the difference between just having good financial reporting, but and then actually understanding what's going on under the hood.

Mark Andersen 17:33

Very true, very true. People don't really realize, , especially the the layperson and the the people that are trying to do DIY accounting are never going to look at the terms for their accounts payable and their accounts receivable and realize that, oh my gosh, I've got this big cash flow mismatch, right? Um, so that that's one of the things that we'll help help clients with. Um the the other one though that I I think about quite frequently is forecasting, right? And most of our clients don't need forecasting until it's time for them to either sell the business or try to get a loan because lenders want to see that sort of thing. So just a couple of examples of the CFO level services that we do for our small businesses.

Breaking The “Not A Numbers Person” Habit

Natalie Picha 18:15

Okay. Why do you think so many owner business owners sometimes avoid looking at their financials?

Mark Andersen 18:21

Because they know they're bad or wrong is probably the biggest reason for that. Uh they're intimidated. You know, I don't know, I don't think I told you guys this, but I actually started a school community. Are you familiar with school?

Natalie Picha 18:35

No.

Mark Andersen 18:35

Alex Ramosy. Okay, look it up. It's S-K-O-O-L. Uh, our school community is called Numbers Nation. And um, the the reason that that I have it is to really help small business owners understand their financial information better, to identify when they could potentially be wrong so that they can have intelligent conversations with their CPAs or us if we're doing their books for them. But more than anything, to understand the story that their financial statements are telling them, right? Um, too many small business owners, they blow off that responsibility by just saying, I'm not a numbers person. And that is a terrible way to run a business. The the fact of the matter is that even if they've hired us to do the books and help them with some of these CFO services, at the end of the day, if whether they like it or know it or not, they are the CFO of their business. Right. And they're they're the chief marketing officer, they're the the chief IT manager, they're the head of HR, they're they're the heads of all of these different silos that big businesses have, right? But they've got to be that I mean, I I'm not suggesting at all that they should get into the accounting on a day-to-day basis. That's not at all what I'm saying. But what they should do is have some sort of reporting cadence that they go through on a daily, weekly, monthly basis. Um, and I feel like it starts with the monthly basis because that's when we issue financials, balance sheet, income statement, cash flow statement. Those are the three core ones that we we start them off with.

Natalie Picha 20:07

So that's so interesting because that is a direct parallel to what we often see when we're doing planning with a new client. We may have a couple come in and some one of one of the two will say, Well, I'm not the numbers person, so I just don't look at it, right? Right. And what we want to do is we want to take the numbers portion, really, that that responsibility off of their plate and create the story that they can understand and see. Because, and you'll know if you've if you've seen my TED talk, I'm I'm really big on particularly women really taking control of their financial life and understanding what they own, what they have, and and getting some clarity around that, that doesn't mean you have to be a numbers person. No, it just means you need to have some of these these basics and let us, we'll handle the numbers for you. Yeah, 100%. 100%. We'll handle the numbers because we bel I also believe firmly that when, like you said, once you get into that rhythm and that cadence, and and I see this happen all the time, light bulbs go off for people. Oh, yeah. And you're in this rhythm, and with that rhythm comes confidence. Because okay, each month, each quarter, each year, we're going to know where we stand and we're going to be able to make decisions that's going to help move the ball forward wherever we want to go.

Confidence Grows With A Monthly Cadence

Natalie Picha 21:31

So have you seen business owners become more confident leaders simply because they understood their finances and how did it impact really where their business is and where it could go?

Mark Andersen 21:45

Well, I I don't know if I can necessarily speak directly to the leadership part of it. Um, I can tell you I've seen them. I I can think of one gentleman in particular that I I um helped. And he Ended up running a more profitable, more valuable business as a result. It took over probably three or four years, but we we started off. Uh, I started our our conversation started like this. I started to ask him about he's just opening this business. It was a physical therapy business. And we started talking about his build-out for the facility that he was leasing. And I started to ask him questions about capitalizing his lease-old costs and stuff like that. And he goes, Well, what's that? And the and and that led to a conversation about the balance sheet. And to make a long story short, he didn't know what a balance sheet was.

Natalie Picha 22:40

Oh.

Mark Andersen 22:41

Had no idea. And so that was the level of knowledge that he had when we had we first started to meet, right? Started talking and doing his accounting and all of that. And fast forward four years, , this is when I really felt like I had an impact on this person because now he came to me and started asking me, Hey, Mark, I feel like our margins are slipping. And when he said that, and I kind of took a step back and started thinking about our initial conversation, I was like, holy crap, this guy has really gone a long way. His financial acumen, right? Right. That is so amazing, and it made me feel really good to see that transformation. The hardest part about it though is I mean, anybody can do it though, right? Anybody can do it. The problem is not everybody does or tries to. Right. And um, it's those that try are trying to do it that they get the most out of it. They run the more profitable businesses, they have more valuable businesses, they've got more cash flow coming through the business. I I kind of think about it like the one thing that I disliked about being a golf pro, especially teaching golf, was having that conversation with the student that I'd ask him after doing one lesson with them and meeting up with him the week after, and I'd say, Well, did you hit the ball well this week? He goes, I haven't hit a ball since I saw you last. And I'm like, Well, that's not going to do you very much good for your golf game. Uh it's the same parallel. It takes a certain level of investment to learn financial information. And I feel like if you can just learn a little bit every day, imagine where you'll be at the end of the year. You may not be an expert. Uh, you may not know as much as I do, but you will know a whole lot more than when you started.

Natalie Picha 24:35

Yes, absolutely. Information really is power.

Mark Andersen 24:39

Oh, it sure

Profitability Isn’t The Same As Cash

Natalie Picha 24:40

is. I mean, it really is. So let's talk a little bit about that, that margin question, right? I think many business owners assume profitability means everything's fine. Or if cash flows, I think you mentioned earlier, the one client, if there's cash coming in the door, we we must be doing okay. Um when is that not the case?

Mark Andersen 25:01

Just because one example I like to look like to talk about. Actually, I've got a couple. The the first one is that you can run a profitable business and be cash poor. And here's how that happens, right? And and I'll I'll use us as an example. Now I'm pretty militant about collecting cash from clients. Um, we have a system in place where we we put our reminders and and even I've even changed my engagement letters over the year to make sure that as new clients are coming on board, we actually collect for services from the prior month on the first day of the next month. So I want, I did the work, I want to get paid, right? Not only do I want to get paid, I got to pay my people, right? So I I have good cash flow because I have great good processes and I I've got a profitable business. So matter of fact, a good example, I've got my AR aging sitting right here next to me. So I'm always looking at it and I look at it every day to see, okay, who who do I need to really reach out to to kind of ping them and say, hey, you know, you you're going to pay us?

Natalie Picha 26:08

Right.

Mark Andersen 26:09

Um, so that's that's one. And then the other one really is um, I like to I I remember this client, he was so proud of himself. He had a construction business, he was so proud of himself because he hit one million dollars in revenue. And I was like, okay, that's great, but why in the world are you looking at revenue? Exactly. Revenue is meaningless, right? I want to know how much profit you made because that's really all that matters. So looking at his bottom line, 10 grand. Like, wait a minute, all this work, million dollars worth of work for ten thousand dollars, I would rather have a business in in in the I would rather have a business doing two hundred thousand dollars and making ten grand than a million dollar business and making ten grand. Right. Right, it's a lot easier to do, and even those margins aren't very good, right? That's 10%. Even those margins stink. But I'd rather have the two hundred thousand dollar business. What's the I mean, it's a status thing for some people. We our businesses million dollars a year. It's like, right, okay, I don't care about that. Uh kind of the same thing on the tax return, right? When I'm talking with Michelle about my taxes, I'm like, how much taxes did I have to pay this year? I don't care about my refund. I don't care about how much I have to pay. I want to know what my total tax bill for for the year is. That's the only thing that matters.

Three Metrics To Track Monthly

Mark Andersen 27:37

Right.

Natalie Picha 27:37

That's exactly right. So if a business owner listening today could focus on only three financial metrics each month, which would you choose and why?

Mark Andersen 27:50

So I'm going to qualify this a little bit because, like I was saying earlier, every business is a little bit different, and I would suggest different metrics for different businesses, but I will preface it by saying this. I'll answer it based on the most common things that I see. Okay. The first one I'll pick, I'll pick off of the income statement, and that's gross margins, right? Um, I I like to look at gross margins as a as a you know, the first first number. It's really the most important number because it's a reflection of the operations of the business.

Natalie Picha 28:29

Yes.

Mark Andersen 28:30

Um, you can have other things going on. I mean, there are certain fixed costs that you have to have with running a business, but without sufficient gross margins, you're going to have a hard time. And from those gross margins, you can actually determine a break-even point and know how much revenue you need to generate if you're achieving the necessary margins to make sure you're breaking even every month. That's one thing. Then another one that I like to look at is what's called the current ratio. And basically that's current assets over current liabilities. And that tells you if that number is below one, that means you've got more liabilities than you do assets, and that's a bad place to be. If you have more than I don't know, for my business, I try to have at least two and and sometimes more, and it depends a little bit on the business, right? I mean, a lot of the work we do is recurring, so I can count on that that cash flow being or that cash balance being replaced every month. If you've got a more project-based business, then you may need to squirrel away a little more money, and maybe you need to keep a five current ratio, right? So it's that's why it's a little hard for me to just give you a definitive on all of those. But and then the last one, I like to look at the debt to assets ratio, right? Or the debt to equity, which they're they're they correlate with one another, right? There's a one-to-one relationship there. If you have, for example, if you have an equity position of say 40% in your business, then you may have a hard time borrowing because most banks want you to have a certain certain amount of skin in the game.

Natalie Picha 30:07

Right.

Mark Andersen 30:07

Um, because if you are borrowing, you know, it after post-transaction, if you've got 40%, that's obviously going to go down once you borrow. So that's why, you know, if you're going to get a loan, you got to take some time to manage your balance sheet in a way that will be attractive for a lender. That's a that's another to me, another kind of the CFO level services that we help with is to direct people in that that way. I I do remember one client that I had that that basically all the time he'd pull all the money out of the bank and and ended up with a negative deficit in equity as a result. And then he wanted to go borrow. And I go, look, you got this track record of stripping the money out of the business all the time. You you have negative equity in the business as a result. If you left the money in the business, you would probably be able to get that loan, but now you can't because you've got this track record with your financials. And so, anyway, um, I hope that answers the question sufficiently.

Natalie Picha 31:04

I think so. I think so.

The Hidden Cost Of Bad Hires

Natalie Picha 31:06

So that's interesting because that kind of is a great segue into my next question, which is what's one of the most costly mistakes that you see business owners make because they don't understand their numbers?

Mark Andersen 31:18

That's actually a very easy question, and that's making a bad hire. Oh, okay. To me, that's that's the biggest mistake because you don't really, you know, you may think about it, well, it was it was only the cost to buy the or to to pay this person or whatever, but , I think I think about that a little bit differently, right? So I I hired a new person, they started today. I spent a significant amount of time with that person to bring them up to speed. And I brought over my my accountant level person to help him kind of get up to speed on operations. So there are all these hourly people that are or hours that are being spent devoted to training this person. And if they don't work out, you've invested all that money for nothing. I mean, it is a complete and total loss. You will never get that time back, right? You never get that money back, but it won't really show up on your income statement as a loss or anything like that. So making good hires is is important, and I would say one of my favorite sayings came from a book called Good Degrade. Are you familiar with it?

Natalie Picha 32:31

I think so.

Mark Andersen 32:32

Jim Collins. He studied some of the most profitable long-term businesses. And I want to say it was like 97 or 2000 when his book, his edition of that came out. But one of the mantras in that book is um hire slow, fire fast. So we don't waste any time. If it's clear that someone's not going to work out, um, we're like, hey, listen, for your benefit and ours, we're we need to part ways. It's definitely not working for us. And if it's not working for us, you are you need to find some place that you are much better suited. And and that's really the way that we we approach that. So , but yeah, hiring is is definitely it it can be very, very costly. And when with us, hiring the right people is is a profit center. So it's even that much more important for us.

Build A Business You Can Sell

Natalie Picha 33:22

Yeah, absolutely. So again, we we have a lot of clients that we work with both in the business as well as in their personal finances. And we work with business owners, particularly when they're coming up to a liquidity event of some sort and helping them think through. A lot of times they don't realize there's a lot of impact that can be made for planning prior to that liquidity event as of as much as two to three years in advance for tech strategies and things like that. So a big part of what we do is helping them with that. But as a business owner myself, I know the time and the energy and wearing all the hats that it takes to run a business, right? When do you see that business owner or when do you start to recommend that that business owner take a minute, take a breath, take a pause, and start to focus on their individual wealth as a result of the business. Right. It's really easy to put your head down. You've got you've got people to pay, you've got clients to keep up with, you've got all of these things that you have to do to keep the business going. But at some point, the focus has to be why are we building the business in the first place? Right. And making that shift.

Mark Andersen 34:41

Yeah, I don't know if we necessarily have a direct conversation about that specific situation. I I do and I post about this on our social platforms from time to time, where small business owners will just close the doors rather than try to sell their business. It's it's oh my goodness. It's mind blowing. Mind blowing, right? So I I try to put that out on social media and and I talk about that probably once a month, maybe twice a month. The importance of really positioning your business for sale at some point, right? Because that that's one thing that's that's very, you know, it's it's possible for anybody. Um, but the other the other part to that that I think is is critically important is making sure that they are able to get out of the business. Um, because if you're going to go to sell the business and you're still participating in the business, you're not really selling a business, you're selling a job. And nobody wants to buy a job, they want to buy a business.

Natalie Picha 35:42

Right.

Mark Andersen 35:43

So um that's the probably the more the closest to that type of conversation that we have is noticing those those business owners that are still like I I can I can think of a gentleman that I'm I'm trying to phrase this in the right way so that I don't blow his cover, so to speak. But to make a long story short, he's he's in the home services business. Let's just make it that broad. So that way nobody knows if he's an electrician or a plumber or whatever, right? But he's still rolling up his sleeves doing the work. He's got an assistant helping him. But I'm like, hey, Steve or John or whoever, why don't you hire a master electrician or plumber or whatever? And that way you can get out of the business and you can you can start selling more, doing that sort of thing. Because that's the big mistake, the tactically, I think, that most small business owners make is that they think they have a business when they're participating in the business, and they don't. They've got a job, they've got a glorified job.

Natalie Picha 36:50

Right.

Mark Andersen 36:50

That's that's what they have. And I hate to be so harsh about that, but it's the truth, right? So right,

AI Helps But Cannot Replace Judgment

Mark Andersen 36:59

right.

Natalie Picha 36:59

So just a bit of a pivot here. A lot of what we're talking about these days, especially as we look at what the job numbers look like, openings, closings, and AI. How is AI changing what you guys do? Right. And how is that going to change really? How's that is it going to, is it going to help or hurt the small business owner?

Mark Andersen 37:23

I use AI every day, not not so much on um on the accounting side. I mean, account it's going to have an effect on the routine types of transactions, right? And somebody asked me the same question yesterday, actually. So I'll I'll pair it what I said yesterday. Is let's take an AC contractor as an example, right? They go down to Home Depot and they buy, you know, I I think they're they're measured in gallons. I could be wrong about that, but a big old air compressor, 800-gallon air compressor, 1200-gallon, whatever it is, whatever it holds, right? So the question becomes how will AI know how to treat that transaction? Because the way I look at it is that could be potentially a fixed asset that will need to be depreciated over the useful life of that asset. Okay. And if it's a smaller company, or I'm sorry, excuse me, a much bigger company, that value of that that expense may be so small that they're going to write it off as repair and maintenance and not even put it on the fixed asset ledger. They'll expense it right away, right? Right. And then lastly, what if it's part of a project? Right? Because now it's sitting in cost of sales and not on the balance sheet and not as an expense, right? So to me, AI is never going to until AI can crawl into the business owner's head and also pull out the right answer to that question. I I think that that AI is, I mean, while it's helpful, it's not going to solve. You're still going to need people. Right.

Natalie Picha 39:04

Yeah, you're not going to get rid of people.

Mark Andersen 39:05

And it's the same thing with you guys, right? I mean, there there are going to be be personal interactions that must be had with your clients in order for you guys to invest funds properly, right? You'll you'll never be able to fully automate the the trading that you guys are are doing for for clients or the planning that you're doing for clients. It just isn't going to happen, not 100%. It'll be a great aid, but it's it's not going to solve every problem.

Natalie Picha 39:35

That's that's so true. And yeah, what you've said just mirrors what we do on a daily basis because a lot of the conversations that we have, once we do have good data and we've got good data in the plan, a lot of times the conversations we're having are very emotional sometimes, right? They're about life and making sometimes hard decisions or dealing with what sometimes is a crisis. And those are things that I don't think will ever be replaced by AI. You know, those convers those kinds of conversations.

Closing

Natalie Picha 40:10

Well, Mark, I really appreciate this conversation. And as a wonderful closer, I have got to I I just want to ask you a question about one of your personal interests. As I understand it, you run hundred-mile marathons. Like I have to ask if you're sane.

Mark Andersen 40:26

Um, well, no runner is sane. So let's just start off with that, right? Yeah, I I love running. I actually did a 50 mile race back in April. Um it was it was a mud fest, but and I had some wicked blisters on my feet because when your feet get wet, you're you know, you're just ripe for blitzing.

Natalie Picha 40:46

But yeah, I've done done 50 miles.

Mark Andersen 40:49

I gotta mess 50 miles.

Natalie Picha 40:51

Yeah, how long did it take to do 50 miles? I mean, that's double the marathon almost.

Mark Andersen 40:56

Almost, almost. I want to say it was a little under 11 hours.

Natalie Picha 41:00

Oh my goodness.

Mark Andersen 41:01

Yeah, yeah.

Natalie Picha 41:02

I am not a runner, I don't love to run. It's it's it's pretty hard to make me run. I love to exercise, do not like to run. So to tell me that I'm going to have to run for 50 miles for 11 hours, how do you train for that?

Mark Andersen 41:17

Well, you you run some long runs. I mean, um, I sort of approach it as, you know, with my wife, since she married me, she became a runner herself, right? But she she does marathons and and you know, I'll do the do those races with her. And I just kind of view those marathons as training runs. So for the I I am running an 100-mile in December. I will probably about six weeks prior to that race, maybe, maybe five or four weeks prior to that race, we'll probably go out for a 30 to 35 mile run. But that will, you know, that that'll be the peak for that particular race. And then we'll just kind of ease into the race after that. But yeah, wow, do a fair amount of I actually don't run, I run less now than I once did for these races just because I've kind of figured out that you know, working out and and stretching are very important. And if you can do both of those things, you can reduce your your risk of injury. Right. And it you just don't need to, yeah, you sure you have to bust one out that's really long every once in a while, but you don't have to be running a hundred miles a week, right?

Natalie Picha 42:32

100 miles, I can't even imagine.

Mark Andersen 42:34

Yeah.

Natalie Picha 42:35

Well, as I mentioned in the introduction, you actually have your own podcast on the run.

Mark Andersen 42:44

And business on the run.

Natalie Picha 42:46

Business on the run. Yeah. Sorry, business on the run, which I've seen some of your some of your podcasts, and I've seen how, and I don't, I can't even imagine. You're running and talking sometimes. Like some of your people, you actually can run and talk. You have conversations with these people. Um, and I'm super excited because you get to be a guest with RHP Market Talk this week. Yeah. And next week, , we're going to be a guest on Business on the Run. So you are.

Mark Andersen 43:16

Can't wait to turn the tables on.

Natalie Picha 43:18

It's going to be fun. It's going to be a lot of fun. To all of those out there, our listeners, I just want to say thank you always, always for tuning in and listening to RHP Market Talk. Whether you're managing a business, planning for retirement, or simply trying to make better financial decisions, confidence starts with clarity. The more you understand your numbers, the better equipped you are to make informed decisions and build the future you want. If you found today's conversation valuable, please subscribe, share this episode with someone who can benefit from greater financial clarity and confidence. And to learn more about RHP Wealth Management, please visit RoyalHarborPartners.com. Thank you, Mark, for being with us today.

Mark Andersen 44:00

Thank you for having me.

Disclaimer

Disclaimer 44:04

Royal Harbor Partners is a registered investment advisor, and the opinions expressed by Royal Harbor Partners on this show are their own. Registration as an investment advisor does not imply a certain level of skills or training. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as subject. Any statements or opinions are subject to without the information and does not explain offered or still sale or purchase of specific securities, investments or investment strategies. Investments involved with unless otherwise statements are not 15. The information expressed does not take out for specific situations or check this and is not intended to present appropriate for any other are encouraged to be devised for the qualified tasks legal or investment advisors to determine whether any information may be suitable for their specific situation.