Profit That Actually Hits The Bank

The fastest way to lose money is to chase revenue without guarding your margins. We sat down with Mark Stiles—CPA, CEO of MAS CPA, and former D1 basketball captain—to unpack a no-fluff playbook for trades and service owners who want cash in the bank, not vanity metrics. From discipline learned on the court to discipline in your books, Mark shows how small, repeatable wins compound into durable profit.

We start where most owners feel it first: the bank balance. You’ll learn how to build profit-first habits that actually stick, separate accounts to mirror reality, and celebrate quarterly wins to keep the team bought in. We get tactical on entity structure too—when an S‑Corp election makes sense, how it shifts self-employment taxes, and why timing matters. Then we zoom into the numbers that decide your fate: gross margin, CAC, SG&A, and the expense runway. If your strike rate is sky-high, your pricing is likely off; we walk through buffers, benchmarks, and phased increases that protect client relationships while you reclaim profit.

AI isn’t a threat here—it’s capacity. Treat it like a smart intern today and an agent tomorrow, offloading prep and repeatable work so you can step into reviewer and advisor roles. We share how firms can package bookkeeping, tax, and advisory for maximum client impact, and how owners can negotiate vendors, trim shiny-tool bloat, and use rewards responsibly. The thread through it all is strategy built on constructive conflict: get smart people in the room, debate the plan, and commit. If you’re the smartest person there, find a new room.

Ready to price for reality, lead with numbers, and keep more of what you earn? Hit play, subscribe for more candid business breakdowns, and leave a review with the one change you’ll make to protect your margins this quarter.

Visit www.triumphbusinesssolutions.pro to learn more about our services and our Profit First Cash Clarity Programs.

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Transcript

Coffee, Snow, And Wins

Dave 0:01

Welcome to the Business Unscripted Podcast. We're here to share real life insights, practical strategies, and the honest lessons that we have learned from our own mistakes. Because frankly, we have been in your shoes. So whether you need help with operations, accountability, financial knowledge, details, or maybe just getting your mindset right, we are here and it is the right spot for no fluff conversations and tools to network. So grab your favorite cup of Joe. Let's jump into the show. Let's jump into the show, everybody. Welcome everybody to another Friday morning. It is a beautiful lost one for some of us cold. Some of us got feet of feet of snow, I was heard from our guest. But Dwar, welcome, Ed. You're back. How are you? How you feeling?

Duarne 0:39

Yeah, we're good. Definitely no snow here. A low pressure system rolling through, but I was gonna say you barely ever get snow, so I I you know you're lucky. Barely ever. I don't think we've ever had snow in this country. If there was, I'm not aware of it. I think there's only one place in the country you can grow strawberries that it's cold enough for that. So as I found out. Yeah, I'm doing good. I'm doing good. It's a great week. Great to be back again. What about yourself? How's it been?

Dave 1:06

Yeah, well, we're uh, you know, I'm I'm I'm trying to figure out the sleep schedule, right? You know, I think last night, like I just telling you earlier, it was 1 30 in the morning when we fell asleep because you know, baby had a bad night, but you know, hey, just getting used to it. It's one of those things to keep us shut. That's the ultimate goal. Yeah, it'll keep us shut.

Duarne 1:21

We've had two back to back. My wife is the one who takes it on the chin most of the time when it comes to not getting enough sleep. Apparently, I sleep like a log, I just don't wake up to anything, and she gets very upset with me about that.

Dave 1:36

I'll just say you uh it's like I'll fall asleep and then I don't remember anything until I wake back up. But I'll always tell her like catch me, like you know, punch me or something if you need you know, what can I do? I can't I mean she's feeding, you know, I can't do anything new at this point, you know, so I offer my help where I can and uh I do what I need.

Duarne 1:52

So fetch the water, fetch anything she needs, help her out, get the nappy. Yeah, be there. You were telling me you got a you got a big win, right?

Dave 2:02

You got a big win, you know, right before this week, right?

Duarne 2:05

Yeah, we've had a big win. I can't talk too much about it at the moment due to NDAs, but we've had a great win. Something we've been working on, a partner of mine and I for a few months now. And yeah, it got confirmed after a big meeting yesterday that it's happening. And it's great.

Dave 2:22

It's a key point, you know. Like sometimes it's not just gonna happen like right away, right? It's it's you a lot of these proposals and these follow-ups, you know. I mean, you could probably count on multiple hands how many times you had to follow up with probably to to keep the progress moving forward, you know what I mean?

Duarne 2:38

So absolutely. We're kind of this one here is like one of those ones where the scope changed quite a lot a couple of times. The thankful part was it kept getting uh a bit larger and larger as the scope went, and then everything else went up with it. So staffing resources, cost, and also reward. So it's fantastic. We're excited. It's looking like it could be a two-year commit. So that's even better, and yeah, happy days. So a big smile from from uh from my side of town today, and yeah, we'll see how it goes in a month. I'm struggling to fill the eight 11 roles I have to go and find. But yeah, for now, super exciting.

Meet Mark Stiles, Athlete To CPA

Dave 3:25

That's all right. Yeah, that's a good problem to have. But so with that, let's let's yo. So we have uh we have Mark Stiles, who's a CPA. He's gonna be joining us today. And so, Mark, yeah, we're we're definitely appreciate for him coming on. And and for those of you that may not know Mark, he's a uh CEO of MAS CPA and a former D1 basketball captain at Stenson. So I'm definitely not gonna play him in b-ball or a pickup game. Uh, so he knows a thing or two about discipline that it really takes to win. Uh, he's built this firm that doesn't just do taxes, but he's actually helping the trades and service-based founders turn their intuition into data-backed growth. So, today we're gonna be talking into you know a lot of that strategy, this the support that kind of goes and he helped how he helps businesses go from owner-operator sort of chaos, as we talk about a lot, to structured leadership. So, Mark, let's go ahead and you know, kind of dive in and welcome to the stage, sir. Thanks for having me on.

Guest - Mark Stiles 4:18

I gotta I gotta have you as my hype man to just follow me around and and give me, you know, give me some introductions as I walk around, right?

Dave 4:25

So yeah, you're like, oh man, this is awesome. Uh let's do it. No, no, that's that that's the thing that's I I I think we've we've been connected for a while, but that that's probably something I didn't know about you was that you were a D1 basketball star, you know, until I kind of you know dug it a little bit deeper to kind of you know do a little bit of research for the show. But that's pretty cool. So how what uh what position? So what position did you play?

Duarne 4:51

Looks like you might be on mute there, Mark. Oh, Mike, you might you might be muted. There he is.

Dave 4:56

There he is. There you go. There we go.

Guest - Mark Stiles 4:59

These dang microphones, sometimes you hit you hit them the wrong way, and I'm a hand talker, so either which way. No, so yeah, I mean, basketball was great. You know, it was it was uh, you know, for me, I'm six foot eight. You know, 20 25 years ago, you know, six foot eight was basically a center or a power forward. I like to always think that I was a little bit early for my time because I was somebody that took people off the dribble and shot threes and stuff like that. But but you know, the bread and butter was always you know footwork and in the pet in the paint. So, you know, for me, as much as I'm always typically sitting down in the in a chair now, unless it's unless it's the thick attack season and I got my standing desk set up and everything, you know, normally I don't know.

Dave 5:37

You don't really know like the height of somebody, you know what I mean? Like it's all the same rectangle for everybody. So exactly. But if I give if I were to go boom, right?

Discipline From Sports To Business

Guest - Mark Stiles 5:46

Like you're like, okay, yeah, that's a tall guy, right? So uh so yeah, but uh but no, I think I think where where that was was really good is is exactly what you talk talked about. It just teaches you a different level of discipline. I mean, it was it was interesting because my son was going into band practice and he has to go, he's in elementary school, and he has to go in at 7:30 every morning. And we I was driving him in yesterday because he goes in not every morning, every Thursday. And I was I was like, and he was talking about how he's a little tired. I'm like, hey, bud, when I was when I was in middle school and high school, I drove in at 5:30 in the morning and went into a gym at six o'clock to practice from six o'clock to seven o'clock to then take a shower and go to class. And then after cloud after school, had practice. And she's like, he was like, wait a minute, like you you did like four extra hours of everything on top of school. And I'm like, Yeah, that's also how I became a D1 basketball player. That's how I played over in Germany. You know, that's how you know that that opened up doors, not only in the athletic world, but it also taught me that like working hard really isn't isn't as as cumbersome as people make it seem. It's just being willing to to take that extra step. And you know, the way I always thought about this, and and this is kind of what I've always I've always said to anybody that you know I mentor or any anybody that you know works under me, is like, um, you might be smarter than me. I'm I'm not sitting here saying I am you know the smartest person in the world, but I'll outwork you. I will just I will beat my head against the wall until I figure out what it how it's right. And and I think that's that's a principle that you learn through athletics and and things of that nature if you really want to achieve a high level. Now, if you just want to have fun, you can get good enough where you can just have fun. But you know, but if you want, if you want to be an expert, if you want to, if you want to really reach that, you know, 10,000 hours, then it it takes some discipline. And I think that's really important, you know, and it's been a really good thing that I've applied to my businesses as well as I've applied to the client, the clients that I work with, of really going, how do we instill discipline? And I think that's one thing that, you know, with who we serve, trades and service-based industries, as well as high net worth individuals from the from the individual tax side, most of them have a little bit of that, you know, that discipline. They've came up with something, you know, or or they've worked hard enough to achieve a certain certain status. And from there is going, hey, how do we leverage this discipline that you already know and add some layers on that get your mind to open up a little bit differently? Because if you think of yourself as, hey, I'm really good at this, but I need help elsewhere, then we can probably build off of what that what skill, what service, what solution that you came up with, and truly scale that to a place where where you're looking back and going, wow, like look at what we did. Right. And and and so kind of bringing that full circle. You know, when people bring up basketball or anything like that, I look back and I go, wow, look at look at what I did, look where it took me across all the world. You know, look, you know, it took me across the whole states at first, and then going like, oh, this is cool seeing all these cool places. Then it took me around the world, you know, and and then it also opened up doors in the business world that I never would have expected it to open up. So, you know, that's kind of, you know, taking that experience is really what we parlayed in the MASCPA and then what we try to parlay into our clients of that, hey, there's going to be a point where there's going to be satisfaction looking back because you started with compliance, you built on some additional advisory arms from there. And then from there, you took that advisory and compliance and realized what strategy truly is, and it opened up your doors. And so when we see some of our clients that are like, Life is so much better now, better than I could have ever imagined. That's really when we go. This is that look back, right? Where you go restaurant and look what how much discipline I had to get to this point. And then it's then it's the conversation of now, don't stop. Don't get staged, right? Because stagnation is is the is the is the antithesis of innovation, right? Well, I say that I say that all the time, too.

Dave 9:36

Like because if you're you know, if you stop moving, the world's not stopped moving, right? So if you think that you're at your peak, you're just gonna get passed by and it at the the pace that things are moving in today's world, you're gonna get passed by in months instead of years. You know, before you could you could let yourself, you know, maybe give yourself a couple months and then you would be okay. But now it's like people are gonna pass by if you're not staying on top of your game and looking at the different we talked pre-show, like strategy and the different ways you can innovate. And innovate doesn't mean how do I reinvent the entire business. Innovate is just how do I improve my business just a little bit, you know? And I think if you're not constantly doing that, you're gonna get passed by by by your competition.

Celebrate Small Wins And Profit First

Guest - Mark Stiles 10:16

100%. Innovation is not a one size fits all word, right? Innovation is different for every business and every capacity because something that might be innovation to you might be the common knowledge to another another firm. But what that unlocks for you is much different than what that unlocks for them. Similarly, innovation for them might be something that's way forward thinking that you have no point or business being even involved in right now, right? And it's it doesn't seem like it seems like, oh, well, I need to keep up with those that Jones. And the answer, the reality is it's not, and that's really where strategy comes in is is not, and and and a lot of people think that strategy is like, how do I make a million dollars? How do I, you know, how do I get that nine figures that everybody on LinkedIn is talking about? How do you know how do I become that business coach out of all of these things that uh all of these businesses that I've ramped up, which has become the common knowledge? And this is why the speed thing, Dave, is is the reality, right? The speed is so much because there's abundance of information now, right? That some Gen Z person can spin up a business and go, you know what, I'm willing to beat my head against the wall, and you you're still thinking, hey, I just know this better than everybody, right? And that's where they get that that speed comes in. But when we when we when we dive into you know true strategy is going, where am I at now? Where do I want to be? And what are the what are the mission critical elements and the objectives that we need to obtain to get to where I want to be? And that's understanding where you are today and understanding where what what it takes to be at tomorrow. And that's truly strategy, and that's a more comprehensive look than just going, hey, how do I make nine figures? Like everybody can throw, hey, we can make nine figures by doing this or building our pipeline to do this, or you know, doing X, Y, and Z. And that's a portion of it. But where are you at now? And can is that really realistic? And have you set have you set the right milestones so that you don't how do you say this the best way? If you don't create milestones within your goals, then you have a never-ending story that you're you're fighting towards. And that's kind of to keep us a little relevant with with what Stranger thinks, right? You have this never-ending story that keeps going on and on and on, right? I won't sing the song, but it's this never-ending story that goes on and on and on. Now, if you set up milestones and and and mission objectives and things of that nature, mission critical objectives and must-win battles, when you reach those, those will give you a moment to kind of look back, to kind of what we talked about a second ago, to kind of take a small look back of okay, so we've gone this far. Now we still need to get here, but hey, this is an achievement that we can we can sit on. And that's why I always talk about goals as a staircase, right? We're all we're always taking steps forward and we're thinking about the one critical thing that matters to get to that next step, right? And then if we can acknowledge that and accept the small wins that are building up to be that large win, that's how we can really make make sustainable growth.

Duarne 13:08

Yeah, yeah. I think the other thing is too is as you get those wins, it's really important to celebrate those. Don't take you know, take a minute and celebrate and acknowledge because so many people are just so young-ho going for the the end goal, they just don't stop and you know smell the roses, and they like just and they sit there and they look back and you're oh yeah, I've come really far, but they don't celebrate enough of those smaller wins along the way.

Dave 13:34

Well, and and I think the you know that that kind of goes into profit first. Obviously, everyone knows profit first, and and I'm a member of that, but it's the profit piece of that, the profit bucket. When I asked a lot of the individuals a question, Mark, you may ask some of your business clients the same thing. When's the last time you took profit out? And they're like, Oh, I just took that out last week, you know? And it's like, okay, but what did you use it for? And they're like, Well, I had to pay you like a utility bill or I had to pay my mortgage or my car note or whatever it ends up being, but that's not profit, right? That that's your lifestyle. So with that mindset, the profit account is meant to like like Dorne, you were just saying, celebrate what you're actually doing in your business. So let it grow. And every quarter, you take out, you know, 40, 50% of it, and now you're doing something that's out of the ordinary, right? And depending on how good your profit was that quarter, you may go on a vacation, you may, you know, go for a weekend getaway, you may just go to a nice steak dinner with your wife or your kids or whatever it ends up being. But now you're you're celebrating that every quarter. And now everybody in your surrounding, you know, family, or even you can do something with your with your employees as well, but now they get bought in as well because they're like, oh, this is this is for all the effort we just did in the last quarter. This is why daddy's gone, you know, on the weekends, or taking uh the video I saw the other day when you, you know, you you own a business, it'll have you looking like you're in a uh toxic relationship because you're technically taking phone calls and corners, you know what I mean? You said that to me or something like that. And so it's like that's why we're doing it. It's because every quarter, you know, we're doing all these things or you know, we get to go to this year-end, you know, trip that we do every year because business was good. And we had that habit of putting that money aside to actually celebrate what we're doing in our business. And I think a lot of people get caught up in the day-to-day and they forget to do that, you know. So I don't know, Mark, do you do you how do you kind of approach that, especially with trades, right? You're they're so in the weeds, they love to do it. How do you kind of approach that with them? What with what corner was?

Guest - Mark Stiles 15:27

I think I love I love the approach that you have of going, hey, take a take a vacation, celebrate it with that profit. But at a more simplified level, and let's just the reality of what trades people and most people that are under about under about a million five, right? The reality of what they're looking at. They're looking at their bank account. It doesn't matter about a vacation or anything. They go, how do I have a tax return that says I'm profitable of X and I only have Y in the bank, right? So even think about it when you your wins that you can take on a quarterly basis. If you're properly handling your business and you're profitable, even looking and going, okay, my my profit and loss statement says I made $150,000 this this last quarter. And you're looking at a at a bank account that shows $150,000. Do you know how good that would make somebody feel who normally looks at their bank account and goes, holy cow, I need to get the next job. Right. Yeah. So that I can so that I can pay for my payroll. And I think that's the thing. And this is that little area that sometimes gets skipped with small business owners to people that are reaching a point where they can scale and they can actually bring in leaders that love what they're doing. Because this is what goes on between zero to about 1.5 is I love what I'm doing and I'm willing to put in the sweat equity to make this amount of revenue to get to this specific point. And then, you know, if I'm lucky enough, I brought in the right people so that I can actually see a little bit of prop profit, but even 5% is great for me because I'm doing this all on my back and this is me, and I am everything for every moment of every client that I'm working with. And then you get to that 1.5 in revenue, and you're normally going, like, I have more work than even 90 hours a week can cover, you know, or or I have problems that is not in my wheelhouse, and I have to bring in somebody that loves it. And the beauty of when you're up at that 1.5 and you've actually been around for a long time, we can hit talk about an e-commerce company and get that in like three months, right? But if you're actually sustaining your business and you're bringing in amount that that much, you're you're in a world where bringing in somebody that loves sales is is where you should be, that loves operations, is where you should be hiring, right? That love, and then you should bring in those leaders because they're doing what you did from zero to 1.5, but they're just taking a salary because they love doing that. They don't want to run a business, they want to build your pipeline, right? And so, so, you know, that's what's tough with those people that are, and a lot of our trades clients are in that, like, we're about to hit that precipice, but but it it really comes down to the discipline and how we're actually structuring ourselves. But from that zero to 1.5 is more going like, I don't have any money to take a vacation. I haven't taken a vacation in six years, right? But bringing in a million dollars.

Bank Accounts, Reality, And S‑Corp Basics

Dave 18:17

And you hit this at the beginning because they look at one bank account, right? They they let the money all come in and then they they they it flows out, they have no idea what the purpose is it for. And again, even if you have 150,000 for the year, do you have the how much do you know what how much should go to taxes? Have you put that aside?

Guest - Mark Stiles 18:35

And the other side is that's why profit first is great, right? Because you set up those density. Yep, but that can be that win too. That's the only one thing I wanted to focus on. That can be the win of just looking at it and going, oof, all right, I all right, 100%. Okay, maybe I gotta put 30 or 40 away for taxes, but like, wow, I got 90 grand sitting here. Yep, 90, 100 grand is sitting here that I can have some fun with, right? And it's like or not have any fun and just leave it alone.

Dave 18:59

And on the technical side, right? The a lot what a lot of and and if they're that size, they should be an S-corp, which or some sort of like better structure tax, right? But what people don't realize, and I've I've had a client I just brought on, that they have an accountant, but they're an X-Corp, but they're not they're not paying themselves right, right? The salary that you're supposed to be. And the side of that is that the business should be paying both sides of Social Security Medicare for you, right? It's gonna come out, but then you basically reimburse yourself so that you're getting and that's the beauty of the taxes that it's not just the income tax, it's paying for all your taxes that as a business owner that you have to do. And so that's what like those small things make you feel like a win. One of the other clients that I have, he just started kind of implementing. He's like, dude, just seeing the the accounts there and the money start to go in, maybe it's not a lot to start because we're not gonna make this big shift, but it's just just seeing it there is a win because it's like, okay, I have I'm starting to build that habit, right? Right, you know, profit is a habit, as Juwan kind of pointed out earlier. That we had, but that's the beauty of it, is that you have these wins.

Guest - Mark Stiles 20:02

Yeah, and I think that's a big thing too. Like you can see, and this is where I'm gonna be very honest, and I am I'm a geriatric millennial or and and the end of Gen X person. So I will say this and and sound like that crotcheted old man. There's a lot of things that I think Gen Z does wrong. One of the things that Gen Z has figured out is just the banking game. So let's not talk about business for a second. We talk about profit first and business perspective. You know, like most Gen Z guys are like, oh, I can have a high yield savings account, and most of my paycheck can go there, and then my disposable income can go in my checking account. And I can pay all my bills through a high yield savings account because I'm earning interest on all of that money, right? Right. And then I'm paying my bills. And then if I'm doing that right, I'm probably getting some type of rewards too. And they're they're stacking all of these things. And and and we all think it's crazy because, like, why would you have multiple bank accounts? Just have it, just direct deposits into your bank account. And then you set set up auto withdrawal, and then and then you hear Gen Z going, like, why are you paying on their auto withdrawal dates? Why aren't you paying right when it's due and having that money sit for 10 days collecting interest rather than paying right when you get your paycheck? And it's it's things that that you don't think about, but are very logical, right? And it's just taking the time to, and this is where this really comes into it. You know, when I talk about, you know, I'm not smarter than everybody, but I'll bang my head against the wall until I get it right and I'll do it over and over again. That's that's blocking off time. That's going, listen, I need to be have have thoughtful time where I can actually think about how these things can work. And if I don't have that time, then I'm just running. I'm a hamster in a hamster wheel, and I'm just running and running and running and running and running and running and hoping that one day something strikes gold for me. Right. But if I have some of that time to think about it, which is honestly what all these Gen Z kids had to do when COVID happened and they couldn't go anywhere. And they're just sitting there reading business books and listening to LinkedIn and linked into all these people that are like, How can you make money right now? And luckily, they went through a five year period where if you put any money in the stock market, you were making. A mint, right? And so they learned some of these habits that weren't taught to us when it was a world of, hey, you work for somebody for 25 years, you get a pension, you don't ever have to work again, and you just sit on that pension until you until you die. Like that was kind of the tried and true model all the way through the 90s, even through the early aughts. When we started getting to the 10s and 20s, is when people started going, wait a minute, I don't need to work for somebody for 20 plus years. I need to find whoever's going to give me the most money and realize that businesses are going to take just as much as I'm going to take, right? And it should be that equal kind of 50-50. Well, nothing changes from an individual standpoint, what these Gen Z people are doing and what business owners should do nowadays. And that's that exact same thinking. Hey, put some money that is your profit that you plan on making and set that aside and make that a make that a habit that you're consistently setting aside. You won't even notice it. And half of these POS systems that you guys are using have forced savings where you can create create bins and they'll just throw them in there. Now, are they creating a lot of interest? Maybe, maybe not. You can look at all those things. American Express has some things, all these different banks have some things that'll give you an extra perk for that. But throw that money in there so that you can do exactly what you're saying, Dave. Just look at it and go, wow, this is what I've done, right? Because for a lot of especially people in the trades industry and some things of that nature and service base, looking at the bank account is them looking at their financials. And you know, making profit habit is important, making looking at your financial statements. We call it the Holy Trinity, your balance sheet, your profit and loss, and your statement of cash flows, wholly as in W H O L Y, but a play on Holy Trinity, right? Three statements create one picture, right? But when if you're doing that, make that a habit, great. But most people don't. So then you need to set up your banking so that if you're that's where you're gonna look, that's gonna tell you to give you your financial outcome for right now until you grow up a little bit, then separate them out so that you can truly understand because a lot of people don't. They'll see a windfall of money in there and they'll go, okay, I'll pay off my debt. Okay, well, that just ate into your payroll, your three-month payroll that you should have reserved. Oh, okay, I just got all this money, I'm gonna pay off this, you know, or I'm gonna do that, or I'm yeah, and you're not thinking the game of like how how can I preserve my profit? How can my money make more money for itself? How can I play the game of leveraging debt properly? Yeah, and if you're thinking about all of those things, your business is operating in hunger, right? And a lot of people aren't.

Duarne 24:23

So interesting points there. Like what I've got a client of mine, for example, and he actually has his American Express card, and wherever possible, he will throw all the purchases on that. Then when it comes time, say, hey, I'm gonna go to the US or I'm gonna go to New Zealand or I'm gonna fly off to the Philippines, he upgrades with points to business class, you know. And this is the sort of thing where he's like, Well, isn't that a lot of points? Yeah, but I've been paying off all my business expenses and supplier invoices with this, and then alongside that, he gets all these extra points. So just the other day, he's sitting there and he goes, Oh, I've got like 1.2 million points. What do I do with these? I'm gonna buy an iPad. So he got himself an iPad Pro, got himself, and then he's like, Oh, I'm gonna get a $500 gift card to JB Hi-Fi, which is you know, like a best buys in the US, I guess you could say. And he went and bought some accessories for that thing. And he's like, I've still got points left over, I'll I'll save those for another day. But he got to reward himself by just changing, and he just that was possible by changing the way he spent. It was one thing that he changed a few years ago on the way he spent, and he was able to reward himself. But a lot of people are not aware of these simple little things they can do because they haven't got the person giving them the advice or telling them how it can be done. And you're right, there's a lot of bloody noise out there. You go online, there's so much noise, it's a lot easier when you just got one trusted individual who has an idea who can share and help and mentor you.

Credit Cards, Points, And Guardrails

Dave 26:26

Well, I think the the the biggest thing for some people to always is the discipline. You know, they are like, oh, I got this big American Express card, I'll put everything on, and then they see the money accumulating in their bank account, and they don't realize that you know they have this big liability that they gotta pay, and they're like, Oh, I'm gonna go spend, and then they overspend, it's like, oh shit, right? And now it's like, how am I gonna figure this out? And now they're scrambling. And so it's it's you know, you're robbing Peter to pay Paul, and now you're just going down the rabbit hole. So it's really if if you if you are somebody like that that that kind of lacks that discipline, it it becomes important to have somebody like Mark, right? Or another advisor that can be working with you that can give you those insights, right? And hold you accountable and say, okay, well, why did you just spend this 10k? Like you have a $50,000 credit card bill. Like, why aren't we paying that down? You know, and those advisory work is is important. So with that in mind, Mark, let me ask you this question because I I get this question to ask a lot. I'd love to get to get your opinion on it. With everything happening in the accounting industry with like AI, where do you see the AI an impact on accounting, let's say in the next 18 to 24 months? What is that bookkeeper role? Because you you know, you do have a bookkeeping kind of arm of your firm. Where do you see that moving to in the next 18 to 24 months?

Guest - Mark Stiles 27:41

Yeah, I mean, I think you you've gotta if if accounting firms aren't already diving into AI in certain at least a minimal capacity, then you're you're way behind. That's just the reality. I mean, I think that the reality is listen, you're gonna see all the software putting out AI-related tools and things of that nature that can help with some of your efficiency and effectiveness. And you should evaluate all of those and also understand, uh, similar to what I was talking about, how AI can do some of the things better than some of these SaaS-based companies, there's limitations in these SaaS-based companies for the AI that they can utilize because it takes over some of the tools that they have, right? So you've got to realize that some of their stuff is not gonna be really, you know, the catch, you know what. It's it's you know, it's it's it's a it's an efficiency tool that you probably can figure out yourself or you have figured out. But, you know, you know, I think it's very similar to this model. And I think over the next 12 to 18 months, you know, for the longest time, the big four had was employing a bunch of people overseas. Most, most of the people that you kind of see coming from the big four now, you can probably hire in India. And that's just a little tidbit from our industry. Like they were always using them. They were always using them because it's it's cheaper labor, but it's also paying a really great price for a resource that's willing to work extremely hard and it's a really fair price for them and where they're at. And I know, I know, Darren, you you've got you've got your kind of outsource unit, so you know how this kind of works, right? Of like, hey, we got really top-level clients that have touched a lot of things and done a lot of tasks. And but that's something that was always going on, and now it and it's just recently become really big for like smaller firms and everything, going, hey, why aren't we leveraging this talent, right?

Duarne 29:14

Right, you know, and I think AI similar mainstream accessible for them everyone.

AI’s Near-Term Impact On Accounting

Guest - Mark Stiles 29:20

Yeah, like you're not it's not a stigma, there's not a stigma where like we used to have to have all these like disclaimers and everything if we had any outsourced unit units and everything. But I think AI becomes similar now, right? We've shifted from that outsource where that's become more mainstream to now, okay, yeah, of course you have people that that that do some work for you outsourced wise. Now we're starting to lean into leveraging AI. And the best way to think about AI, especially from an FPA standpoint, is it is a great intern. And that intern is going to be as strong as how you teach it, right? Uh and if you approach it that way, then you're gonna let that AI tool scale like you would an intern. And I think that's how you have to think about it right now, because I think within 12 to 18 months, especially as you kind of get into more, more mainstream agentic AI and things of that nature, then you're leaning on AI to be that strong intern for you that's gonna give you that information. And then you it's it's your job to do something with that information, right? So when we get into agentic, and if you you've taken the right stepping step stools of 12 to 18, of going, hey, I'm working with it as an intern for right now and making sure it's learning, right? And then going, how do we add this agentic uh element on it? Then you're gonna pace with what all these other other companies are doing, these AI companies that are spitting up, these people that are gonna throw you emails constantly about agents and all these things that you have. But instead of just jumping on the first person that sent you a cold email and said, Hey, I can I can streamline all your processes and make them better, you know, you're you're working with a tool that you you're familiar with and then adding on. And I think that's how you our our industry is going to see it, and that's how they're gonna use it as they feel more and more comfortable. Uh and then I think when you get to that 18-month mark, you're having agents that are doing some tasks that somebody is required to over oversee, right? And then going, okay, and doing kind of that reviewing capacity. So where does our firm kind of shift to more less of a less of a doer and more of a reviewer, right? Where the expertise comes at the review level, not at each level, right? So, you know, if you think about a traditional firm today, you've got prepares, prepares have a good solid understanding of the code, or or bookkeepers that have a solid understanding of accrual or cash-based accounting, and they're applying those principles right now. And then that goes up to a reviewer that has done it for years and years and years, you know, and then if there's an extra, if there's a more complex task, then we're, you know, we're leveraging the expert that's in the firm to kind of take on that task, right? Where I think in the future we're looking at more agentic functionality that's coming up with that initial preparation of the of that tax return, of that books, of your books, of your financial, you know, your quarterly report, you know, breaking down the different facets of what's going on within your business. And then there's gonna be more of that reviewer level, which means your staff's got to step up, right? Uh, and then from that reviewer, that reviewer level, then you have that extra level if there needs to be complexity. So I think what what ends up happening is your staff starts elevating. And if they don't elevate, you're replacing with somebody who is elevated and willing to take that next step. And that agentic layer that's gonna be at the bottom is gonna be doing all of the menial tasks and doing all of the number crunching because the accuracy there and the lack of human error can be in place there. Now, hallucinations can happen, right? But that lack of human error is there, so then the reviewer can come and apply their expertise. And so I think what we have to do as a as firm owners is cultivate our teams to understand that right now you should be leveraging that as your intern, right? Like you're if you're prepared, leverage that as your get comfortable with it. Now have the right guardrails in place, have the right Wisp, have everything that you need to have. And then those are all topics that we can dive into another time, but having that security layer so that you're not letting out personal information and you're not giving away too much, too much of you know, of your secret sauce and all of that stuff, right? But having it so that it can be something that they're comfortable with, and then understanding that their job is going to shift into a more of a reviewer role. So those SOP shift a little bit. What is expected to get done at each level shifts a little bit, but that's how AI works. If you're if you don't have a degree, it gives you a degree. If you got a degree, it gives you a master's. If you got a master's, it gives you a PhD. So if you're leveraging it that way, then then the 12 to 18 months as an accounting firm with AI is gonna be is gonna be just like building up, you know, entry-level staff, right? And then, but the key point is that inflection point and about probably between the speed of what things are going, between six and twelve months, where you're gonna realize that there are agents out there that it can do a lot of what your entry-level staff can do. And how do you how do you can maintain your culture as a firm, but also elevate your staff or find the right staff that can do that review level and is comfortable there?

Dave 34:50

Yeah, I mean, actually, I mean, one, it can give you way more capacity, right? And then I think two, you have to get comfortable shifting into you, I think you said it, understanding the numbers and then explaining it better, right? Because with your clients specifically, you can't pitch anymore, hey, let me take all this, you know, basic stuff off your plate. Like you're like, hey, we're gonna do this as like a bonus. Like, here's what we're really gonna help you with. Like, we're gonna give you the information to make better financial decisions, we're gonna give you that information, that accountability. What we were talking about kind of at the beginning of the show, right? About just having somebody there that's on your side as a partner. That's I think also where if you are a bookkeeping firm specifically, that's all you do, you have to be comfortable getting into that advisory role. And and if you're not, I think ultimately then you have to maybe find a partner or something like that that is comfortable with that. And then you kind of learn how to manage like the AI side of it and and the agent side of it.

From Doers To Advisors: New Firm Model

Guest - Mark Stiles 35:44

And if you don't want to get an advisory, in this industry, I think it's important to understand too. In this industry, there's there's rainmakers and there's workhorses, right? And there's there's there's workhorses that are going to be that are they love doing their tasks. Very similar to what I was talking about about CRO or ops person, they love doing that. So, you know, as you as your business is scaling, you need to be thinking about, hey, who's my rainmaker and who's my workhorse, right? Because the rainmaker's gonna bring the business in, the workhorses are gonna get the work done. And it's important to know kind of where your staff fits in that that area and and and and applying what we talked about earlier, that discipline of going, this is this, these are our guardrails here, you know. And I think that's that's really, really important for firms to really understand kind of going forward, or you're gonna kind of get left behind because, you know, even when we look at what we've offered with our bookkeeping, we don't offer like there's some clients that want to do uh, hey, I just want bookkeeping, I don't want anything else. All right, cool, you're our minimum rate, you know, but we we purposely create package solutions for our bookkeeping clients that include tax preparation, bookkeeping, and then some form of advisory. And we do that purposely, right? We have three different different levels. We have our startup, which is really from our zero to zero to a million dollars, and that's really making sure that your compliance is in lock, is lock and step, right? And making sure that that's good. You get a quarterly meeting, you know, where we can go over some advisory, but our bookkeeper's job is to take all the information, provide you all of your financials every month and everything, and and and it and kind of nudge you on taking a look at those, right? You know, and then and then you have your quarterly meeting, and then our our scale is normally between one and three million. And that's normally for somebody that that they want a little bit more of a monthly touch base with the CFO. So they need that C that monthly advisory. We step up the bookkeeping hours and things of that nature, and then we have our sustain, which is normally when you start building in your leaders. And so then we're talking to more than just you as a CEO, we're talking to your your sales lead, you're talking to your operations lead, your finance lead, your you know, your people and leadership lead. And and so those all come with different levels of advisory because it software alone, let's not even say AI, like just lump that into software, is doing a lot of the heavy lifting now. So, so and and where there's not that heavy lifting, there's the ability to jump on Chat GPT or a Claude or whatever, especially Claude with what it's kind of putting out now, right? And going, hey, do this for me, right? Or help me do this, right? And people can, smart enough business owners can do it themselves, right? The the difference is going to be how do you help lead your customers into a success, a success trajectory that's going to help them because the beauty of a CPA, a bookkeeper, a tax preparer is you've seen how many different businesses that have came through your company. Like you've you've had those conversations on how you can optimize that in different capacities. You are you need to become an advisor. And and you know, from the preparation staff all the way to the executives, have to have that advisory thought process first because people aren't coming to you to understand how to make an S-corp election. They're coming to understand why an S-corp election matters when they're making over $100,000 in revenue a year. That's that's the difference. And if you can explain that, then you've really solved the problem for the client. And that's that's the new the new thing for CPA firms, bookkeeping firms, tax preparation firms. It's not about, hey, there's death and taxes, and you need to come talk to me, right? It's there's death and taxes, and you can get those done, but we can show you a path of how you can work forward and be more successful and minimize and or optimize your tax, your tax liability, right? Or it and grow your profit and as well as you're growing your top, your top line revenue, right? You know, building out and understanding the goals that you have and helping you see if you're tracking the right way. That's where the industry is going as a whole. Instead of just doers, we're advisors. And advisors aren't necessarily just doing all the work and going, here it is. And if you really want to know, I'll I'll walk you through in a 30-minute walkthrough, right? Advisors are going, hey, I noticed this, and I want you know to align with your goals, you need to be looking at this, this, and this. And this is what's going to happen. So, perfect example of that. When we talk about this S-corp election, because I know you brought it up earlier and some things of that nature, right? But when we're dealing with an S-corp, if I see that you're a Schedule C filer, which means you file under your 1040 under a schedule called Schedule C, which is basically for self-employed individuals, right? Regardless that you set yourself up in LLC and you you got an EIN, but you didn't do anything else, right? You are a disregarded entity with the IRS and you file a schedule C. But if you make over 100 grand in revenue and you're service-based, which is most of our, most of our, you know, your self-employed people or your trades or something like that, I can normally show you on your tax return where self-employment taxes are greater than your actual taxes. And you go, well, why am I getting taxed 45%? Well, because you're getting these self-employment taxes. And when we can we can go into uh and step you up and look at your entity and go, hey, you actually work better as an S corporation. And what does that do? That transfers self-employment taxes, which are just glorified Social Security and Medicare, and transfer that to your salary rather than your profit, then you're immediately saving money on taxes. Like those are things that people don't understand. They just heard, hey, somebody on TikTok told me to set up an S Corp and then I can have more tax advantages, just like people on TikTok tell you that you can set up an LLC and funnel every expense through your business, which is not true, right?

Dave 41:11

Right. I mean, it's not true. I mean, I I I I I start making that like assumption around like 45, 50,000 for some people too, you know, in terms of net revenue, you know, because you can you could totally still even save a few thousand dollars. And then if you pay yourself, you could pay yourself like a quarterly, you know, salary. You don't even have to pay yourself monthly. It's like some of the payroll cuts. Yeah, it's really depends on what's the strategy. Yeah, there's yeah, there's a big number. Yep, exactly.

Guest - Mark Stiles 41:34

And and just so we'd be clear, if you drop drop on AI, I'm pretty sure AI tells you around 75 grand. So there you go. You got you got two professionals telling you 40 to 50, 100, and then AI is telling you 75. But it's an ex but but we always say this, like every every and I always say this to my clients, right? Every CPA or every accountant or advisor is gonna give you a different barometer on when that step up place is. And it's normally just you know looking at looking at your financials, looking at where you're going and and what your direction is, and then going, okay, this is where it is. Because you can maybe read the tea leaves at 50 grand and go, listen, let's get this compliance stuff out of the way right now, right? Like let's get it over with, let's get your elections in, let's make sure you're in a good place. And then hey, because next year you're gonna make you're gonna make $300,000 and you're gonna scale that quickly. Let's get this out of the way so we're not having an after the fact. Because I think this is probably why you advise it too. I can't help you for 2025 in February of 2026. Can't can't really do that much. We can do a couple things, but we don't have many levers, right? But if we if we look at that and we're advising you throughout the year, then we can we have so many more levers that we can pull to looking at at how we can optimize your tax position, your profitability, you know, where you're strategically you're you're strategically directed towards as well.

Dave 43:26

Yeah, and for me, ultimately, I've tried to I just try to stay away from the taxes, which is why I like guys like work and other tax partners of mine. That's just something like you you guys focus on that, you know. Like, I mean, I'll do it, you know, if I need to, but ultimately it's it's it's like you guys you guys love that game, so I'm good with it.

Duarne 43:41

So, what I'm hearing here is it's about the personalized service, right? It's the personalized service that you're offering as a firm now, as opposed to just crunching the numbers, and it's very similar to a lot of other industries. Uh, you've been there's been the people doing the basic work in the background, and one thing we're noting in a lot of industries now is the AI is a multiplier, and it's a multiplier that's allowing menial tasks to get done quicker. That the people who were previously hired to do those menial tasks and happy just to sit there forever doing it and no longer gonna have access to doing those roles as much because there's tools out there that can do it for them. So they need to step up, they need to learn new skills, they need to become of more value to the customer and to the business that they're representing as well in a lot of cases, so they can actually become a multiplier along with the tools they're using.

Dave 44:35

Well, and and that that it doesn't even just apply to like CPA firms, right? I think that personalization is in in a service base, in any sort of business, right? B to be, you know, how do you think through what you're providing as a as an outcome and a benefit to your clients or your to your customers and make it more of a personalized experience, right? Because that's ultimately why people decide to study as experiences. And we can go into the whole show on that, you know what I mean. But I guess the one the one thing I wanted to kind of dive into with you, Marky, is you were kind of saying pre-show, you know, you want and and you focus with a lot of your service-based clients, right? Top and bottom line, right? And so walk me through that because obviously I had I had some you know, kind of add-on, I think, or I'm sure it's things that you do as well, but I think it's something that's missed by a lot of people. So I want you to kind of explain that idea, that you know, thought process that you kind of focus on, and then we'll go a little bit more into that.

Yes-And: Top Line And Bottom Line

Guest - Mark Stiles 45:29

Yeah, and I I mean, I I won't lie, it comes very much from very much like an improv mindset and and something that everybody's heard the yes and, right? Like, and and and I think when you're looking at everything strategically in business, it's like yes and and that's normally what's going on. And and when we're talking about you know, growth and we're talking about strategy, a lot of the time. There's a focus, right? There's a focus on like, hey, how do we how do we increase top line revenue? Right. And that's great. Like, and that's, but if if if you don't have the team to support that and you haven't had the foresight to think about the profitability of that additional revenue, then you run into a situation where you have top line growth and you have you have bottom line either stagnation or decline. And and that's not the goal of your growth trajectory. Now, the the in and it used to be this model of like, hey, SaaS-based companies, of we're gonna run our money, our company into the ground. We're gonna continually ask for money until we hit it hit an inflection point where we make enough of a multiple to sell. And that's the reality of what it used to be. And I was fortunate enough to go through a $30 million exit 15 years ago, 16 years ago, at the thing at this point in time. And that that was 100% what it was. Hey, how much can we bring in? How much could top line can we bring in? We'll make a P we'll make a VC or PE company extremely happy. They'll see that top line revenue, they'll immediately give us X whatever, you know, in as a payoff, you know, to kind of take over our business and kind of run with that. And then the beauty of that was being there long enough to also see when the PE company realized that under the hood there was no profitability and the money was just being hemorrhaged. And a whole, a whole strategic decision needed to be changed of, hey, are we a professional services company? Are we a software company? Are we a mixture of both? And what is the proper mix, right? To then fast forward to 2024 when I was fortunate enough to go through a hundred million dollar exit with a SaaS-based company where the rule of 40 is everything. And it's going, hey, are you showing growth? Are you also showing prop, you showing you momentum in your profit? And are we able to line those two things up so that it can, so you can be a viable business? And that's how, if you think about it, how if it's evolving at that level, right, of going, hey, top line's great, bottom line matters just as much, then why shouldn't it matter at a smaller level, right? And why shouldn't you try to mimic some of the expectations that these firms have when they're buying bigger companies in your own business, and maybe not to sell, so that you can sit there and you can, like what Dave and I were talking about earlier about so you can sit back and look at that profit bank account that's that's that's accumulating all of that profit that you had you had you had you had game planned for, right? Those are those types of things that you need to keep in mind. So when we're talking about top line and bottom line revenue, the yes and conversation should always come up. Okay, great, we got a pipeline of this. You know, we have an expected strike rate of 30 to 40 percent. Great. So that means we're gonna bring in X amount of revenue. Well, how do we make that revenue profitable? You know, if if we know that bringing in a million dollars more in top line revenue is gonna mean that we need to bring in five different resources that all total up to basically double of our payroll, we're probably not sitting in the same profitability realm as that we that we were expecting. Now, level setting that through your strategy and going, hey, we're willing to take a 10% cut from our profitability because we're gonna bring in X amount, that's a whole different conversation. But the focus should always be a yes and. And especially when we're talking about top and top end and bottom, bottom line, you know, uh considerations, right? Yes, we're bringing in X amount of revenue, but how much you know, and how much how much profitability do we expect to have? And that should be kind of the the mindset that you have throughout your strategic, you know, your strategic meetings, as well as what you're putting in place each month, each quarter, each year.

Dave 49:12

And and I think the the biggest piece that I want, like listener, if you're listening to this, right? Like we're not talking bottom line. Well, and maybe I don't know. Let's maybe we can clarify it, Mark. Like, we're not talking like bottom line profitability right now. Like ultimately, when you're a business owner, and I've talked about this before, you have to truly understand your gross profit margin, right? Like that's the number one key metric that you need to understand for your business if you want to grow, especially service-based businesses, right? If you don't dial in your one, what it needs to be, and two, your process to make sure that you get it every single time, you are costing yourself money, right? So, like, yes, great, you made a million dollars in revenue, but what's your gross profit margin, right? If you made $10,000 more, how much is that gonna add to your bottom, you know, to cover overhead? Or how's much is that gonna add to your bottom luck, right? Because I've had recently a lot of conversations with people because we are looking at their gross profit and they're like, Yeah, I, you know, I just bid these three jobs, okay? How much were they? And all they're focused on is top lock. When they're trying to solve an overhead or a cash flow hole, and they're like, Oh yeah, I just brought in 3K. It's like, okay, but yeah, 3K is like half of that's going to your people, you know. So, like, are you sure you quoted it right? So then when you break it down, the process wasn't there, right? And so we had to build out the process for them to make sure, like, hey, here's how you're actually gonna add up all the cost, here's your estimation process, and then enter your gross profit, and then it's gonna give you the price that you need to quote instead of trying to figure it out on a fly and be like, Oh, I think I can discount this one or no, you have to head that number, and then once because a you know, a five percent price increase can actually increase your net profit by 20, 30, 50, depending on where you're at, you know, and so that's why it's really huge. That's just a I know I like if you're trying to exit, top line's good, but you could focus top, but also understand like what's that what's that middle number, which is your gross profit, because that's the that's the main number.

Gross Margin Beats Vanity Revenue

Guest - Mark Stiles 51:03

That's the yes and right, like yeah, okay, we want to bring in this much, much revenue. How much is this revenue gonna cost us? Okay, all right, and then what is what is the rest? What is the what what else is coming in there? Because do we really have a gross profit? We've seen this, like we had a manufacturing firm that we worked with, and you know, the whole thing was I can get you 1.7 more a million more in in profit if you just improve your gross your gross profit by 50%, right? You do that, you improve that by you improve that by five percent, sorry, five percent. You improve that by five percent, you're gonna have one point seven more in in in in profit next year. How does that work? Okay, well, you you're you have tons of cost of what it costs to actually make that, but then you combine that with going, like, okay, so then why don't you have that money in your bank account now? Okay, well, let's look at what you're paying your salespeople. Okay, are your do your salespeople have a quota? And are are they expected to bring in that that amount? And does your does your commission structure work in that in that favor to align with that? And if not, then we have an SGNA problem. So a selling in general administrative expense problem that we need to dive in and understand. But yeah, I yeah, I think that's that, you know, when when you talk about it, yes, gross profits are important, especially for like trades-based businesses and stuff like that. Service-based, sometimes they don't really have cost of goods sold, right? They're going right to their bottom line because it's really their salary and maybe staff salary. Now you can still break that out and go, okay, what does it actually cost to do that? But I think there's three kinds of areas that people forget to really focus in on when we're talking yes and if we're bringing in X amount of top line revenue, okay, great. What is that top line revenue gonna cost us? Okay, and so and what is that revenue gonna cost us, right? And what does it cost to get that revenue, right? So, not what does it cost to to, you know, obviously the revenue, getting the revenue is the cost of acquisition. What is that cack, right? What is that cost of acquisition? How much does it gonna cost that salesperson to get that? Because that's not part of your gross profit. That's selling in general administrative expenses, right? That's one of your and your other and is how much does it cost to actually produce that product? That gets you to your gross profit, right? And then, and what else do we, what else are we paying for, right? So then you've got, hey, sales is sales is gonna cost me this much. If I'm gonna bring in this much, I want to make this much in profit, then that's your expense runway. You'll it's a it's simple math, guys. It's it's addition and subtraction. A lot of people make CPAs seem like we like love like being statistical analysts and all of these things. There's financial analysts for that. Like most CPAs are doing plus and minus, right? And it's not really that complex, right? But it's it's thinking about it the right way and understanding how each impacts, right? So if you if if your cost of acquisition is significantly higher than your gross profit, you're never making money. Like that's the reality, right? And so then you have a selling and general administrative expense. So if if those tools that you're using, if that person that you're paying spiffs to and paying a salary as well, you know, you know, all of all of that outreach that you're doing and marketing you're doing, if those are all costing you a kit and caboodle, then you're already eating into your profitability. So understanding that is your first thing that you need to understand from that revenue that you're bringing in. What is it gonna cost us to bring in that revenue? Then what is it gonna cost us to produce that revenue? And then, and then, okay, yes, we know those two things now. Now, and what else is there that we need to really look at to make sure that we can make that profit, right? Because that expense run runway is that simple math. Hey, we want to make this much profit, we're gonna bring in this much revenue, it's gonna cost us this much. So there's only a small little delta that's there. How are how are you going to manage that? And how how do you properly manage that? And that's where the discipline comes into going, no, we're going to make 25% profit, net profit. Boom, 25%. So then if I'm if I'm a million, we're going to make $250,000. Okay. So I only have 750 in between. Like that's it. That's my expense runway, period, between cost of acquisition, cost of goods sold, and everything else, right? And I think that's kind of where, you know, that top line and that bottom line is extremely important, especially with our target market. If you're between 500 and 5 million in revenue, like that's where we need to be focused on those three elements. And everything else is just noise, right? Uh, and and honestly, after the first two elements of the what does it cost us to get that revenue? And what does it cost to produce that revenue? The rest is really noise. And and, you know, other than a couple little things of maybe paying like leaders' salaries and and insurance, do we really need that? And those need to be those, hey, these are the silent drains that we're seeing. Like, are do you really need this stuff, right? Like, because that's all going to eat away at that 25% that we want to get. And, you know, and and and that's kind of where then we can start celebrating those wins. And then if you're actually earning that, you can have bigger discussions. Hey, maybe we can increase this budget. By increasing this budget, what do we need? Then you work backwards. What do we what was top line need to be? And what how do we need to control that cost of acquisition? How do we control that cost of goods sold? So it's all that things that we have to think about.

Dave 55:54

That's where like those two numbers combine. You know, what is your lifetime gross profit margin for each client, and then what is your CAC? And we've talked about it, the golden ratio on these shows, too, is that you need that to be at least three to one, right? Between customer lifetime, gross profit margin to your actual cost to actually bring in that new client. And if you're less than that, then you need to either one, you need to increase your price because you're probably charging too less, right, in order to increase your gross profit margin. Two, increase the length of time that they are working with you or the repeating, you know, how often do they repeat, or you need to look at your your spending for your marketing and reduce where you're actually, you know, marketing because it's obviously not efficient enough. And so that's why really it's really important, you know, when you talk about those things, Mark, is that you have to know these numbers as a business owner.

Guest - Mark Stiles 56:41

Yeah, I think it was and listen, you got to know too, you should have a 30 to 40 percent strike rate. If you're sitting here telling me that you got an 80% strike rate, you have a pricing problem, and I can almost guarantee you that you have you have a lot less money in your bank account, which is where you're predominantly focusing on, right? Is what's in your bank account. You're normally you don't have enough in there, and you're thinking about what and go ahead.

Dave 57:03

I was gonna say the people that get into that are the ones that are really struggling because you're like, I need the I need this, right? And so they're like, I need to make every sale, so they're willing to negotiate, they're willing to discount to make exceptions, discounts exactly. And and then they're the ones that get into that, and then it's a cycle, it's just a rote, you know, negative rotating cycle of you know their business, and then they're they're they're struggle, they end up like me with the hair, you know, and so it's you know, it's one of those things where it's just you know, it's crazy.

CAC, COGS, And Expense Runway

Duarne 57:31

But yeah, the moment you're gonna really, you know, when I hear this, some of this stuff is like just makes a lot of sense. But you know, I think about it from a contractor point of view, right? You go out, you quote a job, you quote how many men are gonna go out and how many men hours to do the job. You take into consideration things like weather and you know, circumstance and delay, then you've got other things you've got to take into consideration, like do you own the equipment? Do you have to rent the equipment? You know, all of these little things. Do you have all the tools to do the job? Do you have to buy the tools to do the job? Does the material cost have you already pre-purchased it? Is there something that could go up? You know, there's so many different variables in these things. So if you get this wrong with those numbers you're talking about, you can quickly, quickly end up costing yourself a lot of money to deliver a contract that you've quoted. And many years ago, one of my good friends was telling me he was a contracts director for Rio Tinto, BHP, and a lot of other big firms doing mining. And he was saying that he would look at the contracts of these small guys who would come in and he'd look at it and he'd hand him, he'd hand him back and you go, it's too low. You're not gonna be able to deliver it. Go and try again without accepting it. And they'd look at him, no, no, I'm trying to win the bid. No, you're not gonna win it because we don't trust you're gonna be able to deliver the job. Trust me, we know. Did you know that our induction process is a two-day process? That's for every time it's not you send someone new to site, you're gonna lose two days of man hours every time you send someone to site, and every site requires that they work on, requires that they do that on that site. There's ten sites on this job project. Have you factored in those 20 days? Oh no, I didn't know that. So go and ask more questions, go and re-quote it because, and then unfortunately, this is just the reality when you're in a desperate mode, and one thing we talked about pre-show is like a lot of contractors are jumping from one trade, they're jumping from one job to the next job to pay the next one. You get into a mode of desperation at that point, you just need that next job to come in, you'll take whatever you get, and sometimes you sit there going, Oh shit, that's that's got not as much profit as I thought it did, or that's gonna require some different tool that I didn't know I needed, or a different piece of machinery I didn't know I needed. I misjudge that. And you can't, unless you've got your documents and your contracts and your scopes, you know, with the variation clauses in them, you're screwed, you've got to deliver it. So there's a lot of little moving factors. So the profit makes a big, big difference. And when you're saying that, you know, if the bank account is sitting there low because you're taking and you've got a high strike rate, I totally get what you're saying. I've seen this, I've witnessed this, I've experienced this in the past. And I told myself I'm building a portfolio, it's okay. But the reality is you're just taking every job that comes down the road because you're like, Well, I don't know when the next one's coming.

Guest - Mark Stiles 1:00:32

But if you're gonna do it, and listen, take the take the same, take the same yes and principle. When next time somebody's like, Yeah, I built a company to nine figures, and what was your profitability? Exactly. And they say like all these people, all these people are telling you they they listen, all the noise is telling you how to grow your business and how to, but they're only thinking about growing revenue, right? Yes, we can go out and cold call a million people, we can do all of these things, and we can put all these things in place and these referral networks, and we can we can do all of these different things. And listen, technology can do X, Y, and Z and all this thing to bring them in. But if you're not thinking about what it costs to get that revenue and what it costs to produce that revenue, then you're pretty much always going to be taking on a new job to pay for the last one because you haven't taken down like the best businesses are sitting on proposals for a while. They're thinking about everything that you're talking about. You know, during is like going, hey, what do we have for like is there gonna be delays? Do I need to have buffer? And what the funny thing that I always see with the trades is like, we're not putting a markup in there. All right, it costs me this much, so I'm gonna build this. And you're like, wait, wait a minute, put 50% markup in there. Well, I only want to make 305% on a great. You know how many, you know how many times that client's gonna come back to you and say this isn't right, and you're gonna have to send somebody out, which costs you fifteen hundred dollars a day. Oh, I didn't even think about that. Exactly. That's why we want to bake in. So we talk about profit first with regards to what's in your bank account and things of that nature, but that that mentality and that habit is not just a habit of where you're putting money once you receive it, it's where you're thinking about it throughout the whole process, right? If I'm thinking, hey, my profit has to be baked into this proposal so that I'm not just paying for the next job, I'm actually I'm actually giving buffer to the next job. Then you're starting to think properly on how your quote should be, how you know, and then so then you can sit there and go, okay, I lost 15% of what I what my target goal was, but I was never expecting to make the 50%. I was expecting to make 35%, and that 15 was basically my buffer, right? That was my buffer to make sure I can actually hit that.

Dave 1:02:34

Right. So and what James here, James, who was our guest last week, like I think it's it's a good point, James. Like every industry has average gross profit margins, average net, and that should be right where you look and start, you know, because it means half the people are below it, half the people are over it, you know, and the means of averages, right? So, where do you want us to be? You know, do you want to be that budget-friendly option and be known as that, which is basically you have to fight for every job based on price, and then you have to do a numerous number of jobs, or do you want to give good results because you can spend more time depending on what you're doing, especially if you're a services? Do you want to spend more time giving that more high quality and you have a higher profit margin because you're you're able to do it that way? So look at your national averages, right? And again, they're long track, they're not new, you know. The only thing that's really new now is is the AI world. But you know, CPAs have been around for a while. Like, look at their average margins, you know. If you're looking at, you know, or you're looking at, you know, landscape or anything has long industry averages. Look to at those distractions.

Duarne 1:03:32

If you don't know what it is, the only thing I'd say to James, yeah.

Guest - Mark Stiles 1:03:36

Yeah, the only thing I would say to James is is is it's business is just as much psychological as it is the numbers, as it is the doing and everything, too. And sometimes using national averages isn't gonna stick with a client. So we don't want to, we don't we, you know, do we want to benchmark? 1000%, James. 100% we want to benchmark and go, hey, most people in your industry are here. But if you're jumping in and and and coming in in that advisory role, you know, you need to know where they are currently and and where you could where you can easily optimize them to to give them at least a starting point, right? Because then, hey, if you can hit 15% on on on on a regular basis, but then we know that national averages are 25%. Once we start getting into that consistency and that discipline of always hitting that, then we can start going, okay, great, we've established where you're comfortable at. Now I need to make you uncomfortable because the the national averages are this. So we we had an acupuncture client. So you can imagine touchy-feely, a lot of, hey, hey, I want to make sure that that the customer's always feeling well about the pricing that we're having. I don't feel comfortable with them doing, you know, that. And we so we had to sit sit strip back a little bit. I couldn't just go, hey, most acupuncture studios are making actually this, you know, or or wellness studios are making this. I had to go, okay, well, first off, let's just talk about where you're at. Where's your salary at? Are you paying yourself the right way? No, I'm not. Okay, let's look at your profitability. Are you actually able to cover all of these? No, I'm actually not. We had to get past that by just going in calculation and going, okay, so if you raised your rates $25 per per visit, you're gonna hit all of your target goals that you were you were striving for right now, right? Yes, I was. Psychologically, that's a win for them. Then psychologically, you've just built a better rapport with a new client, right? Then you start going, all right, cool. So now the next step for you is to understand that now that we got you regulated and you understand that pricing matters and pricing can actually change everything. In one month, it changed it for them, right? So now let's get you up to our national or our national or our regional averages that we have here, you know, through phone calls, through through looking up Gartner, through all these different things and going, hey, how we need to get you here. So let's talk about how we can get you here. And then that sticks a little bit better. So it's not, I wouldn't, I don't argue with James on using national averages. I think that's a great, a great benchmark to use. I think you also got we also got to think, you know, especially you know, where where a client is in their life cycle of, hey, where do we start with them of building in that discipline? Is it is it just strictly on national averages so that they're they have these lofty goals that they might not be able to reach? So then that doesn't give them that staircase of successes that they can lean on. Or do we we understand where they are, speak to that and get them to a good place where they're they're then you're not only building a rapport, but you're also instilling discipline and then start introducing some of those more complex metrics and and things to benchmark against because then they're a little bit more comfortable, right? Right because I can tell you.

Pricing Power, Buffers, And Benchmarks

Dave 1:06:30

So if you're if you're just getting into business, like that's a good place to start. Like, don't set yourself up for failure, right, by not understanding what the industry average is. And what if you're an existing same thing, you know? The mindset there is like we don't want you to make an overhaul completely. Like, let's just go, like, let's say the industry average is, for example, 50%, you know, gross profit margin, and right now you guys are sitting at 35. Okay, let's let's go three or four percent, you know what I mean? You know, to start, and then every quarter or every half a year, you can make a light little little more change to that until you're up, right? Exactly. And you know, so that you get there eventually, you know what I mean? And I think ultimately the idea is that if it's an established company, take your time, as you were kind of saying, right, Mark? Like take your time, understand where you need it, put that place, and that's the advisory role of it, you know, is that you're literally advising them and keeping them accountable to make and get up to there. And you know, and to James' point, right? Yeah, we are worried about the health of the company, you are right. But you sometimes, as to Mark's point, you know, they do have a lot of clients, right? That they may lose if they do a drastic shift. You know, to go from 30 to a 50% gross profit margin could be a huge increase in pricing. And so sometimes it makes sense to do that, depending on the number of clients and what you think you might actually lose, but sometimes a phase. approach over you know a a two you know you know two to eight quarter approach makes more sense too because you're not going to piss people off and I think it also comes down to how do you message that too you know do you message it as hey we're just making our pricing increases just because we want more money or do you actually explain the reasoning and then actually have that conversation with them.

Guest - Mark Stiles 1:08:10

Yeah and I think you got to understand too when you're dealing with small business owners yes they are your client and you you care about the business but they are the business. And I think you got to realize that until they get to the point where they have other leaders, which is normally an inflection point back to where we talk about like 1.5 million and stuff like where they can actually afford to bring in leaders and stuff like that, a lot of the times they are the chief everything officer. So the moment that they see that retention drop when they're like oh my God five clients have said no right even though even though five might have said yes to the increase right five said no I and then psychologically they're like I can't keep hemorrhaging all of these clients they're not seeing the bigger picture of you raised rates and so to kind of normalize it, right? They're seeing clients are getting I'm getting churn and that churn is giving me anxiety. And that anxiety that I get is affecting how I'm going I'm willing to stay consistent with the pricing or I'm going to revert back to my old ways. And if you want the customer to if you want going back to client and business thing if you want that client to stick with you and you have the best the company's best interest in mind, you've got to think about the the psychological standpoint of that with a chief everything officer that will go listen, he told me to raise my prices I did that and I lost 15 customers and all he thinks about is or she thinks about is the 15 customers I lost and what potential revenue I lost there. And don't and it's not necessarily front and center that oh well 20 of them all took my higher thing. So as time goes on I'm going to start realizing that I'm a lot more profitable. But that psychological standpoint really comes into place there that we've got to we've got to manage at the same time that we manage what's right for the company.

Duarne 1:09:45

Yeah and I think there's an you can also balance that out a little bit and this is one thing that I've tried with and I've worked with clients on before is with many service providers, one of the things that we see in the IT industry is they're trying to standardize pricing and there's different value propositions they can add in in that conversation as to why they're increasing. You know, there's different conversations around compliance cybersecurity every industry has their extra service value ads. At that point you can increase your margin profit margins on those add-ons and use them as the tools to get you that next level if you need to but you can also go the other way where you can go back to your vendors and talk to your vendors about getting a bit of a break how many small business owners are so caught up in the weeds that haven't gone back and asked for a better price from their vendors or suppliers for God knows how long you can pick up an extra few few percent saving just because you've got you know and you you can have that conversation hey look I've got this many clients now I'm projecting to have this many clients if I can get to that level will you give me a better buy break to get to that level and will you stage me out so I can get to that level what do I need to do to make that happen and that could get you a higher product a higher profit margin today without actually even going to a client and talking to them about a better rate yeah no I mean that's definitely one of those things listen uh my chief of staff manages our uh our whole tech stack right and she always pulls me in at the end because I'm always coming in going okay can you give me a better price?

Guest - Mark Stiles 1:11:11

Like just and and she is I would never think about just asking that and that's more common than not common right of going hey can you give me a better price? How can you give me better terms? Hey so I'm really looking at this and this is an area that I really needed can you give me a can you give me a break on that until that that that's in your pipeline and in your roadmap yeah and those things are there and we can talk a lot about when and timing and things like that. You go at the end of the month you're normal you get at the end of the quarter you're gonna get even a better break right so think thinking about those things are obviously important right you know but you should always ask for those things and I think that's something that is kind of what we were talking before the show is not only thinking about today but where's tomorrow at right? Like so you know and then that's really what true strategy is it's not looking at everything from just very high level metrics that you that you hear and that you know that you need to focus on it's also dialing in to the minutiae and going hey where can we squeeze out you know more so that you know that everything else we talked about the cost of acquisition we talked about the cost of goods sold that everything else that also helps you run your business are we really maximized there is the software at the right price point for us or do we need to think about something more manual right and that's the thing too is the shiny object what we really need or do we need something that just does the work right and and I think you got to always kind of think about that so that you can align what you need today with where you want to be tomorrow.

Duarne 1:12:29

Right for sure well and so oh go ahead go ahead go on one more thick just just with that too I mean it's like you mentioned earlier like the TikTok videos the two the YouTube videos everybody's a bloody expert right on online on socials and stop listening to every in every expert out there find yourself a trusted advisor to work with would be my you know biggest suggestion here too because somebody's gonna take the time and not generalize their information they're gonna really tailor it to suit you customize it find out about you your business your customer and really make sure it works for you because there's so many times I've seen people say oh yeah but I I need to get a million and I look at them I go why what are you going to spend it on? What's your profit margin on that? You're a certain you're a consultant it's mostly profit what you're getting you know so would 250 300 do if that was mostly profit in your in your bank you know what does that mean for you right now and when you have those conversations they suddenly change their mindset and go well I was doing it because Alex Hamossi told me I had to go and get a million dollars you know in sales or revenue coming through and it goes back to what you said earlier right a million dollars in revenue is not a million dollars in your bank account where you can pull out and spend you've got to make sure your profit's there so you can have 5000 with a higher profit margin than what you've got with a million and it could be a whole lot less stress.

Vendor Negotiations And Hidden Savings

Dave 1:13:55

Well and and you know to kind of wrap it up I mean obviously James for sure we would rather do 750 at a 15% profit at one and a half at five you know but I'd also rather do one and a half while you know kind of working towards 15 as well you know what I mean and I think ultimately it does you know kind of roll into that that planning the the forecasting like all that kind of stuff the strategy side which I think a lot of people miss if you're spending too much time in your business because you're you're too focused on it. And so as we kind of wrap up you know Mark Mark I love it. I I know like we could go on for a lot of different focus points and strategies and I think it was a first conversation I think I'd love to have you back on and we can talk like actual sort of implementation side of things today was just kind of like a first kind of high level conversation. Yeah I know it's gonna be in the busy season right with taxes and all that fun stuff coming up for you. So good luck good luck with that but what's something you know we like to wrap up the show every time with with something that you hope somebody walks away from today from the conversation from our you know kind of unscripted you know back and forth what what's that one thing for you that you hope somebody walks away from today yeah that that's a that's a really good good question to lean on.

Guest - Mark Stiles 1:15:05

I mean I think I think understanding understanding it takes more than just you to be successful is really the unlock key that that that that most owners learn over time. Right. And I think I think this conversation alone shows you how there's so many different side sides and opinions and viewpoints and when you're listening to them and and completely agreed you don't need to listen to all the noise but if you find the right experts and the right leaders that are all willing to have a conversation first off you realize that not everybody agrees. James has James has countered some of the things that I've said and I I love it. Like that's not something frustrated about that is that is what strategy is about you get you get leaders in a room and you have a conversation of where we are and what the numbers say where we are of how our feelings are where we are of how our philosophies are and you you chart a path forward and the whole goal of strategy is is is allow is is building out a plan so that everybody can be disciplined and everybody can row the boat in the same direction. And if if you're if you're truly willing to to to bring the right people in the room with you, then you're truly going to flourish and I always say this is like if you're the smartest person in the room, you're in the wrong room. And if you want to get to the next room you need to make sure that you're ready for it. So that means that you've prepared through understanding certain metrics, understanding certain philosophies to understanding the people that you're going into that room with because you know what's going to end up happening that's going to unlock so much more keys that you might not have had that other person does have. And I think that kind of runs hand in hand with with where strategy and discipline kind of run around our whole goal is going, hey, we're coming up with this plan that allows everybody to be disciplined in every department, right? But it starts with I need to get the right people in the room and we need to disagree and we need to have what's considered constructive conflict. And if we can have constructive conflict the only thing that can come out of constructive conflict is of the right path forward. And then some might not love that path and some might think it's the greatest path since sliced bread, but we're all committed to that path forward. And if we can it and if if you can find advisors, if you can find people, if you can find you know even if it's your wife to sit in the room with you and just be that devil's advocate right and really challenge and you guys be willing to have that challenging conversation then so many insights can come out even if it's not the insights that you were hoping for. And I think that's the big thing. So that I'd I'd want I'd want people that were listening to this kind of you kind of had a little bit of an insight especially at the end of like hey people might not agree on this or people might have different philosophies for it. But it's all geared towards making you more profitable making sure that your top line and your bottom line are all in sync and moving forward for you so that you your business can move forward.

Dave 1:18:05

For sure I love it.

Duarne 1:18:06

And so Juan how about you what uh what's one thing that you kind of hope somebody walks away from today's conversation with yeah I like what you said there Mark I mean so many people like surrounding themselves with yes men or yes women just saying yeah yeah that's a great idea pat you on the back thank you see you later whether it's that's whether that's an advisor or staff you're hiring I always hire for a skill set a skill set that I don't have or a skill set that someone does better than me and one of the things I find is so many people when they're doing things if you're growing in their business and myself included and Dave you too in the conversations we've had if you're not feeling uncomfortable with some of the decisions you're making you're probably too comfortable and you probably are not growing anywhere near the pace you want to or in the direction you want to go you've got to feel a little bit uncomfortable. You've got to feel like the direction you're going in is the right you've got to know and you got it to the right direction but you've got to know that it's gonna take a bit of grit it's going to take determination it's gonna take hard work and like you said earlier Mark like banging your head against the wall until you get it right. And if you have the funds you can hire someone to do it but if you don't have the funds be prepared to do the work be prepared to just fail at him a bunch of times before you finally get it right so for me I'd say yeah stop surrounding yourself with yes people make sure that you do the hard work and try and surround yourself with people who are capable of giving you good information and if you are going to do you know if you're gonna hire a bookkeeper and accountant anyway why not hire someone who's got some willingness to give you some advice and take a minute to understand what you really do not just crunch some numbers and you know check in your software occasionally well and and I think that's and I've mentioned it here if if you're not getting any sort of like if your bookkeeper is literally just sending you a report and that's it at the end of the month like it no matter how much you like them it is time for you to probably find somebody else right or if your accountant is only giving you a tax return and not talking to you except for you know in February and saying hey it's tax time again you got your stuff for me like that is not not the people that you want to support your business like you need to search you know and so that's one thing.

Strategy, Conflict, And Better Decisions

Guest - Mark Stiles 1:20:30

And the second thing I think or ask or at least a lot of you we can put this all on us but a lot of people go hey just want tax preparation and you go sure you don't want some advice hey I think we should set up a call and you're like nope and then and then you go my CPA doesn't give me anything it's like you you you need to you need to just be very clear on what you really want because all of them are probably willing to give it to you you know especially if they have the three letters I got they're willing to give it to you they just don't think that you're gonna pay for it and that is where our industry is dinosaur.

Dave 1:20:58

I will fully own that right we're just like death and taxes that's that's all we want right people change their mind what people said three months ago may not be what they want us they're gonna stay in six months or 12 months from now so I'll for sure that's why it's always important that you check in yep that's why it's always important that you check in no matter what you know every three or four months with your follow-up processes but that's another episode we'll get in you know later and your follow-up and your process and all that stuff but I I think it ultimately it comes down to you know making sure that you understand your numbers that you have that support team you know as Mark said it he kind of reiterates what I've said before you do not have to be the smartest person in your room you know surround yourself with those people that are are smart and can push you forward you know that not just say oh yeah you're you're doing everything perfectly and then they're just going to hold you where you need to be you know find those people find that support group and and surround yourself with them I think is the important thing. So Mark I love it. I you know I appreciate you kind of joining us today. Dwarne thanks brothy and for those of you that watch if you made it this far we love you. Thank you. If you have any questions about anything we talked about drop a comment down below or feel free to drop it just like you know everybody's doing in the comments feel free to drop some things over there. And then here you go like just to wrap it up Jamie minds together even though maybe different love it man look forward to it and we'll talk to you guys soon and we love you and do all that fun algorithmy stuff when you wrap it up you don't do that like subscribe stuff. So we'll see you in the next one. See ya